Scheduling And Revenue Management Process

1. Scheduling and Revenue Management Process Integration: Benefits and Hurdles Timothy L. Jacobs, Elizabeth Hunt and Matt Korol Operations Research and Decision Support American Airlines May 2001

3. Airline Business Overview Scheduling Product Pricing Yield Management Sales and Distribution Long- Term Short- Term Strategic Tactical Customers

4. Typical Scheduling and RM Process Flight Scheduling (Leg-based) Revenue Management (O&D-based) Time 12 + Months 9-6 Months DOD 3 Months 45 Days O&D Demand Forecasts Revenue Management Process & Controls Capacities / O&D Forecasts Network Scheduling & Planning Flight Demand Forecasts Fleeted Schedule (Fixed Capacities) Data Source Data Source Informal Feedback

5. Proposed Integrated Process Causal Effect Data Date Specific Data Steady-State Industry Forecast O&D Daily Forecast O&D Time Series Forecast Revenue Management Process & Controls O&D Network Planning O&D-based Scheduling Near-term Aircraft Assignment (D 3 Process) Flight Scheduling Revenue Management Forecasting Data Sources Time 12 + Months 9-6 Months DOD 3 Months 45 Days Forecasts Forecasts Controls/Capacities O&D Forecasts/Capacities Forecast Data and Control Information

7. Consistent Scheduling and RM Benefits - Theory Integrated Scheduling & Revenue Management Process No Revenue Management Revenue Management Only Reference: Jacobs, Ratliff and Smith;1997, 2000

8. Extension to Consider Pricing Effects No RM O&D RM O&D RM & Pricing O&D Fleeting and RM O&D Fleeting, RM & Pricing Reference: Jacobs, Ratliff and Smith;1997, 2000

11. O&D Fleeting and RM Benchmark Results

16. D 3 Benchmark Results - Max Profit Measure* Input Schedule D 3 Solution Incremental Profit Gain (% of Revenue) 0.64 Switched Flights Segments Flown 114 RJ3 RJ4 230 * All measures are for a daily schedule 10:31 9:37 Utilization RJ3 RJ4 336 198 368 10:02 10:14

17. D 3 Parametric Analysis Results - Swap Limit Swap Limit Daily Profit Increase (% of Revenue) Cumulative Percent of Total 25 50 75 100 114 0.25 0.35 0.50 0.60 0.64 39% 56% 78% 94% 100%

18. A Closer Look - 25 Swap Limit Flight No. 1 2 3 Profit Change (% of Rev) 0.01 0.02 0.03 Reservation Holds 7 32 33 Incremental Traffic Input Output 7 4 3 8 9 10 Fleet Input Output RJ4 RJ3 RJ3 RJ3 RJ4 RJ4 Total Traffic Input Output 14 36 36 15 41 43

19. D 3 Benefits and Timing - What the theory tells us.

20. D 3 Benefits and Timing - The Practice