Practical Airline Economics - Essay Example

Since the fare for A-B itinerary is much less than the two local itineraries, the profit maximization is to spill 50 passengers on the A-B itinerary (15000 dollars). From this, the remaining demand for flight 1 does not exceed the capacity (Holloway, pp.124-178). Because the local fare for flight 2 is much less than the fare for X-Z itinerary, 75 passengers are spilled from B-C itinerary (16875 dollars). Hence, the minimum spill cost for fleeting 1 15000+16875 = 31875. The spill cost for each transient is in Table 5.

Thus, the fleeting contribution for fleeting 1 is 71250-(30000+31875) = $9375. Through analysis, the rest of the fleeting as shown in Table 5, that the optimal fleeting is fleeting 1. The spill minimizing strategy for this case in every flight is to drop passengers in view of increasing fare until passenger’s number accurately equals the assignment capacity in every flight. For instance, managers always spill passengers in order to keep the higher fares for connecting passengers