CHAIRS: A choice-based air transport simulator applied to airline competition and revenue management

Mitsuyoshi Fukushi*, Felipe Delgado, Sebastián Raveau, Bruno F. Santos

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

In Revenue Management (RM) systems, information censoring and the interaction between the forecasting and optimization stages, increases the costs and complexity of performance analysis using historical data. An affordable and suitable alternative is using simulations, but appropriate behavioral models must be considered. In the following document, we discuss and test the implementation of a dynamic air transport market simulator, designed to analyze RM systems. The simulator replicates the behavior of passengers that book seats offered in multiple flights by different airlines. We use discrete choice models to replicate the demand behavior, accounting for preferences and decision rule heterogeneity, and including a temporal evolution of the preference throughout the selling horizon. To replicate the supply behavior, a number of airlines modify the price and quantity of different fare classes offered in each flight, using a variety of RM forecasting, un-constraining, and optimization techniques. The simulator allows analysts to study the economic benefit of RM systems under predefined assumptions in an artificial and controlled environment. This increases the benefits obtained by the correct selection of context-appropriate RM systems and the likelihood of successfully implementing new and complex systems. We test and showcase the simulator performance, studying the entrance of a new airline in a competitive context. We generate, implement and evaluate different RM strategies in response to the introduction of new competition, and discuss the results, highlighting the interpretability and accuracy of the proposed framework.

Original languageEnglish
Pages (from-to)297-315
Number of pages19
JournalTransportation Research Part A: Policy and Practice
Volume155
DOIs
Publication statusPublished - 2022

Bibliographical note

Green Open Access added to TU Delft Institutional Repository ‘You share, we take care!’ – Taverne project https://www.openaccess.nl/en/you-share-we-take-care
Otherwise as indicated in the copyright section: the publisher is the copyright holder of this work and the author uses the Dutch legislation to make this work public.

Keywords

  • Discrete choice models
  • Revenue management
  • Simulations

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