A hybrid tabu search/branch-and-bound algorithm for the direct flight network design

This paper introduces a network design problem with a structure that is encountered in many transportation processes. The general organization of these systems is as follows. Freight has to be transported between a large number of origins and destinations. To consolidate the freight, it is first shipped to a terminal. Next, it is transported directly to a terminal where it is re-loaded and shipped to its destination. The task is to decide which terminals have to be used and how the freight is transported among the terminals. We describe an application where the terminals are airports and the freight is letter mail. Here, the transportation between terminals is by air, which is required due to temporal constraints. The economical impact of these decisions is huge because air transportation is costly and the process is repeated every night. We show how the problem can be modeled as a capacitated warehouse location problem with side constraints and propose a hybrid Tabu Search/ Branch-and-Bound algorithm, which solves large real-world instances with acceptable computation times.