Airline Demand Forecast and Seat Inventory Control with Passenger Buy-Down Behavior

Due to the weakening of the fare class booking restrictions, passenger buy-down behavior occurs frequently. As a result, traditional revenue management tools based on the assumption of independent demand cannot fit the new environment very well. Passenger demand was redivided into three components and demand forecast model was then proposed. Marginal revenue data transformation as well as expected marginal seat revenue method was used to calculate booking limits of fare classes. The forecasting and seat allocation methods were applied to branded fare families with multiple classes. The simulation results show that the new approaches increase expected revenues by 10 to 15 percent and maintain a relatively high load factor.