 Contribution
of Operational Research: Practitioners Viewpoints |
| Professor
Peter Belobaba |
Effective use of YM forecasting, optimisation and reservations
control tools has commonly been associated with increases
in total airline revenues of two to five percent. Given that
these revenue increases are realised with relatively low
incremental costs, primarily those associated with yield
management systems, development and operation. Most of the
benefit of YM goes directly to airline operating profits.
For a medium to large international airline, the annual revenue
benefits attributed to even the most basic tools of overbooking
and discount seat allocation can easily exceed US $100 million.
The successful development and implementation of more accurate
demand forecasting, network optimisation, and advanced origin-destination
YM systems has the potential to provide further substantial
increases in airline revenues.
The importance of good yield management to airline profitability
is clear. Since most airlines struggle to achieve operating
profits much in excess of US $100 million even in the best
of years, it could well be argued that, without YM, many
airlines would not be able to turn a profit, and the profits
of the strongest airlines could easily by reduced by half.
Of course, this could also be said about many other aspects
of airline management, including scheduling, route development,
and capacity planning.
But that's the point -- effective YM is critical to airline
profitability, but it is not the sole answer to an unprofitable
airline's problems. Even the best YM technology available
cannot come close to overcoming the negative impacts of poor
fleet planning and scheduling decisions, bloated cost structures,
or simply bad airline management.
Professor Peter Belobaba
Principal Research Scientist,
Department of Aeronautics and Astronautics, USA
MIT University, USA
July 1997
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