Les Johnson
Business Travel Agent
Herndon, Virginia

Airlines use Yield Management to forecast the demand for aircraft seats in hundreds of markets and allocate available seats. The goal is to reduce the gap between projected revenue and actual revenue.

Prior to the U.S. Government deregulation of the airlines, passengers flew from point to point. Airline yield managers knew who would occupy a seat and how long the seat would be occupied. At the time of deregulation, airlines began developing the "Hub and Spoke" system which increased the possible combinations of seat sales. Yield managers learned to forecast the demand for local, through, and connecting flights.

Airline yield managers control booking requests across the airline's network using computers and software designed to forecast the probability of demand for aircraft seats. Various fare classes, also called fare buckets, are used to allocate inventory on every flight. Passenger's booking requests are compared with established fare buckets and are accepted or rejected based upon their ability to maximize revenue system-wide. Passengers compete for the same seats at different fares. As the aircraft fills or conditions change, fare bucket availability changes.

If a flight from Chicago to Omaha on Wednesday afternoons is consistently filled to 40% capacity, passengers are sold inexpensive tickets. If a flight from Washington Dulles to Chicago on Friday afternoons is consistently filled to capacity, remaining seats are sold at the highest price the market will bear.

For example: United's flight 535 departing Chicago at 12:05 PM is selling:

• At least five seats in first class cabin. The fare bucket F is first class.
• At least nine seats in the economy cabin are being sold for $697.00 as an unrestricted economy fare. The fare bucket is Y.
• At least nine seats in the economy cabin are being sold for $464.00 as an unrestricted economy fare. The fare bucket is B.
• At least nine seats in the economy cabin are being sold for $307.00 as an unrestricted economy fare. The fare bucket is M. Other fares offered using the M fare bucket include a fare requiring round trip purchase at least 7 days in advance with penalties for changes and cancellations for $675.00 and a fare requiring round trip purchase at least 14 days in advance with penalties for changes and cancellations for $423.00.
• At least nine seats in the economy cabin are being sold for $323.00 as a fare requiring round trip purchase at least 21 days in advance. Penalties for cancellation and changes apply. The fare bucket is H.
• The fare buckets, Q, V, and W, are no longer being sold. The Q fare was offered as a round trip fare requiring a 7 day advance purchase with penalties for $172.00. Another Q fare was offered as a round trip fare requiring a 14 day advance purchase with penalties for $170.00. The V fare was offered as a round trip fare, 14 day advance purchase with penalties for $168.00 and the W fare was a round trip, 14 day advance purchase with penalties for $145.00.
• The remaining fare buckets, A, S, T, K, L, and G, are used internally by United for special purposes such as group travel, tours, and free tickets issued to frequent fliers.

Note that all the fare buckets on United's flight 1129 departing Chicago at 9:19 AM are available, enticing travelers to leave earlier in the day.

Individual airlines revise and publish air fares and the associated fare buckets continually.

Rental car companies and hotel reservation systems also use yield management.

Here is a humorous scenario. It is an imaginary conversation between a customer and salesperson. The salesperson is selling paint to a customer using the airline's fare rules.

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