Network Capacity Allocation with Multi-Channel Distribution

Recently reducing channel distribution costs has been concerned for many airlines which are facing fierce competition in airline markets. In a long period since the 1970s, capacity control has always played a pivotal role in defining airlines market strategy. However, when airlines selects distribution channels and make capacity allocation decisions, they still separately make different decisions. Hence, when a customer purchases a ticket from a channel with an appropriate fare class, the channel might not be an optimal channel from the airlines perspective. When the airline sells a ticket in a right channel, the ticket price is probably not a right fare. In this study, we proposes a new model which integrate channel distribution into network dynamic capacity control model. To solve these problem, the paper has proposed an approximation method. The numerical experiment results illustrate that the new model can significantly improve the revenues and efficiently reduce the channel distribution cost for airlines.