Revenue Management plan for Akash Airways

Akash Airways is a new regional airline that has started with its limited service for Delhi,

Lucknow, Mumbai, Bangalore and Chennai. Akash Airways has two Boeing $737400$ airplanes,

one based in Delhi and the other in Lucknow. Both airplanes have a coach section with a $132$

seat capacity. Each morning the Delhi$$based plane flies to Chennai with a $132$seat capacity. Each

morning the Delhi based plane flies to Chennai with a stopover in Mumbai and the Lucknowbased

plane flies to Bangalore, also with a stopover in Mumbai. Both flights land at Mumbai

around the same time at Mumbai and leaves after $45$ minutes stopover. $($At the end of the day,

both planes return to their home bases. To keep the size of the problem reasonable, we restrict

our attention to the Delhi$$Mumbai$,$ Mumbai$$Chennai$,$ Lucknow$$Mumbai and Mumbai$$Bangalore

flight legs for the morning flights.$)$ Figure below illustrates the logistics of the Akash Airways

problem situation.

Akash Airways uses two fare classes: a discount $$ fare Q class and full$$fare Y class.

Reservations using the discount$$fare Q class must be made $14$ days in advance and must include

a Saturday night stay in the destination city. Reservations using the full$$fare Y class may be made

anytime, with no penalty for changing the reservation at a later date.

To determine the itinerary and fare alternatives that Akash Airways can offer its

customers, we must consider not only the origin and the destination of each flight, but also the

fare class. For instance, possible products include Delhi to Mumbai using Q class, Lucknow to

Chennai using Q class, Mumbai to Bangalore using Y class and so on$.$ Each product is referred to

as an origin$$destination$$itinerary fare $($ODIF$).$ For May $5,$ Akash Airways established fares and

developed forecasts of customer demand for each of $16$ ODIFs. These data are shown in table

below.

FARE AND DEMAND DATA FOR $16$ AKASH AIRWAYS ORIGIN$$DESTINATION$$ITINERARY FARES

$($ODIFS$)$

ODIF Origin Destination Fare

Class

ODIF

code

Fare

$($INR$)$

Forecasted

Demand

$1$ Delhi Mumbai Q DMQ $600033$

$2$ Delhi Bangalore Q DBQ $900044$

$3$ Delhi Chennai Q DCQ $1000045$

$4$ Delhi Mumbai Y DMY $1000016$

$5$ Delhi Bangalore Y DBY $150006$

$6$ Delhi Chennai Y DCY $1600011$

$7$ Lucknow Mumbai Q LMQ $900026$

$8$ Lucknow Bangalore Q LBQ $1200056$

$9$ Lucknow Chennai Q LCQ $1300039$

$10$ Lucknow Mumbai Y LMY $1500015$

$11$ Lucknow Bangalore Y LBY $180007$

$12$ Lucknow Chennai Y LCY $195009$

$13$ Mumbai Bangalore Q MBQ $600064$

$14$ Mumbai Bangalore Y MBY $100008$

$15$ Mumbai Chennai Q MCQ $700046$

$16$ Mumbai Chennai Y MCY $1400010$

Suppose that on April $4$ a customer calls the Akash Airways reservation office and request

a Q class seat on the May $5$ flight from Delhi to Bangalore. Should Akash Airways accept the

reservation? The difficulty in making this decision is that even though Akash Airways may have

seats available, the company may not want to accept this reservation at the Q class fare of

Rs$\mathrm{.}9000,$ especially if it is possible to sell the same reservation later at the Y class fare of Rs$.15000.$

Thus, determining how many Q and Y class seats to make available are important decisions that

Akash Airways must make in order to operate its reservation system.

Also examine how dynamically Akash Airways may update its reservation policy based on actual

reservations taking place in advance.