Airline inventory control of callable tickets based on real option

Zhi Yang Zhong*, Jin Lin Li, Lun Ran

*Corresponding author for this work

    Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

    2 Citations (Scopus)

    Abstract

    It is extremely important for airlines to study the flexible seat inventory control issues to prevent flight revenue from spoiled due to inaccurate prediction of air passenger demand. This paper provided a novel capacity control method based on real option and showed how airlines may be considered as the holder of callable tickets. In a fully competitive market, a partial differential equation model was used to describe the financial aspects of the capacity of callable tickets. Based on the new method, the tickets' capacity has been decided using finite difference method; the amount of callable tickets sold has been calculated using an integral linear programming. Meanwhile, based on this paper presents a model to optimize the quantity of the callable ticket. Such capacity model was much better than the method that without option into consideration.

    Original languageEnglish
    Title of host publication2010 International Conference on Management Science and Engineering, ICMSE 2010
    Pages135-140
    Number of pages6
    DOIs
    Publication statusPublished - 2010
    Event17th International Conference on Management Science and Engineering, ICMSE 2010 - Melbourne, VIC, Australia
    Duration: 24 Nov 201026 Nov 2010

    Publication series

    Name2010 International Conference on Management Science and Engineering, ICMSE 2010

    Conference

    Conference17th International Conference on Management Science and Engineering, ICMSE 2010
    Country/TerritoryAustralia
    CityMelbourne, VIC
    Period24/11/1026/11/10

    Keywords

    • Callable tickets
    • Inventory control
    • Real option
    • Revenue management

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