Revenue management of airline alliances with integral planning strategy

Abstract : The cooperation between airlines has been a growing global phenomenon in airline industry. This paper deals with a revenue management problem of an airline alliance with two member airlines within highly competitive markets. We formulate a MIP (Mixed Integer Programming) model to maxmize this alliance's total revenue by global optimization. We also consider the influence of competition (horizontal competition with two members operating the same itineraries and vertical competition between local and connecting passengers), customer demand transferred probabilities and code sharing agreement in an airline network. A computational study shows that the optimized revenue can be achieved by our model. The results exhibit that the network size and intense competition can make an effect on airline alliance's total revenue