Air cargo revenue management under buy-back policy

Danping Lin, Carman Ka Man Lee and Jilin Yang

Journal of Air Transport Management, 2017, vol. 61, issue C, 53-63

Abstract: Few researches address the application of financial “buy-back†concept in the air cargo revenue management. This paper examines the air cargo booking and execution procedure to measure the applicability of the buy-back policy in the air cargo revenue. By applying buy-back policy during the period of order release and order execution, a revenue model is built which incorporates Hellermann's capacity option model into the Black-Scholes pricing model. The results demonstrated that buy-back policy not only answers the questions of whether to buy-back, when to buy-back and how much to buy-back, but also increases the revenues of both asset provider and intermediary. Further study is extended in the overbooking and partial buy-back scenarios. The buy-back policy showed better performance in these two scenarios compared with current approach.

Keywords: Air cargo; Asset provider; Buy-back; Intermediary; Overbooking; Revenue management (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaitra:v:61:y:2017:i:c:p:53-63

DOI: 10.1016/j.jairtraman.2016.08.012

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