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Applications of Operations Research in the Air Transport Industry

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 Applications of Operations Research
in the Air Transport Industry

Cynthia Barnhart • Peter Belobaba • Amedeo R. Odoni

Massachusetts Institute of Technology, Cambridge, Massachusetts 02139
cbarnhart@mit.edu • belobaba@mit.edu • arodoni@mit.edu

T his paper presents an overview of several important areas of operations research appli-
cations in the air transport industry. Specific areas covered are: the various stages of
aircraft and crew schedule planning; revenue management, including overbooking and leg-
based and network-based seat inventory management; and the planning and operations of
aviation infrastructure (airports and air traffic management). For each of these areas, the
paper provides a historical perspective on OR contributions, as well as a brief summary of
the state of the art. It also identifies some of the main challenges for future research.

1. Introduction air transport associations are currently represented in

During the one hundred years since the first flight of
Orville and Wilbur Wright, the air transport indus-
try has grown into a major sector of the global econ-
omy. Even more importantly, it has become essential
to developing and maintaining cultural and economic
links among countries and peoples. The airlines alone
generated more than $300 billion in revenues in 2002,
a lean year, and carried about 1.6 billion passengers, a
number expected to grow at an annual rate of 4%–5%
over the next 20 years according to most forecasts.
According to the industry “air transport provides
28 million direct, indirect, and induced jobs world-
wide” and carries “over 40% of the world trade of
goods, by value” (Collaborative Forum 2003).
After spending roughly its first 40 years trying to
get off the ground, literally at times, the air trans-
port industry has grown by leaps and bounds dur-
ing the last 60, especially since the advent of the “jet
age” in the late 1950s. Throughout that second period,
operations research (OR) has played a critical role in
helping the airline industry and its infrastructure sus-
tain high growth rates and make the transition from
a novelty that catered to an elite clientele to a service
industry for the masses. More than 100 airlines and
AGIFORS, the Airline Group of Operational Research
Societies, which has been active since 1961. Indeed,
it is difficult to think of any single sector, other than
perhaps military operations, with which operations
research has been linked more closely. One of the rea-
sons is that airline operations and, more generally,
the air transport environment provide natural con-
texts for the application of OR techniques and models.
A second is that the airline industry has consistently
been a leader in the use of information technology
and has relied heavily on the intensive use of com-
puters over the years.
The objective of this paper is to present a histor-
ical perspective on the contributions of operations
research to the air transport industry, as well as to
offer an assessment of some of the challenges that will
be confronted next. Any reasonably thorough cover-
age of this subject would probably require an entire
issue of this journal because the number of OR papers
published on air transport easily exceeds 1,000 over
the last 50 years. In view of the severe constraints
on its length, the scope of the paper will instead be
confined to a selected subset of air transport-related
topics, where operations research has made some

Transportation Science © 2003 INFORMS 0041-1655/03/3704/0368

Vol. 37, No. 4, November 2003, pp. 368–391 1526-5447 electronic ISSN
 BARNHART, BELOBABA, AND ODONI
Operations Research in the Air Transport Industry
of its most significant contributions to date. Exam-
ples of important topics that are either not covered
at all or are touched on peripherally include: avia-
tion safety and security, airline fleet planning, airline
staffing, airline maintenance planning, aircraft load-
ing, and decision support tools for the management
of airport operations (e.g., gate assignments). More-
over, the specific topics and contributions that are
highlighted are presented in nonquantitative terms
and largely reflect the authors’ own interests. In addi-
tion to the bibliographic references associated with
these contributions, other survey papers, which pro-
vide additional details and references, are cited when-
ever possible.
Section 2 of the paper deals with the classical
problems of scheduling, routing, and crew assign-
ment in the airline industry. This is a context that
is perfectly suited to the use of large-scale, discrete
optimization approaches and, indeed, has motivated
several methodological and computational develop-
ments in this vibrant area of OR over the years. Sec-
tion 3 covers airline revenue management, includ-
ing overbooking, flight leg yield management and
network revenue maximization. Through a combina-
tion of stochastic and optimization models, OR work
in this area has generated significant additional rev-
enues for the airlines ever since the late 1980s. More-
over, revenue management continues to be a field in
which airlines are vying intensively for competitive
advantage. Section 4 surveys selected applications of
OR to the study, planning, and design of the two
major pieces of aviation infrastructure, the airports
system and the air traffic management (ATM) system.
Historically the emphasis here has been on stochas-
tic models, as the questions addressed have focused
on capacity, delays, and safety under conditions in
which the probabilistic characteristics of the input
parameters play a dominant role. However, optimiza-
tion models, both deterministic and stochastic, have
found use in the intensive recent research on air traf-
fic flow management, a topic also reviewed briefly
in §4. Finally, §5 summarizes the main conclusions
regarding the fundamental challenges faced by future
research.
Transportation Science/Vol. 37, No. 4, November 2003
2. Aircraft and Crew
Schedule Planning
Schedule planning involves designing future aircraft
and crew schedules to maximize airline profitabil-
ity. This problem poses daunting challenges because
it is characterized by numerous complexities, includ-
ing a network of flights, differing aircraft types, gate,
airport slot and air traffic control restrictions, noise
curfews, maintenance requirements, crew work rules,
and competitive, dynamic environments in which
passenger demands are uncertain and pricing strate-
gies are complex. Not surprisingly, no single opti-
mization model has been solved, or even formulated,
to address this complex design task in its entirety.
The problem’s unmanageable size and complexity
has resulted in the decomposition of the overall
problem into a set of subproblems, often defined as
follows:
(1) Schedule design: Defining which markets to
serve and with what frequency, and how to schedule
flights to meet these frequencies.
(2) Fleet assignment: Specifying what size aircraft to
assign to each flight.
(3) Aircraft maintenance routing: Determining how
to route aircraft to ensure satisfaction of maintenance
requirements.
(4) Crew scheduling: Selecting which crews to assign
to each flight to minimize crew costs.
Suboptimal, yet feasible aircraft and crew plans are
constructed by solving the subproblems in order, con-
straining the solutions to subsequent problems based
on the solutions to preceding problems. Although
smaller and simpler than the overall problem, these
subproblems are still large-scale and rich in complex-
ity. In fact, OR theoreticians and practitioners have
been developing models and algorithms to solve them
for decades and, in so doing, have had significant suc-
cesses and impacts.
In the late 1960s and early 1970s, United Airlines,
American Airlines, British Airways, and Air France,
recognizing the competitive advantage that decision
technologies could provide, formed OR groups. These
groups grew rapidly, developing decision support
tools for a variety of airline applications, including
aircraft and crew schedule planning, and in some
cases began offering their services to other airlines
369
 BARNHART, BELOBABA, AND ODONI
Operations Research in the Air Transport Industry
as well. According to one executive, the schedule
planning system developed at American Airlines and
Sabre has generated over $500 million in incremen-
tal profits annually (Cook 2000). Most major airlines
around the world have formed similar groups by
now. Their name and size, as well as their placement
in the corporate structure, vary considerably from air-
line to airline. Many consulting companies are also
offering products and services in this general area.
Other testimonials on the impact of optimization in
the airline industry can be found in Yu et al. (2003),
Butchers et al. (2001), Wiper et al. (1994), Smith et al.
(1992), and Patty et al. (1991).
Beginning in the 1950s and 1960s, early research on
airline schedule planning focused on approaches to
assign aircraft to routes (Ferguson and Dantzig 1956a)
and crews to trips (Arabeyre et al. 1969). Since then,
researchers have continued to work on these prob-
lems, refining and expanding the models to better rep-
resent the actual problem faced, or developing more
sophisticated algorithms to improve the quality of the
solutions generated.
In the following sections, we provide an overview
of progress, highlighting some of the major accom-
plishments and describing some of the remaining
challenges.
2.1. Schedule Design
The flight schedule, specifying the flight legs to be
flown and the departure time of each flight leg,
largely defines the competitive position of an air-
line and is thus a key determinant of airline prof-
itability. Designing a profit maximizing flight sched-
ule, however, is extremely complex. It affects and is
affected by essentially all aircraft and crew schedul-
ing decisions of the airline, and competing airlines as
well. No single model has captured all these inter-
dependencies, and even if such a model were for-
mulated, it surely would be intractable. Moreover, its
input data requirements are impractical, requiring, for
example, accurate estimates of itinerary-specific pas-
senger demands, spill costs, and recapture rates.
Notwithstanding this complexity, flight schedule
design and variants of the problem have been of
interest to researchers for many years, with Simp-
son (1966), Chan (1972), Soumis et al. (1980), and
370
Etschmaier and Mathaisel (1984) describing early
work. Nonetheless, because of the inability of opti-
mization models to adequately capture the scope of
the design problem, the typical airline practice today
is to build flight schedules manually, with limited
optimization. With recent research advances, how-
ever, this trend is reversing and optimization is begin-
ning to play a role.
Success has been achieved by defining a simplified
design problem involving only incremental changes
to existing flight schedules. Berge (1994), Marsten
et al. (1996), and Lohatepanont and Barnhart (2001)
develop models and algorithms that select from a
subset of candidate flights legs, those that will be
added to or removed from a given (often existing)
flight schedule. Their approaches are incremental in
that the changes from one published flight sched-
ule to the next are limited. The reported impacts,
however, are significant. Lohatepanont and Barnhart
solve problems at one major airline that contain about
800 potential flight legs, 65,000 itineraries, and 165
aircraft, resulting in formulations with 30,000–60,000
rows and 50,000–65,000 columns, and solution times
ranging from 12 hours to more than 3 days. They
report potential improvements in aircraft utilization
and significant increases in revenue, with an esti-
mated impact exceeding $200 million at that airline.
A nonincremental, clean-slate approach to airline
schedule design is described in Armacost et al. (2002).
They present models and algorithms to generate
(near-) optimal flight network designs for express par-
cel delivery, and report savings of about 7% in oper-
ating costs and potential reductions of 10% in the
required fleet size.
Another schedule design application involving a
charter airline is described in Erdmann et al. (1999).
By exploiting the special characteristics of the prob-
lem, they are able to achieve near-optimal solutions
in minutes.
Schedule generation, with its important strategic
and financial implications, represents an important
area for future research, one rich in opportunity and
challenge. The successes to date are just first steps
in addressing the myriad of questions surrounding
schedule design. Future research is needed to capture
the critical interactions among the various resources
of the airline, its competitors, and airports.
Transportation Science/Vol. 37, No. 4, November 2003
 BARNHART, BELOBABA, AND ODONI
Operations Research in the Air Transport Industry
2.2. Fleet Assignment
With the flight schedule determined, the fleet assign-
ment problem is to find the cost-minimizing assign-
ment of aircraft types to legs in the flight network.
Fleeting costs are comprised of:
(1) Operating costs: Specified for each flight leg—
aircraft type pair, representing the cost of flying that
flight leg with that aircraft type.
(2) Spill costs: Measuring the revenue lost when
passenger demand for a flight leg exceeds the
assigned aircraft’s seating capacity.
One of the earliest research efforts on airline
scheduling was that of Ferguson and Dantzig (1956a).
They developed a linear programming model to allo-
cate aircraft to roundtrip routes to minimize operat-
ing plus spill costs. In a follow-up paper (Ferguson
and Dantzig 1956a), they expanded their approach to
handle uncertain demands. These first models, while
applied to simplified flight networks and tiny prob-
lems by today’s standards, identified key problem
attributes and launched decades of research on fleet
assignment.
As a result, some 30 years later, researchers devel-
oped the capabilities to solve fleeting problems rep-
resentative, both in complexity and size, of those
truly faced by airlines. Abara (1989) and Hane et al.
(1995) formulated the fleet assignment problem as
a multicommodity network flow problem with side
constraints. The underlying network (depicted in
Figure 1) has:
(1) Nodes: Representing the times and locations of
flight leg departures and arrivals.
(2) Flight arcs and ground arcs: Each flight arc corre-
sponds to a flight leg with its arrival time adjusted
to include the minimum amount of time required
on the ground for disembarking and embarking pas-
sengers, unloading and loading baggage, and refuel-
ing. Ground arcs represent idle aircraft on the ground
between flights.
The objective is to flow commodities, that is, air-
craft types, through the network feasibly and with
minimum cost. Side constraints enforce the following
requirements and restrictions:
(1) Cover: Each flight leg is assigned to exactly one
aircraft type.
Transportation Science/Vol. 37, No. 4, November 2003
count line
airport A
airport B
flight arc
ground arc
Figure 1 A Timeline Network Involving Two Airports
(2) Aircraft count: Only available aircraft are
assigned to the network.
(3) Balance: Each aircraft type is assigned to the
same number of flight legs arriving at a station as
departing that station.
Each possible assignment of an aircraft type to a flight
leg is represented by a binary variable, with value 1
if the aircraft type is assigned to that flight leg, and
0 otherwise. The resulting formulation for the fleet
assignment problem of a major airline contains about
20,000 rows and 30,000 columns and can be solved
typically within minutes.
2.2.1. Impacts and Challenges. Multicommodity
flow-based fleet assignment models are widely used
by the industry and are credited with achieving
significant cost savings, measuring in the millions
of dollars annually. For example, Rushmeier and
Kontogiorgis (1997) report realized savings of at least
$15 million annually at USAir. Using fleet assignment
models, Wiper et al. (1994) report annual savings
of $100 million at Delta Airlines, and Abara (1989)
reports a 1.4% improvement in operating margins at
American Airlines.
Beyond providing economic benefits, research on
fleet assignment problems has led to advanced tech-
niques for solving general linear programs. For exam-
ple, the node consolidation idea introduced in Hane
et al. (1995), which reduced formulation size by more
than 40% for the problems of one major airline, has
been generalized and incorporated into commercial
solvers, allowing more efficient solution of large-scale
optimization problems.
371
 BARNHART, BELOBABA, AND ODONI
Operations Research in the Air Transport Industry
These impressive results notwithstanding, there
remain several critical challenges in fleet assign-
ment. Many of these challenges stem from modeling
assumptions that include:
(1) Many fleet assignment models assume that the
flight schedules repeat daily, even though most air-
lines operate different schedules on the weekend.
(2) Most fleeting models assume flight leg demand
is known and does not vary by day of week, but his-
torical data show that day-to-day demand variations
are present.
(3) Flying times and ground times are typically
assumed to be deterministic in fleet assignment mod-
els; however, congestion on the ground and in the air,
weather conditions, and new security practices pro-
duce large variations in flight and ground times.
(4) Most fleet assignment models assume that the
number of spilled passengers, and their associated
spill costs, can be computed at a flight-leg level. In
fact, passenger demand, spill, and the revenue asso-
ciated with each passenger are itinerary specific, not
flight-leg specific. As a result, it is possible to estimate
leg-specific spill costs only approximately.
To improve on leg-based models, researchers intro-
duced itinerary- or origin-destination-(O-D) based fleet
assignment approaches (Jacobs et al. 1999; Barnhart
et al. 2002a, b). These approaches consider passen-
ger fares, demand, spill, and recapture to be itinerary,
not flight-leg, specific. Inaccuracies resulting from
the allocation of fares and demands to flight legs
are thus not introduced into these enhanced fleeting
approaches. Using their O-D-based fleet assignment
approach, Jacobs et al. (1999) report annual improve-
ments of 0.54%–0.77% in revenue compared to those
obtained with a flight-leg-based model. Similarly, in
a case study involving a major U.S. airline, Barn-
hart et al. (2002a) report that itinerary-based fleet
assignment improves on leg-based fleeting signifi-
cantly, with estimated savings ranging from 30 mil-
lion to over 100 million dollars annually.
In a first step at integrating fleet assignment and
schedule design decisions, Rexing et al. (2000) simul-
taneously assign an aircraft type to each flight leg
and select each flight leg’s departure time, allowing
retimings of 5–20 minutes from the current schedule.
372
Departure retiming allows additional aircraft assign-
ments that can lead to better matches between flight
leg demand and assigned capacity. The result, accord-
ing to Rexing et al. (2000), is reduced operating costs
and improved revenue capture, with savings for one
major airline of $20–$50 million annually.
2.3. Aircraft Maintenance Routing
With schedule design and fleet assignment decisions
made, the flight network decomposes into subnet-
works, each one associated with aircraft of a single
type. The assignment of individual aircraft to flight
legs in a subnetwork occurs in the aircraft mainte-
nance routing step. The goal is to determine routings,
or rotations, for each aircraft in a fleet. A routing is
a sequence of flight legs, with the destination of one
flight leg the same as the origin of the next leg in
the sequence. A rotation is a routing that starts and
ends at the same location. Each aircraft’s rotation vis-
its maintenance stations at regular intervals. More
details on the maintenance routing problem are con-
tained in Feo and Bard (1989), Gopalan and Talluri
(1998), and Clarke et al. (1996b). For restricted mainte-
nance routings of three or four days, Gopalan and Tal-
luri (1998) and Talluri (1998) describe graph-theoretic
approaches to maintenance routing.
In general, the aircraft maintenance routing prob-
lem can be modeled as a network circulation problem
with side constraints. The decision variables corre-
spond to sequences (strings) of flight legs, with each
sequence beginning and ending at maintenance sta-
tions and satisfying the rules governing the maximum
time between maintenance. If a string is included in
the solution, a single aircraft flies each flight in the
sequence and then undergoes maintenance. Side con-
straints include cover constraints and count constraints.
Cover constraints ensure that each flight leg is con-
tained in exactly one selected string, and count con-
straints limit the number of assigned aircraft to the
number available. Additional details are provided in
Barnhart et al. (1998a).
2.3.1. Impacts and Challenges. Solving the fleet
assignment problem first and then the resulting
aircraft routing problems can lead to violations
of aircraft maintenance requirements. To guaran-
tee feasible solutions, particularly in low-frequency,
Transportation Science/Vol. 37, No. 4, November 2003
 BARNHART, BELOBABA, AND ODONI
Operations Research in the Air Transport Industry
point-to-point networks, researchers have integrated
fleet assignment and aircraft routing models, as in
Desaulniers et al. (1997) and Barnhart et al. (1998a).
This has the effect of substantially expanding the air-
craft routing model to include multiple fleet types,
instead of a single aircraft type. The number of con-
straints for large airlines is often less than a few thou-
sand, but there are many billions of possible variables.
For hub-and-spoke networks, however, the increased
size and complexity of this integrated model is rarely
warranted. Instead, feasible solutions are typically
generated using a slightly modified sequential solu-
tion approach in which an altered fleeting model is
first solved and then the routing model is solved.
The modified fleet assignment model contains pseudo-
maintenance constraints to ensure that sufficient num-
bers of aircraft of each type are located at mainte-
nance stations periodically. In hub-and-spoke networks
with banks containing many aircraft together on the
ground at the same time, these maintenance con-
straints are often sufficient to ensure that the resulting
fleet assignment has associated feasible maintenance
routings.
In addition to the possibility of generating infea-
sible solutions, a disadvantage of the sequential
solution approach to aircraft and crew planning is
that aircraft routing solutions limit possible crew
scheduling opportunities, potentially causing crew
costs to increase significantly. The linkage between
aircraft routing and crew scheduling occurs because
a crewmember can connect between two flight legs
separated by less than the minimum required connec-
tion time only if the same aircraft is assigned to both
legs. To account for this, Klabjan et al. (2002) swap
the order of the problems and solve the crew pair-
ing problem before the maintenance routing problem.
This approach has the advantage of generating opti-
mal crew solutions, but it does not ensure that for
the optimized crew solution there is a correspond-
ing maintenance-feasible solution. To achieve crew
optimality and maintenance feasibility, Cordeau et al.
(2000) and Cohn and Barnhart (2003) integrate the
basic maintenance routing and crew pairing models.
2.4. Crew Scheduling
Crew scheduling problems with numerous, com-
plex rules, and well-defined costs are particularly
Transportation Science/Vol. 37, No. 4, November 2003
amenable to optimization. With so many possible
decisions, it is difficult to find feasible—let alone
optimal—solutions manually. Moreover, crews repre-
sent the airlines’ second highest operating cost after
fuel, so even slight improvements in their utilization
can translate into significant savings.
For these reasons, airline crew scheduling has gar-
nered considerable attention, with research spanning
decades. Arabeyre et al. (1969) published a survey
of early research activities on the topic. At that
time, because of large problem size and lack of
advanced techniques and sufficient computing capa-
bilities, heuristics were employed to find improved
crew solutions.
Since then, researchers have continued to work on
the crew scheduling problem, seeking more efficient
solution approaches, expanding models to capture
more of the intricacies of the crew scheduling prob-
lem, and integrating the crew problem with other
airline scheduling problems. Recent detailed descrip-
tions of the airline crew scheduling problem are
included in the survey papers by Desaulniers et al.
(1998), Clarke and Smith (2000) and Barnhart et al.
(2003).
Even today, the crew scheduling problem is typ-
ically broken into two sequentially solved subprob-
lems, the crew pairing problem and the crew assignment
problem:
(1) The crew pairing problem. The problem generates
minimum-cost, multiple-day work schedules, called
pairings. Regulatory agencies and collective bargain-
ing agreements specify the many work rules that
define how flight legs can be combined to create fea-
sible schedules. Work-rule restrictions include limits
on the maximum number of hours worked in a day,
the minimum number of hours of rest between work
periods, and the maximum time the crew may be
away from their home base. Even with these limi-
tations, the number of feasible pairings measures in
the billions for major U.S. airlines. The cost structure
of pairings adds further complexity, with cost typ-
ically represented as a nonlinear function of flying
time, total elapsed work time, and total time away
from base.
(2) The crew assignment problem. This problem com-
bines these pairings into equitable and efficient
373
 BARNHART, BELOBABA, AND ODONI
Operations Research in the Air Transport Industry
month-long crew schedules, called bidlines or rosters,
assigning them to individual crewmembers. With ros-
tering, schedules are constructed for and assigned
to specific individuals, taking into account their par-
ticular needs and requests. With bidline generation
(a practice commonly used in the United States), a
generic set of schedules is constructed and individ-
ual employees reveal their relative preferences for
these schedules through a bidding process. The spe-
cific assignment of schedules to employees is based
on seniority, with the more senior crewmembers most
often assigned their preferred schedules. More details
on the bidline and rostering problems can be found in
Kohl and Karisch (2003), Cappanera and Gallo (2001),
Caprara et al. (1998), Christou et al. (1999), Dawid
et al. (2001), Day and Ryan (1997), and Gamache et al.
(1998).
The crew pairing, bidline, and rostering problems
can all be cast as set partitioning problems. While sim-
ple in form, the set partitioning model is powerful in
this context. To illustrate, consider the crew pairing
problem.
The crew pairing problem has one binary deci-
sion variable for each possible pairing, and its objec-
tive is to minimize the cost of the selected pairings
such that for each flight, exactly one pairing con-
taining that flight is chosen. By defining variables
as sequences of flight legs, only feasible pairings are
considered and explicit formulation of complicated
work rules is unnecessary. Moreover, nonlinear pair-
ing costs can be computed offline and captured as a
single value. The crew pairing model, is then a set par-
titioning problem, with a linear objective function and
binary decision variables. The one drawback to this
modeling approach is that there are potentially many
billions of possible crew pairings, especially in hub-
and-spoke flight networks with numerous aircraft at
hubs at the same time, allowing many possible crew
connections.
2.4.1. Solving Crew Scheduling Problems. Be-
cause of the immense size of airline crew scheduling
problems, i.e., thousands of constraints and billions
of variables, researchers initially focused on heuristic
methods to achieve solutions. Many of these heuris-
tics generate solutions by considering only a relatively
small number of pairings. Examples of this strategy
374
can be found in Arabeyre et al. (1969), Anbil et al.
(1991), Gershkoff (1989), and Hoffman and Padberg
(1993).
While producing improved solutions compared to
those generated earlier, these heuristics still have a
drawback; namely, the quality of their solutions can-
not be quantified relative to an optimal solution.
With advances in optimization theory and comput-
ing, however, researchers have built enhanced crew
scheduling capabilities and designed optimization-
based approaches capable of generating provably
optimal or near-optimal crew pairing solutions.
To generate crew solutions with known optimal-
ity bounds, even when variable enumeration is not
practical, many researchers have turned to branch-and-
price. Branch-and-price, surveyed in Barnhart et al.
(1998b), is a smart enumeration technique in which
linear programming bounds are generated at each
node of a branch-and-bound tree using column gen-
eration. Column generation allows very large LPs to
be solved without explicitly enumerating all of the
variables, or columns. Rather than directly solving
the master problem (the problem with all possible
columns), a restricted master problem containing only
a subset of the original columns is solved. The dual
solution to the restricted master problem is used to
identify columns with negative reduced cost. These
columns are added to the restricted master problem;
the restricted master problem is then resolved, and
the process is repeated until no negative reduced cost
columns can be found. At that point, the algorithm
terminates with an optimal solution to the master
problem.
In the case of the crew pairing problem, negative
reduced cost columns are identified without explic-
itly considering each pairing. Instead, all columns
are implicitly considered by solving a pricing prob-
lem, often formulated as a multilabel, shortest path
problem in which some paths correspond to pairings.
By exploiting dominance, shortest paths—and hence
minimum reduced cost pairings—are identified with-
out examining all paths, or pairings. For a detailed
exposition of multilabel, shortest path problems, see
Desrochers and Soumis (1988).
A particular challenge in branch-and-price algo-
rithms is that a standard branching rule based on
Transportation Science/Vol. 37, No. 4, November 2003
 BARNHART, BELOBABA, AND ODONI
Operations Research in the Air Transport Industry
variable dichotomy is often difficult to implement.
Instead, a branch-on-follow-ons branching rule is typi-
cally used (Ryan and Foster 1981). This rule is based
on pairs of flights, with one flight immediately follow-
ing the other. One branching decision requires sched-
ules containing either flight to contain both flights
and the other decision disallows this. For applications
of this branching strategy to airline crew schedul-
ing, see Lavoie et al. (1988), Desrosiers et al. (1991),
Ryan (1992), Gamache and Soumis (1993), Barnhart
et al. (1994), Vance et al. (1997), and Desaulniers et al.
(1998).
Even with the effective branch-on-follow-ons rule,
the number of branching decisions to prove optimal-
ity is typically excessive for crew-scheduling prob-
lems. To remedy this, researchers have embedded
heuristics within the branch-and-price optimization
process. An example is the variable-fixing approach
described in Marsten (1994) in which variables with
fractional values close to one are sequentially fixed
to one. Marsten shows that by reducing the num-
ber of LPs solved in generating integer solutions,
improved solutions can be generated with signifi-
cantly less computing time and memory. Klabjan et al.
(2001) integrate the heuristic consideration of sub-
sets of columns with an optimization-based pricing
approach. They produce improved solutions, com-
pared to those achieved with branch-and-price, by
initially developing hundreds of millions of columns
and applying random selection and pricing tech-
niques to prune the number of columns ultimately
considered.
2.4.2. Impacts and Challenges. Most major air-
lines use optimization tools to partially or fully
generate their crew schedules, with significant eco-
nomic impacts. Already in the 1960s, airlines were
solving crew pairing problems to reduce costs and
automate their burdensome manual planning process
(Arabeyre et al. 1969). With advances in optimization
and computing, crew pairing solvers became increas-
ingly sophisticated and applicable. Using advanced
heuristic techniques, Anbil et al. (1991) achieved cost
savings at American Airlines of $20 million dollars
annually, representing an increase in crew utilization
of 1.5%.
Transportation Science/Vol. 37, No. 4, November 2003
Motivated by the potential for even further cost
savings, researchers focused on the development of
optimization-based approaches in the decades span-
ning the 1980s and 1990s. Barnhart et al. (2003)
reported that using a branch-and-price approach, one
major U.S. airline was able to produce near-optimal
crew solutions costing $50 million per year less than
the solutions generated by a state-of-the-art heuristic.
In addition to these economic benefits, crew
scheduling optimization can be a useful tool in con-
tract negotiations, helping airlines to quantify the
impacts of proposed changes in cost structures, bene-
fits, and work rules. The economic impact of each pro-
posed change can be evaluated by changing selected
inputs to the crew scheduling model, and rerunning
the optimization procedure.
While significant, the effects of optimization on
crew scheduling are nonetheless limited by the
sequential schedule planning process. With the flight
schedule, fleet assignment, and aircraft routing deci-
sions fixed, the range of crew scheduling possibilities
is limited. To mitigate the myopic effects of sequential
solutions, researchers have developed extended mod-
els that incorporate crew considerations into some of
the other subproblems solved. For example, Clarke
et al. (1996a) and Barnhart et al. (1998c) extend fleet
assignment models to account for some of the down-
stream effects on crews. The fleet assignment model in
the sequential solution process is then replaced with
one of these extended models, resulting in an increase
in fleet assignment costs that is offset by a greater
reduction in crew costs.
2.5. Ongoing and Future Challenges
Notwithstanding the substantial progress made in
solving aircraft and crew scheduling problems in
recent decades, significant work remains. Research
opportunities, beyond those identified for the sched-
ule design, fleet assignment, aircraft routing, and crew
scheduling problems described above, include:
Schedule planning: (1) Integrating decisions involv-
ing schedule design and aircraft and crew routing
and scheduling; (2) expanding schedule planning
models to include pricing and revenue management
decisions; (3) assessing the systemwide cost and ser-
vice impacts of paradigm shifts in airline scheduling,
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Operations Research in the Air Transport Industry
such as depeaking flight schedules by spreading out
aircraft arrival and departure banks; and (4) devel-
oping tools, such as the stochastic model and airline
operations simulator described in Rosenberger et al.
(2002), to evaluate airline plans and recovery policies
in a stochastic operating environment.
Robust planning: Optimized solutions are rarely exe-
cuted as planned. Crew sickness, mechanical failures,
and adverse weather result in necessary changes to
the plan, often leading to significantly increased costs.
Moreover, a finely tuned, optimized solution achieves
increased utilization through the removal of slack,
providing crews with less time to connect between
flights and aircraft with less time on the ground
between flying. Less slack time, although economical
in theory, can translate in practice into less robust-
ness and increased costs. To address these issues,
researchers have begun to investigate a different plan-
ning paradigm, one that considers unplanned, dis-
ruptive events and attempts to minimize realized, and
not planned, costs. Current research, such as that
of Ageeva (2000), Rosenberger et al. (2001a), Schae-
fer et al. (2001), and Chebalov and Klabjan (2001),
attempts to achieve robustness by isolating causes of
disruption and/or downstream effects. In Lan (2003),
robust aircraft routes are generated to place slack judi-
ciously, that is, where it is needed to minimize the
disruptive effects of delays on passengers.
Operations recovery: Given a plan and one or more
disruptions, the goal of operations recovery is to
return the airline to its plan quickly (often requir-
ing decisions within minutes) and cost effectively.
Detailed descriptions of recovery models and algo-
rithms are included in Jarrah et al. (1993), Clarke
(1997), Thengvall et al. (2000), Rosenberger et al.
(2001b), Stojkovic et al. (2002), Bratu (2003), and
Yu et al. (2003). Although these problems typically
involve multiple airports and many of the airline’s
resources, most of the work to date focuses on recov-
ering a particular resource, either aircraft, crews, or
passengers. For example, in their Edelman Award-
winning work, Yu et al. (2003) report that Conti-
nental Airlines saved approximately $40 million in
2001 using their crew recovery system. The challenge
moving forward is to enhance current capabilities by
considering integrated passenger, crew, and aircraft
376
recovery decisions, while rapidly determining low-
cost solutions.
3. Airline Revenue Management
Even with an optimized fleet assignment and sched-
ule of operations, some flight departures will have
empty seats while others will experience more pas-
senger demand than capacity. In an effort to better
match the demand for each flight with its capacity
and to increase total revenues, airlines practice differ-
ential pricing by offering a variety of fare products at
different price levels for the same flight. Revenue man-
agement is the practice of determining the number of
seats on each flight to be made available at each fare
level, limiting low-fare seats and protecting seats for
later-booking, higher-fare passengers. Given that the
operating costs of a scheduled flight departure are in
large part fixed in the very short run, the goal of rev-
enue management is to fill each flight with the maxi-
mum possible revenue to maximize operating profit.
This section provides a brief review of the role of
operations research in the development of airline rev-
enue management (RM) models, with an emphasis on
the works that have most influenced the state of the
practice in the industry. A much more comprehensive
survey of OR literature dealing with revenue manage-
ment and related problems can be found in McGill
and van Ryzin (1999). In addition, Weatherford and
Bodily (1992) developed a categorization of “perish-
able asset revenue management” problems, of which
the airline revenue management problem is the best-
known example.
This review begins with an introduction to the
functions of typical airline RM systems, followed by
descriptions of the types of OR models employed to
perform three of the principal techniques of revenue
management—overbooking, fare class mix, and O-D
control. Therefore, the focus of this discussion is on
the seat inventory control component of airline rev-
enue maximization, as virtually all airline RM systems
assume that the fare structure is determined exoge-
nously by a separate airline pricing function.
3.1. The Evolution of Airline RM Systems
The sheer size and complexity of the airline seat
inventory control problem led to the development
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of computerized RM systems. A medium-sized air-
line might operate 1,000 flight legs per day, using
10 booking (fare) classes in its reservations system,
and accepting bookings up to 330 days prior to each
departure. At any point in time, this airline’s seat
inventory includes over three million booking limits,
which can change with each booking that is accepted.
Airline RM systems have evolved in both their
computer database and mathematical modeling capa-
bilities over the past 20 years. The first RM systems,
developed in the early 1980s, were designed to collect
and store data extracts from computer reservations
systems (CRS). By the mid-1980s, several RM sys-
tems offered additional monitoring capabilities that
allowed actual flight bookings to be tracked dynam-
ically, relative to an expected or “threshold” book-
ing curve for the flight. By the late 1980s, the more
advanced airlines began to implement RM systems
that could perform forecasting and optimization by
booking class for each future flight leg departure, in
addition to having all of the database and booking
monitoring capabilities of previous systems. It was
into this “third generation” of RM systems that OR
models, some of which had been developed a decade
or more earlier, began to be integrated.
The major components of a typical third-generation
RM system are illustrated in Figure 2. Historical book-
ing data for the same flight leg and day of the week
are combined with actual booking information for
each future flight departure to generate a forecast of
total demand by booking class for that departure.
REVENUE HISTORICAL ACTUAL
DATA BOOKING DATA BOOKINGS
FORECASTING
MODEL
OPTIMIZATION OVERBOOKING
MODEL
RECOMMENDED
BOOKING LIMITS
Figure 2 Third-Generation Airline RM System
Transportation Science/Vol. 37, No. 4, November 2003
These forecasts, together with estimates of the rev-
enue value of each booking class, are then fed into an
optimization model that calculates the recommended
booking limits for the flight departure in question.
At the same time, the demand forecasts are fed into
an overbooking model, which also makes use of his-
torical information about passenger no-show rates to
calculate an optimal overbooking level for the future
flight departure. Both the booking class limits and
overbooking levels calculated by the mathematical
models are then presented as recommendations to the
RM analyst.
The demand forecasts and booking limits are
reviewed by the RM systems at regular intervals
during the flight booking process, as often as daily
in some cases. Should unexpected booking activity
occur, the system reforecasts demand and reoptimizes
its booking limit recommendations. A substantial pro-
portion of the revenue gain attributable to fare mix
optimization comes from this dynamic revision of
booking limits.
Most large and medium-sized airlines throughout
the world have implemented third-generation RM
systems, and the benefits of such systems have been
well documented. Effective use of techniques for over-
booking and fare class mix alone have been estimated
to generate revenue increases of as much as 4%–6%
compared to situations in which no seat inventory
control tools were applied (Belobaba 1992b, Smith
et al. 1992).
3.2. Overbooking Models
Airlines have been accepting reservations in excess
NO-SHOW
of aircraft capacity for more than two decades, in an
DATA effort to reduce the revenue losses associated with no-
shows. With the development of RM systems, over-
booking was incorporated into the seat inventory
control functions of these systems. The objective of
the flight overbooking component of revenue man-
agement is to determine the maximum number of
MODEL bookings to accept for any given future flight depar-
ture, trading off the risks and costs of denied board-
ings against the potential revenue loss from unsold or
spoiled seats.
Operations research work on the airline overbook-
ing problem can be traced to the 1960s, well before
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Operations Research in the Air Transport Industry
overbooking became integrated into RM systems (and
before RM systems were even required). Notable early
published works include those of Simon (1968) and
Vickrey (1972), as well as articles by Rothstein (1971,
1985). Rothstein’s 1985 article is a survey of previous
OR literature dealing with the airline overbooking
problem, and includes a discussion of the customer
service impacts of inaccurate overbooking and the
role of government in regulating denied boarding
penalties.
Statistical overbooking models typically represent
no-show rates as Gaussian random variables. The
objective is to find the maximum authorized number
of bookings (or “AU”) that will keep denied board-
ings below some airline-specified target level with
a desired level of confidence. These models provide
airline managers with flexibility in determining their
own overbooking policy, for example, by increas-
ing denied boarding tolerance or reducing statistical
confidence.
An extension of the statistical overbooking ap-
proach is the cost-based overbooking model, which
explicitly accounts for the actual costs associated with
denied boardings and with empty seats (“spoilage”).
The objective is to find the optimal overbooking level
that minimizes the total combined costs of denied
boardings and spoilage by performing a search over a
reasonable range of AU values. The cost-based over-
booking model is the current state of the practice
at many airlines. However, this approach represents
a static formulation of the overbooking problem, in
that the dynamics of passenger bookings, cancella-
tions, and no-shows are not explicitly accounted for
in determining an overbooking level.
The OR literature contains many additional works
on the airline overbooking problem, some of which
propose dynamic programming (DP) formulations.
Rothstein’s (1968) Ph.D. thesis was the first to
describe such a DP approach, while Alstrup et al.
(1986) extended the DP formulation to a two-class,
joint overbooking and fare class mix problem. More
recently, Chatwin (1996) as well as Feng and Xiao
(2001) have proposed DP-based approaches that allow
for the incorporation of time-dependent no-show
and cancellation rates associated with multiple fare
classes. In practice, few airlines have implemented
378
such complex DP formulations because of the difficul-
ties of providing adequate and accurate inputs in the
form of booking and cancellation rates by the time-
period before departure.
The economic motivation for airline overbooking
is substantial. In the United States, domestic airline
no-show rates average 15%–25% of final predeparture
bookings. Given that most airlines struggle to attain a
5% operating margin (revenues over costs), the loss of
15%–25% of potential revenues on fully booked flights
(which would occur without overbooking) can repre-
sent a major negative impact on profits. As part of
a revenue management system, effective overbooking
has been shown to generate as much revenue gain as
optimal fare class seat allocation, described below.
3.3. Fare Class Mix
The second major technique of airline revenue
management is the determination of the revenue-
maximizing mix of seats available to each booking
(fare) class on each future flight-leg departure. Vir-
tually all airline RM systems were developed with
the capability to optimize fare class mix as their pri-
mary objective. As introduced earlier, RM systems
forecast the expected demand for each fare class on
each future flight-leg departure by applying statisti-
cal models to historical booking data for the same
fare class on previous departures of the same flight.
The forecasting of expected booking demands for
future flight departures has been addressed in many
OR papers, including Littlewood (1972), L’Heureux
(1986), Lee (1990), and Curry (1994).
These demand forecasts are then used as inputs to a
seat allocation optimization model, which determines
booking limits to be applied to each of the booking
classes on the flight departure in question. The vast
majority of airline reservations systems now have
inventory structures based on serial nesting of booking
classes, as shown in Figure 3. Seats are not “allocated”
to partitioned classes, but are instead “protected” for
higher fare classes and nested booking limits are applied
to the lower fare classes. All available seats in the
shared inventory are made available to the highest
booking class, in the (unlikely) event that the entire
capacity of the aircraft can be filled with demand for
the highest-priced fare product. This ensures that the
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 BARNHART, BELOBABA, AND ODONI
Operations Research in the Air Transport Industry
TOTAL
AVAILABLE
SEATS
} Protected for Class 1 from 2, 3, and 4
BL1
} Protected for 1+2 from 3 and 4
BL2
} Protected for 1+2+3 from 4
BL3
BL4
Figure 3 Nested Booking Limits and Class Protection Levels
airline would never turn down a high fare request, as
long as there are any seats still available for the flight.
OR work on “seat allocation” problems for two fare
classes (full-fare and discount fare) can be traced to
Littlewood (1972). Littlewood’s (1972) rule for protect-
ing full-fare seats was extended to multiple nested fare
classes by Belobaba (1987, 1989), who wrote the first
doctoral dissertation on airline pricing and revenue
management. The Expected Marginal Seat Revenue
(EMSR) approach for setting RM booking limits was
then refined to become the “EMSRb” model (Belob-
aba 1992a). These models were the first to recognize
that the optimality conditions for traditional resource
(seat) allocation problems did not result in the max-
imum expected revenues in a multiple class, nested
booking limit environment. Both models are based on
heuristic decision rules for nested booking classes and
have become the most commonly used seat inventory
control models in airline RM systems. Optimal formu-
lations of the multiple nested class problem have also
been published by Curry (1990), Brumelle et al. (1990),
and Wollmer (1992).
The general premise of these fare class mix mod-
els is as follows. Given the forecast demand for each
booking class, expressed in terms of a mean and stan-
dard deviation, along with its associated average fare,
the expected marginal revenue of each incremental
seat on a flight leg can be determined. It is equal to
the average fare of the booking class under consider-
ation multiplied by the probability that demand will
Transportation Science/Vol. 37, No. 4, November 2003
materialize for that incremental seat. The optimal pro-
tection level for a higher-class seat is equal to the num-
ber of seats with an expected marginal seat revenue
greater than or equal to the average fare in the next
lower class. Because higher fare classes have access
to unused lower class seats in a nested booking class
inventory structure, the problem is to find seat pro-
tection levels for higher classes, and booking limits on
lower classes. Simulations and actual airline experi-
ence have indicated that use of these decision mod-
els for establishing the fare class mix of seats on each
flight departure can increase total airline revenues by
2%–4% (Belobaba 1989).
Recent research on the single-leg fare class mix
problem has been rather limited, as both researchers
and practitioners have focused on network opti-
mization techniques for airline revenue management
instead, as described below. The most recent pub-
lished works involve extensions that include the
application of DP methods and the joint optimization
of fare class booking limits and overbooking levels
(for example, Zhao and Zheng 2001), as well as the
joint optimization of the airline pricing and fare class
mix problems, as described in §3.5.
3.4. Network Revenue Management:
Origin-Destination Control
Network RM (or O-D Control) represents a major step
beyond the fare class mix capabilities of most third-
generation RM systems, and is currently being pur-
sued by the largest and most advanced airlines in the
world. As its name implies, O-D control gives the air-
line the capability to manage its seat inventory by the
revenue value of the passenger’s origin-destination
itinerary on the airline’s network, not simply accord-
ing to the fare class requested on a single flight leg.
Because a leg-based RM system cannot distinguish
among itineraries in the same fare class, optimizing
fare class mix on each flight leg individually will not
ensure that total network revenues are being maxi-
mized. This is especially true for the large connecting
hub networks operated by many airlines, in which a
substantial proportion of passenger itineraries involve
multiple flight legs and a connection at the hub.
As a first step in the implementation of O-D control
strategies, American Airlines in the 1980s developed
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Operations Research in the Air Transport Industry
what has come to be known as “virtual nesting”
(Smith et al. 1992), an assignment process that maps
each itinerary/fare type to a hidden or “virtual” value
class within the airline’s own reservations system. For
an itinerary/fare assigned to a given virtual class,
the seat availability on a given flight leg is estab-
lished by the booking limit for that virtual class. Ini-
tial implementations of virtual nesting were based on
total itinerary fare values, giving preference to longer-
haul connecting passengers with higher total fares.
The shortcoming of this “greedy” approach was that
it did not address the need under certain circum-
stances to give preference to two “local” passengers
instead of taking the connecting passenger.
OR models have been instrumental in the sub-
sequent development of O-D control strategies that
allowed airlines to manage seat inventories on
the basis of the network revenue value of each
itinerary/fare combination. Network revenue value can
be defined as the total itinerary fare (ticket value)
minus the revenue displacement that might occur on
connecting flight legs if the passenger’s request for
a multiple-leg itinerary is accepted. For example, the
network revenue value of an $800 total fare on the
first leg of a connecting itinerary must be reduced by
$300 if acceptance of this passenger would result in
displacement of $300 in total network revenue on the
second flight leg. The displacement cost associated
with the last (lowest valued) available seat on a given
flight leg is its marginal value to the total network
revenue—the amount by which the total network rev-
enue would decrease if we were to “remove” (or sell)
one seat on the flight leg. If the flight leg consistently
has empty seats, the marginal network value of its
last seat would be zero. In the more realistic situa-
tion where the flight leg has a significant probability
of being full and it carries both local and connecting
passengers, determining the impact on total network
revenues of removing a seat can require substantially
more complicated analysis, including network opti-
mization models.
Various network optimization and heuristic algo-
rithms have been applied to the problem of deter-
mining the network revenue value contribution of
each O-D itinerary and fare product (or ODIF). As
described in Belobaba (1998), several large airlines
380
make use of leg-based EMSR values to approximate
the network revenue value associated with a given
connecting itinerary/fare combination. Because these
approaches do not make use of any formal network
optimization models, they are referred to as “leg-
based heuristic” models for estimating network rev-
enue displacement.
The majority of published works devoted to the
O-D seat inventory control problem have proposed
mathematical programming approaches to determine
optimal seat allocations for every ODIF over a net-
work of connecting flight legs (see, for example,
Glover et al. 1982, Dror et al. 1988, and Curry 1990).
Williamson’s (1992) doctoral thesis provides a compre-
hensive review of the literature relevant to the applica-
tion of mathematical programming and network flow
models to the O-D seat inventory control problem.
More recently, there have been new works propos-
ing more sophisticated network models. For exam-
ple, Bratu (1998) developed a “probabilistic network
convergence” algorithm for estimating the marginal
network value of the last available seat on each leg
in an airline network. Talluri and van Ryzin (1999a)
propose a randomized linear programming method,
while stochastic dynamic programming is also being
pursued as an alternative algorithm for determining
the marginal network value of a range of remaining
seats on each flight leg to account for changes to the
marginal value as bookings are accepted.
Given an estimate of down-line revenue displace-
ment it is possible to map ODIFs to virtual classes
based on their estimated network revenue value. Dis-
placement adjusted virtual nesting (DAVN) increases
availability to connecting passengers, while adjust-
ment for down-line displacement of revenues ensures
that two local passengers (with a higher total revenue)
will receive preference when two connecting flights
are expected to be heavily booked.
The estimated marginal network revenue of the
lowest-valued available seat on a flight leg can also
be used in a much simpler inventory control mech-
anism based on bid price controls. At the time of an
ODIF request for seat availability, the ODIF fare is
evaluated against the sum of the leg bid prices over
the itinerary being requested. As was the case for esti-
mates of revenue displacement associated with con-
necting passengers, leg bid prices can similarly be
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 BARNHART, BELOBABA, AND ODONI
Operations Research in the Air Transport Industry
calculated either with network optimization tools or
leg-based heuristics such as EMSR approaches. Talluri
and van Ryzin (1999b) have done much work on
network bid price control and identify the condi-
tions under which this approach provides revenue
optimality, while de Boer et al. (2002) compare the
performance of deterministic and stochastic network
formulations for O-D control.
Until recently, relatively few airlines had imple-
mented network optimization models for dynamic
calculation of displacement costs and/or bid prices
for O-D control. Because most reservations systems
and, in turn, third-generation RM systems were
developed on the basis of leg/fare class data, most
airlines did not have access to the detailed historical
ODIF booking data required by network optimiza-
tion models. Use of large-scale network optimization
models also raised technical and computational issues
related to the solution times and frequency of reop-
timization. However, with the development of airline
databases designed to capture detailed ODIF histori-
cal data, along with advances in both solution algo-
rithms and computational speeds, network revenue
management has been implemented by over a dozen
airlines in different parts of the world.
The benefits of leg-based revenue management
and incremental benefit of O-D controls over leg-
based fare class controls have been estimated by
several researchers through simulation. For example,
Williamson (1992) developed a network revenue man-
agement simulation approach that allowed different
schemes for optimization and control of seat inven-
tories to be tested. An even more realistic approach
to simulating the impacts of different RM schemes in
a full-scale, competitive airline network environment
is that of the passenger origin-destination simulator
(PODS). Developed originally by researchers at Boe-
ing (Hopperstad 1997), PODS has been enhanced to
realistically simulate large networks in which compet-
ing airlines generate RM forecasts and set seat inven-
tory controls based on “historical” (i.e., previously
simulated) data. At the same time, the simulated pas-
sengers in PODS choose among alternative airlines,
fares, restrictions, schedules, and seat inventory avail-
ability as established by each airline’s own RM sys-
tem. PODS has been used to simulate the competitive
Transportation Science/Vol. 37, No. 4, November 2003
impacts of RM (Belobaba and Wilson 1997), as well as
the benefits of improved forecasting models and the
impacts of RM on airline alliances.
The simulations cited here along with others per-
formed by academics and airlines have provided con-
sistent estimates of the potential for revenue gains of
1%–2% from advanced network revenue management
methods, above and beyond the 4%–6% gains real-
ized from conventional leg-based fare class control.
The potential to realize even 1% in additional revenue
through network RM is substantial enough that many
of the world’s largest airlines have implemented or
are in the process of developing their O-D control
capabilities. For a large airline with annual revenues
of $5 to $10 billion or more, successful implementa-
tion of a network RM system can lead to total revenue
increases of $50 to $100 million per year.
3.5. Future Challenges
Development of OR models for the “next genera-
tion” of airline revenue management is currently an
extremely popular topic among academics and prac-
titioners alike. The most obvious next steps in the
further enhancement of airline revenue management
systems is to integrate the pricing and seat inventory
control decisions currently being made with different
decision support tools and, at many airlines, in dif-
ferent parts of the organization. Clearly, the ability to
relax the traditional RM assumption that fare struc-
tures are given and fixed has the potential to further
increase the revenue gains of RM. Joint pricing and
inventory optimization requires the incorporation of
passenger choice and demand elasticity models, and
promising OR work in this direction has been pub-
lished by Weatherford (1997), Gallego and van Ryzin
(1997), and Cote et al. (2003), among others. In a
recent Ph.D. dissertation de Boer (2003) examines this
problem in a network context and presents a variety
of other modeling advances and insights.
Looking ahead, it is apparent that information
about the utilization of seat inventories and the
response of passenger demand to different pricing
strategies can and should provide useful feedback
to fleet assignment and even scheduling of airline
flight departure times. The integration of airline pric-
ing and seat inventory decisions with those of the
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Operations Research in the Air Transport Industry
scheduling and fleet assignment functions is therefore
considered to be the “ultimate” challenge for airline
operations research. Development of more respon-
sive and even dynamic decision support systems that
take into account expected passenger choice behav-
ior, as well as the expected response of competitors
in terms of price, schedule, and capacity in determin-
ing a profit-maximizing strategy for the airline, will
only become more important with growing competi-
tive pressures in the airline industry.
4. Applications to Aviation
Infrastructure
The infrastructure of the global aviation system con-
sists of two principal elements, airports and air traffic
management (ATM) systems. Airports can be further
subdivided into airside facilities (runways, taxiways,
aprons, aircraft stands) and landside facilities (pas-
senger and cargo buildings, curbside), while ATM
systems are now viewed as being comprised of a tacti-
cal subsystem—air traffic control (ATC)—and a strate-
gic one—air traffic flow management (ATFM). The
design, development, and operation of all these facil-
ities and systems has attracted extensive interest on
the part of operations researchers, usually in response
to ongoing developments in the field. For example,
much of the fundamental work on airside capacity
was performed during the 1960s and early 1970s, the
time when it was first realized that runways con-
stituted an important bottleneck of the air transport
system. Overall, the body of work on aviation infras-
tructure has led to insights and models that have
proved of critical importance in practice and have, in
some cases, been adopted by airport and ATM ser-
vice providers on a global scale. Because of space
limitations, this section briefly reviews OR applica-
tions in airport airside operations and air traffic flow
management—only two of the four major areas iden-
tified above. Surveys of OR models for the analy-
sis of passenger terminal operations can be found in
Tosic (1992) and de Neufville and Odoni (2003). Of
the many OR-related topics addressed by research on
air traffic control, the widely investigated subject of
detecting and resolving potential “conflicts” between
airborne aircraft is reviewed well in Kuchar and Yang
382
(2000). Various other analytical and simulation mod-
els on several different aspects of ATC are covered in
Odoni et al. (1997).
4.1. Airside Operations
The runway complexes of major airports are among
the scarcest resources of today’s international air
transport system and, barring a drastic change in the
landing and takeoff requirements of commercial air-
craft, will continue to be so in the foreseeable future.
New runways are very expensive to build, require
great expanses of land, and most importantly have
environmental and other impacts that necessitate long
and complicated approval processes with uncertain
outcomes. It is not surprising therefore that one of the
most “mature” areas of transportation science deals
with the modeling of runway operations and, more
generally, airside operations. The products of this
work include both analytical (“mathematical”) mod-
els and simulation tools.
4.1.1. Analytical Capacity and Delay Models.
Analytical models preceded viable simulation tools by
about 20 years. In a landmark paper, Blumstein (1959)
defined the capacity of a runway as the expected
number of movements (landings and takeoffs) that
can be performed per unit of time—typically one
hour—in the presence of continuous demand and
without violating air traffic control separation require-
ments. He also presented a model for computing the
capacity of single runways used for arrivals only,
for departures only, and for strings of arrivals fol-
lowed by strings of departures. Subsequent general-
izations included the possibility of inserting depar-
tures between successive arrivals, possibly by increas-
ing (“stretching”) the separation between arrivals
(Hockaday and Kanafani 1972) and the treatment of
some of the parameters of Blumstein’s (1959) mod-
els as random variables, instead of constants (Odoni
1972).
Extensions to cases involving two or more simulta-
neously operating runways were also developed at an
early stage—see, e.g., Swedish (1981). The complex-
ity of multirunway models depends greatly on the
extent to which operations on different runways inter-
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 BARNHART, BELOBABA, AND ODONI
Operations Research in the Air Transport Industry
act because of air traffic control separation require-
ments. For example, in the case of a pair of intersect-
ing runways, the location of the intersection relative
to the points where takeoffs are initiated or where
landing aircraft touch down greatly affects the com-
bined capacity of the two runways. Similarly, in the
case of two parallel runways, the capacity depends on
the distance between the centerlines of the runways.
Approximate capacity analyses for airports with two
parallel or intersecting runways are quite straightfor-
ward. Multirunway analytical capacity models also
provide good approximate estimates of true capacity
in cases involving three or more active runways, as
/S =
long as the runway configurations can be “decom-
and S denote the expected value
posed” into semi-independent parts, each consisting
of one or two runways. Such models have proved
extremely valuable in airport planning, as well as in
assessing the impacts of proposed procedural or tech-
nological changes on airport capacity.
Another topic of intensive study has been the esti-
mation, through the use of queueing models, of the
delays caused by the lack of sufficient runway capac-
ity. This is a problem that poses a serious challenge to
operations researchers: The closed-form results devel-
oped in the voluminous literature of classical steady-
state queueing theory are largely nonapplicable—at
least when it comes to the really interesting cases. The
reason is that airport queues are, in general, strongly
nonstationary. The demand rates and, in changing
weather conditions, the service rates at most major
airports vary strongly over the course of a typical
day. Moreover, the demand rates may exceed capacity
(
> 1), possibly for extended periods of time, most
often when weather conditions are less than optimal.
This has motivated the development of numer-
ical approaches to the problem of computing air-
port delays analytically. In another landmark paper,
Koopman (1972) argued—and showed through exam-
ples drawn from New York’s Kennedy and LaGuardia
Airports, at the time among the world’s busiest—that
the queueing behavior of an airport with k “runway
equivalents” (i.e., k nearly independent servers) can
be bounded by the characteristics of the M(t)/M(t)/k
and the M(t)/D(t)/k queueing models, each providing
“worst-case” and “best-case” estimates, respectively.
Transportation Science/Vol. 37, No. 4, November 2003
Note that this allows for dynamic changes in the ser-
vice rates, as well as in the demand rates.
Extending the work of Koopman (1972), the
Mt/Ek t/k system was proposed by Kivestu (1976)
as a model that could be used to directly com-
pute approximate queueing statistics for airports—
rather than separately solving the M(t)/M(t)/k and
M(t)/D(t)/k models and then somehow interpolating
their results. (Note that negative exponential service
times (M and constant service times (D) are sim-
ply special cases of the Erlang (Ek ) family, with k = 1
and k = , respectively.) Kivestu (1976) noted that k
should
√ be determined from the relationship ES
k, where ES
and the standard deviation of the service times and
can be estimated from field data. He also devel-
oped a powerful numerical approximation scheme
that computes the (time varying) state probabilities
for the Mt/Ek t/k system efficiently. Malone (1995)
has demonstrated the accuracy and practicality of
Kivestu’s (1976) approach and developed additional
efficient approximation methods, well suited to the
analysis of dynamic airfield queues. Fan and Odoni
(2002) provide a description of the application of
Kivestu’s (1976) model to a study of the gridlock con-
ditions that prevailed at LaGuardia Airport in 2000
and early 2001.
Additional (numerical) analytical models for com-
puting airport delays have been developed over the
last few years. Peterson et al. (1995) and Daniel
(1995) describe two different models for computing
delays at hub airports, which are characterized by
sharp “banks” or “waves” of arrivals and departures.
Hansen (2002) has used a deterministic model, based
on the notion of cumulative diagrams, to compute
delay externalities at Los Angeles International Air-
port. Finally, Long et al. (1999) and Malone (1995)
present two dynamic queueing network models and
their application to the study of congestion in the
National Airspace System. Ingolfsson et al. (2002)
offer a comprehensive survey and comparison of sev-
eral alternative approaches to the analysis of nonsta-
tionary queueing systems.
Many of the best features of some of the analyt-
ical capacity and delay models just described have
been integrated recently in a number of new software
383
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Operations Research in the Air Transport Industry
packages (Long et al. 1999, Stamatopoulos et al. 2003,
EUROCONTROL 2001) that perform both capacity
and delay analyses and, in the instance of the last
two references, include models of aprons and aircraft
stands. After some necessary enhancements and an
adequate amount of testing in a variety of airport
environments, packages of this type may provide air-
port planners within a few years with an easy-to-use
and very fast set of tools for the study of a host of
airside issues.
4.1.2. Airside Simulations. General-purpose sim-
ulation models of airside operations first became
viable in the early 1980s and have been vested with
increasingly sophisticated features since then. Three
models currently dominate this field internationally:
SIMMOD, The Airport Machine, and the Total Air-
port and Airspace Modeler (TAAM). A report by
Odoni et al. (1997) contains detailed reviews (some-
what out-of-date by now) of these and several other
airport and airspace simulation models and assesses
the strengths and weaknesses of each. At their cur-
rent state of development (and in the hands of expert
users), they can be powerful tools in studying detailed
airside design issues, such as figuring out the best
way to remove an airside bottleneck or estimating the
amount by which the capacity of an airport is reduced
due to the crossing of active runways by taxiing
aircraft.
Unfortunately, these models are frequently misused
in practice, at great cost to the client organization.
This happens when they are applied to the study
of “macroscopic” issues that can have only approxi-
mate answers because of the uncertainty inherent in
the input data. An example is a question that often
confronts airport operators: When will airside delays
reach a level that will require a major expansion of an
airport’s capacity (e.g., through the construction of a
new runway)? Questions of this type, often requiring
a look far into the future, are best answered through
the approximate analytical models surveyed earlier,
which permit easy exploration of a large number of
alternative scenarios and hypotheses. Detailed simu-
lation models, by contrast, cannot cope well with the
massive uncertainty involved because they require
inputs that are difficult to produce (e.g., a detailed
schedule of aircraft movements at the airport for a
384
typical day 10 or 15 years hence) and lack credibility
under the circumstances.
4.1.3. Optimizing Airside Operations. The air-
side models discussed so far are descriptive in nature.
Their objective is to help users understand and pre-
dict the operational characteristics of the various
airside facilities under different operating scenarios.
A considerable amount of OR work with an optimiza-
tion focus also exists, much of it concerned with the
effective use of runway systems.
The capacity of a runway is largely determined
by the separation requirements specified by the
providers of ATM services (e.g., the FAA in the United
States). For any pair of consecutive runway opera-
tions these requirements depend on the type of air-
craft involved. For example, in the United States,
when an arriving “heavy” (H) aircraft—defined as
one with a maximum takeoff weight (MTOW) greater
than 255,000 lbs—is immediately followed by an ar-
riving “small” (S) aircraft (MTOW < 41,000 lbs), the
required separation between them, at the instant
when H is about to touch down on the runway, is
6 nautical miles (∼10.9 km). This is because “heavy”
aircraft (wide-body jets) may generate severe wake
turbulence, which may be hazardous to other aircraft
behind it. By contrast, when an aircraft of type S is
followed by one of type H, the required separation is
2.5 nautical miles (∼4.5 km). Note that given a num-
ber n of aircraft, all waiting to land on a runway,
the problem of determining the sequence of landings,
such that the time when the last aircraft lands is min-
imized, is a Hamiltonian path problem with n points.
However, this is only a static version of a prob-
lem which in truth is a dynamic one: Over time the
pool of aircraft available to land changes, as some
aircraft reach the runway while new aircraft join
the arrivals queue. Moreover, minimizing the “latest
landing time” (or maximizing “throughput”) should
not necessarily be the objective of optimal sequencing.
Many alternative objective functions, such as mini-
mizing the average waiting time per passenger, are
just as reasonable. A further complication is that the
very idea of “sequencing” runs counter to the tra-
ditional adherence of ATM systems to a first-come,
first-served (FCFS) discipline. Deviations from FCFS
raise concerns among some airside users about the
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 BARNHART, BELOBABA, AND ODONI
Operations Research in the Air Transport Industry
possibility of systematic discrimination against cer-
tain classes of aircraft operators (e.g., general avia-
tion) when it comes to runway access. In a dynamic
environment, this may even result in a compromise
of safety, if some aircraft are indefinitely relegated to
the end of the queue as new aircraft show up to land.
These observations have led many investigators to
study the runway-sequencing problem with the objec-
tive of increasing operating efficiency while ensur-
ing that all airport users are treated equitably. Dear
(1976) and Dear and Sherif (1991) developed the con-
cept of constrained position shifting (CPS), i.e., of a
limit in the number of positions by which an aircraft
can deviate from its FCFS position in a queue. For
instance, an aircraft in the 16th position in a FCFS
queue would have to land in one of the positions
14–18 if the specified maximum position shift (MPS) is 2.
Through many numerical examples and for several
reasonable objective functions, Dear (1976) showed
that by setting MPS to a small number, such as two
or three, one can obtain most of the benefits of an
unconstrained optimized system (e.g., 60%–80% of
the potential improvements). This finding motivated
several researchers (e.g., Psaraftis 1980, Venkatakr-
ishnan et al. 1992, Bianco et al. 2001) to investigate
a number of increasingly complex and realistic ver-
sions of the sequencing problem. Two advanced ter-
minal airspace automation systems, CTAS and COM-
PAS, that have been implemented in the United States
and in Germany, respectively, incorporate sequenc-
ing algorithms based on CPS (Erzberger 1995). How-
ever, this feature of CTAS and of COMPAS has not
been activated, primarily because of concerns about a
potential increase in controller workload.
Gilbo (1993) and Hall (1999) have gone beyond the
sequencing of arrivals only by considering how avail-
able capacity can best be allocated in a dynamic way
between landings and takeoffs to account for the dis-
tinct peaking patterns in the arrival and departure
streams at airports over the course of a day. Pujet
et al. (1999) have further examined the issue of opti-
mizing the number of aircraft taxiing out during peri-
ods of congestion, based on the empirical observation
that departure rates at major airports seem to decrease
when the number of active aircraft on the taxiway
system exceeds a certain airport-specific threshold.
Transportation Science/Vol. 37, No. 4, November 2003
Although still at the theoretical stage, some of these
promising ideas will eventually find their way into
practice.
4.2. Air Traffic Flow Management
The most advanced OR work on aviation infrastruc-
ture to date is undoubtedly associated with air traf-
fic flow management (ATFM). ATFM took on major
importance in the United States and Europe during
the 1980s, when rapid traffic growth made it neces-
sary to adopt a more strategic perspective on ATM.
Rather than addressing congestion through local mea-
sures (e.g., by holding arriving aircraft in the airspace
near delay-prone airports) the goal of ATFM is to pre-
vent local system overloading by dynamically adjust-
ing the flows of aircraft on a national or regional
basis. It develops flow plans that attempt to dynam-
ically match traffic demand with available capacity
over longer time horizons, typically extending from
3–12 hours in the future. The prototypical applica-
tion of ATFM is in ground holding, i.e., in intentionally
delaying an aircraft’s takeoff for a specified amount
of time to avoid airborne delays and excessive con-
troller workload later on. Other ATFM tactics include
rerouting of aircraft and metering (controlling the rate)
of traffic flows through specified spatial boundaries
in airspace.
An important difference in the nature of the ATFM
problem in the United States and in Europe should
also be noted. In the United States, ATFM is primar-
ily driven by airport capacity constraints, whereas in
Europe en route airspace acts as the principal “bot-
tleneck.” Europe’s Central Flow Management Unit,
located in Brussels, currently determines (heuristi-
cally) ground delays to ensure that no en route sec-
tor capacity constraints are violated. This difference
may, however, become moot in the near future due
to continuing progress in increasing en route airspace
capacity in Europe.
OR model development related to ATFM can be
viewed as going through two distinct stages. The
first stage involved problem definition and develop-
ment of large-scale mathematical optimization mod-
els of an aggregate scope. Attwool (1977) was the
first to cast ATFM issues in mathematical terms, while
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Operations Research in the Air Transport Industry
Odoni’s (1987) detailed description of the single-
airport ground holding problem (GHP) as a dynamic
and stochastic optimization problem stimulated much
of the subsequent work. Important advances in mod-
eling and solving the GHP are marked by the stochas-
tic programming models of Richetta and Odoni
(1993), the extension to a multiairport setting by
Vranas et al. (1994), and the inclusion of en route
constraints and rerouting options by Bertsimas and
Stock (1998). Many other interesting papers on vari-
ous aspects of optimizing ATFM and GHP appeared
in the 1990s. Good reviews of the literature and of
computational results can be found in Andreatta et al.
(1993) and Hoffman and Ball (2000).
The one common characteristic of the models devel-
oped in this first stage is the implicit assumption of a
single decision-making authority attempting to opti-
mize a “global” objective function: The providers of
ATFM services (e.g., the FAA in the United States,
Eurocontrol in Europe) are responsible for the allo-
cation of ground holding delays among individual
flights and/or for the rerouting, if necessary, of flights.
The objective is to optimize in the aggregate, e.g., by
minimizing the overall direct operating costs associ-
ated with ground holding and rerouting decisions,
summed over all airlines and aircraft. This, however,
is an operating philosophy that airlines strongly dis-
agree with. They correctly argue that only individ-
ual airlines have the information necessary to make
decisions on what is best for their own flights. As
an obvious example, airline A, faced with a period
of delays at a given congested airport, may assign
very high priority to the timely arrival of one of its
flights, X, because that flight may be carrying many
business-class passengers who will be connecting to
other flights or because it carries crews for subsequent
flights departing from that airport. The assignment of
priority to flight X has, in fact, little to do with direct
operating costs of aircraft and is based on the busi-
ness model of airline A and on information that only
A possesses.
In response to such airline concerns, as well as to
various complaints about the limitations of the ATFM
system during the 1980s and 1990s, the FAA has been
engaged for the past 10 years in developing the Col-
laborative Decision-Making (CDM) Program. After an
386
initial planning period of about five years, CDM was
fielded for the first time in 1998 in connection with the
FAA’s Ground Delay Programs (GDPs), which go into
effect whenever long air traffic delays are anticipated
at an airport due to poor weather or other reasons,
thus often necessitating ground holding. CDM marks
a truly fundamental innovation in the ATM system,
possibly the most important one in at least 30 years.
The three main elements on which it is based are: (a)
a dedicated data communications network (“CDM-
net”), which facilitates the continuous exchange of
information between the FAA and the airlines (plus
any other CDM participants) about the current and
near-future states of the ATM system; (b) the use of a
common database and a common set of software tools
by all CDM participants; and (c) the partial decentral-
ization of decision making. With respect to (c), it is
the FAA’s responsibility to forecast the capacity that
will be available at each part of the ATM system dur-
ing the relevant time horizon, as well as to allocate
this capacity among the individual airlines and the
other ATM system users. And it is the responsibility
of each individual airline to decide how it will use its
allocated share of capacity at each part of the system.
This is a somewhat simplistic description of what, in
practice, is a complicated process that employs sev-
eral types of distributed decision-making techniques,
such as rationing by schedule (RBS) and schedule
compression—see Wambsganss (1996) and Vossen et al.
(2003) for details.
The driver for the adoption and implementation of
the CDM concept was a small, OR-minded team in
the FAA, the U.S. Department of Transportation, and
especially the Metron Corporation (Chang et al. 2001).
The CDM Program has already led to major reduc-
tions in delays and missed connections for air travel-
ers and to documented savings of hundreds of mil-
lions of dollars in airline operating costs. ATFM-
related OR research has concurrently shifted away
from large-scale, aggregate optimization models and
toward “real-time” decision support tools that assist
air traffic managers in the FAA and Airline Opera-
tions Centers in taking maximum advantage of the
massive, up-to-date information base that CDM has
made available. It is important to note, however, that
many of the ideas and formulations developed in the
Transportation Science/Vol. 37, No. 4, November 2003
 BARNHART, BELOBABA, AND ODONI
Operations Research in the Air Transport Industry
“pre-CDM” models can still be adapted to the CDM
environment, often with little modification. For exam-
ple, one of the most critical problems in the plan-
ning of GDPs continues to be the determination of
airport acceptance rates (AAR) for several hours into
the future and in the presence of uncertainty about
airport capacity and air traffic demand. The efficient
stochastic integer program developed for this purpose
by Ball et al. (2003) can be viewed as a direct descen-
dant of the pre-CDM model proposed by Richetta and
Odoni (1993).
ATFM in the CDM era also provides fertile ground
for much future research because the scope of poten-
tial OR analysis and modeling has expanded greatly.
Examples of some topics, along with occasional recent
references, include: identifying (as an airline) flights
that should be cancelled or delayed (and by how
much) in connection with GDPs, recovering (as an air-
line) from irregular operations (cf. §2) resulting from
GDPs or other ATFM interventions, ensuring equity
of access to airports and ATM resources (Vossen et al.
2003), collaborative routing of aircraft through con-
gested airspace (Ball et al. 2002), introducing bartering
and possibly market-based mechanisms in the alloca-
tion of airport slots (Vossen and Ball 2001, Hall 1999),
and developing efficient simulation environments for
the testing of alternative ATFM strategies.
5. Conclusion
Operations research has been one of the principal con-
tributors to the enormous growth that the air trans-
port sector has experienced during the past 50 years.
In the best tradition of OR, the development of mod-
els and of solutions has been motivated by issues and
problems encountered in practice and has led, in sev-
eral instances, to insights of a general nature and to
important methodological advances in the OR field at
large. At this point, OR models and algorithms are
diffused throughout the sector and constitute an inte-
gral part of the standard practices of airlines, airports,
and ATM service providers.
In view of the numerous challenges that it cur-
rently faces, it is safe to expect a continuing cen-
tral role for OR in the air transport sector’s future.
As indicated in this paper, there are many promis-
ing topics for future research in each of the areas
Transportation Science/Vol. 37, No. 4, November 2003
examined. At the most fundamental level, and in
general terms, the frontiers can be summarized as
follows:
• Relaxing the boundaries between the successive
stages of aircraft and crew schedule planning, so
that schedule design, fleet assignment, aircraft main-
tenance routing, and crew scheduling might eventu-
ally be performed in an integrated way, rather than
solved sequentially as interrelated, but distinct sub-
problems.
• Including pricing decisions in revenue manage-
ment, instead of treating fares and fare classes as
fixed, externally specified inputs.
• Developing fast decision support tools that
increase the safety and efficiency of air transport oper-
ations by taking advantage of the massive, real-time
data flows in an increasingly “info-centric” aviation
infrastructure.
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