1. ¹is a project/lead engineer at Dar Al-Handasah (Shair), a global engineering consulting AEC firm, with more than six years' experience in concept and detailed engineering design of mechanical systems for multi-million commercial and light industrial projects. His research interests focus on solving operational problems that maintain a balance between theory and implementation, as well as optimisation techniques that employ computer mathematical models and simulation
2. ²is Professor of Operations Research in the Department of Mathematics and Statistics, University of Southern Maine. His research interests are in modelling and analysis of stochastic systems. His book, 'Sample-Path Analysis of Queueing Systems' (co-authored with S. Stidham) was awarded the '1999 Best Publication Award' by the Applied Probability Society of INFORMS

Correspondence: Muhammad El-Taha, University of Southern Maine, Department of Mathematics and Statistics, 96 Falmouth Street, Portland, ME 01404-9300, USA; Tel: +1 207 780 4286; Fax: +1 207 780 5607; E-mail: eltaha@usm.maine.edu

Revised 13 February 2004.

Abstract

This paper formulates a discrete time, finite horizon Markov decision process (dynamic programming), for the two-leg airline seat inventory control problem. The dynamics of the passenger reservation process together with realistic elements of customer behaviour such as cancellations, no-shows and overbooking are explicitly considered. Mirroring the dynamic seat inventory control models for the single-leg flight, it solves the two-leg seat allocation problem with multiple fare classes, and generalises the formulation to the multileg airline seat inventory control problem. A computationally efficient model is developed and is shown to provide solutions that are within a few percentage points of the optimal solution.