An Integrated Approach to Single-Leg Airline Revenue Management: The Role of Robust Optimization

Abstract

In this paper we introduce robust versions of the classical static and dynamic single leg seat allocation models as analyzed by Wollmer, and Lautenbacher and Stidham, respectively. These robust models take into account the inaccurate estimates of the underlying probability distributions. As observed by simulation experiments it turns out that for these robust versions the variability compared to their classical counter parts is considerably reduced with a negligible decrease of average revenue.

Keywords: Robust Optimization, Dynamic Models, Single-Leg Problems, Static Models, Airline Revenue Management