Dynamic yield management when aircraft assignments are subject to swap
As a practical form of demand driven dispatch at some major airlines in North America, cockpit compatible aircraft of different capacities are paired in the fleet assignment for a possible future swap on the two involved flights. They are paired in such a way that the swap does not affect their aircraft routings on other legs. The swap decision depends on demand realization on the two flights and is made at a predetermined time prior to departure. Yield management on the two flights is studied in this paper. We begin by studying a base problem in which at a certain time before departure, the assignment on a flight is subject to change with a fixed probability. The base problem extends the threshold policy into the case where future capacity is uncertain. Secondly, we propose a heuristic for yield management over two flights with swappable aircraft by repeatedly updating the swap probability as demand unfolds. Our numerical result shows that this policy significantly enhances the airline's capability to increase revenue under demand driven dispatch. In addition, the base problem may shed lights on derivation of optimal yield management policy in irregular operational settings where final capacity assignment is independent of yield management policy.
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Volume (Year): 40 (2006)
Issue (Month): 7 (August)
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References listed on IDEAS
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- Guillermo Gallego & Garrett van Ryzin, 1994. "Optimal Dynamic Pricing of Inventories with Stochastic Demand over Finite Horizons," Management Science, INFORMS, vol. 40(8), pages 999-1020, August.
- Youyi Feng & Baichun Xiao, 2000. "A Continuous-Time Yield Management Model with Multiple Prices and Reversible Price Changes," Management Science, INFORMS, vol. 46(5), pages 644-657, May.
- Kalyan Talluri & Garrett van Ryzin, 2004. "Revenue Management Under a General Discrete Choice Model of Consumer Behavior," Management Science, INFORMS, vol. 50(1), pages 15-33, January.
- Jason D. Papastavrou & Srikanth Rajagopalan & Anton J. Kleywegt, 1996. "The Dynamic and Stochastic Knapsack Problem with Deadlines," Management Science, INFORMS, vol. 42(12), pages 1706-1718, December.
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