Airline Yield Management
Airline
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In This Issue: Airline Yield Management
The practice of Yield management has been widely adopted by service organizations in the past three decades. Yield management originally started in the airline industry and this capacity management strategy is also most often applied by airlines. The practice of yield management, especially in the airline industry, has been discussed in many different studies. There is, however, limited empirical research on the effects on business-to-business relationships and knowledge on how the feelings of price fairness affect loyalty. This article will discuss the differences in perception and reactions on both business and leisure travelers. The main goal of this article is to give answers to these questions: What is Yield management? What are the impacts of yield management in the airline industry on customer’s feelings of price fairness, its drawbacks, and benefits and how does it affect loyalty?
Yield Management
There is a number of varying definitions of yield management used in academic research for different service industries. Wang and Bowie (2007) used the most comprehensive description: “The main target is to maximize revenue through the effective management of three main areas: pricing, strategy, inventory control and control of availability. The term yield management and revenue management are currently used synonymously.” This definition is also most suitable for the airline industry and will be used in this article. In that case, inventory controls depends on the available resources (employees, aircrafts and gasoline) to provide a specific service. The control of availability is the number of empty seats on board. It is understandable that firms take advantage of yield management practices. Kimes (1997) and Cross (1997) in Wang and Bowie (2007) shows that company’s revenue normally increases 3-7 per cent by employing yield
News Express
airline NEws Express We Report to you
In This Issue: Airline Yield Management
The practice of Yield management has been widely adopted by service organizations in the past three decades. Yield management originally started in the airline industry and this capacity management strategy is also most often applied by airlines. The practice of yield management, especially in the airline industry, has been discussed in many different studies. There is, however, limited empirical research on the effects on business-to-business relationships and knowledge on how the feelings of price fairness affect loyalty. This article will discuss the differences in perception and reactions on both business and leisure travelers. The main goal of this article is to give answers to these questions: What is Yield management? What are the impacts of yield management in the airline industry on customer’s feelings of price fairness, its drawbacks, and benefits and how does it affect loyalty?
Yield Management
There is a number of varying definitions of yield management used in academic research for different service industries. Wang and Bowie (2007) used the most comprehensive description: “The main target is to maximize revenue through the effective management of three main areas: pricing, strategy, inventory control and control of availability. The term yield management and revenue management are currently used synonymously.” This definition is also most suitable for the airline industry and will be used in this article. In that case, inventory controls depends on the available resources (employees, aircrafts and gasoline) to provide a specific service. The control of availability is the number of empty seats on board. It is understandable that firms take advantage of yield management practices. Kimes (1997) and Cross (1997) in Wang and Bowie (2007) shows that company’s revenue normally increases 3-7 per cent by employing yield