Authors:
Elias Olivares-Benitez
1
;
Ana Paula Orozco Esparza
2
;
Juan Orejel
1
and
Catya Zuniga
3
Affiliations:
1
Faculty of Engineering, Universidad Panamericana, Alvaro del Portillo 49, Zapopan 45010, Mexico
;
2
Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder), Germany
;
3
Faculty of Technology, Amsterdam University of Applied Sciences, Amsterdam, The Netherlands
Keyword(s):
Airline Profit, Overbooking, No-Show, Seat Inventory, Airplane Selection.
Abstract:
This research presents a model for airline profit optimization considering information such as demand forecasts, seat inventory, operational costs, overbooking penalties, expected no-shows, and time-dependent fare classes. The main decisions in the model are the selection of the aircraft, the number of seats sold per fare, including overbooking, and the number of denied seats. The model incorporates probabilistic information, like the expected demand and the expected proportion of no-shows. The model is constructed as a deterministic mixed-integer program. Some data was estimated using information acquired from different industry sources, and some data was set with reasonable estimations. A factorial experiment was designed to understand the importance of different parameters. The input variables were the overbooking compensation penalty, the no-show probabilities per fare and time block, and the seat demand. Using a statistical analysis, it was determined that the no-show estimation
has the most significant impact on the total revenue, and the demand forecast after that. These results highlight the importance of precise estimations to increase the airline’s profit.
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