Fleet Planning Decision-Making: Two-Stage Optimization with Slot Purchase

Lay Eng Teoh and Hooi Ling Khoo

Journal of Optimization, 2016, vol. 2016, 1-12

Abstract:

Essentially, strategic fleet planning is vital for airlines to yield a higher profit margin while providing a desired service frequency to meet stochastic demand. In contrast to most studies that did not consider slot purchase which would affect the service frequency determination of airlines, this paper proposes a novel approach to solve the fleet planning problem subject to various operational constraints. A two-stage fleet planning model is formulated in which the first stage selects the individual operating route that requires slot purchase for network expansions while the second stage, in the form of probabilistic dynamic programming model, determines the quantity and type of aircraft (with the corresponding service frequency) to meet the demand profitably. By analyzing an illustrative case study (with 38 international routes), the results show that the incorporation of slot purchase in fleet planning is beneficial to airlines in achieving economic and social sustainability. The developed model is practically viable for airlines not only to provide a better service quality (via a higher service frequency) to meet more demand but also to obtain a higher revenue and profit margin, by making an optimal slot purchase and fleet planning decision throughout the long-term planning horizon.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jjopti:8089794

DOI: 10.1155/2016/8089794

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