Booking Control Increases Profit at Scandinavian Airlines

Jens Alstrup, Sven-Eric Andersson, Søren Boas, Oli B. G. Madsen and René Victor V. Vidal
Additional contact information
Jens Alstrup: Ramboell and Hannemann Ltd., Consulting Engineers and Planners, Teknikerbyen 38, DK-2830 Virum, Denmark
Sven-Eric Andersson: Scandinavian Airlines, Department STOAY, S-16187 Stockholm, Sweden
Søren Boas: Peter Matthiesen Ltd., Transformervej 14, DK-2730 Herlev, Denmark
Oli B. G. Madsen: IMSOR, The Institute of Mathematical Statistics and Operations Research, The Technical University of Denmark, DK-2800 Lyngby, Denmark
René Victor V. Vidal: IMSOR, The Institute of Mathematical Statistics and Operations Research, The Technical University of Denmark, DK-2800 Lyngby, Denmark

Interfaces, 1989, vol. 19, issue 4, 10-19

Abstract: Planes are overbooked to avoid empty seats. Yet, there is a trade-off of increased upgradings, downgradings, and denied boardings. The patterns of reservations, cancellations, and no-shows are random. Thus, determining the best overbooking levels involves stochastic multistage optimal decision making and time series analysis. An overbooking model for a nonstop flight with two types of passengers is based on a statistical description of the booking process and two-dimensional stochastic dynamic programming. It produces, apparently for the first time, an optimal policy for a real case. The model has been validated and used at Scandinavian Airlines. The net potential revenue increase was about two million US dollars per year.

Keywords: transportation: air; decision analysis: applications (search for similar items in EconPapers)
Date: 1989
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Citations: View citations in EconPapers (4)

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