Title: Air cargo simultaneous weight and volume capacity planning with revenue management approach

Authors: Mohammad Vardi; Ali Ghorbanian

Addresses: Department of Industrial Engineering, Faculty of Engineering, Tarbiat Modares University, Iran ' Department of Industrial Engineering, Esfarayen University of technology, North Khorasan, 96619-98195, Iran

Abstract: Revenue management (RM) is a subfield of operations research with the aim to maximise the revenues acquired by selling perishable products/services. Due to the substantial growth in air cargo industry over the past few years, sophisticated techniques are needed to maximise revenue. In this paper, airline cargo capacity allocation problem in two cases, including cancellation possibility and impossibility have been investigated. Two capacity dimensions of the problem, volume and weight, is complicated the decision making about request acceptance policy. For the formulation of two problems, dynamic programming technique has been used. Since dynamic programming suffers from much memory consumption for large size problems, three heuristics including deterministic integer linear programming (DILP), bid price (BP) and dynamic programming decomposition (DPD) has been proposed for problems solving. Results of simulation showed that BP and DILP have the better performance comparing to other approaches. In addition, comparison of two problem's optimum values indicated that considering cancellation increase total revenue more than 10%.

Keywords: revenue management; air cargo; cancellation; overbooking.

DOI: 10.1504/IJAMS.2018.095324

International Journal of Applied Management Science, 2018 Vol.10 No.4, pp.319 - 337

Received: 26 Oct 2016
Accepted: 02 Sep 2017
Published online: 03 Oct 2018 *

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