Question: Next week, Eagle Air has a regularly scheduled flight from New York to Dallas that will be booked to capacity. Based on prior experience, the

Next week, Eagle Air has a regularly scheduled flight from New York to Dallas that will be booked
to capacity. Based on prior experience, the airline expects 20 customers (normally distributed with
a standard deviation of 5) to cancel their reservations too late to resell the seat or to fail to show
up for the flight (we will assume that the tickets are refundable so that no-shows represent lost
revenue). Revenue from a ticket on the flight is $300. If more customers show up than Eagle Air
has seats, the policy is to put the customer on the next available flight (without bumping any other
passengers) and to give them a free round-trip ticket that will cost Eagle Air an average of $550 in
lost revenue at a later date. Should Eagle Air overbook the flight? By how many seats?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related General Management Questions!