A two-stage stochastic model for airline network design with uncertain demand

Abstract

This study addresses airline network design problems with stochastic demand. The airline network design problem aims to determine hub location, flight routes and flow allocation. The hub location decision is a long-term investment and will not vary according to different demand levels. On the other hand, the determination of flight routes and flow allocation are short-term decisions and may change due to seasonal demand variation. A two-stage stochastic model was proposed to formulate the problem. The first-stage problem corresponds to hub location decision, while the second-stage corresponds to flight route determination and flow allocation based upon the hub location from the first stage and realised uncertain demand. Finally, a contrived network and a real network are used to test the proposed model.