The effect of buy-back policy in air cargo revenue management

Danping Lin, Ka Man Lee, Jilin Yang

Research output: Chapter in book / Conference proceedingConference article published in proceeding or bookAcademic researchpeer-review

Abstract

In order to hedge against demand fluctuation after an intermediary has booked cargo space from an asset provider, buy-back policy has been applied in revenue management. This practice allows both the asset provider and the intermediary to buy back or sell reserved capacity options. This study seeks to apply the financial buy-back concept into the logistics domain by incorporating the Hellermann's capacity option model into the Black-Scholes pricing model. The proposed model was verified by practical air cargo booking data. The experiment results showed that the buy-back policy is capable of increasing the revenues from both the aspects of asset provider and intermediary. The developed model serves as a potential framework for the air cargo participants to handle their booking capacity during the period of order release and order execution.
Original languageEnglish
Title of host publicationIEEM 2015 - 2015 IEEE International Conference on Industrial Engineering and Engineering Management
PublisherIEEE Computer Society
Pages465-469
Number of pages5
Volume2016-January
ISBN (Electronic)9781467380669
DOIs
Publication statusPublished - 18 Jan 2016
EventIEEE International Conference on Industrial Engineering and Engineering Management, IEEM 2015 - Singapore, Singapore
Duration: 6 Dec 20159 Dec 2015

Conference

ConferenceIEEE International Conference on Industrial Engineering and Engineering Management, IEEM 2015
CountrySingapore
CitySingapore
Period6/12/159/12/15

Keywords

  • air cargo
  • asset provider
  • buy-back
  • intermediary
  • revenue management

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)
  • Industrial and Manufacturing Engineering
  • Safety, Risk, Reliability and Quality

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