AVL 708- Air Cargo Revenue Management

Contact Information
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Course Description

As a capital-intensive industry, air cargo industry requires an extensive analysis about determining of the out-of-pocket costs of excess capacity and the opportunity costs of underutilized capacity. This is very essential for occurring of supply and demand equilibrium obtained by e-business platforms, especially. Hence, in this course, capacity aggrements in air cargo industry, the relationship between supply contracting and revenue management, capacity-option pricing model will be emphasized. In addition to that, a model in course book will be introduced and components of the model will be taught in details. Furthermore, following a case study, managerial implications will be introduced.

Course Outcomes

Upon the completion of this course, the student will be able to:

  1. define and demonstrate knowledge of concepts and characteristics of air cargo operations and components of revenue management.- AVLLO: 1, 3.
  2. discern the necessary mechanism and techniques for revenue management and monitoring the performance.- AVLLO: 2, 3, 4
  3. find out how to overcome the problems related to managing the revenues and correct them with the written and oral communication skill as well as the analytical thinking skill that this course provides. –AVLLO: 1, 2,3,4,6,9
  4. have the ability to assess and predict the effects of future changes in air cargo revenue management. –AVLLO: 1,2,4,6.
  5. improve an effective oral and written communication skill and working ability both individually and as a member of a group.- AVLLO: 5,7.
  6. enhance critical thinking skill by integrating relevant information, decision-making techniques in air cargo revenue management..- AVLLO: 6
  7. make ethical and legal business decisions.- AVLLO: 9.

The course outcomes are assessed by using 5 short exams, 1 term project, 1 mid-term exam and 1 final exam.

AVL Learning Outcomes:

Upon successful completion of the program, students will be able to:

  1. have adequate knowledge in aviation, logistics and supply chain and computing tools to make decisions in new or unpredictable environments of aviation logistics.
  2. formulate and solve a complex aviation logistics problems involving human, material, machinery, money, information, time and energy elements; analyze and design it under realistic constraints and conditions.
  3. use information technologies effectively with the knowledge of aviation logistics.
  4. design and conduct experiments, gather data, analyze and interpret results for investigating complex aviation logistics research questions.
  5. work efficiently in interdisciplinary and multidisciplinary teams by collaborating effectively, in addition to an individual effective working ability.
  6. enhance critical thinking skill by integrating relevant information, decision-making techniques, and concepts through the interdisciplinary aviation logistics area.
  7. communicate effectively, using information technology and oral and written skills to enhance decision making process through better communication.
  8. be aware of the importance of lifelong learning.
  9. make ethical and legal business decisions by considering cultural differences.
  10. recognize the importance of entrepreneurship, innovation and sustainable development.
  11. have knowledge of the global and social effects of aviation logistics on health environment, and safety, and contemporary issues of the century reflected into the field of aviation logistics.
Prerequisites

There is no prerequisite for this course.

Required Text(s) and Materials
  1. Hellermann, R. (2006) Capacity Options for Revenue Management: Theory and Applications in the Air Cargo Industry. Lecture Notes in Economics and Mathematical Systems No: 575, Springer.
  2. The instructor can provide some articles published in journals, case-studies and additional readings related to current issues in air cargo revenue management when needed.
Assessment Method(s) and Evaluation

Grading will be based upon using 5 short exams, 1 term project, 1 mid-term exam and 1 final exam.

Mid-Term Exams:

This is 30% of the final average: The mid-term exam will be administered by means of the portal on the scheduled date. The mid-term exam will be an essay type exam. It consists of 4-5 questions. There will be 2 hours to complete it.

Final Exam:

This is 40% of the final average: A comprehensive final exam will be administered by means of the portal on the scheduled date. The final exam will be an essay type exam. It consists of 4-5 questions. There will be 2 hours to complete it.

REMARK:

Questions in the exams are designed to make sure that you understand the main concepts, tools and procedures in an air cargo revenue management. The types of questions on the exams will be similar to the class materials covered during the class period. Since the final exam is cumulative, the materials covered after the second midterm exam will be given more weight in the final exam.
The evaluation of the mid-term and final exams will be as follows:
Questions in the exams are designed to make sure that you understand the main concepts, tools and procedures in an air cargo revenue management. The types of questions on the exams will be similar to the class materials covered during the class period. Since the final exam is cumulative, the materials covered after the second midterm exam will be given more weight in the final exam. The evaluation of the mid-term and final exams will be as follows: The scores will be given according to organization of information, language and grammar and content of the written exam. In the organization of information part, well organized information with well constructed paragraphs; subheadings provided (if needed); logical progression of ideas are essential. In the language and grammar part, fluent sentences, no grammatical spelling and punctuation errors, accurately presented materials and sources are crucial. In the content part, information that you provide has to relate clearly to the main topic and include supporting details and/or examples, clear well-focused topic. The main idea has to stand out and be supported by detailed information.

Short exams:

This is 10% of the final average: Students are required to complete 5 short exams throughout the course by means of the portal. The short exams are composed of ten multiple-choice questions with each of them covering specific chapters. Related chapters to each homework will be announced during the lecture.
Due dates will be announced when short exam is assigned.
Late short exams will not be graded. There will be no make-up short exam if you fail to complete it by the deadline.

Term project: This is 20% of the final average:

These assignment is related to current issues in air cargo revenue management and the topic will be selected by the student. Until the 3.week, the student has to inform the instructor about the topic that is selected by the student. The student can study the topic after getting approval of the instructor.
On an assigned day of the week, the student will upload the term project to the portal. The term project is due on the last day of class. Term project has to include i)abstract, ii)introduction, iii) methodology, iv)results and discussion, v) conclusion and vi) references. The student can combine two or more headings in one appropriate heading, if needed. This option is upon the approval of the instructor.

Term- project has to included the main components as follows:
  • The abstract is the main summary of the term project.
  • The introduction part provides background information necessary to understand the research and getting readers interested in the subject.
  • In the methodology part, methods used are introduced and be summarized. The relation between the method and the research question has to be pointed out.
  • In the results and discussion part is the most essential part of the work. It is here that the student demonstrates the work that have accomplished. In this part, the significance of the project is stated. The quality of this part will impact the final average more than any other component of the term project.
  • The conclusion part does state clearly what the findings of the project demonstrate about the problem that were tackled in the project.
  • References have to be placed.
  • Further assistance will be provided by the instructor when needed. E-mail the instructor and ask for an appointment except the office hours.
Grading
Grading Scale
Grade Quality Points
A = Excellent 90 – 100%
B = Good 80 – 89%
C = Satisfactory 70 – 79%
D = Passing 60 – 69%
F = Failing below 60%
Incompletes- I

Incompletes (I) demonstrate that a student was doing sufficient work at the end of a semester period but, for reasons beyond the control of the student, was unable to complete all requirements of the course in the related semester. The grade I obliges student to complete all course requirements within a time period that is specified by the instructor. This time period can’t exceed one academic calendar year from the end of the semester in that the grade I is assigned. The students has to arrange with the course instructor in order to complete all course requirements in a specified time period. If all course requirements are not completed by the students in a specified time period, I is changed to the grade F, unless the instructor has assigned a different grade.

Withdrawals-W

Students may withdraw from courses following the drop and add period until mid-term by completing the withdrawal process on the portal. A grade of "W" will appear in the student's official records if the student has withdrawn according to the SFU’s Withdrawal Policy. (Please see the SFU’s Withdrawal Policy for details.)

Attendance Policy

Participation and consistent attendance is essential for acceptable performance in the course. The students are expected to be present each class period except when special hardships occur, e.g. illness.
Regulations for attendance of Suje Florida University will be applied for this class.

Academic Integrity

Academic integrity is the responsibility of all Suje Florida University faculty and students. Cheating and plagiarism are not tolerated and will result in a failing grade, if the student is found guilty of cheating. Students are responsible for knowing and abiding by the Academic Integrity Policy. All students are expected to do their own work and to uphold a high standard of academic ethics.

Course Expectations
  1. As a portal course, it requires extensive work be done by students using the Internet. You must familiarize yourself with your portal account. Supplemental materials, including lecture notes will be posted on portal.
  2. Students are expected to read assigned material(s) prior to lecture and participate in discussions and activities.
  3. Log on at least three times a week – on different days in order to completely weekly assignments, assessments, discussions and/or other weekly deliverables as directed by the instructor.
  4. Check your e-mail often.
  5. Communications with the instructor should be via portal or e-mail. Email is preferred. Emails sent Monday through Friday will be answered within 24 hours. Emails sent Saturday– Sunday may not be answered until Monday.
  6. It is your responsibility to ensure you are registered throughout the course.
  7. Changes may be necessary in the syllabus. Students will be informed of changes to the syllabus.
  8. Students are responsible for any new material or announcements missed due to the absence.
Tentative Detailed Course Content and Recommended Readings
Week Topic Recommended Reading(s)
1 Introduction
2 Capacity Agreements in the Air Cargo
Industry- Challenges in Air Cargo
Transportation- Market Dynamicsy
Hellermann, R. (2006) Capacity Options for Revenue Management: Theory and Applications in the Air Cargo Industry.
Lecture Notes in Economics and Mathematical Systems No: 575, Springer.- Ch. 2.1.
3 Capacity Reservation and Dynamic Pricing (Case Study from the book:
Lufthansa AG)- Products, Competition, Revenue Management System, Rationale and Problems of Long-Term Contracts
Hellermann, R. (2006) Capacity Options for Revenue Management: Theory and Applications in the Air Cargo Industry. Lecture Notes in Economics and Mathematical Systems No: 575, Springer.- Ch. 2.2.
4 Supply Contracting and Revenue Management- Advance Sale of Capacity: Economic Reasoning and Implications, Selected Modeling Approaches- Supply Contracts: Order Quantity Decisions Under Stochastic Demand: The Newsboy Model, Purposes of Contracts, Contract Types Hellermann, R. (2006) Capacity Options for Revenue Management: Theory and Applications in the Air Cargo Industry.
Lecture Notes in Economics and Mathematical Systems No: 575, Springer.- Ch. 3.1 and 3.2.
5 Revenue Management: Background, Components of Revenue Management Systems, Implementation and Impact, Areas of Application, Air Cargo Revenue Management Hellermann, R. (2006) Capacity Options for Revenue Management: Theory and Applications in the Air Cargo Industry. Lecture Notes in Economics and Mathematical Systems No: 575, Springer.- Ch. 3.3.
6 Capacity-Option Pricing Model: Model Overview, Setup and Assumptions Hellermann, R. (2006) Capacity Options for Revenue Management: Theory and Applications in the Air Cargo Industry. Lecture Notes in Economics and Mathematical Systems No: 575, Springer.- Ch. 4.1 and 4.2.
7 Capacity-Option Pricing Model: The Intermediary’s Problem, The Asset Provider’s Problem Hellermann, R. (2006) Capacity Options for Revenue Management: Theory and Applications in the Air Cargo Industry. Lecture Notes in Economics and Mathematical Systems No: 575, Springer.- Ch. 4.3.
8 MID-TERM EXAM
9 Model Results and Comparative Statics- Framework for the Analysis: The Base Case, Scenario Definition, Numerical Solution Procedure
Illustration of Optimal Policies: Optimal Reservation Policy of the Intermediary, Optimal Pricing Policy of the Asset Provider
The Benefit of the Contract Market: Optimal Pricing and Reservation Policies, Expected Profits, Capacity Utilization
Hellermann, R. (2006) Capacity Options for Revenue Management: Theory and Applications in the Air Cargo Industry. Lecture Notes in Economics and Mathematical Systems No: 575, Springer.- Ch. 5.1, 5.2 and 5.3.
10 Model Results and Comparative Statics- Framework for the Analysis- Comparative Static Analysis of Contract Types: Capacity Size, Contract Market, Spot Market, Cost Structure, Reduction of Double-Marginalization, Summary of Results Hellermann, R. (2006) Capacity Options for Revenue Management: Theory and Applications in the Air Cargo Industry. Lecture Notes in Economics and Mathematical Systems No: 575, Springer.- Ch. 5.4, 5.5 and 5.6.
11 Model Extensions: Distribution of Profits, Correlations, and Overbooking- Distribution of Profits, nterdependencies Between Stochastic Variables, Correlation Between Spot Market Demand and Spot Price, Demand Correlation Between Contract and Spot Market Hellermann, R. (2006) Capacity Options for Revenue Management: Theory and Applications in the Air Cargo Industry. Lecture Notes in Economics and Mathematical Systems No: 575, Springer.- Ch.6.1 and 6.2.
12 Model Extensions: Distribution of Profits, Correlations, and Overbooking- Overbooking: No-Shows Within the Capacity-Option Pricing Model, Conditions for Useful Application, Optimal Overbooking Policy, Illustration of Optimal Overbooking Policy, Joint Optimization of Tariff and Booking Level Hellermann, R. (2006) Capacity Options for Revenue Management: Theory and Applications in the Air Cargo Industry. Lecture Notes in Economics and Mathematical Systems No: 575, Springer.- Ch.6.3.
13 Application Case Study in the Air Cargo Industry Hellermann, R. (2006) Capacity Options for Revenue Management: Theory and Applications in the Air Cargo Industry. Lecture Notes in Economics and Mathematical Systems No: 575, Springer.- Ch. 7.
14 Managerial Implications and Conclusion Hellermann, R. (2006) Capacity Options for Revenue Management: Theory and Applications in the Air Cargo Industry. Lecture Notes in Economics and Mathematical Systems No: 575, Springer.- Ch.8.
15 Review of semester
16 FINAL EXAM
Student Opinion of Instruction

At the end of the term, all students will be expected to complete an online Student Opinion of Instruction survey (SOI) that will be available on portal. Students will receive an e-mail notification through their Suje Florida University e-mail address when the SOI is available. SOI responses are anonymous to instructors/administrators. Instructors will be able to view only a summary of all responses two weeks after they have submitted final grades.

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Access Statement

Students with disabilities who are experiencing barriers in this course may contact the Access Office for assistance in determining and implementing reasonable accommodations.