I know this question has been asked before, but both times option 2 was said to be the best by the same answering tutor. We feel that this doesn't make much sense because it quite literally says "it is unlikely they will accept". We have been extremely unprofitable thus far and will finally have a positive net income of $80,000 using the forecast pro-forma, so we dont think they would choose us.

We are torn between 3 & 4, but if partnering is integral to doing well then we will consider 1 &2. We feel that giving up our scheduling autonomy and name isn't a good idea, as we would be limited in what we can do and how we can respond to threats within our routes/region. However, it may also give us the benefit of a strategic flight schedule that will outcompete our rivals, and also ensure we do not go under. We are a luxury brand charging 51 cents per mile and offering level 3 cabin/food if that affects anything. THANKS!!!!!!

Here is the question:

Dual Designate

Your airline has been offered the opportunity to partner with West Airlines, a major carrier at your regional hub. This carrier is a profitable company with a history of good passenger service and safety. As a dual-designated carrier, you would share your flight schedule codes with your partner so the codes could be listed in its computer reservation system and published schedules. You would thus become the spoke operation for smaller communities. Although a feeder carrier sacrifices some autonomy, sales increase.

Currently, you routinely hold your outgoing runs from your hub until the major carriers have brought passengers into the hub. However, they do not delay their departures for your connecting passengers. West Airlines has stated they will work closely with you on both departure and incoming flights. Examples of these types of agreements in the industry are numerous. They include Delta Connection, American Eagle, United Express, QantasLink, and Air Canada Express.

The vice president of marketing feels the move would be an excellent opportunity and one that would assure the future of the airline. The president knows some of the stockholders would prefer not to give up the image, name, and autonomous operation of the firm. The director of planning has expressed concern about the contractual ability of the major carrier to control scheduling and route structure. The VP of finance countered this objection with I dont think theres a future for independent airlines without some type of connection with a major carrier. If we pass this up we may not get the same opportunity again with a carrier of this stature. I think we should accept or we will slowly be squeezed out by other carriers who have taken advantage of aligning with a major carrier.

The carrier with whom you are negotiating asks that you repaint your fleet with their colors and insignias at a cost of $30,000 per aircraft. (This cost will be allocated over the next 10 quarters.) You may need to rename your airline to indicate your connection with the carrier. Your schedules will be dictated by the schedule of the major carrier. There may be some change in your routes. The options are:

1. Accept the offer. The successful firm(s) will be notified next quarter, and any costs will be charged automatically at that time. 2. Make a counteroffer to become an informal feeder for the major carriers operation but retain your name and right to schedule routes. If another firm agrees to accept the offer (option 1), it is unlikely the major airline would accept this counteroffer. 3. Investigate the possibility of merging with another commuter airline to provide the financial and fleet strength to become a strong independent regional airline. 4. Continue as an independent operation using computer-aided scheduling techniques to optimize your ability to connect with major carrier flights.