This paper addresses an air cargo space buy-back problem accounting for demand uncertainties. The buy-back occurs between the order release and order execution period. The idea of asset provider redeeming the space from intermediary comes from financial buyback concept. The similarities of financial concept and logistics application are derived by literature review. Based on the description of cargo procurement process, a buy-back model is proposed which takes advantage of Hellerman’s capacity option model and Black-Scholes’s pricing model. The proposed model generates the buy-back time and price. Experiments demonstrated that the proposed buy-back model yielded more profits for asset provider and intermediary. The model is further tested under the overbooking and partial buy-back scenarios and both experiments got impressive results. Therefore, implementing buy-back policy can improve revenue for air cargo industry and it is an extended application of financial buy-back concept in the new industry.
Comparing with previous studies, this study proposed a buy-back scenario in which the improvement occur from the perspective of asset provider and intermediary’s profit. For the airline and air forwarder companies, it may be a novel approach to effectively manage the revenue and service by introducing the buy-back policy. It is a relatively new concept and it offered a feasible judge point for asset provider to pick up the optimal time.
Future work can adjust the proposed procedure which considering the dependency between the demand and the spot market price, since many real-world problems appear from the assumptions used. Moreover, the application of buy-back policy should be generalized considering more participants. Future research can also explore the model adoption given the imperfect demand forecasting.
Collected and summarized from the source below by Quynh Hoa https://db.vista.gov.vn:2095/science/article/pii/S0969699715300533