An Integrated Problem of p-Hub Location and Revenue Management with Multiple Capacity Levels under Disruptions

Abstract

This paper considers an integrated hub location and revenue management problem in which a set of capacities is available from which one can be chosen for each hub and the disruption is considered in a star-star shaped airline network. We propose a two-stage stochastic programming model to maximize the profit of the network in which the cost of installing the hubs at different levels of capacities, the transportation cost, and the revenue obtained by selling airline tickets are considered. To provide flexible solutions, a hybrid two-stage stochastic programming-robust optimization model is developed by putting relative emphasis on a weighted sum of profit maximization. Furthermore, a sample average approximation approach is used for solving the stochastic programming formulation and a genetic algorithm approach is applied for both formulations. Numerical experiments are conducted to verify the mathematical formulations and compare the performance of the used approaches.