Question: UMass Airways ( UMA ) operates a plane with 1 4 0 seats, servicing the route between Boston and Chicago, all allocated for economy class

UMass Airways (UMA) operates a plane with 140 seats, servicing the route between Boston and Chicago, all allocated for economy class passengers. The yield management division at UMA seeks support in developing an overbooking strategy
UMA estimates their average ticket revenue to be $400. In the event of denied boarding due to overbooking, UMA compensates customers by refunding the ticket price and offering a complimentary Boston Chicago ticket for the next available flight. Additionally, passengers receive a complimentary entry pass to the luxurious UMA lounge at Logan Airport. The company incurs a cost of $600 per customer for the complimentary ticket and lounge access. Remarkably, customers who experience overbooking express high satisfaction with this service, resulting in a "gain-of-goodwill" valued at $100 per customer. Given that no-shows are projected to occur uniformly between 4 and 14, how many seats should UMA overbook each day?

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!