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In the context of parallel alliances, this paper proposes and describes
an option-based mechanism that allows an airline to transfer bumped
passengers to its alliance partner's flight. The objective of this
mechanism is to reduce the overbooking risk borne by the allied airlines.
An analytical model is built to calculate the net benefit that can be
obtained by the airlines. The simulation results confirm that the proposed
mechanism can generate monetary and non-monetary benefits for allied
carriers under many practical conditions.
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