Correspondence: Thomas Gorin, Continental Airlines, Houston, TX, USA. Tel.: +1 713 324 6882; Fax: +1 713 324 6762. E-mail: tom.gorin@coair.com, marymichele16@yahoo.com, bill.brunger@coair.com

¹Thomas Gorin is Manager-Revenue Management at Continental Airlines, and Adjunct Professor of Revenue Management at the University of Houston's Conrad N. Hilton School of Hotel and Restaurant Management. Dr Gorin received his PhD from the Massachusetts Institute of Technology's Center for Transportation and Logistics in September 2004. His doctoral research focused on the impacts of entry in airline markets and the difficulty in assessing predatory practices in the airline industry in light of the competitive effects of airline revenue management and network flows of passengers. Prior to his doctorate studies, Dr Gorin received his Masters degree in Transportation from MIT after graduating from Ecole Centrale Paris (France), where he studied general engineering with a concentration in engineering economics.

²William G. Brunger is the former Senior Vice President of Network, Continental Airlines Inc., responsible for developing and implementing the airline's route network, including economic forecasting, route planning, scheduling, pricing, revenue management and the decision support functions related to those disciplines. Over a 25-year airline career, he held a range of positions in the distribution, pricing, revenue management, strategic planning and marketing departments. Bill is currently pursuing a Doctoral Program in Management at the Weatherhead School of Business at Case Western Reserve University, while continuing to do consulting projects for Continental. Bill has a Masters of Business Administration degree with distinction from the Wharton School of the University of Pennsylvania with concentrations in market modeling and decision sciences, and a bachelor's degree in liberal arts from Middlebury College.

³Mary Michele White is a student at the University of Houston where she is working towards a Bachelors of Science from the Conrad N. Hilton School of Hotel and restaurant Management. Her Bachelors will focus on marketing research and consumer behavior. Mary White also spent a summer as a Revenue Management Intern at Continental Airlines.

Received 27 September 2006.

Abstract

Overbooking and no-show forecasting remain critical components of airline revenue management, even as the airline business model changes to meet low-cost challenges. In this paper, we examine the performance of a blended cost-based, PNR-adjusted approach to no-show forecasting, as compared to traditional methods of no-show forecasting. Our results show that this method generates up to 10 per cent revenue gains per available seat-mile compared to historical average no-show rates, and consistently outperforms expert no-show forecasts. We also estimate the revenue gains from overbooking to range between 15 percent and 18 percent of the total revenue gains from revenue management for a 33-day period in the peak summer season.