The OVERBOOK.lng Model

Optimal Airline Overbooking 1

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Closely related to the newsboy problem (in a mathematical sense) is the airline overbooking problem. Given that a certain percentage of fliers with reservations will not show up for a flight, airlines that don't overbook will be sending most planes up with empty seats. Assuming the penalty cost for overbooking is not too high, an airline that hopes to maximize revenue should overbook its flights. The following model determines the optimal number of reservations to allow on a flight, and assumes the number of no-shows on a flight has a binomial distribution.

Keywords:

Marketing | Forecasting | Demand Backlog | Probabilities | Uncertainty | Sales | Airline | Transportation | Overbooking |