Applying an axiomatic approach to revenue allocation in airlines problems

TL;DR

This paper applies an axiomatic approach to justify and analyze revenue sharing mechanisms among airlines, supporting IATA's weighted system and exploring cases with equivalent flights and fixed weights.

Contribution

It provides a theoretical foundation for IATA's revenue sharing method using axiomatic analysis, clarifying when and why the weighted system is appropriate.

Findings

Weighted system justified by axiomatic analysis

Support for IATA's mechanism with fixed weights

Analysis of equivalent flights case

Abstract

The International Air Transport Association (IATA) states that the revenue from interline tickets must be shared among the different airlines according to a weighted system. We analyze this problem following an axiomatic approach, and our theoretical results support IATA's procedure. Our first result justifies the use of a weighted system, but it does not specify which weights should be applied. Assuming that the weights are fixed, we provide several results that further support the use of IATA's mechanism. Finally, we provide results for the case in which all flights can be considered equivalent and no weighting is required.