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Booking Control Increases Profit at Scandinavian Airlines

Author

Listed:
  • Jens Alstrup

    (Ramboell and Hannemann Ltd., Consulting Engineers and Planners, Teknikerbyen 38, DK-2830 Virum, Denmark)

  • Sven-Eric Andersson

    (Scandinavian Airlines, Department STOAY, S-16187 Stockholm, Sweden)

  • Søren Boas

    (Peter Matthiesen Ltd., Transformervej 14, DK-2730 Herlev, Denmark)

  • Oli B. G. Madsen

    (IMSOR, The Institute of Mathematical Statistics and Operations Research, The Technical University of Denmark, DK-2800 Lyngby, Denmark)

  • René Victor V. Vidal

    (IMSOR, The Institute of Mathematical Statistics and Operations Research, The Technical University of Denmark, DK-2800 Lyngby, Denmark)

Abstract

Planes are overbooked to avoid empty seats. Yet, there is a trade-off of increased upgradings, downgradings, and denied boardings. The patterns of reservations, cancellations, and no-shows are random. Thus, determining the best overbooking levels involves stochastic multistage optimal decision making and time series analysis. An overbooking model for a nonstop flight with two types of passengers is based on a statistical description of the booking process and two-dimensional stochastic dynamic programming. It produces, apparently for the first time, an optimal policy for a real case. The model has been validated and used at Scandinavian Airlines. The net potential revenue increase was about two million US dollars per year.

Suggested Citation

  • Jens Alstrup & Sven-Eric Andersson & Søren Boas & Oli B. G. Madsen & René Victor V. Vidal, 1989. "Booking Control Increases Profit at Scandinavian Airlines," Interfaces, INFORMS, vol. 19(4), pages 10-19, August.
    • Handle: RePEc:inm:orinte:v:19:y:1989:i:4:p:10-19
    DOI: 10.1287/inte.19.4.10
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    Citations

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    Cited by:

    1. Richard E. Chatwin, 1999. "Continuous-Time Airline Overbooking with Time-Dependent Fares and Refunds," Transportation Science, INFORMS, vol. 33(2), pages 182-191, May.
    2. Richard E. Chatwin, 1998. "Multiperiod Airline Overbooking with a Single Fare Class," Operations Research, INFORMS, vol. 46(6), pages 805-819, December.
    3. Jeffrey I. McGill & Garrett J. van Ryzin, 1999. "Revenue Management: Research Overview and Prospects," Transportation Science, INFORMS, vol. 33(2), pages 233-256, May.
    4. John Kros & Scott Dellana & David West, 2009. "Overbooking Increases Patient Access at East Carolina University's Student Health Services Clinic," Interfaces, INFORMS, vol. 39(3), pages 271-287, June.

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