Service models for airline revenue management problems

Eroğlu, Fatma Esra
In this thesis, the seat inventory control problem is studied for airlines from the perspective of a risk-averse decision maker. There are only a few studies in the revenue management literature that consider the risk factor. Most of the studies aim at finding the optimal seat allocations while maximizing the expected revenue and do not take the variability of the revenue and hence a risk measure into account. This study aims to decrease the variance of the revenue by increasing the capacity utilization called load factor in the revenue management literature. In addition to expected revenue, load factor is an important performance measure the state companies work with. For this purpose, two types of models with load factor formulations are proposed. This thesis is the first study in the revenue management literature for the airline industry that uses the load factor formulations in the mathematical models. It is an advantage to work with load factor formulations since the models with load factor formulations are much easier to formulate and solve as compared to other risk sensitive models in the literature. The results of the proposed models are evaluated by using simulation for a sample network under different scenarios. The models we propose allow us to control the variability of revenue by changing the used capacity of the aircraft. This is at the expense of a decrease in the revenue under some scenarios. The models we propose perform satisfactorily under all scenarios and they are strongly recommended to be used especially for the small-scale airline companies and state companies and for scheduling new flights even in large scale, well established airline companies.