Air travel has become the leading form of transportation this century and its demand will double over the next 20 years. For airlines to maintain their profitability, they must turn to airline revenue management. Since deregulation, airlines have adopted this system to maximize revenue and profitability. What exactly is Revenue Management? It is a system designed to take advantage of the market by segregating the market population into different categories of consumer needs, income and general consumer behavior. Through this process airlines improve product availability and pricing to maximize revenue. The implementation of airline revenue management occurred shortly after deregulation. As the government has ended control over air routes and fares, airlines have had to find a way to maintain and sustain their profitability. The first airline to introduce revenue management was none other than American Airlines. In 1985 and under pressure from low-cost airlines such as People Express, American airlines opted for a computerized approach to inventory allocation. This was the birth of revenue management in the airline industry. Furthermore, the American Saber Airmax, the first computerized RMS system, was born. In its first three years of use, American's Saber Airmax contributes an additional $1.4 billion in revenue. For revenue management to be successful, four key conditions must be met. The first requires a permanent amount of inventory available for sale. This means that a fixed number of seats should be available per aircraft per route. Second, the resources sold must be perishable. Seats are perishable items, if not sold they expire worthless. Third, the most vital part of the r… middle of the paper… question as a function of marketing variables, such as price or promotion. This involves creating specialized forecasts such as market response models or cross-price elasticity estimates to predict customer behavior at certain prices. By combining these forecasts with calculated price sensitivity and pricing ratios, a revenue management system can then quantify these benefits and develop price optimization strategies to maximize revenue. There are several types of revenue management, some examples include fare class yield management, heuristic bid pricing, shift-corrected virtual nesting, and probabilistic bid pricing. Rate class yield management is a leg-based inventory control revenue management. This is a top-down approach, offering maximum protection to the highest class, then the next class, and so on until all seats have been assigned to a fare class.