An Overbooking Model for Air Cargo Industry under Stochastic Booking Request and Show-Up Rate

Abstract

Overbooking is a technique which sells goods or services in excess of the available capacity because there is a possibility that some customers might not show up. In air cargo overbooking problem, overbooking model is more complex because of the two-dimensional characteristic. This paper presents a two-dimensional air cargo overbooking model to find the optimal overbooking level in order to minimize the total cost, which consists of spoilage and offloading costs. Booking requests and show-up rate are random variables with known distributions. Sensitivity analysis is used to observe the impact of the ratio between spoilage and offloading costs on the optimal overbooking level.