Airplane transforming into money, symbolizing airline revenue optimization.

Unlock Airline Revenue Secrets: How Choice-Based Management Can Boost Profits

Jordan Keane in Business & Economy August 2025 • 4 min read.

"Dive into the innovative strategies major airlines are using to optimize flight pricing and assortment, and how these methods can significantly increase revenue."

The airline industry, known for its razor-thin margins and fierce competition, is constantly seeking innovative strategies to maximize revenue. One approach that has gained significant traction is choice-based revenue management (CBRM). This sophisticated methodology moves beyond traditional seat inventory control to focus on understanding and influencing customer booking choices.

Imagine an airline that not only knows how many seats it has on a flight but also understands why customers choose specific flights, departure times, and fare classes. By modeling these choices, airlines can optimize pricing, assortment (the combination of flights and fares offered), and booking policies to capture a greater share of the market and increase overall profitability. This article delves into the complexities of CBRM, exploring its potential to transform airline revenue management.

In today’s dynamic market, airlines grapple with numerous factors influencing customer decisions, including fluctuating demand, competitor actions, and diverse customer preferences. CBRM provides a framework for navigating these challenges and making data-driven decisions that enhance both revenue and customer experience.

The Core of Choice-Based Revenue Management

Airplane transforming into money, symbolizing airline revenue optimization.

At its heart, CBRM is about understanding the factors that drive customer booking decisions. Airlines gather vast amounts of data, including booking history, fare availability, competitor pricing, and customer demographics, to build sophisticated models. These models aim to predict the probability of a customer choosing a particular flight or fare class, given the available options.

One key element of CBRM is incorporating customer heterogeneity. Not all travelers are the same. Some prioritize price, while others value convenience, flexibility, or specific departure times. CBRM models account for these differences by segmenting customers and tailoring pricing and assortment strategies to each segment.

Modeling Customer Preferences: Building models that accurately predict how customers will choose between flight options.
Dynamic Pricing: Adjusting fares in real-time based on demand, competition, and customer behavior.
Assortment Optimization: Selecting the optimal mix of flights and fare classes to offer at any given time.
Competitive Analysis: Monitoring and responding to competitor actions to maintain a competitive edge.

These strategies enable airlines to capture more revenue by offering the right products to the right customers at the right prices. For instance, an airline might increase fares for flights with high demand from business travelers while offering discounted fares on less popular flights to attract price-sensitive leisure travelers.

The Future of Flight Revenue

Choice-based revenue management represents a significant advancement in how airlines approach pricing and inventory control. By embracing data-driven decision-making and understanding customer preferences, airlines can unlock new opportunities to increase revenue, improve customer satisfaction, and navigate the complexities of the modern aviation market. As technology continues to evolve, CBRM will likely become even more sophisticated, offering airlines a powerful tool for staying ahead of the competition and achieving sustainable profitability.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: 10.2139/ssrn.2404193, Alternate LINK

Title: Choice Based Revenue Management For Parallel Flights

Journal: SSRN Electronic Journal

Publisher: Elsevier BV

Authors: Jim G. Dai, Weijun Ding, Anton Kleywegt, Xinchang Wang, Yi Zhang

Published: 2014-01-01

Everything You Need To Know

What is Choice-Based Revenue Management (CBRM) and how does it differ from traditional seat inventory control?

Choice-Based Revenue Management, or CBRM, is a methodology used by airlines to understand and influence customer booking choices. It goes beyond simply managing seat inventory. By modeling why customers choose certain flights, departure times, and fare classes, airlines can optimize pricing, assortment, and booking policies to increase profitability and market share. This involves collecting data on booking history, competitor pricing, and customer demographics to predict booking probabilities.

What type of data do airlines collect and analyze to implement Choice-Based Revenue Management effectively?

Airlines use vast amounts of data to build sophisticated models in CBRM. This data includes historical booking data, fare availability, competitor pricing, and customer demographics. These models aim to predict the likelihood of a customer selecting a particular flight or fare class from the available options. By analyzing this data, airlines can identify patterns and trends in customer behavior, allowing them to fine-tune their pricing and assortment strategies.

How does Choice-Based Revenue Management account for customer heterogeneity, and why is this important?

Customer heterogeneity refers to the fact that not all travelers have the same priorities. Some may prioritize the lowest price, while others may value convenience, flexibility, or specific departure times. In CBRM, airlines segment customers based on these preferences and tailor their pricing and assortment strategies accordingly. This approach enables airlines to offer the right products to the right customers at the right prices, maximizing revenue and customer satisfaction.

What is dynamic pricing in the context of airline revenue, and how does it help airlines maximize profits?

Dynamic pricing involves adjusting fares in real-time based on factors like demand, competition, and customer behavior. This strategy allows airlines to respond quickly to changing market conditions and optimize revenue. For example, an airline might increase fares for flights with high demand from business travelers while offering discounted fares on less popular flights to attract price-sensitive leisure travelers. The implementation requires sophisticated algorithms and real-time data analysis.

Can you explain assortment optimization within Choice-Based Revenue Management and its impact on customer choices?

Assortment optimization is the process of selecting the best mix of flights and fare classes to offer at any given time. By carefully curating their assortment, airlines can ensure that they are meeting the needs of different customer segments while maximizing revenue. This involves analyzing demand patterns, competitor offerings, and customer preferences to determine which flights and fare classes are most likely to appeal to different types of travelers. It ensures that the airline offers the most attractive options to potential customers.