lect19 - MIT MIT ICAT Flight Overbooking: Models and...

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MIT ICAT MIT ICAT Flight Overbooking: Models and Practice 16.75J/1.234J Airline Management Dr. Peter P. Belobaba April 24, 2006
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MIT ICAT MIT ICAT Lecture Outline Overbooking Terminology and Relationships Evolution of Airline Overbooking Models Manual/Judgmental Deterministic Model Probabilistic/Risk Model Cost-Based Overbooking Model Costs of Denied Boardings and Spoilage Customer Service and Goodwill Issues
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MIT ICAT MIT ICAT Background: Flight Overbooking Determine maximum number of bookings to accept for a given physical capacity. Minimize total costs of denied boardings and spoilage (lost revenue). U.S. domestic no-show rates can reach 15-20 percent of final pre-departure bookings: On peak holiday days, when high no-shows are least desirable Average no-show rates have dropped, to 10-15% with more fare penalties and better efforts by airlines to firm up bookings Effective overbooking can generate as much revenue gain as fare class seat allocation.
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MIT ICAT MIT ICAT Overbooking Terminology Physical Capacity CAP Authorized Capacity AU Confirmed Bookings BKD <= AU Waitlisted passengers WL Go-show passengers GS Stand-by passengers SB
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MIT ICAT MIT ICAT Overbooking Terminology (cont’d) No-shows NS Show-ups SU No-show rate NSR Show-up rate SUR Passengers Boarded PAX Denied Boardings DB Spoilage SP
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MIT ICAT MIT ICAT Overbooking Relationships 1. PAX = min [ BKD - NS + GS + SB, CAP] = BKD + GS - NS + SB - DB 2. BKD = NS + SU 3. SU = PAX + DB - GS - SB 4. NSR = (BKD - SU) / BKD 5. SUR = SU / BKD = 1.0 - NSR 6. SP = CAP - PAX, only when BKD = AU
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MIT ICAT MIT ICAT Evolution of Airline
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lect19 - MIT MIT ICAT Flight Overbooking: Models and...

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