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Skip to 0 minutes and 16 secondsHi Bill Hi Christophe Is there a fourth mistake that could help us to some improvements. Well, I don't know. Probably in the hallways of the operations research department of a major airline somebody has already figured out what the fourth mistake is, and is busy fixing it. But if I were to make a guess the next big step will be to push the information from the revenue management system into the scheduling . Because three months out, you have to decide the schedules. And you should decide the schedules to put the airplanes with the bigger number of seats in the places where the discounts were not very big, where the last fare you sold was a pretty high fare.

Skip to 0 minutes and 54 secondsBecause that's where the underlying demand is. Because today when you look at the flights, they're ALL full. You don't know where to put the big airplanes and the little airplanes. So you should be putting the big airplanes with the going discount, the flights with the going discount the highest. And the little airplanes with the flights with the going discount the lowest. So we push that information back into the scheduling process. And then, ideally, back into the fleet planning process. So I would say the fourth mistake, if it's a mistake, is that revenue management (and the pricing management that goes with it), should push information back into the schedule planning and fleet planning. A long time in advance.

Skip to 1 minute and 30 secondsTry to fit into the planning in advance. Use the day-to-day information accumulated over the year and use that information to re-cut your schedules once a month and re-cut your fleet once a year. Thank you very much, Bill. Polite applause…

Business talk: Revenue Management in the airline industry

Airlines have been practicing Revenue Management for decades now and are among the early developers of some of the most sophisticated techniques used by other industries today.

But how did it all get started? How have these techniques been implemented?

Can you identify the 3 “big mistakes” that have forced airlines to invent revenue management as we know it today?

Join the discussion

In response to the question above, share your interpretation of Bill Swan’s explanations.


William “Bill” Swan is Chief Economist for Seabury-Airline Planning Group.

Previously and for many years, he was Chief Economist for Boeing Commercial Airplanes. He has worked for United and American Airlines in operations research and strategic planning. He holds a PhD in Transport Systems from MIT. He has been a researcher, an economist and an expert in air transport for many years. He has been one of the early revenue management developers and has followed the evolution of revenue management in air transport since the 70s.


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This video is from the free online course:

Manage Your Prices: an Introduction to Pricing Strategy and Revenue Management

École Nationale de l'Aviation Civile

Course highlights Get a taste of this course before you join:

  • Case study: the airline manager dilemma
    Case study: the airline manager dilemma
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    This cartoon video exposes an easy decision problem of an airline manager of one flight. How to increase his profit with a single price strategy?

  • Consumer welfare
    Consumer welfare
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    Is price discrimination good or bad for customers? Before answering, watch Nathalie Lenoir explain the concept of consumer welfare.

  • Price elasticity
    Price elasticity
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    When prices change, how much do the quantities demanded change? This is what price elasticity measures. In this article, Nathalie Lenoir explains how.

  • Business talk: Prices and costs in the airline industry
    Business talk: Prices and costs in the airline industry
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    How are prices related to costs in the airline industry? Watch airline senior revenue manager Bill Swan share his expertise on that question.

  • A key notion: The Expected Marginal Seat Revenue (EMSR)
    A key notion: The Expected Marginal Seat Revenue (EMSR)
    article

    The notion of Expected Marginal Seat Revenue is central to revenue management. In this article, Christophe Bontemps explains the notion of EMSR.

  • Hundreds of people hitching themselves up to the outsides of a train
    Overbooking
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    In this article, Christophe Bontemps defines overbooking and illustrates the problem of computing the overbooking rate.

  • Business talk: RM and Customer Relationship Management
    Business talk: RM and Customer Relationship Management
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    In this video, Benoît Rottembourg shares his vision on the future of the revenue management. E-retailers, such as Amazon, should use these techniques.