MILP Model For Network Revenue Management In Airlines

Abstract

Seat inventory control is an important problem in revenue management which is to decide whether to accept or reject a booking request during the booking horizon in airlines. The problem can be modeled as dynamic stochastic programs, which are computationally intractable in network settings. Various researches have been tried to solve it effectively. Even though dynamic (and stochastic) programming (DP) models can be solved it optimally, they are computationally intractable even for small sized networks. Therefore, in practice, DP models are approximated by various mathematical programming models. In this paper, we propose an approximation model for solving airline seat inventory control problem in network environments. Using Linear Approximation technique, we will transform our problem into a concave piecewise LP model. Based on the optimal solution of ours, we suggest how to implement it for airline inventory control policies such as booking limits, bid-price controls and virtual nesting controls.