Skylight Airlines The dataset includes nine years of quarterly data about costs on two different cost drivers of an airline company. The dataset includes the operational costs in thousands of dollars in each quarter from 1994 until 2003, the number of passengers transported, and the tons of cargo shipped in the quarters. As a controller you should analyse the cost structure of this airline company.

1. Plot the data, do you see a clear relationship between the cost drivers and the operational costs?15 2. Test whether the number of passengers and the number of cargo shipped are reliable cost drivers for the firm. Which part of the costs are fixed cost and which part are variable costs when these two cost drivers are used?

3. Reflect on the quality of the regression equation. Does the regression meet its assumptions?
Where do you see problems? Hint: Also plot the residuals against time, and against the predicted values of the operational costs.
4. The airplane industry was hit very hard by the attacks on the World Trade Centre in the 3rd quarter of 2001. This led to a decrease in both passengers and cargo shipped. Since Skylight Airlines had problems to adjust their costs downwards very rapidly they ran into problems. How do you model such a sudden shift in these time series? Assess the impact of this crisis on the airlines’s costs.
5. Is there a seasonal pattern in the costs that is unrelated to the cost drivers? Examine what the impact of seasonality is on the cost pattern.

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Dataset for Skylight Airlines Year Quarter Operating Passengers Cargo Year Quarter Operating Passengers Cargo costs costs 1994 1 3137 2709 168 1999 1 3053 3118 138 1994 2 3107 2897 177 1999 2 3086 3669 141 1994 3 3016 2942 129 1999 3 3250 3487 139 1994 4 3197 2742 206 1999 4 3128 3135 150 1995 1 3010 2691 187 2000 1 3148 3203 134 1995 2 3585 2941 247 2000 2 3201 3860 134 1995 3 3003 2933 138 2000 3 3493 3593 140 1995 4 2901 2688 154 2000 4 3723 3293 153 1996 1 2862 2685 134 2001 1 3605 3589 141 1996 2 2767 3013 139 2001 2 3779 4401 145 1996 3 2802 2977 129 2001 3 3835 4050 141 1996 4 2775 2731 135 2001 4 3885 3617 156 1997 1 3351 2774 126 2002 1 3957 3598 140 1997 2 3064 3134 131 2002 2 3890 3537 131 1997 1997 34 2994 3170 124 2002 3 3649 3190 116 4 2970 2925 145 2002 4 3985 2639 119 1998 1 3074 3160 142 2003 1 3538 2878 111 1998 2 3022 3250 143 2003 1998 3 3122 3260 143 2003 23 3601 3217 109 3805 3165 112 1998 4 3102 3133 160 2003 4 3670 3061 126