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Strategic analyses of applying an option-based hedging mechanism in parallel airline alliances

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dc.contributor.authorWang, Xiaojia
dc.contributor.authorFung, Richard Y. K.
dc.date.accessioned2024-01-24T16:13:10Z
dc.date.available2024-01-24T16:13:10Z
dc.date.issued2023
dc.description.abstractThe extant literature proposes an option-based hedging mechanism for airlines in a parallel alliance to transfer bumped passengers to their alliance partner’s flight. This paper extends this literature by conducting strategic analyses and developing a two-stage simulation-based algorithm to identify the best strategy for applying the hedging mechanism. Specifically, the best strategy refers to the best number of options for the allied carriers to transact. The authors show that there exists a robust result of the best number of options, and it is obtained under the objective of maximizing alliance-wide revenue. The result of this paper can provide direct guidance to the management of airlines on the best practice of hedging ex-post overbooking risks and matching supply with demand.
dc.identifier.citationWang, X. & Fung, R. Y. (2023). Strategic Analyses of Applying an Option-Based Hedging Mechanism in Parallel Airline Alliances. International Journal of Information Systems and Supply Chain Management (IJISSCM), 16(1), 1-20. http://doi.org/10.4018/IJISSCM.324163
dc.identifier.doihttp://doi.org/10.4018/IJISSCM.324163
dc.identifier.urihttps://hdl.handle.net/20.500.14078/3387
dc.language.isoen
dc.rightsAttribution (CC BY)
dc.rights.urihttps://creativecommons.org/licenses/by/4.0/
dc.subjectoverbooking risk
dc.subjectreal options
dc.subjectrevenue management
dc.subjectsimulation-based optimization
dc.subjectstrategic alliances
dc.titleStrategic analyses of applying an option-based hedging mechanism in parallel airline alliancesen
dc.typeArticle

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