Alpha Airlines has ordered a new fleet of DC- 717s. At this stage
of the contract, Alpha’s operations manager must specify the
seating configuration on the aircraft that will be used on the
Boston-Atlanta-ChicagoBoston circuit. Alpha flies this route once
each day. The configuration decision involves specifying how many
rows will be allocated for first class and how many for tourist
class. If the aircraft were configured entirely of tourist rows
(containing six seats each), there would be forty rows. Firstclass
seats are wider and afford more legroom, so that, in order to make
room for one first-class row (containing four seats), two tourist
rows must be removed. Thus, conversion from tourist to first-class
seating involves the loss of some seats, but the conversion may be
appealing because the revenues are higher for first-class
passengers than for tourist passengers (see Exhibit 1). A perfect
match between the configuration and the demand for seats is seldom
possible. Historical data suggest a probability distribution of
demand for seats on each leg (as detailed in Exhibit 2). There is
another distribution for the fraction of demand that corresponds to
first-class seats (Exhibit 3), which seems to apply on all legs,
although the fraction that occurs in one market on any day is
independent of the fraction in the other markets. Finally, there is
some chance that all seats in either seating category will be
booked on a given leg when demand for that category occurs. Under
present management policies, such demand is simply lost to
competitors.
- Simulation Sensitivity Problems 1 Airline Revenue Management Alpha Airlines Has Ordered A New Fleet Of Dc 717s At Th 1 (9.78 KiB) Viewed 51 times
- Simulation Sensitivity Problems 1 Airline Revenue Management Alpha Airlines Has Ordered A New Fleet Of Dc 717s At Th 2 (12.6 KiB) Viewed 51 times
- Simulation Sensitivity Problems 1 Airline Revenue Management Alpha Airlines Has Ordered A New Fleet Of Dc 717s At Th 3 (8.33 KiB) Viewed 51 times
day. Alpha Airlines is seeking a profit-maximizing
configuration.
a. What is the expected profit per day for a configuration of
three first-class rows and thirty-four tourist rows? For
convenience, you may allow fractional values of demand in your
model.
b. With the suggested configuration, what proportion of the days
will Alpha at least break even on the Boston–Atlanta–
Chicago–Boston circuit?
c. For the demand that Alpha faces, what is the maximum expected
profit, and what is the seat configuration that achieves it?
Tourist EXHIBIT 1 Revenue per Seat First-class Boston-Atlanta $400 Atlanta-Chicago $400 Chicago-Boston $450 $175 $150 $200
EXHIBIT 2 Distribution of Total Demand for Seats minimum most likely maximum Boston-Atlanta 160 180 220 Atlanta-Chicago 140 200 240 Chicago-Boston 150 200 225
EXHIBIT 3 Distribution of Fraction First Class Fraction 5% 12% Probability 0.2 0.5 15% 0.3