Airline network revenue management by multistage stochastic programming |
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Authors: | Andris Möller Werner Römisch Klaus Weber |
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Institution: | (1) Humboldt University Berlin, Institute of Mathematics, Unter den Linden 6, 10099 Berlin, Germany;(2) AIDA Cruises, Am Strande 3d, 18055 Rostock, Germany |
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Abstract: | A multistage stochastic programming approach to airline network revenue management is presented. The objective is to determine
seat protection levels for all itineraries, fare classes, points of sale of the airline network and all dcps of the booking
horizon such that the expected revenue is maximized. While the passenger demand and cancelation rate processes are the stochastic
inputs of the model, the stochastic protection level process represents its output and allows to control the booking process.
The stochastic passenger demand and cancelation rate processes are approximated by a finite number of tree structured scenarios.
The scenario tree is generated from historical data using a stability-based recursive scenario reduction scheme. Numerical
results for a small hub-and-spoke network are reported.
This research is supported by the DFG Research Center Matheon “Mathematics for key technologies” in Berlin. |
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Keywords: | Airline revenue management Seat inventory control Multistage stochastic programming Scenario tree generation |
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