The Sales Based Integer Program for Post-Departure Analysis in Airline Revenue Management: model and solution

Giorgio Grani (), Gianmaria Leo (), Laura Palagi, Mauro Piacentini () and Hunkar Toyoglu ()
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Giorgio Grani: Department of Computer, Control and Management Engineering Antonio Ruberti (DIAG), University of Rome La Sapienza, Rome, Italy
Gianmaria Leo: IBM Analytics Data Science Elite, Munich, Germany
Mauro Piacentini: Amazon EU SARL, Luxembourg, Luxembourg
Hunkar Toyoglu: Sabre Airline Solutions, Operations Research Consulting, Southlake, TX, United States

No 2019-05, DIAG Technical Reports from Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza"

Abstract: Airline revenue management (RM) departments pay remarkable attention to many different applications based on sales-based linear program (SBLP). SBLP is mainly used as the optimization core to solve network revenue management problems in RM decision support systems. In this study we consider a post-departure analysis, when there is no more stochasticity in the problem and we can tackle SBLP with integrality constraints on the variables (SBIP) in order to understand which should be the best possible solution. We propose a new formulation based on a market-service decomposition that allows to solve large instances of SBIP using LP-based branch-and-bound paradigm. We strengthen the bound obtained with the linear relaxations by introducing effective Chvatal-Gomory cuts. Main idea is to optimally allocate the capacity to the markets by transforming the market subproblems into a piecewise linear objective function. Major advantages are significant reduction of the problem size and the possibility of deriving a concave objective function which is strengthened dynamically. Numerical results are reported. Providing realistic integral solutions move forward the network revenue management state of the art.

Keywords: revenue management; mixed-integer programming; decomposition; airline; piecewise linear (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-cmp and nep-tre
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