The application of inventory transshipment modeling to air cargo revenue management |
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| Affiliation: | 1. Department of Management, Marketing and Operations, College of Business, Embry-Riddle, Aeronautical University, Daytona Beach, FL 32114, USA;2. Department of Logistics, Business and Public Policy, Robert H. Smith School of Business, University of Maryland, College Park, MD 20742, USA;1. Collaborative Innovation Center for Transport Studies, Dalian Maritime University, Dalian, 116026, PR China;2. Transportation Management College, Dalian Maritime University, Dalian, 116026, PR China;1. University of North Texas, College of Business, 1155 Union Circle #311396, Denton, TX 76203-5017, USA;2. Kedge Business School, 680cours de la Liberation, 33405, Talence, France;3. Daegu-Gyeongbuk Development Institute, 43, Cheongsu-Ro, Suseong-Gu, Daegu, Republic of Korea;1. Strome College of Business, Old Dominion University, Norfolk, VA 23529, USA;2. School of Economics and Management, Tongji University, Shanghai, 200092, China;3. Department of Civil and Environmental Engineering, National University of Singapore, Singapore 117576, Singapore;1. Logistics Engineering College, Shanghai Maritime University, Shanghai, China;2. Department of Industrial and Systems Engineering, The Hong Kong Polytechnic University, Hong Kong |
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| Abstract: | This paper applies an inventory transshipment modeling approach to investigate the air cargo revenue management problem for an airline operating in a two-segment network. Building upon an extension of the classic two-location inventory transshipment model, we develop a framework to optimize an airline’s cargo overbooking decisions in a two-segment network setting. We find consistent evidence indicating that network-based global optimization always leads to greater expected profits than does local (i.e., market by market) optimization. Further, the magnitude of profit improvement is found to be most significant when local shipments have a relatively higher freight yield compared to flow-through shipments. Finally, our results indicate that global optimization contributes to greater profit improvement as offloading penalty costs become higher. |
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