This Article Full Text (PDF) References Alert me when this article is cited Alert me if a correction is posted Services Email this article to a friend Similar articles in this journal Alert me to new issues of the journal Download to citation manager Citing Articles Citing Articles via Google Scholar Google Scholar Articles by Amaruchkul, K. Articles by Gupta, D. Search for Related Content

Single-Leg Air-Cargo Revenue Management

Graduate Program in Industrial and Systems Engineering, Department of Mechanical Engineering, University of Minnesota
Graduate Program in Industrial and Systems Engineering, Department of Mechanical Engineering, University of Minnesota
Graduate Program in Industrial and Systems Engineering, Department of Mechanical Engineering, University of Minnesota
amar0017{at}umn.edu
billcoop{at}me.umn.edu
guptad{at}me.umn.edu

We consider a cargo booking problem on a single-leg flight with the goal of maximizing expected contribution. Each piece of cargo is endowed with a random volume and a random weight whose precise values are not known until just before the flight's departure. We formulate the problem as a Markov decision process (MDP). Exact solution of the formulation is impractical, because of its high-dimensional state space; therefore, we develop six heuristics. The first four heuristics are based on different value-function approximations derived from two computationally tractable MDPs, each with a one-dimensional state space. The remaining two heuristics are obtained from solving related methematical programming problems. We also compare the heuristics with the first-come, first-served (FCFS) policy. Simulation experiments suggest that the value function approximation derived from separate "volume" and "weight" problems offers the best approach. Comparisons of the expected contribution under the heuristic to an upper bound show that the heuristic is typically close to optimal.

Key Words: air-cargo operations; revenue management
History: Received: April 2005; revised: March 2006; accepted: August 2006.