Cargo Revenue Management With Allotments And Spot Market Demand

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Executive Summary

The paper considers a problem faced by an airline that operates a number of parallel flights to transport cargo between a particular origin destination pair. The airline can sell its cargo capacity either through allotment contracts or on the spot market where customers exhibit choice behavior between different flights. The goal is to simultaneously select allotment contracts among available bids and find a booking control policy for the spot market so as to maximize the sum of the profit from the allotments and the total expected profit from the spot market. Computational experiments show that the proposed approach can be scaled to realistic problems and provides high quality allotment allocation and booking control decisions.

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