Air cargo simultaneous weight and volume capacity planning with revenue management approach

Abstract

Revenue management (RM) is a subfield of operations research with the aim to maximise the revenues acquired by selling perishable products/services. Due to the substantial growth in air cargo industry over the past few years, sophisticated techniques are needed to maximise revenue. In this paper, airline cargo capacity allocation problem in two cases, including cancellation possibility and impossibility have been investigated. Two capacity dimensions of the problem, volume and weight, is complicated the decision making about request acceptance policy. For the formulation of two problems, dynamic programming technique has been used. Since dynamic programming suffers from much memory consumption for large size problems, three heuristics including deterministic integer linear programming (DILP), bid price (BP) and dynamic programming decomposition (DPD) has been proposed for problems solving. Results of simulation showed that BP and DILP have the better performance comparing to other approaches. In addition, comparison of two problem's optimum values indicated that considering cancellation increase total revenue more than 10%.