Tickets Pricing And Sales Policy For Airline Considering Swapping Applications

Against the backdrop of economic globalization, the civil aviation industry hasdeveloped rapidly with great potential and domestic airlines face enormousdevelopment opportunities. At the same time, however, with the gradual relaxation ofthe government on the regulation of civil aviation, more and more enterprisesparticipate in the competition in the civil aviation industry. In addition, therequirements of the customers on the quality of service are increasing, whichintensifies the competition of the civil aviation industry. In the face of opportunitiesand challenges, the airlines have to make full use of revenue management, in order toenhance the carry capability and maximize the overall revenue.Ticket sales and pricing for two routes of the airlines are investigated byconstructing mathematical models from the aspects of considering swappingapplications and overbooking and No-show with integrating the strategy of swappingapplications and unidirectional substitution into the same framework in this paper.Pricing and revenue management, operations research and other related theory arecombined and model constructing, comparative analysis and other methods are used.The impact of unidirectional substitution and swapping applications on the optimaldecisions of airlines are studied with comparative analysis and the condition ofswapping applications is investigated, to reveal management implications. The mainlycontent is showed as follows:1. Sales policies for single-fare airline considering swapping applications for tworoutes are investigated with taking ticket amount as decision variables. Thecorresponding decision model is formulated and the optimal ticket price, ticket amountand expected revenue are derived with and without considering swapping applications.Comparative analysis of the optimal solutions are given afterwards, which shows thatwhen swapping applications are considered, the optimal ticket price and amountremains the same for route1(big plane) while the optimal ticket price decreases andthe ticket amount increases for route2(small plane); the total expected revenueincreases for the airline company. Further, from the sensitivity analysis, it is derived that the optimal ticket amount of both route are increasing function of ticket price anddecreasing function of denied cost. And the revenue of aircraft swapping is adecreasing function of ticket price of route one and an increasing function of ticketprice of route two. What’s more, the impact of swapping strategy on optimal decisionsand revenue are investigated by using numerical analysis, which verifies the validity ofthe theoretical analysis.2. Ticket pricing and sales policy for single-fare airline considering swappingapplications for two routes are investigated with taking ticket price and ticket amount asdecision variables. The corresponding decision model is formulated and the optimalticket price, ticket amount and expected revenue are derived with and withoutconsidering swapping applications. Comparative analysis of the optimal solutions aregiven afterwards, which shows that when swapping applications are considered, theoptimal ticket price and amount remains the same for route1(big plane) while theoptimal ticket price decreases and the ticket amount increases for route2(small plane);the total expected revenue increases for the airline company. The optimal ticket pricesof both routes are increasing function of market demand scale and the revenue increasedfrom swapping applications is a decreasing function of market demand scale of routeone and an increasing function of market demand scale of route two. What’s more, theimpact of swapping strategy on optimal decisions and revenue are investigated by usingnumerical analysis, which verifies the validity of the theoretical analysis.3. Ticket sales policy of two routes for two-stage fares airline are studied underthe following three conditions in this paper: neither unidirectional substitution of cabinnor swapping applications is considered, only unidirectional substitution of cabin isconsidered, both unidirectional substitution of cabin and swapping applications areconsidered. We formulate the corresponding decision model and derive the optimalticket amount and expected revenue. It shows that compared with the condition thatneither unidirectional substitution of cabin nor swapping applications is considered,when only unidirectional substitution of cabin is considered, the expected optimalticket amount and expected revenue increase; compared with the condition that onlyunidirectional substitution of cabin is considered, when both unidirectional substitutionof cabin and swapping applications are considered, the expected optimal ticket amountand expected revenue increase. Further, sensitivity analysis is undertook, which shows that when neither unidirectional substitution of cabin nor swapping applications isconsidered, the optimal ticket amount of first class and economy class of route1androute2are increasing function of their ticket prices. When only unidirectionalsubstitution of cabin is considered or both unidirectional substitution of cabin andswapping applications are considered, the optimal ticket amount of first class of route1and route2are increasing function of ticket prices of first class. And the optimal ticketamount of economy class of route1and route2are increasing function of ticket pricesof economy class and decreasing function of ticket prices of first class. What’s more,the impact of unidirectional substitution strategy and swapping strategy on optimaldecisions and revenue are investigated by using numerical analysis, which verifies thevalidity of the theoretical analysis.