Skip to main content

Advertisement

SpringerLink
Log in

Developing an integrated hub location and revenue management model considering multi-classes of customers in the airline industry

  • Published:
Computational and Applied Mathematics Aims and scope Submit manuscript

Abstract

The hub location and revenue management problems are two interesting research fields in the transportation and network design studies. The hub location model designs the transportation network structure and the revenue management model allocates the network’s capacity for customer classes based on their sensitivity to prices. In this paper, we consider the integrated hub location and revenue management problem in the airline industry to maximize the revenue of transportation network and minimize hub installation costs. p hubs have been chosen from a set of n nodes and connected to a central node based on star–star network design. The capacity of the installed links between the hubs and the central node and the hubs and non-hub nodes is limited. This limited capacity has been allocated to the stochastic demands of customer classes using the revenue management approach. A two-stage stochastic model has been derived to determine the locations of hubs and protection levels in the ticket sale process, and an efficient modification of genetic algorithm has been proposed for the large-scale problems. Numerical experiments have been carried out to assess the effectiveness of the proposed algorithm.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5
Fig. 6
Fig. 7
Fig. 8
Fig. 9
Fig. 10
Fig. 11
Fig. 12
Fig. 13
Fig. 14

Similar content being viewed by others

References

  • Adewuya AA (1996) New methods in genetic search with real-valued chromosomes. Diss. Massachusetts Institute of Technology

  • Adibi A, Razmi J (2015) 2-Stage stochastic programming approach for hub location problem under uncertainty: a case study of air network of Iran. J Air Transp Manag 47:172–178

    Article  Google Scholar 

  • Alumur SA, Yaman H, Kara BY (2012) Hierarchical multimodal hub location problem with time-definite deliveries. Transp Res Part E Logist Transp Rev 48(6):1107–1120

    Article  Google Scholar 

  • Alumur SA, Stefan N, Saldanha-da-Gama F (2012) Hub location under uncertainty. Transp Res Part B Methodol 46(4):529–543

    Article  Google Scholar 

  • Beale EML (1955) On minimizing a convex function subject to linear inequalities. J R Stat Soc Ser B Method 17(2):173–184

    MathSciNet  MATH  Google Scholar 

  • Belobaba PP (1989) OR practice—application of a probabilistic decision model to airline seat inventory control. Oper Res 37(2):183–197

    Article  Google Scholar 

  • Belobaba PP, Weatherford LR (1996) Comparing decision rules that incorporate customer diversion in perishable asset revenue management situations. Decis Sci 27(2):343–363

    Article  Google Scholar 

  • Birge JR, Louveaux F (2011) Introduction to stochastic programming. Springer, Berlin

    Book  MATH  Google Scholar 

  • Brumelle SL, McGill JI (1993) Airline seat allocation with multiple nested fare classes. Oper Res 41(1):127–137

    Article  MATH  Google Scholar 

  • Campbell JF, Ernst AT, Krishnamoorthy M (2002) Hub location problems. Facil Locat Appl Theory 1:373–407

    Article  MathSciNet  MATH  Google Scholar 

  • Campbell JF, O’Kelly ME (2012) Twenty-five years of hub location research. Transp Sci 46(2):153–169

    Article  Google Scholar 

  • Çetiner D (2013) Fair revenue sharing mechanisms for strategic passenger airline alliances, vol 668. Springer, Berlin

    MATH  Google Scholar 

  • Chen S et al (2010) Optimal seat allocation for two-flight problems with a flexible demand segment. Eur J Oper Res 201(3):897–908

    Article  MATH  Google Scholar 

  • Curry RE (1990) Optimal airline seat allocation with fare classes nested by origins and destinations. Transp Sci 24(3):193–204

    Article  Google Scholar 

  • Damgacioglu H et al (2015) A genetic algorithm for the uncapacitated single allocation planar hub location problem. Comput Oper Res 62:224–236

    Article  MathSciNet  MATH  Google Scholar 

  • Dantzig GB (1955) Linear programming under uncertainty. Manag Sci 1(3–4):197–206

    Article  MathSciNet  MATH  Google Scholar 

  • Donovan AW (2005) Yield management in the airline industry. J Aviat Aerosp Educ Res 14(3):9

    Google Scholar 

  • Farahani RZ et al (2013) Hub location problems: a review of models, classification, solution techniques, and applications. Comput Ind Eng 64(4):1096–1109

    Article  MathSciNet  Google Scholar 

  • Feng Y, Xiao B (2006) A continuous-time seat control model for single-leg flights with no-shows and optimal overbooking upper bound. Eur J Oper Res 174(2):1298–1316

    Article  MATH  Google Scholar 

  • Ferris MC (2016) MATLAB and GAMS: interfacing optimization and visualization software, University of Wisconsin. http://research.cs.wisc.edu/math-prog/matlab.html. Accessed 2016

  • Gallego G, Phillips R (2004) Revenue management of flexible products. Manuf Serv Oper Manag 6(4):321–337

    Article  Google Scholar 

  • Gavish B (1982) Topological design of centralized computer networks—formulations and algorithms. Networks 12(4):355–377

    Article  MathSciNet  MATH  Google Scholar 

  • Gavriliouk EO (2009) Aggregation in hub location problems. Comput Oper Res 36(12):3136–3142

    Article  MATH  Google Scholar 

  • Gen M, Cheng R (1997) Genetic algorithms and engineering design. Wiley, New York

    Google Scholar 

  • Holland JH (1975) Adaptation in natural and artificial systems: an introductory analysis with applications to biology, control, and artificial intelligence in 1992, 2nd edn. MIT Press, Cambridge

    MATH  Google Scholar 

  • Jaillet P, Song G, Yu G (1996) Airline network design and hub location problems. Locat Sci 4(3):195–212

    Article  MATH  Google Scholar 

  • Kali P, Wallace SW (1994) Stochastic programming. Wiley, Chichester

    Google Scholar 

  • Kara BY, Tansel BC (2000) On the single-assignment p-hub center problem. Eur J Oper Res 125(3):648–655

    Article  MATH  Google Scholar 

  • Kimes SE (1989) Yield management: a tool for capacity-considered service firms. J Oper Manag 8(4):348–363

    Article  Google Scholar 

  • Kratica J et al (2011) An evolutionary-based approach for solving a capacitated hub location problem. Appl Soft Comput 11(2):1858–1866

    Article  MathSciNet  Google Scholar 

  • Kratica J et al (2007) Two genetic algorithms for solving the uncapacitated single allocation p-hub median problem. Eur J Oper Res 182(1):15–28

    Article  MathSciNet  MATH  Google Scholar 

  • Labbé M, Peeters D, Thisse JF (1995) Location on networks. In: Ball MO, Magnanti TL, Monma CL, Nemhauser GL (eds) Network routing, handbooks in operations research and management sciences, vol 8. North-Holland, Amsterdam, pp 551–624

  • Labbé M, Yaman H (2008) Solving the hub location problem in a star–star network. Networks 51(1):19–33

    Article  MathSciNet  MATH  Google Scholar 

  • Lederer PJ, Nambimadom RS (1998) Airline network design. Oper Res 46(6):785–804

    Article  MATH  Google Scholar 

  • Li MZF, Oum TH (2002) A note on the single leg, multifare seat allocation problem. Transp Sci 36(3):349–353

    Article  MATH  Google Scholar 

  • Littlewood K (1972) Forecasting and control of passenger bookings, AGIFORS 12th annul symposium proceedings. October, Nathanya, Israel, pp 193–204

  • Madansky A (1960) Inequalities for stochastic linear programming problems. Manag Sci 6(2):197–204

    Article  MathSciNet  MATH  Google Scholar 

  • McGill JI, Van Ryzin GJ (1999) Revenue management: research overview and prospects. Transp Sci 33(2):233–256

    Article  MATH  Google Scholar 

  • Modarres M, Sharifyazdi M (2009) Revenue management approach to stochastic capacity allocation problem. Eur J Oper Res 192(2):442–459

    Article  MathSciNet  MATH  Google Scholar 

  • Montgomery DC (2005) Design and analysis of experiments, 6th edn. Wiley, Oxford ISBN: 0-471-48735-X

    MATH  Google Scholar 

  • O’kelly ME (1987) A quadratic integer program for the location of interacting hub facilities. Eur J Oper Res 32(3):393–404

    Article  MathSciNet  MATH  Google Scholar 

  • Park C, Seo J (2011) Seat inventory control for sequential multiple flights with customer choice behavior. Comput Ind Eng 61(4):1189–1199

    Article  Google Scholar 

  • Phadke MS (1989) Quality engineering using robust design. PTR Prentice-Hall. Inc., Englewood Cliffs

    Google Scholar 

  • Phillips R (2005) Pricing and revenue optimization. Stanford University Press, Stanford

    Google Scholar 

  • Roy RK (2010) A primer on the Taguchi method, 2nd edn. Society of manufacturing engineers, Dearborn

  • Ruszczynski A, Shapiro A (eds) (2003) Stochastic programming. Handbooks in operations research and management science. Elsevier, Amsterdam, pp 1–63

  • Schaffer JD, Caruana RA, Eshelman L, Das R (1989) A sudy of control parameters affecting online performance of GA for function optimization. In: Schaffer JD (ed) 3rd international conference on genetic algorithms. Morgan Kaufman, San Mateo, pp 51–60

    Google Scholar 

  • Sierag DD et al (2015) Revenue management under customer choice behaviour with cancellations and overbooking. Eur J Oper Res 246(1):170–185

    Article  MathSciNet  MATH  Google Scholar 

  • Stanimirovic Z (2007) Solving the capacitated single allocation hub location problem using genetic algorithm. In: Skiadas CH (ed) Recent advances in stochastic modelling and data analysis. World Scientific Publishing Co Pvt Ltd, pp 464–471

  • Talluri KT, Van Ryzin GJ (2004) The theory and practice of revenue management. Springer, New York

    Book  MATH  Google Scholar 

  • Talluri KT (2001) Airline revenue management with passenger routing control: a new model with solution approaches. Int J Serv Technol Manag 2(1–2):102–115

    Article  Google Scholar 

  • Topcuoglu H et al (2005) Solving the uncapacitated hub location problem using genetic algorithms. Comput Oper Res 32(4):967–984

    Article  MATH  Google Scholar 

  • Weatherford LR, Bodily SE (1992) A taxonomy and research overview of perishable-asset revenue management: yield management, overbooking, and pricing. Oper Res 40(5):831–844

    Article  Google Scholar 

  • Wollmer RD (1992) An airline seat management model for a single leg route when lower fare classes book first. Oper Res 40(1):26–37

    Article  MATH  Google Scholar 

  • Xiao Y, Fu X, Zhang A (2013) Demand uncertainty and airport capacity choice. Transp Res Part B Methodol 57:91–104

    Article  Google Scholar 

  • Yaman H, Elloumi S (2012) Star p-hub center problem and star p-hub median problem with bounded path lengths. Comput Oper Res 39(11):2725–2732

    Article  MathSciNet  MATH  Google Scholar 

  • Yaman H (2008) Star p-hub median problem with modular arc capacities. Comput Oper Res 35(9):3009–3019

    Article  MathSciNet  MATH  Google Scholar 

  • Yang T-H (2009) Stochastic air freight hub location and flight routes planning. Appl Math Model 33(12):4424–4430

    Article  MATH  Google Scholar 

  • Zhang D, Cooper WL (2009) Pricing substitutable flights in airline revenue management. Eur J Oper Res 197(3):848–861

    Article  MATH  Google Scholar 

  • Zhang D, Cooper WL (2005) Revenue management for parallel flights with customer-choice behavior. Oper Res 53(3):415–431

    Article  MathSciNet  MATH  Google Scholar 

  • Zhao W, Zheng Y-S (2001) A dynamic model for airline seat allocation with passenger diversion and no-shows. Transp Sci 35(1):80–98

    Article  MATH  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Industrial Engineering, Yazd University, Yazd, Iran

    H. Tikani, M. Honarvar & Y. Zare Mehrjerdi

Authors
  1. H. Tikani
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. M. Honarvar
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Y. Zare Mehrjerdi
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to M. Honarvar.

Additional information

Communicated by Ernesto G. Birgin.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Tikani, H., Honarvar, M. & Mehrjerdi, Y.Z. Developing an integrated hub location and revenue management model considering multi-classes of customers in the airline industry. Comp. Appl. Math. 37, 3334–3364 (2018). https://doi.org/10.1007/s40314-017-0512-3

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s40314-017-0512-3

Keywords

Mathematics Subject Classification

Search

Navigation