Revenue Management Model for Integration of Air Cargo and Passenger with Overbooking Consideration

Oki Anita Candra Dewi, Siti Nurminarsih, Winda Narulidea
Departement of Logistics Engineering
Universitas Internasional Semen Indonesia, Gresik, Indonesia
Tel: (+62) 31-398-5482

Email: oki.dewi@uisi.ac.id, siti.nurminarsih@uisi.ac.id, winda.narulidea@uisi.ac.id

Ahmad Rusdiansyah
TDLog Research Group, Departement of Industrial Engineering
Teknologi sepuluh Nopember, Surabaya, Indonesia
Email:arusdian@ie.its.ac.id

Abstract— Revenue management is related to demand management policies to estimate and classify the various requests of pricing and capacity control. This study will develop airline revenue management model integrates passenger with air cargo that takes into account on two dimensions, namely cargo weight and volume based on the control of air cargo space. In this case, we specifically discuss the expected revenue function on dynamic programming model to maximize the expected revenue from the policies of accept or reject the booking requests between passengers and air cargo by the same airline. Moreover, in this proposed model, we also deal with the aspect of the overbooking problems. Overbooking is one of the ways in which the airlines to reduce the cost of spoilage due to cancellation or no-show. However, if the overbooking is applied in excess, it will also lead to offload costs which will reduce the airline company's revenue. This overbooking limits need to be set optimally in order to maximize revenue for the airline. Overbooking in this study is overbooking of passenger. To implement the model, we develop a dynamic programming algorithm for a set of expected revenues. We conduct some numerical experiments to show the behavior of this model.

Keywords—Airline Revenue Management, Air Cargo Revenue Management, Overbooking, Cancellations, No-Shows

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