We propose a two-class revenue management (RM) model, which combines two of the most important RM strategies, namely overbooking and seat inventory control for a passenger airline. We derive a closed-form expression for an optimal overbooking limit that maximizes the expected profit, and analytically perform sensitivity analysis by changing model parameters such as a revenue, a penalty cost associated with unsatisfied demand, a show-up probability, a refund, a denied boarding cost, and a plane capacity.
