Piedmont Airlines: Discount Seat Allocation (a)

10 Pages Posted: 21 Oct 2008

See all articles by Phillip E. Pfeifer

Phillip E. Pfeifer

University of Virginia - Darden School of Business

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Abstract

The manager of the revenue enhancement department of a small airline has to decide the optimal number of seats to reserve for discount customers on a particular flight. In order to help make the decision, historical data are given as well as probability distributions of demand for both full and discount fares. (The B case is QA-0340.)

Excerpt

UVA-QA-0339

Rev. Sept. 24, 2012

PIEDMONT AIRLINES: DISCOUNT SEAT ALLOCATION (A)

Marilyn Hoppe smiled as she set aside the most recent edition of the Piedmonitor, the company's monthly news magazine. April's lead article (see Exhibit l) had done an excellent job of describing the function of Hoppe's Revenue Enhancement department, and in general, she was pleased with it. The article was both accurate and informative, and had stressed the importance of revenue enhancement to the financial success of the company. Because of the article, Hoppe believed it might now be a little easier to obtain the cooperation of other departments in providing the vast array of data and information needed to successfully carry out the revenue enhancement activities.

The major function of the department was to decide exactly how many discount fare seats were to be sold on each of Piedmont's flights. The financial importance of revenue enhancement meant that Hoppe and her department shouldered a considerable burden. Although she had every reason to be pleased with her department's performance, she often wondered whether there might be room for improvement. Piedmont's new information system was as good as most in the industry, and the seven analysts were both knowledgeable and quite good at using the information to allocate discount seats. The nagging problem was that the process still relied quite heavily on the judgments of those seven. Although the analysts were well-informed experts with access to huge amounts of data and information, they were still humans making numerous daily decisions in a manner that was not as scientific as the article suggested.

Discount Seat Allocation

. . .

Keywords: decision theory, diverse protagonist, female, Monte Carlo simulation, probability, diversity case, service industries, management of, simulation, diversity

Suggested Citation

Pfeifer, Phillip E., Piedmont Airlines: Discount Seat Allocation (a). Darden Case No. UVA-QA-0339, Available at SSRN: https://ssrn.com/abstract=1283386

Phillip E. Pfeifer (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4803 (Phone)

HOME PAGE: http://www.darden.virginia.edu/faculty/Pfeifer.htm

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