Airline Alliance Revenue Distribution Considering Horizontal and Vertical Competition

Considering the existence of multi-level fares in the alliance,and the existence of horizontal competition and vertical competition at the same time,this paper intends to maximize the revenue of airline alliance and fairly distribute the revenue to member airlines.Firstly,a model is built under the centralized mechanism,in which all airlines in the alliance are regarded as a whole.By solving the model,the shadow price of each flight leg on the code-sharing route is gotten.It is used to calculate the proportion of the revenue distribution.Then,the centralized model is decomposed into the single airline model by the proportion.The seat allocation among airlines and distributed revenue can be gotten by solving the model.Three typical examples are designed to test it.The results show that,the model can effectively reflect the managerial principal of the airline alliance,that is maximizing total revenue and fairly distributing the revenue among member airlines.