Planes are overbooked to avoid empty seats. Yet, there is a trade-off of increased upgradings, downgradings, and denied boardings. The patterns of reservations, cancellations, and no-shows are random. Thus, determining the best overbooking levels involves stochastic multistage optimal decision making and time series analysis. An overbooking model for a nonstop flight with two types of passengers is based on a statistical description of the booking process and two-dimensional stochastic dynamic programming. It produces, apparently for the first time, an optimal policy for a real case. The model has been validated and used at Scandinavian Airlines. The net potential revenue increase was about two million US dollars per year.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.