Aircraft replacement scheduling: A dynamic programming approach

This study developed a stochastic dynamic programming model to optimize airline decisions regarding purchasing, leasing, or disposing of aircraft over time. Grey topological models with Markov-chain were employed to forecast passenger traffic and capture the randomness of the demand. The results show that severe demand fluctuations would drive the airline to lease rather than to purchase its aircrafts. This would allow greater flexibility in fleet management and allows for matching short-term variations in the demand. The results of this study provide a useful reference for airlines in their replacement decision-making procedure by taking into consideration the fluctuations in the market demand and the status of the aircraft.