Optimal airline overbooking policy for a single leg with multiple flights per day

Abstract

This paper addresses the problem of determining optimal overbooking policies on a single flight leg with multiple daily flights. In particular, it solves for the optimal booking level to accept on each of n daily flights from an origin to a destination point that minimizes the total cost of denied boarding and revenue losses. The problem is modeled and solved as a stochastic dynamic program where optimal overbooking policies for a single origin destination flight leg are derived for up to 3 daily flights. An example illustrating the computation of optimal booking levels using the policies derived from the proposed model is shown for the case of Middle East Airlines daily flights on the Paris-Beirut leg.