23 Agustus 2018 | Tim Media UISI

Modeling Value At Risk (Var) Policies For Two Parallel Flights Owned By The Same Airline

This study develops a risk policy in Airline Revenue Management (ARM). ARM related to airline demand management policies to estimate and classify the various requests of pricing and capacity control

Oki Anita Candra Dewi
Department of Engineering Management
Semen Indonesia School of Management (STIMSI)
Gresik, Indonesia

Email: oki.dewi@uisi.ac.id

Ahmad Rusdiansyah
Department of Industrial Engineering, Institut Teknologi Sepuluh November (ITS),
Surabaya 60111 Indonesia,

E-mail: arusdian@ie.its.ac.id

Naning A. Wessiani
Department of Industrial Engineering, Institut Teknologi Sepuluh November (ITS),
Surabaya 60111 Indonesia,

E-mail: wessiani@ie.its.ac.id

Abstract—This study develops a risk policy in Airline Revenue Management (ARM). ARM related to airline demand management policies to estimate and classify the various requests of pricing and capacity control. We made a model of the optimal policy value at risk (VaR) for two parallel flights owned by the same airline. The two parallel flights is a condition which an airline operates two flights in the same departure date with different time schedule. VaR is the worst possible losses under normal market conditions during the some period and certain confidence level. We specifically discuss the revenue risk policy for joint dynamic seat allocation problem including operational risks such as seat allocation risk. Moreover, in this proposed model, we also deal with passenger choice behaviour. We attempt to optimize VaR in determining seat allocation policies of both flight such as (i) improving revenue targets, (ii) choosing the best result for a given confidence level. To implement the model, we develop a dynamic programming algorithm for a set of expected revenues. We conduct some numerical experiments to show the behaviour of this model.


Keywords—Airline Revenue Management, Paralellel Flights, Seat Allocation Risk, Value at Risk

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