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The average revenue collected on this flight is $145/seat. However, if the flight is overbooked and the airline needs to rebook a ticketed passenger, United typically gives the customer a free round-trip ticket for a future flight. The cost of this free round-trip ticket averages $330. By how many seats should United overbook for this route

Sagot :

nuhulawal20

This question is incomplete, the complete question is;

United Airline flights from Newark to Seattle are typically booked to capacity. However, due to United’s current lenient rebooking policies, on average 17 customers (with a standard deviation of 10) cancel or are no shows for these flights. The average revenue collected on this flight is is $145/seat. However, if the flight is overbooked and the airline needs to rebook a ticketed passenger, United typically gives the customer a free round-trip ticket for a future flight. The cost of this free round-trip ticket averages $330. By how many seats should United overbook for this route?

Answer:

the number of seats that should be overbooked is approximately 12

Step-by-step explanation:

Given the data in the question;

average = 17 customers

standard deviation = 10

Cost of under booking the flight ( underage ); Cu = $145

Cost of overbooking the flight ( Overage ); Co = $330

we calculate the service level

service level = Cu / ( Cu + Co )

we substitute

Service level = 145 / ( 330 + 145 )

= 145 / 475

Service level = 0.3053

In excel, we use NORMSIV function to determine the z-value

z-value = NORMSIV ( 0.3053 )

z -value = -0.509

Now, the number of seats (Q) that should be overbooked will be;

Q = Average cancellations + Z-value × S.D

we substitute

Q = 17 + ( -0.509 × 10 )

Q = 17 + ( -5.09 )

Q = 17 - 5.09

Q = 11.91 ≈ 12

Therefore, the number of seats that should be overbooked is approximately 12

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