Correspondence: Christine S M Currie, School of Mathematics, University of Southampton, Highfield, Southampton, SO17 1BJ, UK. E-mail: christine.currie@soton.ac.uk

¹is a lecturer in Operational Research in the School of Mathematics at the University of Southampton, where she also completed her PhD. One of her main research areas is the pricing of airline tickets and she has carried out a number of recent projects with major UK airlines. Her research has appeared in the European Journal of Operational Research and the Journal of the Operational Research Society.

²is currently employed by a major UK airline, where he is working closely with the Revenue Management department. He previously gained an MSc in Operational Research from the University of Southampton in 2006, writing a dissertation on airline pricing ladders, and a BSc in Mathematics from the University of Bath in 2005.

Received 10 January 2007; Revised 10 January 2007; Published online 27 June 2008.

Abstract

Pricing ladders are widely used in the airline industry to define the discrete set of prices that can be charged for seats on a flight. We consider the factors that affect the setting of these ladders for one-way economy tickets. The minimum and maximum fares are assumed to be fixed and we focus on maximising the revenue generated on a flight by changing the spacing of the intermediate fares. Three scenarios are considered for the market: single flight with perfect market segmentation and imperfect market segmentation and multiple flights on one route.