In order to maximize the revenues, the businesses should allocate the capacity in advance so that any opportunity to satisfy the need of high-class customer that might come any time should not go wasted. Curry, (1990) stated Capacities should be divided into different classes like high-class middle class as well as low class. The best way is to keep filling the low class first and store the high as well as a middle class for later usage at higher rates. The paper conducts an experiment to check for profits based on first come first serve as well as capacity allocation methods.
After simulation, it was proved that capacity allocation generates considerable higher profits as compared to first come first serve process. Pak, Daker, Kindervater, (2003) state that in industries such as airline industry earlier it was stated that they have fixed business as well as economy class seats but this paper negates the concept of a limited number of seats and introduces the concepts of convertible seats. As per the current demand, the economy class can be converted to business class or business class can be converted to economy class without losing the profits.
Since airline industry is based on the model that all passengers are not charged uniformly and there is a limited capacity therefore instead of serving customers on the basis of first come first server if customers are dealt on the grounds that how much revenues they are generating then revenues can be increased. Initially, curtains were moved to convert an economy class to business class or a business class to economy class which is now not preferred instead a number of seats should be increased in business class to convert to economy class.
Sylla, (2000) paper suggests that this is a good practice especially in times of higher seasonal demands. The paper also suggests that in order to make up for eleventh-hour seat cancellation the airline should make prior overbookings.
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