Ch. 9
Building Model-Driven Decision Support Systems

Airlines are using decision support tools to project travel trends and to cut costs. DSS benefit customers by reducing or controlling expenses, evaluating ticket prices, shortening lines in the terminal and reducing delays. Also, airlines are using DSS to reduce their seat inventories.

American Airlines. One type of airline DSS is a Yield Management System. This Model-Driven DSS solves a problem that is described as a non-linear, stochastic, mixed integer mathematical program that requires data, such as passenger demand, cancellations, and other estimates of passenger behavior that are subject to frequent changes. This DSS would require approximately 250 million decision variables to solve the system-wide yield management problem. American Airlines developed a model that reduced the large problem to three much smaller sub-problems that could be solved efficiently.

American Airlines’ yield management system is called DINAMO (Dynamic Inventory and Maintenance Optimizer). It was fully implemented in 1988. Since then the system has improved productivity by automating the identification of critical flights (a flight that required manual attention) and increased pricing flexibility with a discount allocation process. Between 1988 and 1990 productivity for each analyst using DINAMO increased by over 30%. Overall Yield Management has provided quantifiable benefits of over $1.4 billion for 1988-1990 (see Smith, Leimkuhler, and Darrow, Yield Management at American Airlines, Interfaces, 1992, pp. 8-31). American Airlines also uses a Flight Scheduling DSS.

United Airlines. United deployed the System Operations Advisor (SOA), a real-time decision support system, at its operations control center (OCC) to increase the effectiveness of its operational decisions. United Airlines developed the SOA and implemented it in August 1992. From October 1993 to March 1994, this DSS application saved more than 27,000 minutes of potential delays, which translates to $540,000 savings in delay costs, and the number of flight delays charged to aircraft controllers in the systems operations control dropped by 50%.

United Airlines also uses a Crew Scheduling DSS, a Gate Assignment and Planning System and a Customer Service Manager DSS. The Crew Scheduling System at United Airlines is estimated to save about $12 million annually in credit time for crewmembers and about $4 million annually in hotel costs.

1. What types of models are used in the various Airline Industry DSS?

2. Why do you think so many DSS have been developed for Airline Companies?

Thanks to Saksatit Sverundra for his help in investigating Airline Industry DSS.