Journal article
Data-Driven Frequency-Based Airline Profit Maximization
ACM transactions on intelligent systems and technology, Vol.8(4), pp.1-28
07/31/2017
DOI: 10.1145/3041217
Abstract
Although numerous traditional models predict market share and demand along airline routes, the prediction of existing models is not precise enough, and to the best of our knowledge, there is no use of data mining-based forecasting techniques for improving airline profitability. We propose the maximizing airline profits (MAP) architecture designed to help airlines and make two key contributions in airline market share and route demand prediction and prediction-based airline profit optimization. Compared to past methods used to forecast market share and demand along airline routes, we introduce a novel ensemble forecasting (MAP-EF) approach considering two new classes of features: (i) features derived from clusters of similar routes and (ii) features based on equilibrium pricing. We show that MAP-EF achieves much better Pearson correlation coefficients (greater than 0.95 vs. 0.82 for market share, 0.98 vs. 0.77 for demand) and R-2-values compared to three state-of-the-art works for forecasting market share and demand while showing much lower variance. Using the results of MAP-EF, we develop MAP-bilevel branch and bound (MAP-BBB) and MAP-greedy (MAP-G) algorithms to optimally allocate flight frequencies over multiple routes to maximize an airline's profit. We also study two extensions of the profit maximization problem considering frequency constraints and long-term profits. Furthermore, we develop algorithms for computing Nash equilibrium frequencies when there are multiple strategic airlines. Experimental results show that airlines can increase profits by a significant margin. All experiments were conducted with data aggregated from four sources: the U.S. Bureau of Transportation Statistics (BTS), the U.S. Bureau of Economic Analysis (BEA), the National Transportation Safety Board (NTSB), and the U.S. Census Bureau (CB).
Details
- Title: Subtitle
- Data-Driven Frequency-Based Airline Profit Maximization
- Creators
- Bo An - Nanyang Technological UniversityHaipeng Chen - Nanyang Technological UniversityNoseong Park - University of North Carolina at CharlotteV. S. Subrahmanian - University of Maryland, College Park
- Resource Type
- Journal article
- Publication Details
- ACM transactions on intelligent systems and technology, Vol.8(4), pp.1-28
- Publisher
- Assoc Computing Machinery
- DOI
- 10.1145/3041217
- ISSN
- 2157-6904
- eISSN
- 2157-6912
- Number of pages
- 28
- Grant note
- National Research Foundation, Prime Minister's Office, Singapore, under its IDM Futures Funding Initiative; National Research Foundation, Singapore
- Language
- English
- Date published
- 07/31/2017
- Academic Unit
- Marketing
- Record Identifier
- 9984618619802771
Metrics
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