Optimal Decision Making for Airline Inventory Control

This paper presents a market-reactive optimization approach to solve, on-line, the airline Revenue Management problem. The recursive demand forecasting method proposed, which makes use of geometric programming is described and the uncertainties related to the demand arrival process are taken into account within the Inventory Control module via the use of stochastic dynamic programming. A new backward recursive dynamic programming model is developed and implemented for different situations of fare-classes confinement and numerical results and performance assessments are obtained by computer simulations.