Revenue management for air cargo space with supply uncertainty

Abstract

This study is aiming to apply the revenue management (RM) concept, a common practice in air passenger operation, to the control of air cargo space. The RM problem of air cargo differs from that of the air passenger in a lot of aspects. The most important one is the uncertainty of air cargo space supply. Meanwhile, the problem of denied boarding caused by supply uncertainty must be dealt with carefully. A single-leg air cargo RM problem is tackled by a dynamic programming (DP) model to derive the optimal control policy and the expected revenue. Numerical experiments based on the actual operational data of a Taiwanese international airline are performed to verify the model. The result shows, to raise revenue by RM, it is critical for the airlines to accurately forecast and control the cargo space supply of a flight.