Airline revenue management with passenger routing control: a new model with solution approaches

For large airlines with multiple hubs and alternative routes, the proposed model and solution procedures have the potential for significant revenue enhancements, with almost no deterioration in the level of service, and a manageable increase in computational costs.

Abstract

We propose a new model for the airline revenue management problem that incorporates passenger routing along with seat inventory control. The revenue management models proposed so far in the literature have concentrated solely on controlling lower fare sales on high demand flights to maximise revenue. Our model will, in addition, exploit the presence of low demand alternative routes to increase revenue further. For large airlines with multiple hubs and alternative routes, our model and solution procedures have the potential for significant revenue enhancements, with almost no deterioration in the level of service, and a manageable increase in computational costs.