Demand driven dispatch and revenue management

Abstract

The focus of this thesis is on the integration of and interplay between demand driven dispatch and revenue management in a competitive airline network environment. Demand driven dispatch is the reassignment of aircraft to flights close to departure to improve operating profitability. Previous studies on demand driven dispatch have not incorporated competition and have typically ignored or significantly simplified revenue management. All simulations in this thesis use the PODS simulator, where stochastic demand by market chooses between competing airlines with alternative paths and fare products whose availability is determined by industry-typical revenue management systems. Demand driven dispatch (D³) is tested with a variety of methods and objectives, including a bookings-based method that assigns the largest aircraft to the flights with the highest forecasted demands. More sophisticated methods include revenue- and profit-maximizing fleet optimizations that directly use the output of leg-based and network-based RM systems and a minimum-cost flow specification. D³ is then tested with a variety of aircraft swap timings, RM systems, and competitive scenarios. Sensitivity testing is performed at a variety of demand levels, demand variability levels, and with an optimized static fleet assignment. Findings include important competitive feedbacks from D³, relationships between D³ and both revenue management and pricing, and important nuances to D³'s relationship with the level and variability of demand. Depending on how it is implemented, D³ may harm competitor airlines more than it aids the implementer. Early swaps in D³ lead to heavy dilution. Late swaps lead to smaller increases in loads but substantial increases in revenue. The relationship between revenue-maximization and cost-minimization in profit-maximizing D³ is highly influenced by the timing of swaps, revenue estimation, and demand levels. Finally, early swaps are susceptible to high variability of demand while late swaps are more robust. Findings indicate that the benefits of D³ can be estimated at operating profit gains of 0.04% to 2.03%, revenue gains of 0.02% to 0.88%, and changes in operating costs of -0.08% to 0.13%.