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Air cargo revenue management under buy-back policy

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  • 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
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