Modeling the choice of an airline itinerary and fare product using booking and seat availability data

Over the last ten years, the rapid growth of low-cost airlines and the development of web-based distribution of airline tickets have transformed the competitive environment in the airline industry worldwide. The relaxation of fares rules by low-cost airlines has disrupted the pricing and revenue management models of large network airlines. A better understanding of passenger choice behavior is now required to support the development of new strategies to compete more effectively in the current marketplace. In order to avoid the risk of bias associated with stated preference data, we focus in this research on how to develop a model of airline passenger choice based on booking data. Previous studies based on booking data have been limited to the sole choice of an airline itinerary and did not account for heterogeneity of behavior, a major characteristic of airline markets. This is due to the properties of booking data. For instance, only the chosen alternative is recorded in airline bookings and no information is available on other travel alternatives available at the time of the booking. Similarly, booking records contain no information on trip purpose that is traditionally used to segment airline markets. In this dissertation, we develop a modeling framework to overcome these limitations and extend booking-based passenger choice models to the joint choice of an airline itinerary and fare product. Booking data was combined with fare rules and seat availability data to incorporate the impact of pricing and revenue management and reconstruct the choice set of each booking. Characteristics of the traveler and the trip were retrieved from the booking records and used to replace trip purpose.