An Airline Profit Management Model with Overbooking and No-Shows

Elias Olivares-Benitez, Ana Paula Orozco Esparza, Juan Orejel, Catya Zuniga

2025

Abstract

This research presents a model for airline profit optimization considering information such as demand forecasts, seat inventory, operational costs, overbooking penalties, expected no-shows, and time-dependent fare classes. The main decisions in the model are the selection of the aircraft, the number of seats sold per fare, including overbooking, and the number of denied seats. The model incorporates probabilistic information, like the expected demand and the expected proportion of no-shows. The model is constructed as a deterministic mixed-integer program. Some data was estimated using information acquired from different industry sources, and some data was set with reasonable estimations. A factorial experiment was designed to understand the importance of different parameters. The input variables were the overbooking compensation penalty, the no-show probabilities per fare and time block, and the seat demand. Using a statistical analysis, it was determined that the no-show estimation has the most significant impact on the total revenue, and the demand forecast after that. These results highlight the importance of precise estimations to increase the airline’s profit.

Paper Citation

in Harvard Style

Olivares-Benitez E., Esparza A., Orejel J. and Zuniga C. (2025). An Airline Profit Management Model with Overbooking and No-Shows. In Proceedings of the 14th International Conference on Operations Research and Enterprise Systems - Volume 1: ICORES; ISBN 978-989-758-732-0, SciTePress, pages 264-270. DOI: 10.5220/0013159900003893

in Bibtex Style

@conference{icores25,
author={Elias Olivares-Benitez and Ana Esparza and Juan Orejel and Catya Zuniga},
title={An Airline Profit Management Model with Overbooking and No-Shows},
booktitle={Proceedings of the 14th International Conference on Operations Research and Enterprise Systems - Volume 1: ICORES},
year={2025},
pages={264-270},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0013159900003893},
isbn={978-989-758-732-0},
}

in EndNote Style

TY - CONF

JO - Proceedings of the 14th International Conference on Operations Research and Enterprise Systems - Volume 1: ICORES
TI - An Airline Profit Management Model with Overbooking and No-Shows
SN - 978-989-758-732-0
AU - Olivares-Benitez E.
AU - Esparza A.
AU - Orejel J.
AU - Zuniga C.
PY - 2025
SP - 264
EP - 270
DO - 10.5220/0013159900003893
PB - SciTePress