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Implications of seat assignment flexibilization for airline revenue management

Author

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  • Alex Monestier

    (Airdream Interiors Inc.)

Abstract

This paper aims to prompt the airline industry to explore a new way of using existing airline cabin layouts that improves profitability and comfort. The century old paradigm, that passengers take a seat for an entire flight, is a way of utilizing airliner cabins that heuristically means poor comfort for most passengers and low financial returns (Return on Invested Capital – Weighted Average Capital Cost industry wide of −2.3 per cent (2013) and −1.2 per cent (2014), and EBIT of 3.5 per cent (2013) and 5.1 per cent (2014) of revenues Earnings Before Interest and Tax) – Source IATA). The author shows the benefits of allowing a place-exchange market to operate during flights. This market proves to be a superior value extraction tool and opportunity for airlines, which can substantially increase their profits by enabling widespread comfort to their customers. As a consequence, airline economics are greatly improved. As a corollary, this dramatically increases the amount of viable routes.

Suggested Citation

  • Alex Monestier, 2016. "Implications of seat assignment flexibilization for airline revenue management," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 15(6), pages 488-499, December.
    • Handle: RePEc:pal:jorapm:v:15:y:2016:i:6:d:10.1057_s41272-016-0067-8
    DOI: 10.1057/s41272-016-0067-8
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