o & d forecasting for o & d control arjan westerhof decision support
TRANSCRIPT
o & d Forecasting for O & D Control
Arjan WesterhofDecision Support
April 21, 2023 AGIFORS Yield Management June 2003 2
OutlineOutline
• Introduction: O&D control and forecasting
• Why O&D’s are usually o&d’s
• 3 alternatives for handling o&d’s in the forecast
• Conclusions and discussion
April 21, 2023 AGIFORS Yield Management June 2003 3
O&D ControlO&D Control
• KLM implemented O&D revenue management in 2000 (first sub-networks) / 2001 (entire network)
• Systems based on – O&D demand forecasting – O&D fare forecasting– network optimization
• Organization based on O&D / Point of Sale
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Bottom Up vs Top DownBottom Up vs Top Down
KLM uses bottom up demand forecasting
This seems more powerful to capture the various cultural differences in KLM’s home market than top down forecasting
April 21, 2023 AGIFORS Yield Management June 2003 5
From Agifors YM 2002From Agifors YM 2002
April 21, 2023 AGIFORS Yield Management June 2003 6
KLM versus LHKLM versus LH
LH
KL
Are we almost the
same ?
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Every customer is different!Every customer is different!
O&D is not the only dimension …
… other dimensions that might influence booking behavior and passenger revenue:
– Customer or Point of sale (agent / country / corporate account / …)
– Booking class / ticket restrictions– Departure Day of Week– Departure season– Special events– Etc.
Define ‘product’ at a more detailed level
April 21, 2023 AGIFORS Yield Management June 2003 8
The product curveThe product curve
We are different!?
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%P
ax
%Products
LH Products (?)KL Products
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%O&D’s
%P
ax
KL O&D’s
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Why is KLM different from LH?Why is KLM different from LH?
Though Amsterdam is a great place to visit
±70% of our passengers use Amsterdam only for connecting to other destinations
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‘Med
ium
’
‘S
mal
l’
‘BIG
’
Introducing ...Introducing ...
The o&d World
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ax
— KL Products
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O&D or o&d?O&D or o&d?
• > 70% of the products are ‘exotic’ o&d’s (not sold regularly)
• If forecasts are created for these o&d’s:– The quality of these forecasts can hardly be
measured– > 70% of computation time will be involving
‘meaningless’ numbers– The forecast will be confusing to the users
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Solutions for o&d ForecastingSolutions for o&d Forecasting
• Do nothing special
• Forecast aggregation
• Forecast elimination
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Do nothing specialDo nothing special
Network optimization will ‘aggregate’ the o&d’s to the leg-level when determining bid prices and buckets
Advantages:– All detailed information is available in the forecast– Acceptance/rejection in the RES system aligned
with forecast/optimization system
Disadvantages:– Forecast quality can not really be measured– Much data with little information (user/computing)
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Solutions for o&d ForecastingSolutions for o&d Forecasting
Do nothing special
• Forecast aggregation
• Forecast elimination
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Forecast aggregationForecast aggregation
Drop one or more of the dimensions in the product definition for products with insufficient volume
For example:– Drop O&D dimension by splitting o&d’s in legs– Drop point of sale dimension– Drop booking class dimension or aggregate to
cabin level
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Forecast AggregationForecast Aggregation
Advantages– Quality of aggregated forecasts can be measured– Helps to focus on important flows
Disadvantages– Bookings are evaluated in the RES system with
different values than used in optimization– Unconstraining uses different revenue values than
the ones used during passenger acceptance– Products with different booking behavior might be
aggregated
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Forecast quality?Forecast quality?
Hard to measure:
• Many O&D’s/Flights are constrained during some time in the booking cycle
• There are almost no stable reference periods anymore (Sep 11 / War / SARS / …)
• Evaluating forecasts on the leg level might bias the evaluation to the benefit of the aggregated forecasts
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Forecast qualityForecast quality
Leg/cabin level, open flights on two lines
Note: even on an open flight some products may not be for sale due to constraints on other flights
Not much difference in forecast
Which one is better? REMAINING DEMAND No aggregationREMAINING BOOKINGS CYREMAINING DEMAND with aggregation
REMAINING DEMAND No aggregationREMAINING BOOKINGS CYREMAINING DEMAND with aggregation
TIME
Rem
. de
man
d
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TIME
Ave
rage
bid
pric
e
BID PRICE No Aggregation
BID PRICE with aggregation
Aggregation vs. Do NothingAggregation vs. Do Nothing
Some differences but not too big with 50% fewer forecast products
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Solutions for o&d ForecastingSolutions for o&d Forecasting
Do nothing special
Forecast aggregation
• Forecast elimination
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Forecast eliminationForecast elimination
Throw out the o&d’s
Re-map these o&d’s to products with significant demand (O&D’s)
Experimental results indicate that this does not result in a good forecast
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ConclusionConclusion
• Most of the products that are sold are ‘exotic’, there are much more o&d’s than O&D’s
• If these exotic products are being forecast, they are polluting the system
• Aggregation solves the small number problem but the quality of the forecast is not always better
• As a result, the choice between aggregating or not aggregating seems mainly a matter of personal preference (?)
April 21, 2023 AGIFORS Yield Management June 2003 23
Questions ?