Chapter 2

Applications of Revenue Management

History of Revenue Management

American Airlines is credited with introducing the practice of revenue management—then known as yield management—in 1985.1 The first major low-fare airlines, most notably People Express, appeared on the scene, posing a major revenue threat to the established airlines. Matching the low fares across the board was not considered an option because the revenue loss would be too great. American sought ways to target fare reductions to customers, times, and flights in a way that would most impact its new competitors, while maintaining its normal price structure in other circumstances. Customers welcomed the price competition. Many flyers were wary of the new airlines; they welcomed ...

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