Originally Posted by Baeck
So why can't/won't AA work on better yield management in these instances? It should be very easy for them to put additional BIS before departure, but it seems like they're locked into a pricing model that serves to punish last-minute travelers at the expense of revenue. Is it possible for me to call AA and ask for a better price from them on the fare basis? I don't think my price is unreasonable - especially since the plane is half full!
Please Note: I'm not angry about this at all. They have the absolute right to price their product as they see fit. I'm merely curious and am somewhat interested in the topic of yield management.
First off the second poster in this thread is correct; this is a pricing issue. The revenue management concept is to maximize total revenue. I can see how you personally will be giving the airline less money for this trip but AA's forecasting model says that with these fares the flight will maximize its total revenue. For example lets say that their are four seats left on a plane a day before departure. (For simplicity's sack) let's say that there are two available fares, an L class for $200 and a Y class for a $1000. AA's forecaster goes through all relevant flights in the past and and determines that at $200 it will sell all four L seats and at $1000 it will sell only one Y seat. If this were the case the optimizer would choose to sell Y since it generates the most revenue.
[edit] I gave an example of inventory control not pricing. The above example works except through the use of APs. Instead of allocating inventory levels the optimizer will change the advance purchase requirements. Basically in the above case the optimizer is saying more than one in five people who would have bought a $200 will also buy the $1000 fare. In this case the pricing optimizer will make the AP for the $200 fare higher (more days from departure).