Tasks

Peace Airlines has collected data on how many 'no shows' they have on their flights across the year. A 'no- show' is someone who reserved a ticked but does not check-in in time to make the flight. They have collated this information into a probability distribution table that estimates the probability of a given number of no-shows on a given flight.

This assessment requires you to utilise the 'No-show' probability distribution data collected by Peace Airlines to determine the optimum overbooking strategy.

This will include identifying the average number of no-shows, the expected loss of any likely overbooking strategy and the provision of some rationale as to the number of seats Peace Airlines should overbook each flight.

The probability distribution data is provided to youbelow ( REFER TO THE image )

Background information

The following background information is of central importance to the task.

Peace Airlines has determined that no more than 7 passengers are likely to be a no show. The opportunity cost to the Airline of a no show is estimated to be $55. The cost to the Airline of booking an overbooked passenger onto another flight is estimated to be $140.

You do not need to consider any cost associated with damage to Peace Airlines reputation due to overbooking and can assume that all passengers that are overbooked are well handled with no complaints.

Task 1

Identify the mean or average number of no shows Peace Airlines is likely to experience on any given flight.

Task 2

Calculate the expected loss of each possible overbooking strategy and clearly show your working within the excel file.

Task 3

Explain what overbooking strategy you would go with if you were the operation manager at Peace Airlines. Be sure to justify this decision logically

NOTE: DATA: Refer to the image below.

A B C D 1 OVERBOOKING STRATEGY 2 Peace Airlines - No show probability distribution 3 4 No-shows (d) Probability P(d) Reservations Overbooked (x) Cumulative Probability P(d