IDEAS home Printed from https://ideas.repec.org/a/eee/jaitra/v61y2017icp53-63.html
   My bibliography  Save this article

Air cargo revenue management under buy-back policy

Author

Listed:
  • Lin, Danping
  • Lee, Carman Ka Man
  • Yang, Jilin

Abstract

Few researches address the application of financial “buy-back†concept in the air cargo revenue management. This paper examines the air cargo booking and execution procedure to measure the applicability of the buy-back policy in the air cargo revenue. By applying buy-back policy during the period of order release and order execution, a revenue model is built which incorporates Hellermann's capacity option model into the Black-Scholes pricing model. The results demonstrated that buy-back policy not only answers the questions of whether to buy-back, when to buy-back and how much to buy-back, but also increases the revenues of both asset provider and intermediary. Further study is extended in the overbooking and partial buy-back scenarios. The buy-back policy showed better performance in these two scenarios compared with current approach.

Suggested Citation

  • Lin, Danping & Lee, Carman Ka Man & Yang, Jilin, 2017. "Air cargo revenue management under buy-back policy," Journal of Air Transport Management, Elsevier, vol. 61(C), pages 53-63.
    • Handle: RePEc:eee:jaitra:v:61:y:2017:i:c:p:53-63
    DOI: 10.1016/j.jairtraman.2016.08.012
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0969699715300533
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jairtraman.2016.08.012?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Edwin S. Mills, 1959. "Uncertainty and Price Theory," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 73(1), pages 116-130.
    2. V. Padmanabhan & I. P. L. Png, 2004. "Reply to “Do Returns Policies Intensify Retail Competition?”," Marketing Science, INFORMS, vol. 23(4), pages 614-618, January.
    3. Andreea Popescu & Earl Barnes & Ellis Johnson & Pinar Keskinocak, 2013. "Bid Prices When Demand Is a Mix of Individual and Batch Bookings," Transportation Science, INFORMS, vol. 47(2), pages 198-213, May.
    4. Yuri Levin & Mikhail Nediak & Huseyin Topaloglu, 2012. "Cargo Capacity Management with Allotments and Spot Market Demand," Operations Research, INFORMS, vol. 60(2), pages 351-365, April.
    5. Hsieh, Chung-Chi & Lu, Yu-Ting, 2010. "Manufacturer's return policy in a two-stage supply chain with two risk-averse retailers and random demand," European Journal of Operational Research, Elsevier, vol. 207(1), pages 514-523, November.
    6. Kannapha Amaruchkul & William L. Cooper & Diwakar Gupta, 2007. "Single-Leg Air-Cargo Revenue Management," Transportation Science, INFORMS, vol. 41(4), pages 457-469, November.
    7. Ding, Ding & Chen, Jian, 2008. "Coordinating a three level supply chain with flexible return policies," Omega, Elsevier, vol. 36(5), pages 865-876, October.
    8. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    9. W Zhuang & M Gumus & D Zhang, 2012. "A single-resource revenue management problem with random resource consumptions," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 63(9), pages 1213-1227, September.
    10. Han, Dong Ling & Tang, Loon Ching & Huang, Huei Chuen, 2010. "A Markov model for single-leg air cargo revenue management under a bid-price policy," European Journal of Operational Research, Elsevier, vol. 200(3), pages 800-811, February.
    11. Xiao, Baichun & Yang, Wei, 2010. "A revenue management model for products with two capacity dimensions," European Journal of Operational Research, Elsevier, vol. 205(2), pages 412-421, September.
    12. Pak, K. & Dekker, R., 2004. "Cargo Revenue Management: Bid-Prices for a 0-1 Multi Knapsack Problem," ERIM Report Series Research in Management ERS-2004-055-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    13. Kasilingam, R. G., 1997. "Air cargo revenue management: Characteristics and complexities," European Journal of Operational Research, Elsevier, vol. 96(1), pages 36-44, January.
    14. Arcelus, F.J. & Kumar, Satyendra & Srinivasan, G., 2008. "Evaluating manufacturer's buyback policies in a single-period two-echelon framework under price-dependent stochastic demand," Omega, Elsevier, vol. 36(5), pages 808-824, October.
    15. Bjoern Becker & Raja G. Kasilingam, 2008. "Success factors for the implementation of Air Cargo Revenue Management solutions," International Journal of Revenue Management, Inderscience Enterprises Ltd, vol. 2(3), pages 254-271.
    16. Graf, M. & Kimms, A., 2013. "Transfer price optimization for option-based airline alliance revenue management," International Journal of Production Economics, Elsevier, vol. 145(1), pages 281-293.
    17. Lawrence R. Weatherford & Samuel E. Bodily, 1992. "A Taxonomy and Research Overview of Perishable-Asset Revenue Management: Yield Management, Overbooking, and Pricing," Operations Research, INFORMS, vol. 40(5), pages 831-844, October.
    18. Rivi Sandhu & Diego Klabjan, 2006. "Fleeting with Passenger and Cargo Origin-Destination Booking Control," Transportation Science, INFORMS, vol. 40(4), pages 517-528, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shaban, Ibrahim Abdelfadeel & Chan, F.T.S. & Chung, S.H., 2021. "A novel model to manage air cargo disruptions caused by global catastrophes such as Covid-19," Journal of Air Transport Management, Elsevier, vol. 95(C).
    2. Wu, Jiang & Zou, Liuxin & Gong, Yeming & Chen, Mingyang, 2021. "The anti-collusion dilemma: Information sharing of the supply chain under buyback contracts," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 152(C).
    3. An, Jaehyung & Mikhaylov, Alexey & Jung, Sang-Uk, 2021. "A Linear Programming approach for robust network revenue management in the airline industry," Journal of Air Transport Management, Elsevier, vol. 91(C).
    4. Wu, You & Lange, Anne & Mantin, Benny, 2022. "Who benefits from air service agreements? The case of international air cargo operations," Transportation Research Part B: Methodological, Elsevier, vol. 163(C), pages 281-303.
    5. Yu, Shunan & Yang, Zhongzhen & Zhang, Wei, 2019. "Differential pricing strategies of air freight transport carriers in the spot market," Journal of Air Transport Management, Elsevier, vol. 75(C), pages 9-15.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Delgado, Felipe & Trincado, Ricardo & Pagnoncelli, Bernardo K., 2019. "A multistage stochastic programming model for the network air cargo allocation under capacity uncertainty," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 131(C), pages 292-307.
    2. Klein, Robert & Koch, Sebastian & Steinhardt, Claudius & Strauss, Arne K., 2020. "A review of revenue management: Recent generalizations and advances in industry applications," European Journal of Operational Research, Elsevier, vol. 284(2), pages 397-412.
    3. Moussawi-Haidar, Lama & Nasr, Walid & Jalloul, Maya, 2021. "Standardized cargo network revenue management with dual channels under stochastic and time-dependent demand," European Journal of Operational Research, Elsevier, vol. 295(1), pages 275-291.
    4. Long Gao & Jim (Junmin) Shi & Michael F. Gorman & Ting Luo, 2020. "Business Analytics for Intermodal Capacity Management," Manufacturing & Service Operations Management, INFORMS, vol. 22(2), pages 310-329, March.
    5. Moussawi-Haidar, Lama, 2014. "Optimal solution for a cargo revenue management problem with allotment and spot arrivals," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 72(C), pages 173-191.
    6. Masato Wada & Felipe Delgado & Bernardo K. Pagnoncelli, 2017. "A risk averse approach to the capacity allocation problem in the airline cargo industry," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 68(6), pages 643-651, June.
    7. Delgado, Felipe & Sirhan, Cristóbal & Katscher, Mathias & Larrain, Homero, 2020. "Recovering from demand disruptions on an air cargo network," Journal of Air Transport Management, Elsevier, vol. 85(C).
    8. Bo Feng & Jixin Zhao & Zheyu Jiang, 2022. "Robust pricing for airlines with partial information," Annals of Operations Research, Springer, vol. 310(1), pages 49-87, March.
    9. Lei Xu & Govindan Kannan & Xiaoli Yang & Jian Li & Xiukun Zhao, 2013. "Pricing and Allotment in a Sea-Cargo Supply Chain with Reference Effect: A Dynamic Game Approach," Discrete Dynamics in Nature and Society, Hindawi, vol. 2013, pages 1-10, March.
    10. Michael F. Gorman & John-Paul Clarke & Amir Hossein Gharehgozli & Michael Hewitt & René de Koster & Debjit Roy, 2014. "State of the Practice: A Review of the Application of OR/MS in Freight Transportation," Interfaces, INFORMS, vol. 44(6), pages 535-554, December.
    11. Bo Feng & Zheyu Jiang & Fujun Lai, 2020. "Robust approach for air cargo freight forwarder selection under disruption," Annals of Operations Research, Springer, vol. 291(1), pages 339-360, August.
    12. Shaban, I.A. & Wang, Z.X. & Chan, F.T.S. & Chung, S.H. & Eltoukhy, A.E.E. & Qu, T., 2019. "Price setting for extra-baggage service for a combination carrier using the newsvendor setup," Journal of Air Transport Management, Elsevier, vol. 78(C), pages 1-14.
    13. Wai Hung Wong & Anming Zhang & Yer Van Hui & Lawrence C. Leung, 2009. "Optimal Baggage-Limit Policy: Airline Passenger and Cargo Allocation," Transportation Science, INFORMS, vol. 43(3), pages 355-369, August.
    14. Tatsiana Levina & Yuri Levin & Jeff McGill & Mikhail Nediak, 2011. "Network Cargo Capacity Management," Operations Research, INFORMS, vol. 59(4), pages 1008-1023, August.
    15. Yuri Levin & Mikhail Nediak & Huseyin Topaloglu, 2012. "Cargo Capacity Management with Allotments and Spot Market Demand," Operations Research, INFORMS, vol. 60(2), pages 351-365, April.
    16. Justin Dumouchelle & Emma Frejinger & Andrea Lodi, 2024. "Reinforcement learning for freight booking control problems," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 23(4), pages 318-345, August.
    17. Bayliss, Christopher & Currie, Christine S.M. & Bennell, Julia A. & Martinez-Sykora, Antonio, 2019. "Dynamic pricing for vehicle ferries: Using packing and simulation to optimize revenues," European Journal of Operational Research, Elsevier, vol. 273(1), pages 288-304.
    18. Chen, Bo & Zhang, Xiandong, 2019. "Scheduling with time-of-use costs," European Journal of Operational Research, Elsevier, vol. 274(3), pages 900-908.
    19. Andreea Popescu & Earl Barnes & Ellis Johnson & Pinar Keskinocak, 2013. "Bid Prices When Demand Is a Mix of Individual and Batch Bookings," Transportation Science, INFORMS, vol. 47(2), pages 198-213, May.
    20. Chew, Ek Peng & Lee, Chulung & Liu, Rujing, 2009. "Joint inventory allocation and pricing decisions for perishable products," International Journal of Production Economics, Elsevier, vol. 120(1), pages 139-150, July.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jaitra:v:61:y:2017:i:c:p:53-63. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/journal-of-air-transport-management/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.