Modelling air-carrier’s portfolio of business travel

This paper presents a model that optimises the portfolio of contracts that are signed between an air-carrier and different corporations to promote their travel on the air-carrier. The model jointly evaluates the different contracts with different corporations and selects the most profitable ones. The problem is formulated similar to the traditional knapsack problem where the revenue is maximised given the limited seat capacity on each market. The model also captures the trade-off between accepting new contracts and possible displacement of current passengers. It evaluates deals at different disaggregate levels, including markets and cabin classes. Each proposed contract is defined in terms of the amount of discount to be offered by the air-carrier and the associated business travel share that the air-carrier would receive from the corporation’s total travel inventory. The model output is an accept–reject decision for each contract in the input list.