Department of Statistics Seminar
Joint Seminar with Operations Research/Biomathematics
North Carolina State University

presents

Shaler Stidham

University of North Carolina at Chapel Hill

"Airline Yield Management as a Problem in the Control of Queues"

ABSTRACT

Airlines must determine how to allocate the seats on a flight among different fare classes to maximize total revenue when future demand is uncertain. This is commonly referred to as seat inventory control or yield management. The problem is further complicated by the possibility of cancellations, no-shows, and the practice of overbooking. Previous research has analyzed the problem without these complications and with other restrictive assumptions. We show how to formulate and solve the seat-inventory-control problem with overbooking, cancellations, and no-shows as a problem of optimal control of admissions to a queueing system, exploiting the substantial body of research that exists on this topic. The optimal policy is characterized by state and time-dependent booking limits for each class. Our numerical examples show that substantial revenue gains are possible with our model, compared with an equivalent model omitting the effects of concellations and no-shows. We also demonstrate the computational feasibility of our approach using data from a real-life airline application.

Friday, March 27, 1998

3:35 - 4:35 pm

206 Cox Hall

Refreshments will be served on the second floor of Dabney Hall (left of Room 222) at 3:00 pm.