TWA reservations analysis : project update -- demand distribution patterns

Abstract

Background: Research into airline capacity management and yield optimization at the Flight Transportation Laboratory is being performed with the support and funding of the Cooperative Research Program. The focus of this research over the past six months has been on patterns of demand for the different fare products available in airline markets. The objective of this work is to gain insight into the most complex component of the capacity management problem faced by airlines--variations in demand. Trans World Airlines, a participant in the Cooperative Research Program, has given us access to reservations data and booking histories from its domestic operations over the past several years. A preliminary analysis of final reservations totals by day and by fare class for a sample of two transcontinental flights was undertaken to explore the database and identify its potential uses. The results of this preliminary analysis are discussed in an FTL report completed in April 1984. The preliminary analysis examined trends in daily booking levels and their variability over the sample period. The reservations totals exhibited traditional seasonal and daily variations, except when disrupted by changes in product pricing and/or marketing. Of potential importance to the capacity management problem was the finding that the frequency distributions of demand over the sample period (and portions thereof) did not appear to be Normal (Gaussian) in shape, but rather were- positively skewed. An intuitive explanation of such a distribution shape was suggested in the paper, namely that some base level of demand can generally be expected and that extreme values are more likely to be high relative to the mean number of reservations. This issue of demand distribution patterns was pursued with further, more detailed, analysis of reservation data from a larger sample of TWA flights. This paper outlines the analysis that was undertaken and discusses the analysis results in the context of airline capacity management.