Title: A bi-objective airline revenue management problem with possible cancellation

Authors: Mohammad Vardi; Ali Salmasnia; Ali Ghorbanian; Hadi Mokhtari

Addresses: Department of Industrial Engineering, Faculty of Engineering, Tarbiat Modares University, Tehran, Iran ' Department of Industrial Engineering, Faculty of Technology and Engineering, University of Qom, Qom, Iran ' Department of Industrial Engineering, Esfarayen University of Technology, North Khorasan, Iran ' Department of Industrial Engineering, Faculty of Engineering, University of Kashan, Kashan, Iran

Abstract: The optimal allocation of seat inventory is a well-known problem of airline revenue management in the airline industry. It is usually carried out among fare classes with a known demand distribution for each class with the aim at increasing the efficiency of revenue systems and enhancing customer satisfaction. Furthermore, an important assumption is the issue of cancellation which is very common in the field of airlines. So to avoid having unused seat in a flight, overbooking technique is used. During last years, different approaches have been proposed for addressing this problem, but most of them only considered revenue to be maximised. In this paper, an optimisation approach based on Taguchi design of experiment and COPRAS decision-making method is proposed. The suggested method not only maximises total revenue and customer satisfaction simultaneously, but also mitigates the effects of nuisance factors on system by minimising the variance of two objectives. Experimental results on a standard example show the effectiveness of the proposed method.

Keywords: airline revenue management; seat allocation; airlines; Taguchi methods; multi-objective decision making; complex proportional assessment; COPRAS; cancellations; unused seats; overbooking; total revenue; customer satisfaction; nuisance factors.

DOI: 10.1504/IJAMS.2016.075456

International Journal of Applied Management Science, 2016 Vol.8 No.1, pp.20 - 37

Received: 07 May 2015
Accepted: 18 Jun 2015

Published online: 23 Mar 2016 *

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