Contract optimization with front-end fare discounts for airline corporate deals uri icon

abstract

  • This paper develops a non-linear programming model to design optimal corporate contracts for airlines stipulating front-end discounts for all nets, which are defined by combination of routes, cabin types, and fare classes. The airline's profit is modeled using a multinomial logit function that captures the client's choice behavior in a competitive market. Alternative formulations are employed to investigate the impact of price elasticity, demand, and competition on optimal discounting policies. A case study involving a major carrier is presented to demonstrate the model. The results indicate that airlines can increase revenues significantly by optimizing corporate contracts using the suggested model. 2006 Elsevier Ltd. All rights reserved.

published proceedings

  • Transportation Research Part E Logistics and Transportation Review

author list (cited authors)

  • Pachon, J., Erkoc, M., & Iakovou, E.

citation count

  • 12

complete list of authors

  • Pachon, Julian||Erkoc, Murat||Iakovou, Eleftherios

publication date

  • January 2007