Access the data in the "JETBLUE Case" folder posted on Blackboard. The specific Excel file is named "JETBLUE_Q1-2001_Q4-2019". In that file, you will find quarterly inflation-adjusted data from JetBlue Airways Corporation's quarterly Securities and Exchange Commission (SEC) filings from the first quarter of 2001 through the fourth quarter of 2019. In addition to noting the year and quarter for each line, the specific data items included that you will need for your analyses are:

Quarterly total operating revenues (CPI adjusted); variable name REVENUES,

Quarterly total operating expenses (CPI adjusted); variable name EXPENSES,

Quarterly total available seat-miles; variable name ASM,

Number of Airbus A320/A321 aircraft in service at the end of the quarter; variable name A320/1,

Number of Embraer E190 aircraft in service at the end of the quarter; variable name E190, and

A 0-1 variable that takes on the value of 1 beginning in the quarter in which JetBlue began operating its fleet of E190 aircraft, and 0 otherwise; variable name STRATEGY1.

A 0-1 variable that takes on the value of 1 beginning in the second quarter of 2018 when JetBlue impaired its E190 fleet (with plans to replace the aircraft with A220 jets), and 0 otherwise; variable name STRATEGY2.

Required:

1.Using Excel and the data provided, estimate the simple linear regression model with EXPENSES as the dependent variable and ASM as the independent variable. Report the following statistics from your regression output:

Model R²

Model component

Intercept

Coefficient

t-Statistic

ASM

2.Using Excel and the data provided, estimate the multiple regression model with EXPENSES as the dependent variable, and ASM, A320/1, E190, STRATEGY1 and STRATEGY2 as independent variables. Report the following statistics from your regression output:

Model R²

Model component

Intercept

Coefficient

t-Statistic

ASM

A320/1

E190

STRATEGY1

STRATEGY2

Consider your estimated coefficient on ASM above. In the space below, provide a brief, but specific interpretation of the coefficient. In other words, what does the coefficient tell us about the relation between the number of available seat-miles flown (ASM) and quarterly total operating expenses?

3.Assume that the multiple regression model you estimated in requirement (2) above correctly explains the variation in total CPI-adjusted operating expenses. Assume the following activity occurred in the first quarter of 2020:

Flight output (ASM) totals 16,054,480,000 ASM for the quarter (a 4.0 percent increase over Q1-2019),

JetBlue operates 203 A320/321 jets during the quarter (based on the current fleet, adoption of A231neo aircrafts, and expected aircraft deliveries), and

JetBlue operates 60 E190 jets during the quarter.

Assume as well that, for the first quarter of 2020, there is no net change in the variable cost per ASM, no net change in quarterly fixed expenses excluding aircraft costs, and no net change in quarterly strategy-related expenses. Finally, note that, in Q1-2020, both STRATEGY1 and STRATEGY2 take on the value of 1.

Given the estimated multiple regression model you generated in Requirement #2 and the above assumptions, complete the following template to estimate (1) the Q1-2020 total operating expenses, and (2) the Q1-2020 total fixed operating expenses.

TOTAL OPERATING EXPENSES

Q1-2020

Forecasted

Model componentCoefficientLevel

ASM

$

x

=

$

A320/1

$

x

=

$

E190

$

x

=

$

STRATEGY1

$

x

=

$

STRATEGY2

$

x

=

$

Intercept

=

$

Forecasted Q1-2020 total operating expenses=$

TOTAL FIXED OPERATING EXPENSES

Q1-2020

Forecasted

Model componentCoefficientLevel

A320/1

$

x

=

$

E190

$

x

=

$

STRATEGY1

$

x

=

$

STRATEGY2

$

x

=

$

Intercept

=

$

Forecasted Q1-2020 total fixed operating expenses =$