Draft Final Project Revenue Management - Ferran Font
Prior to deregulation, the government strictly regulated the airline sector, setting prices,
limiting routes, and making sure that all airlines functioned in a manner that provided
"guaranteed profits" to all participants. By eliminating federal regulations from numerous
facets of the aviation industry, the aviation Deregulation Act of 1978 significantly changed
this environment. As a result, airlines were able to establish more flexible and competitive
business models, choose routes based on client demand, and set their own prices.
Airlines needed more advanced revenue management techniques as soon as they entered
this fiercely competitive, deregulated market. Airlines were forced to optimize their ticket
sales strategies due to the significant focus on providing reduced pricing. It was at this point
that yield management, also referred to as revenue management, became a necessary
strategy.
Yield management is a dynamic pricing technique that seeks to optimize revenue by offering
the best price on the right seat to the right consumer at the right moment. After deregulation,
the government's regulated prices that had guaranteed airline profitability vanished. In order
to accommodate a variety of traveler types, from pleasure customers looking for the lowest
price to business travelers willing to pay premium pricing for flexibility and convenience, they
had to fill as many seats as possible while simultaneously making sure that those seats were
sold at the best prices.
By offering innovative methods for pricing flexibility, seat segmentation, overbooking, and
capacity optimization, yield management completely changed the business.
The beginning of what many refer to as the "race to the bottom" in the airline business was
marked by the competition to offer the lowest tickets, which frequently came at the sacrifice
of passenger comfort and experience.
Customers started to notice that the airlines were disregarding their fundamental rights and
requirements. A number of lawsuits and massive protests intended to change the situation
were ultimately motivated by this growing dissatisfaction. FlyersRights, a nonprofit
organization that supports passenger rights in the US, filed one of the most popular lawsuits.
After this group succeeded in a landmark case in the District of Columbia Court of Appeals in
2017, the Federal Aviation Administration (FAA) was forced to reevaluate its seat spacing
(FlyersRights.org, 2017)
