This paper summarizes research trends and opportunities in the area of managing air transportation demand and capacity. Capacity constraints and resulting congestion and low schedule reliability currently impose large costs on airlines and their passengers. Significant capacity increases that would solve these problems are not expected in the near- or medium-term. The paper outlines first a number of directions for effecting improvement through marginal capacity increases and better management of demand and available capacity. It then describes strategic initiatives airlines and civil aviation authorities might undertake over time horizons of months to years as well as tactical measures that may be adopted on a daily basis in response to dynamic, "real time" developments like poor weather or schedule disruptions. Research challenges in these areas are identified and classified in terms of specifying, allocating, and utilizing capacity. The first two categories reflect challenges faced by infrastructure providers, the last category challenges faced by airlines.
