: Easy Profit – A Revenue Management Pilot Harvard Case Solution & Analysis

Problem Diagnosis

The concept of revenue management is introduced by this case and it provides us with the tools for maximizing the revenues in diverse industries for maximizing the profitability and providing the competitive advantage to the firms. Revenue management is set to originate in the airline industry and it is the industry where this case has been set. We would be taking the position of the revenue manager that is in charge of selling the seats on a plane. The problem and the goal is to achieve the revenue maximizing strategy for capturing the maximum value of the rent from the market.

The sales of the tickets occur during the 15-week period prior to the time of the departure and the company has two different classes of the customers that are the business customers and the leisure customers. The capacity of the airline is 100 seats in a single cabin plane. Therefore, a strategy needs to be devised to set aside a specific number of seats for the late coming and high paying business class customers. There are three different challenges and we need to resolve all the revenue strategy issues with the help of the Easy Profit Software in which the simulation has to be performed.

Easy Profit – A Revenue Management Pilot Harvard Case Solution & Analysis

Case Analysis

In analyzing this case and devising the optimal revenue management strategy for Easy Profit Airline, we need to perform simulations and analyze the results for the three challenges that are stated in the case. The simulation results and tradeoffs for all the three challenges are discussed as follows

Challenge 1: Single Static Booking Limit

In this challenge we have set different booking limits for the leisure class customers at the beginning of the 15 week sales horizon and we compared them with the benchmark scenarios of 0 seats protected, 50 seats protected and 100 seats protected. We tested the revenues by protecting 30 seats and 75 seats. The revenue profile and the revenue averages for all the five flights are shown in the revenue report below:

It is clearly depicted that the revenue is maximized if the booking limit is set as 75 seats for the leisure class customers. The optimal revenue at this point is $ 9000 and the minimum revenue foregone based on the simulation results would be $ 160. The flight status is shown in the diagram below:

Therefore, the challenge 1 can be addressed by setting the booking limit at 75 seats at which the airline would be generating the maximum revenue and the revenue foregone would be the least.

Challenge 2: Dynamic Multiple Booking Limits

Under this challenge and simulation exercise, different booking limits will have to be set in the different periods. The booking limit decision would be dynamically revised in this challenge for each week based on the demand information that would be materialized for the last week. In this challenge we have tried to set the booking limits at the start of each of the 15-week period for all the 20 flights however.................

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