Airlines Overbooking Problem

     Historically, only a certain amount of passengers who made reservations would actually show up to their flight. Consequently, most airlines overbook to fill the empty seats and make extra revenues. Occasionally, more... [ view full abstract ]

     Historically, only a certain amount of passengers who made reservations would actually show up to their flight. Consequently, most airlines overbook to fill the empty seats and make extra revenues. Occasionally, more passengers will want to take a flight than the capacity of the planes. This mathematical project examines the effects that different overbooking schemes have on revenue airline receives to find an optimal overbooking strategy. We construct a simplified binomial distribution model with a set of static assumptions to consider the overbooking issue in light of current situations such as fewer flights from point A to point B and heightened airport security. We also investigate alternative ways to handle “bumped” passengers. Finally, we propose the auction solution to optimize the overbooking process and explain how it would maximize airlines revenue.