Abstract
Essential to effective revenue management decisions in the airline industry are good forecasts of future passenger demand for tickets. Since 1986, BehavHeuristics, Inc. (BHI) has pioneered the application of neural networks as a forecasting method for the airline problem. Our research and implementation have shown that not only are neural networks a viable alternative to more traditional methods of forecasting, but that significant improvements in accuracy can be achieved. In addition we have found that their flexibility and ease of use make them ideal as the basis for a revenue management system which can be quickly adapted to different airlines. In this paper we describe the general problem of forecasting airline demand and discuss a variety of issues related to the system application. Comparisons of this technique to other traditional techniques are then made on actual airline data to show that improvements in forecast error can be significant.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Smith, B.C., J. Leimkuhler, and R.M. Darrow, “Yield Management at American Airlines,” Interfaces, Vol. 22, No. 1, pp. 8–31, 1992.
Lloyd’s Aviation Economist, pp. 12 May, 1985.
Belobaba, P.P., “Airline Yield Management An Overview of Seat Inventory Control,” Transportation Science, Vol. 21, No. 2, May 1987.
Belobaba, P.P., “Application of a Probabilistic Decision Model to Airline Seat Inventory Control,” Operations Research, Vol. 37, No. 2, March–April 1989.
Stephens, K., W. Hutchison, S. Hormby, and T.M. Bell, “Dynamic Resource Allocation Using Adaptive Networks,” Neurocomputing, 2, pp. 9–16, 1990.
Otwell, K., S.S. Hormby, and W. Hutchison, “A Large-Scale Neural Network Application for Airline Seat Allocation,” an invited talk at the World Congress on Neural Networks, 1994.
Anderson, T.W., The Statistical Analysis of Time Series, John Wiley & Sons, Inc. New York, 1971.
Greene, W.H., Econometric Analysis, Macmillan Publishing Company, New York, 1990.
Da Silva, J.G.C., The Analysis of Cross-Sectional Time Series Data, Ph.D. Dissertation, Department of Statistics, North Carolina State University, 1975.
Hertz, J., A. Krogh, and R. Palmer, Introduction to the Theory of Neural Computation, Addison-Wesley, Menlo Park, CA, 1991.
Rumelhart, D.E., G. Hinton, and R. Williams, Parallel Distributed Processing, Vol. 1, MIT Press, Cambridge, MA, 1986.
Haykin, S., Neural Networks: A Comprehensive Foundation, MacMillan College Publishing Company, New York, 1994.
Trippi, R. and E. Turban (editors), Neural Networks in Finance and Investing, Probus Publishing, Chicago, 1992.
Deboeck, G. (editor), Trading on the Edge: Neural, Genetic, and Fuzzy Systems for Chaotic Financial Markets, John Wiley and Sons, New York, 1994.
Brauner, E., J. Dayhoff, and X. Sun, “Commodity Trading Using Neural Networks: Models for the Gold Market,” 1997 International Conference on Neural Networks (ICNN’97) Proceedings, 1997.
Sharda, R., “Neural Networks for the MS/OR Analyst: An Application Bibliography,” Interfaces, Vol. 24, No. 2, pp. 116–130, 1994.
Sun, X., B. Golden, and E. Wasil, “Classifying the Quality of Wire Bonds: Neural Networks versus Discriminant Analysis,” Intelligent Engineering Systems Through Artificial Neural Networks: Volume 6, (C. Dagli et al editors), ASME Press, New York, 1996.
Wang, Q., X. Sun, and B. Golden, “Neural Networks as Optimizers: A Success Story,” Intelligent Engineering Systems Through Artificial Neural Networks: Volume 3 (C. Dagli et al eds.), ASME Press, New York, pp. 649–656, 1993.
Huang, S.H., and H. Zhang, “Artificial Neural Networks in Manufacturing: Concepts, Applications, and Perspectives,” IEEE Transaction on Components, Packaging, and Manufacturing Technology — Part A, 17(2), pp. 212–228, 1994.
Sun, X., Neural Network Models for the Wire Bonding Process, Ph.D. Dissertation, University of Maryland, 1995. University Microfilms Inc., Ann Arbor, Michigan, 1996.
Simpson, P.K., Artificial Neural Systems: Foundations, Paradigms, Applications and Implementations, Pergamon Press, New York, 1990.
Nelson, M., and W.T. Illingworth, A Practical Guide to Neural Nets, Addison —Wesley, CA, 1991.
White, H.H., “Learning in Artificial Neural Networks: A Statistical Perspective,” Neural Computation, 1, pp. 425–464, 1989.
Ripley, B.D., “Neural Networks and Related Methods for Classification,” Jr. Statisti. Soc, Vol. 56, No. 3, pp. 409–456, 1994.
Cheng, B. and D.M. Titterington, “Neural Networks: A Review from a Statistical Perspective,” Statistical Science, Vol. 9, No. 1, pp. 2–54, 1994.
Hill, T., L. Marquez, L., M. O’Connor, and W. Remus, “Artificial Neural Network Models for Forecasting and Decision Making,” International Journal of Forecasting, 10, pp. 5–15, 1994.
Tang, Z., C. de Almeida, and P. Fishwick, “Time Series Forecasting Using Neural Networks vs. Box —Jenkins Methodology,” Simulation, 57, pp. 303–310, 1994.
Hirose, Y., K. Yamashita, and S. Hijiya, “Backpropagation Algorithm which Varies the Number of Hidden Units,” Neural Networks, Vol. 4, pp. 61–66, 1991.
Reed, R. “Pruning Algorithms-A Survey,” IEEE Transactions on Neural Networks, Vol. 4, No. 5, September, 1993.
Twomeym, J.M. and A.E. Smith, “Performance Measures, Consistency, and Power for Artificial Neural Network Models,” Mathl. Comput. Modeling, Vol. 21, No. 1/2, pp. 243–258, 1995.
Hormby, S., K. Otwell, and W. Hutchison, “Applying Neural Networks to Forecasting and Optimization Problems in Air Transportation and Financial Services,” presented at INFORMS CSTS section, Williamsburg, VA, January 1994.
Belobaba, P.P., Lee, A.O., and Williamson, E.L., “Recent Developments in Demand Forecasting and Revenue Optimization,” Proceedings of Second International Airline Yield Management Conference, Washington D.C., 1989.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 1998 Springer Science+Business Media New York
About this chapter
Cite this chapter
Sun, X.S., Brauner, E., Hormby, S. (1998). A Large-Scale Neural Network for Airline Forecasting in Revenue Management. In: Yu, G. (eds) Operations Research in the Airline Industry. International Series in Operations Research & Management Science, vol 9. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-5501-8_2
Download citation
DOI: https://doi.org/10.1007/978-1-4615-5501-8_2
Publisher Name: Springer, Boston, MA
Print ISBN: 978-1-4613-7513-5
Online ISBN: 978-1-4615-5501-8
eBook Packages: Springer Book Archive