Part 2 Instruction:

1. The demand data from Part 1 is based on a larger Boeing 747 plan. After switching to a smaller DC-9 plan, the flight will not be able to accommodate the same level of demand. In other words, you will have to decide the overbooking level for a smaller airplane DC-9. Determine your overall overbooking level. Explain how you made overbooking decision based on your overbooking forecasts and overbooking costs. Make sure to explain if it was necessary to estimate the number of no-shows by fare classes.

Type your overbooking decision rationale below:

No-show Probability Tally

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Expected Overbooking Cost

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Expected Cost

No-show Probability Tally:

T3he number of no-shows for each departure date (obs.) is the difference between one-week ahead bookings and the actual boarded numbers (see the Data tab). The probability of each no-show level is the # of no-show events at that level divided by the total.

Expected Overbooking Cost:

Show your calculation of "expected overbooking cost" for overbooking one to fifteen passengers in the table below. The costs involved in overbooking depend on the number of people bumped from the flight. The costs include the revenue from the bumped passengers (for simplicity, assume revenue of $1000 for each person not seated) and the penalty. The per passenger penalty cost of leaving passengers stranded is $200*(# of passengers stranded)^2. So leaving 1 person stranded costs $200, two people costs $800, three people, $1,800 etc.e below. Explain your expected overbooking cost calculation in the box below. The expected cost at the bottom row is the weighted denied boarding cost (overbooking cost) of all no-show levels at a given level of overbooking. The weights are the probability of no-shows.

Note: When no-show is higher than overbooking, you do not have overbooking cost. If overbooking is more than no-show, you have denied boarding cost (lost revenue + penalty).