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Aero Air, a carrier, is proposing to dedicate a fleet to the route (HKF-TPE-ICN). The airline has two aircraft types: an A320 with 280 seats and a B777 with 400 seats. The A320 and B777 have operational costs of $250,000 and $410,000, respectively. Because the airline is still in its early stages of development, they predict that each potential passenger who is unable to obtain a seat will cost them $5,000 in the long run. The demand for the sectors HKG-TPE and TPC-ICN is shown in the tables below.

Questions:

1(a) Determine the total cost of using A320 and B777 and suggest which type of fleet should be used.

1(b) Given the uncertainty of no-show with a no-show rate 0.07 and a standard deviation 0.01, the airline decides to increase the authorised capacity of Flight SC2505 [HKF-TPE] to increase the revenue. After evaluating the risk and cost of denied boarding and spoiled seat, the airline found they are indifferent. Considering the aircraft used in (a), suggest an approach, and use it to determine the authorised capacity for the flight SC2505

HKG-TPE TPE-ICN Demand 400 350 250 200 150 100 Probability 0.1 0.22 0.38 0.18 0.08 0.04 Demand 600 550 500 450 400 300 250 200 Probability 0.04 0.08 0.09 0.17 0.28 0.22 0.1 0.02