Dynamic capacity allotment planning for airlines via travel agencies

Aydın, Nursen; Gülpınar, Nalan; Zheng, Yijun

Abstract

In this paper, we study the dynamic capacity allocation problem of an airline using allotment contracts among travel agencies. The capacity allocation problem is formulated as a dynamic programming model where the initial fixed allotment is determined on the basis of a contract between agencies and the airline while the variable allotment is distributed over the planning horizon. We develop approximation methods based on linear programming and Lagrangian relaxation to solve the underlying dynamic programming model. The computational experiments are designed to illustrate the performance of the proposed approaches using real data. The numerical results show that the capacity allotment policy in terms of fixed and variable allotments is significantly affected by price and demand patterns. Even though fixed allotments can provide a cushion against the loss due to potential empty seats, they may not be in the best interest of the airline. Moreover, the booking rules and the airline’s capacity allocation strategy have an impact on the airline’s revenue and the agency’s profit.

Citation

Aydın, N., Gülpınar, N., & Zheng, Y. (2024). Dynamic capacity allotment planning for airlines via travel agencies. Computers and Operations Research, 170, Article 106740. https://doi.org/10.1016/j.cor.2024.106740

• Journal Article Type: Article
• Acceptance Date: Jun 13, 2024
• Online Publication Date: Jun 18, 2024
• Publication Date: 2024-10
• Deposit Date: Jul 31, 2024
• Publicly Available Date: Aug 1, 2024
• Journal: Computers & Operations Research
• Print ISSN: 0305-0548
• Electronic ISSN: 1873-765X
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 170
• Article Number: 106740
• DOI: https://doi.org/10.1016/j.cor.2024.106740
• Public URL: https://durham-repository.worktribe.com/output/2521156