Optimal decision on length of waiting list in airline revenue management

Abstract

Multiple nested fare classes in revenue management can improve revenue level in civil aviation. But it is strictly dependent on an accurate grasp of the needs, which is nearly not achieved. This paper presented a nonlinear stochastic optimization model for study optimal arrangement of waiting list's length, in which the number of left seats and the state of subclass open and closed are the state variables and waiting list's length is the decision variable. The model was based on the proposed six basic assumptions by analysis of waiting list implemented condition. The optimized length of the waiting list was solved by one-dimensional search algorithm. Empirical results demonstrate that waiting list has two basic rules. Rule one, the length of waiting list and waiting revenue is decreasing function of passengers arrival rate; rule two, the decrease of the wait list's length and the waiting revenue will be less when the arrival ratio of passengers be more and more. And empirical results also show that optimal waiting list can improve the airlines revenue. © 2012 Springer-Verlag GmbH.