Airline overbooking models with misspecification

Amaruchkul, Kannapha; Sae-Lim, Patipan

doi:10.1016/j.jairtraman.2010.06.003

Cited by 12 publications

(3 citation statements)

References 23 publications

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“…Flight overbooking (i.e., selling more tickets than available seats) is pervasive 1 in the airline industry (Amaruchkul and Sae-Lim 2011). It is a legal practice to account for no-shows and cancellations (Phillips 2005) to allow airlines to improve their load factors and reduce revenue losses (Guo, Dong, and Ling 2016).…”

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confidence: 99%

Proactive Handling of Flight Overbooking: How to Reduce Negative eWOM and the Costs of Bumping Customers

Nazifi

Gelbrich

Grégoire

et al. 2020

Journal of Service Research

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This research examines the extent to which proactivity in handling flight overbooking reduces negative electronic word-of-mouth (NeWOM) and the required costs of compensation, thus increasing firm profitability. It answers recent calls to use a multimethod approach (i.e., we include archival data, qualitative interviews, seven experiments, and a Monte Carlo simulation for a total of 10 studies) and to adapt recovery to specific contexts (i.e., airlines) and heterogeneous customers (i.e., voluntary/involuntary bumping or offloading). The preliminary studies indicate that overbooking and offloading are pervasive and that a proactive approach is both feasible and desirable. The experiments show that, compared to the default reactive approach (informing passengers at the gate), a proactive approach (informing them before they leave for the airport) substantially reduces NeWOM and the sought compensation. Further, a very reactive approach (informing them in the plane) significantly increases NeWOM and the sought compensation, especially when offloading occurs involuntarily. We also unveil the mechanism explaining the effects of proactivity on NeWOM, through the serial mediation of justice and betrayal. Finally, the results of a Monte Carlo simulation show that offering reduced compensation through a proactive approach allows more aggressive overbooking, higher capacity utilization, and increased net revenue of up to 1.3%.

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confidence: 99%

Proactive Handling of Flight Overbooking: How to Reduce Negative eWOM and the Costs of Bumping Customers

Nazifi

Gelbrich

Grégoire

et al. 2020

Journal of Service Research

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“…An important aspect of Revenue Management in air transportation is overbooking, meaning that an airline sells more flight tickets than available seats on the aircraft (Amaruchkul & Sae-Lim, 2011). The reason is that there is typically a certain percentage of passengers which does not appear for a flight without prior announcement, so-called "noshows" (Walczak, Boyd & Cramer, 2012).…”

Section: Revenue Managementmentioning

confidence: 99%

State of the art of pricing policy in air transportation: network carriers vs. low-cost airlines

Wehner

López-Bonilla

et al. 2018

Tour Manage Stud

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The modern air transport industry is highly competitive. To survive in the market, the implementation of a successful marketing strategy is fundamental. In particular, an effective pricing policy has become crucial for airlines to remain profitable. Correspondingly, the different types of airline in the market have also established very distinct pricing policies. The present study is based on a literature review and presents the state of the art of pricing policy in air transportation. The aim is to compare and discuss the pricing strategies of network carriers and lowcost airlines. Special attention is paid to Revenue Management, which is a very important management tool used by airlines to take advantage of the differences in willingness to pay of passengers. The pricing policy, however, depends on the overall business strategy of the airline. Results show many differences, resulting from the fact that these two types of airline are characterized by very different fundamental business models and, correspondingly, also target groups. Since network carriers and also low-cost airlines have adjusted their pricing strategies lately, these recent developments will be discussed as well. This paper adds to the knowledge of this topic because it presents the most up-to-date and complete study on pricing regarding network carriers vs. low-cost airlines.Keywords: Pricing policy, Revenue Management, willingness to pay, network carriers, low-cost airlines. ResumoA moderna indústria do transporte aéreo é altamente competitiva. Para sobreviver no mercado, a implementação de uma estratégia de marketing bem-sucedida é fundamental. Em particular, uma política de preços eficaz tornou-se crucial para as companhias aéreas continuarem lucrativas. Os diferentes tipos de companhias aéreas no mercado também estabeleceram políticas de preços muito distintas. O presente estudo baseia-se numa revisão da literatura e apresenta o estado da arte da política de preços no transporte aéreo. O objetivo é comparar e discutir as estratégias de preços de companhias aéreas de linha e companhias aéreas de baixo custo. Atenção especial é dada à Gestão de Receitas (Revenue Management), que é uma ferramenta de gestão usada pelas companhias aéreas para aproveitar as diferenças na disposição de pagar dos passageiros. A política de preços, no entanto, depende da estratégia geral de negócios da companhia aérea. Os resultados mostram muitas diferenças, resultantes do facto de que esses dois tipos de companhias aéreas são caracterizados por modelos de negócios fundamentais muito diferentes e, correspondentemente, também grupos-alvo. Como as operadoras de rede e também as companhias aéreas de baixo custo ajustaram as suas estratégias de preços ultimamente, esses desenvolvimentos recentes também serão discutidos. Este documento contribui para o conhecimento deste tópico, pois apresenta o estudo mais atualizado e completo sobre preços de companhias aéreas de linha versus companhias aéreas de baixo custo.Palavras-chave: Política de preços, Revenue Manage...

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“…Studies by Aydin et al (2010), Amaruchkul and Sae‐Li (2011) and Moussawi‐Haidar and Cakanyildirim (2012) allude to the possibility that cargo overbooking may also be static; in other words, it exhibits characteristics that suggest that:overbooking limits will exist within each period in a form which is independent of the limitations of prior periods;a direct correlation is assumed between lost revenue emanating from non‐optimal utilisation of cargo space with cost associated with non‐bookings; andthe existence of a low before‐arrival booking pattern.Our major observation is that there appears to be limited understanding in current literature on how a number of parameters such as cargo volume may in fact impact on overbooking. Our study seeks to respond to this gap.…”

Section: Introductionmentioning

confidence: 99%

Modeling overbookings on air cargo transportation

Singhaseni

Ojiako

2013

International Journal of Physical Distribution &Amp; Logistics Management

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PurposeIn order to hedge against fluctuation in actual “show” for air freight services, cargo airlines engage in the allocation of more space capacity than they actually have. This practice can lead to overbooking of capacity which can incur costs to the airline when a cargo does show that is larger than predicted. In this study, the authors set out to model an optimised value for air cargo booking which is tested against five different cargo case‐representative scenarios. The paper aims to discuss these issues.Design/methodology/approachThe methodology which is primarily discursive utilises a synthesis of existing literature to develop a model to replicate the overbooking problem.FindingsThis paper finds that the optimised value of cargo size may not necessarily depend on the probability of actual “show”. Instead, this variation appears dependent on a random demand for larger sized cargo, and thus, price.Practical implicationsThe model which is developed serves as a potential framework for airlines to avoid uncertainty associated with cargo capacity spoilage and overbooking.Originality/valueIn this study, the passenger overbooking model under the cancellation and no‐show problems in the static single leg case was adapted for use during the modelling of air cargo overbooking.

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Airline overbooking models with misspecification

Cited by 12 publications

References 23 publications

Proactive Handling of Flight Overbooking: How to Reduce Negative eWOM and the Costs of Bumping Customers

Proactive Handling of Flight Overbooking: How to Reduce Negative eWOM and the Costs of Bumping Customers

State of the art of pricing policy in air transportation: network carriers vs. low-cost airlines

Modeling overbookings on air cargo transportation

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