Modeling overbookings on air cargo transportation

Abstract

PurposeIn order to hedge against fluctuation in actual “show” for air freight services, cargo airlines engage in the allocation of more space capacity than they actually have. This practice can lead to overbooking of capacity which can incur costs to the airline when a cargo does show that is larger than predicted. In this study, the authors set out to model an optimised value for air cargo booking which is tested against five different cargo case‐representative scenarios. The paper aims to discuss these issues.Design/methodology/approachThe methodology which is primarily discursive utilises a synthesis of existing literature to develop a model to replicate the overbooking problem.FindingsThis paper finds that the optimised value of cargo size may not necessarily depend on the probability of actual “show”. Instead, this variation appears dependent on a random demand for larger sized cargo, and thus, price.Practical implicationsThe model which is developed serves as a potential framework for airlines to avoid uncertainty associated with cargo capacity spoilage and overbooking.Originality/valueIn this study, the passenger overbooking model under the cancellation and no‐show problems in the static single leg case was adapted for use during the modelling of air cargo overbooking.