9Profitability Forecasting Models

9.1 Introduction

The previous chapter presents an example of itinerary choice models that estimate the probability of selecting a given itinerary among a set of competing itineraries in a given city‐pair. This probability corresponds to what is known as the unconstrained market share of the itinerary. The unconstrained market share of a given itinerary represents the percentage of travelers that select the itinerary assuming unlimited seat capacity. In other words, it represents the passenger market share of the itinerary when the seat capacity of its flight(s) can accommodate all passengers who select the itinerary. However, when the seat capacity of the itinerary is less than its demand, some of this demand is spilled to other itineraries serving this city‐pair. In this case, the actual market share of this itinerary is determined by its seat capacity. In addition, the actual market share of each itinerary in the city‐pair would depend partially on the number of passengers spilled from other itineraries and recaptured on this itinerary.

To estimate the actual market share of the itineraries, an analytical tool is needed to capture the interaction among the different itineraries at the network level. This tool replicates how demand is spilled and recaptured among the different itineraries of the different competing airlines and their corresponding flights (Abdelghany and Abdelghany 2012). It also tracks the number of passengers and computes ...

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