Airline Fares

The setting of airline fares entails a rather complex procedure that combines a variety of techniques from multiple scientific disciplines (statistics, economics, operational research) and the decision-making of various organisational divisions. Market demand, cost factors, competition intensity, segmentation and the identification of ticket restrictions help define a range of fare levels, which tend to remain stable over the booking period because it is very costly and time-consuming to readjust them. Instead, airlines rely on heuristics to manage the seat inventory of each flight dynamically, by varying the allocation of seats across classes based on revised forecasts and remaining capacity.