A Comprehensive Strategy Of Dynamic Pricing And Inventory Control In Airline Revenue Management And The Preliminary Discussion Of Its Risk Analysis

After the reform and open policy was put to practice, the rapid development of economy and the rise in people's material living standard has brought about the high-speed advance in Chinese Civil Aviation Passenger Transport. However, confronted with the strong challenges from other transportation methods at home and heated competition with airlines abroad, laggard management mechanism and methods have put domestic airlines into a disadvantageous position. As an inevitable means to take part in market competition by modern airlines, Revenue Management (RM) has ever created a lot of wonders in foreign airlines. It emphasizes the use of dynamic pricing and inventory control to realize the maximum revenue of airlines by market segmentation and consumer behavior analysis. Its core thought is to sell the right seat to the right passenger at the right time of the right price.As the basic two tools of RM, dynamic pricing and inventory control strategies have become important marketing means in airlines and also hot research topics in RM field. Yet, over the last decades, the researches on these two topics have been developed independently and less connected with each other. But in practice, these two strategies must be taken into account at the same time while airlines management makes decisions; Therefore, it is necessary and important to integrate these two strategies. This article discusses the comprehensive strategy of dynamicpricing and inventory control by using stochastic control theory and maximum concave envelope theory aiming to the maximum of single flight. It also develops a three-stage strategy for the optimal policy, which is the determination of optimal price set, the optimal open classes and the optimal price for each open class.In addition, all present RM research aim to maximize expected revenue, assuming decision-makers are risk neutral and not distinguishing the different risks under the same expected revenue. However, demand randomness, product perishability and heated competition have caused risks for each business opportunity. Even though the best strategy can't eliminate the uncertainty of revenue. Therefore, management should tell the expected revenue with risks from that without risks. This article defines and analyzes the risks in airlines RM decisions, and makes the preliminary discussion of establishing comprehensive RM model based on risk analysis.