Price setting for extra-baggage service for a combination carrier using the newsvendor setup

I.A. Shaban, Z.X. Wang, F.T.S. Chan, S.H. Chung, A.E.E. Eltoukhy and T. Qu

Journal of Air Transport Management, 2019, vol. 78, issue C, 1-14

Abstract: Wide-body aircraft are frequently used to meet upsurges in passenger demand, resulting in the underutilization of the belly-hold capacity on many routes. In the existing literature, investigating this specific underutilization problem has not received much attention from scholars in this field. Therefore, in this paper, we study this problem with two main objectives. First, to propose an Extra-baggage service as a solution to the underutilization problem. Second, to provide the associated prices for the proposed extra-baggage service. For this purpose, we adopt the newsvendor-based pricing model that explores different prices, while combining different amounts of extra-baggage and cargo in the belly-hold space. To demonstrate the potential and feasibility of the proposed service, a numerical simulation has been performed. The simulation includes comparing the expected profit from cargo allocation with the expected profit from the allocation of a combination cargo with Extra-baggage. The simulation results show a significant profit improvement for the airlines, while using the Extra-baggage scheme. This is apparent as the profit increases by 25% over the current excess baggage scheme. Moreover, the results show a double profit improvement in various seasons. This performance echoes the importance of the extra-baggage service being implemented in real practice.

Keywords: Pricing; Newsvendor; Air cargo; Combination carriers; Extra-baggage; Excess baggage; Underutilized capacity (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0969699718302370
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jaitra:v:78:y:2019:i:c:p:1-14

DOI: 10.1016/j.jairtraman.2019.04.003

Access Statistics for this article

Journal of Air Transport Management is currently edited by Anne Graham

More articles in Journal of Air Transport Management from Elsevier
Bibliographic data for series maintained by Catherine Liu ().