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Q: Yield Management Systems ( Answered 3 out of 5 stars,   1 Comment )
Subject: Yield Management Systems
Category: Business and Money > Economics
Asked by: lanson-ga
List Price: $150.00
Posted: 04 Mar 2004 17:45 PST
Expires: 03 Apr 2004 17:45 PST
Question ID: 313588
Can Yield Managements Systems encourage over-segmation of markets,
even at the detriment of these yields? What are the advantages and
disadvantages of the yield management process in a price driven

3500 words 
by the 12th March

Request for Question Clarification by nancylynn-ga on 05 Mar 2004 06:30 PST
Hello lanson-ga:

The final line of your question: "3500 words by the 12th March,"
suggests that this is a class assignment.

Please see this research service's FAQ:
which states: " In general, we recommend that you use GA as a tool to
assist you with your homework rather than as a substitute for you
doing your homework yourself. Please note that we reserve the right to
remove questions from the site for any reason, and questions that are
clearly homework may be subject to deletion."

I will be glad to assist you by researching your two inter-related
questions: "Can Yield Managements Systems encourage over-segmation of
even at the detriment of these yields? What are the advantages and
disadvantages of the yield management process in a price driven

We researchers can assist students with assembling research materials,
but we can't actually write essays, etc., for students.

If you would like assistance in researching this subject, I -- or a
fellow researcher -- will be glad to help you.


Clarification of Question by lanson-ga on 07 Mar 2004 19:57 PST
This a report that I need to present to my employer, an essay styled
answer is not required.

Request for Question Clarification by nancylynn-ga on 08 Mar 2004 12:16 PST
I will be glad to assemble the most substantive, extensive amount of
research reports and background information for you that I possibly
can, with links and references to -- and brief excerpts from --  all
those materials.

That way you can compile your own report in your own words, according
to your boss's precise specifications.

That way, you'll become very familiar with the information as you
write the report, meaning you'll be prepared to field any questions
and discuss any pertinent issues/sub-topics that your boss may raise.

Would this be acceptable to you?


Clarification of Question by lanson-ga on 08 Mar 2004 20:09 PST
That would be fine.....

Request for Question Clarification by umiat-ga on 09 Mar 2004 12:14 PST

 What industry are you in? Is there any particular emphasis or
industry a researcher should focus on, since so far no one has had
much luck on this question? Can you provide any more specific
parameters that would make research on this topic a bit more defined?
As it stands now, the subject is quite broad.
 Since you are coming upon a deadline, we will be awaiting your answer.


Clarification of Question by lanson-ga on 09 Mar 2004 18:56 PST
The question relates to Airline Management, and the deadline can be
extended to the 14th.

Request for Question Clarification by nancylynn-ga on 11 Mar 2004 08:24 PST

I took another shot at researching this matter for you and am finally
having some luck.

It will take me a few more hours to post all of my research, but I
wanted to give you a heads-up on two helpful books I found:

The book "Yield Management" edited Yeoman and Ingold (Thomson
Learning; 2nd Edition; paperback; August 2001).

At this page:
you'll see the book has a section on YMS: "Lessons From The Airline Industry."

Also at see "Revenue Management" by Robert G. Cross
(Broadway; Reprint edition; December 29, 1997):*

Click "Look Inside the Book" feature (you must be registered at to enable this feature) to bring up:

In the search box on that page type in "airline AND revenue
management" or "revenue management AND yields," to get a plethora of
pages you can read right there at Amazon.

I wanted to tell you about these books ASAP because you can also get
next day delivery of these books from, IF you order them
this afternoon, by about 2:30 p.m. Eastern Time. (There are only 4
copies of "Revenue Management" left in stock.)

Again, I will be posting the rest of the data I've found for you as an
Answer within a few hours.

Subject: Re: Yield Management Systems
Answered By: nancylynn-ga on 11 Mar 2004 11:34 PST
Rated:3 out of 5 stars
Please note that Yield Management Systems (or "YMS" or "YM Systems"),
is also known as "Revenue Management Systems" or "RMS" or "RM

I have listed every source I could find pertaining to the airline
industry and YMS/RMS.



I urge you to consider subscribing to the Journal of Revenue & Pricing Management:

Subscription information can be found at this page:

Becoming a subscriber will enable you to access the magazine's online
archive of articles about revenue management, including quite a few
articles that pertain specifically to the airline industry.

For example, "The financial risk of airline revenue management" by
John Lancaster, from the Journal of Revenue & Pricing Management in
the July 2003, Vol. 2 Issue 2.

I found an abstract from that article via my local public library's
"EBSCO" search program: "Every business faces risk. Without risks, no
company would be able to achieve anything or make a profit. The
question every business faces is how to balance risk and reward. To do
this the corporate entity must understand its risk set, the sources of
those risks and the costs associated with operating within the
particular set of risks. Airlines are no exception. For nearly two
decades airlines have been implementing revenue management systems to
improve revenue results without considering the risks assumed or the
consequences. The industry has now faced two major business cycles
using revenue management and experienced revenue meltdown twice. This
paper explores how airlines can understand the risk incurred in their
revenue management policies. After examining the risk profile of a
revenue management system, the paper looks at how risk management
measurements and methods can be applied to the practice of airline
revenue management practice."

At this page:
Click on "EasyLink To to Journal of Revenue and Pricing Management
ONLINE, to bring up an index of past issues:  
There, I clicked on "July 2003 Volume 2, Issue 2 (which contains the
article cited above) bringing up this page:;jsessionid=824pja2bf3bf4.circus?issue=pubinfobike://hsp/rpm/2003/00000002/00000002
where you'll find several articles related specifically to the airline
industry, including: "Optimising airline revenue management" and
"Getting the most from revenue management."

Going back to:
and clicked on the October 2003 issue link:;jsessionid=824pja2bf3bf4.circus?issue=pubinfobike://hsp/rpm/2003/00000002/00000003
and found the article "Measuring the impact of revenue management."
Or, try these links for the above cited articles that I found through
an EBSCO search at my local library. (If you can't access these sites
when you click on the following links, just go to your local public,
or academic, library and the librarian will show you how to use the
EBSCO system.) Just go to "Business Source Premier," then go to the
search box and type in "'revenue management systems' AND airlines" to
bring up these articles.

Two Journal of Revenue & Pricing Management articles that can be
accessed via EBSCO html links (if these work, then click on PDF and
see if the full articles load):

"The financial risk of airline revenue management"

"Better unconstraining of airline demand data in revenue management
systems for improved forecast accuracy and greater revenues":

Travel Weekly Magazine

This online magazine is free to access.

In the search box (upper left) I typed in "yield management systems"
and got 15 hits. (When you do the search, a pop-up box will appear
asking you to register as a "guest." Click the down arrow in that box
to scroll down to click "Guest.")

The relevant articles I found at Travel Weekly:

"Joe Leonard: Recovery is here; it has happened" (4/16/2003), by Nadine Godwin:
". . . Airline executives are jousting with changes that are
permanent, Leonard [CEO of AirTran Airways] said, adding the 'real
change' is the Internet, which 'has destroyed the ability of the
carriers' yield-management systems to gouge last-minute travelers. . .
.' "

A brief, but notable mention of a disadvantage to YMS is noted in
"Industry officials favor inbound marketing aid" (10/1/2002), by
Michael Milligan:
"Part of their financial problem can be attributed to the
yield-management systems they use to price tickets, [Hal Rosenbluth]
said, adding that the airlines lose billions of dollars each year
giving corporate discounts to
companies that have not earned them."

"ACTE forum tackles business fare strategies," (10/24/2001) by Jerry Limone:

". . . Kevin Mitchell, chairman of the Business Travel Coalition, an
advocacy group for corporations, said some analysts have argued that
the airlines' yield management system, in which business travelers
'subsidize' leisure
travelers, has run its course.

"Research conducted by American Express during the past year indicates
it is becoming more popular for business travelers to purchase leisure
fares as a means to slash costs from the company's travel budget. 'The
airlines' yields
are declining on business travel,' affirmed Pam Arway, executive
vice-president and general manager for American Express. . . ."

*** has the article "If someone says they can explain RM
to you, they probably do not understand it themselves," from the April
2002 issue of the Journal of Revenue & Pricing Management (Henry
Stuart Publications) :
(Article uses the term "TRM," which means "Technical Revenue Management."): 
" As an example, if this is done for 150 known and forecasted demand
requests for 100 spaces, and all the requests are sorted by their
descending net values, the threshold price would be the price of
request number 50. That would be the lowest net profit  acceptable and
therefore the threshold price. . . . use this knowledge to know how
profitable each booking is and what product would and would not
improve the yields. The target for TRMs is to raise the threshold
price above the level that RM has calculated as the threshold price.'

The April 2001 issue of Darwin Executive Guides contains the article
"How Low Can You Go?," by Sari Kalin, which addresses the issues of
dynamic pricing and yield management systems:

"Airlines Tie Profitability To Yield Management" by Paul Davis, first
published in SIAM NEWS (Volume 27-5, May/June 1994):

"Performance Measures:
It is difficult to estimate the benefit of the mathematical tools
employed for yield management. Because they are implemented in an
evolutionary way, not in a single dramatic transition, direct before-
and-after comparisons
are not available. Furthermore, external factors like economic
conditions and schedule and price competition can overwhelm such
traditional airline industry measures as percentage of seats filled
and revenue per passenger

"American's Decision Technologies group instead measures the economic
benefit of its work using an approach that places the actual yield
from a set of strategies on a scale whose extremes are the best- and
worst-case revenues. The difference between these extremes is called
"revenue opportunity . . . . Yield management saved American Airlines
$1.4 billion over a three-year period in which its net profits were
only $892 million."

"A Discrete Choice Model of Yield Management," published September 15,
2000, written by Kalyan Talluri of the Department of Economics and
Business at Universitat Pompeu Fabr, and Garrett van Ryzin of the
Graduate School of
Business, Columbia University:

From Northwest Travel Management, see the article "United Busts
Creative Tix Users," by Ben Chapman, published July 15, 2002:

"This latest skirmish between buyers and airlines is the result of
price-driven purchasing that encroaches on the majors' embattled yield
management schemes. United's move to recoup losses on back-to-backs
comes on the heels of other carriers' recent efforts to curtail
short-lived attempts by some travel management companies to regain
commissions on domestic flights by booking U.S. segments through
overseas locations. . . ."



The book "Yield Management" edited Yeoman and Ingold (Thomson
Learning; 2nd Edition; paperback; August 2001).

At this page:
you'll see the book has a section on YMS: "Lessons From The Airline Industry."

Also at see "Revenue Management" by Robert G. Cross
(Broadway; Reprint edition; December 29, 1997):*

Click "Look Inside the Book" feature (you must be registered at to enable this feature, but registration is free) to bring

In the search box on that page type in "airline AND revenue
management" or "revenue management AND yields," to get a plethora of
pages you can read right there at Amazon.

ARTICLES FOUND VIA EBSCO (Business Database, accessible at most public libraries):

Here are resources I found via the EBSCO database at my local library.
If these links don't work for you, please see the EBSCO instructions I
gave you earlier. (It's also possible the company you work for
maintains a library of airline and travel trade journals, including
the publications I've cited. Or, these publications may fax you the
articles you want, for a fee.)

The article "Seat Science,"  by Mark Fray, in the February 2004 issue
of Business Travel World Magazine:

Or if you can't access that link from EBSCO, see Business Travel World's homepage:
to see if you can order a copy of that issue from them.

"Revenue management: The Black Art," by: Surain Adyanthaya for
Interavia Business & Technology, Sept. 1998 issue ( Vol. 53).
HTML Link:

"Revenue Management Without Forecasting or Optimization: An Adaptive
Algorithm for Determining Airline Seat Protection Levels," by Garrett
van Ryzin and Jeff McGill, for Management Science, June 2000, (Vol. 46
Issue 6.):

"Implementing airline origin and destination revenue management
systems," by Goran Skugge, the Oct. 2002 issue of Journal of Revenue &
Pricing Management ( Vol. 1 Issue 3):

"Yield Management Impacts on Airline Spill Estimation," by Peter
P.Belobaba and Andras Farkas, from the May 1999 (Vol. 33 Issue 2) of
Transportation Science Magazine.
which includes sections on:


Here's an abstract of the article:
" . . . In this paper, we illustrate the importance of incorporating
the effects of yield management booking limits into the methodology
used to estimate both the number of passengers spilled at a given
aircraft capacity and their associated revenue value. We describe an
approach to spill estimation that makes use of the detailed demand
information provided by
yield management systems, and we present recursive algorithms that can
be used to obtain more accurate spill estimates in cases when multiple
booking classes are used. Numerical examples are presented to
illustrate the extent to which the outcomes of the different
estimation approaches differ, suggesting that these differences can be
large enough to have an impact on optimal fleet assignment."

If you want to read the full article, go to:

Transportation Science Magazine:
At that page, click "Informs," to bring up:
which will give you contact info on how to obtain the issue and article you need.


See abstracts for "Airline Yield Management" case studies:

"Yield management at American Airlines," which was published in Interfaces in 1992:


"The Financial Impact of Yield Management" from Optims:

Yield Managements Systems on Industry/Markets:

"Introduction to the Theory and Practice of Yield Management" by
Serguei Netessine of the Wharton School at the
University of Pennsylvania, and Robert Shumsky, of the W. E. Simon
Graduate School of Business Administration at
University of Rochester:

"Debunking The Ten Biggest Myths Of Yield Management Systems," by
Warren H. Lieberman, first published in The
University of Cornell H.R.A. Quarterly, Feb. 1993:

Search Strings Used:

yield management systems segmentation impact yields
"yield management systems" AND "encourage oversegmentation"
yield management systems segmentation +can hurt yields
"yield management systems" AND over AND segmentation AND impact
"yield management systems" AND over AND segmentation AND detriment AND
"yield management systems" AND over AND segmentation AND "detriment* yields"
yield management segmentation +of markets detriment
yield management +can lead +to oversegmentation
yield management oversegmentation market
"yield management systems" AND over AND segmentation
"yield management" AND encourage AND segmentation AND impact AND markets
"yield management" AND airlines AND "affects yields"
airline industry AND "yield management systems"
"yield management" AND airline AND price-driven

I hope my research is of help to you. If you have trouble navigating
any of these links, or if you need me to clarify anything, please post
a "Request For Clarification" prior to rating my answer.


Request for Answer Clarification by lanson-ga on 18 Mar 2004 22:59 PST
Thankyou......although I cannot access any of the links relating to EBSCO.

Clarification of Answer by nancylynn-ga on 19 Mar 2004 04:56 PST
Hi lanson-ga:

For the EBSCO articles, go to your local library and the librarian
will show you how to use the EBSCO system on the library's computer
system. Once you're in EBSCO, go to "Business Source Premier," then go
to the search box and type in "'revenue management systems' AND
airlines" to bring up the articles I cited for you.

If the state in which you reside has some sort of "Electronic Library"
or "Power" or "Online" library system, you can access EBSCO from your
own computer by using the bar code on your library card.

lanson-ga rated this answer:3 out of 5 stars
Thankyou for the research, a tremendous help

Subject: Re: Yield Management Systems
From: nancylynn-ga on 09 Mar 2004 10:54 PST
I am releasing my lock on this question, as I'm coming up (nearly)
empty, and this client needs this information ASAP.

Hint to fellow researchers: also try the phrase "revenue management
systems," in addition to "Yield Managements Systems."

If no one else can answer this question within the next day or two, I
will post what little data I found.

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