Please answer the following questions for all the cases, thank you! :)
Case A BlueSky flies three airplanes between Houston and three cities, Chicago, Miami, and Phoenix. These three cities are the spokes connected by the Houston hub. A few times each day the three airplanes fly from the spoke cities to Houston. They arrive simultaneously at Houston; connecting passengers change aircraft during a 45-minute layover, and the three airplanes depart for the spokes. One set of six flights (three inbound to Houston and three outbound) is called a bank. Each bank can serve passengers flying on 12 different routes: three inbound direct routes (Chicago-Houston or C-H, Miami-Houston or For example, on the CH flight, the total demand is MH, and Phoenix-Houston or P-H), three outbound direct routes (H-C, H-M, and H-P), and six routes C-M, and C-P, totaling 130+98+88=316 passengers requiring two flights each (C-M, C-P, M-C, M-P, P-C, (this is the sum of the second row of Table 2). Because and P-M). only 240 passengers can travel on the CH flight, at BlueSky charges a single fee for a one-way coachleast 76 passengers must be turned away. class ticket on each passenger route. Table 1 shows When the total demand for a particular flight the prices charged by BlueSky. The marginal cost of may be larger than the available capacity, an airline flying a passenger on each route is virtually zero. can decide whether to accept or reject an offer to Each of the three airplanes currently has 240 coach buy a ticket for a particular route. Controlling sales seats. Table 2 shows demand for the routes in a bank; in this way to maximize revenue is called revenue assume in this case that demand is known, with no management. For example, BlueSky may decide that uncertainty. From Table 2 we can see that passen- it is optimal to sell large numbers of tickets for the ger demand exceeds airplane capacity on every flight. C-H and C-M routes, but might severely restrict the number of C-P tickets sold. Given the data above, BlueSky might sell tickets for 130CH routes, 98 C-M routes, and only 12 C-P routes, thus filling all 240 seats on the CH flight. Build a model to determine the number of tickets to sell for each route. The objective is to maximize revenues over a single bank. The tables above are available in BlueSky Network Data.xls. 1 1 This Excel spreadsheet file can be found and downloaded from http://ite.pubs.informs.org. Case B (1) Air France asks BlueSky to reserve five seats on Frequently other airlines offer to pay BlueSky to fly BlueSky's flights from Miami to Houston, to be used passengers on its planes (this is one purpose of an for connecting Air France passengers. Air France offers alliance among airlines). For example, Air France to pay $104 per seat. Should BlueSky accept the offer? often flies passengers from Paris to Miami. A few (2) In addition to the offer in (1), Air France offers of Air France's passengers then go on from Miami BlueSky $285 per seat to reserve 10 seats for pasto Houston, while other passengers are headed to sengers traveling from Miami to Chicago. Should Chicago. BlueSky accept this offer? Shumsky: Case Series: BlueSky Airlines: Network Revenue Management INFORMS Transactions on Education 9(3), pp. 145-147, @2009 INFORMS 147 Case C (1) Assume that BlueSky purchases three identical BlueSky is replacing the three aircraft that fly in and aircraft. How many coach seats should BlueSky order out of its Houston hub. It plans to purchase the for the three new aircraft? three new aircraft from the Airbus A330/A340 family. (2) Now suppose that the three aircraft can be difBlueSky has already decided to configure the three ferent sizes, between 240 and 380 coach seats. aircraft with only coach seats and no first-class cabin, (a) How do you think the three aircraft should but the airline has not yet decided on the size of the be allocated among the six routes? In other words, aircraft. The A330/A340 family comes in a wide range should the same aircraft always fly the same routes? of sizes, from 240 to 380 coach seats. Why or why not? (Hint: You do not need an optimizaTo decide on an aircraft size, BlueSky must consider tion model to answer this question). both the cost and revenue implications. On the cost (b) How many coach seats should BlueSky side, a larger aircraft is more expensive to purchase order for each of the three new aircraft? and more costly to operate. The purchasing terms and (3) Because it is cheaper to manufacture three idenperformance data show that the total cost of one flight tical planes, Airbus is offering BlueSky a one-time, from, say, Houston to Miami, includes a fixed cost of $5 million discount if it will order three identical air$12,000 and an additional cost of $40 per seat. These craft. Should BlueSky take the discount? In decidnumbers are calculated from all costs associated with ing this, you may assume that BlueSky operates 3 the flight, including fuel, labor, and maintenance. The banks per weekday through Houston, and that the cost parameters for the other five flights in each bank revenues and demands for every bank on every weekin and out of Houston are nearly identical because all day are equal to the demands in Tables 1 and 2 of the six flights are approximately the same length. (A) Case. Case A BlueSky flies three airplanes between Houston and three cities, Chicago, Miami, and Phoenix. These three cities are the spokes connected by the Houston hub. A few times each day the three airplanes fly from the spoke cities to Houston. They arrive simultaneously at Houston; connecting passengers change aircraft during a 45-minute layover, and the three airplanes depart for the spokes. One set of six flights (three inbound to Houston and three outbound) is called a bank. Each bank can serve passengers flying on 12 different routes: three inbound direct routes (Chicago-Houston or C-H, Miami-Houston or For example, on the CH flight, the total demand is MH, and Phoenix-Houston or P-H), three outbound direct routes (H-C, H-M, and H-P), and six routes C-M, and C-P, totaling 130+98+88=316 passengers requiring two flights each (C-M, C-P, M-C, M-P, P-C, (this is the sum of the second row of Table 2). Because and P-M). only 240 passengers can travel on the CH flight, at BlueSky charges a single fee for a one-way coachleast 76 passengers must be turned away. class ticket on each passenger route. Table 1 shows When the total demand for a particular flight the prices charged by BlueSky. The marginal cost of may be larger than the available capacity, an airline flying a passenger on each route is virtually zero. can decide whether to accept or reject an offer to Each of the three airplanes currently has 240 coach buy a ticket for a particular route. Controlling sales seats. Table 2 shows demand for the routes in a bank; in this way to maximize revenue is called revenue assume in this case that demand is known, with no management. For example, BlueSky may decide that uncertainty. From Table 2 we can see that passen- it is optimal to sell large numbers of tickets for the ger demand exceeds airplane capacity on every flight. C-H and C-M routes, but might severely restrict the number of C-P tickets sold. Given the data above, BlueSky might sell tickets for 130CH routes, 98 C-M routes, and only 12 C-P routes, thus filling all 240 seats on the CH flight. Build a model to determine the number of tickets to sell for each route. The objective is to maximize revenues over a single bank. The tables above are available in BlueSky Network Data.xls. 1 1 This Excel spreadsheet file can be found and downloaded from http://ite.pubs.informs.org. Case B (1) Air France asks BlueSky to reserve five seats on Frequently other airlines offer to pay BlueSky to fly BlueSky's flights from Miami to Houston, to be used passengers on its planes (this is one purpose of an for connecting Air France passengers. Air France offers alliance among airlines). For example, Air France to pay $104 per seat. Should BlueSky accept the offer? often flies passengers from Paris to Miami. A few (2) In addition to the offer in (1), Air France offers of Air France's passengers then go on from Miami BlueSky $285 per seat to reserve 10 seats for pasto Houston, while other passengers are headed to sengers traveling from Miami to Chicago. Should Chicago. BlueSky accept this offer? Shumsky: Case Series: BlueSky Airlines: Network Revenue Management INFORMS Transactions on Education 9(3), pp. 145-147, @2009 INFORMS 147 Case C (1) Assume that BlueSky purchases three identical BlueSky is replacing the three aircraft that fly in and aircraft. How many coach seats should BlueSky order out of its Houston hub. It plans to purchase the for the three new aircraft? three new aircraft from the Airbus A330/A340 family. (2) Now suppose that the three aircraft can be difBlueSky has already decided to configure the three ferent sizes, between 240 and 380 coach seats. aircraft with only coach seats and no first-class cabin, (a) How do you think the three aircraft should but the airline has not yet decided on the size of the be allocated among the six routes? In other words, aircraft. The A330/A340 family comes in a wide range should the same aircraft always fly the same routes? of sizes, from 240 to 380 coach seats. Why or why not? (Hint: You do not need an optimizaTo decide on an aircraft size, BlueSky must consider tion model to answer this question). both the cost and revenue implications. On the cost (b) How many coach seats should BlueSky side, a larger aircraft is more expensive to purchase order for each of the three new aircraft? and more costly to operate. The purchasing terms and (3) Because it is cheaper to manufacture three idenperformance data show that the total cost of one flight tical planes, Airbus is offering BlueSky a one-time, from, say, Houston to Miami, includes a fixed cost of $5 million discount if it will order three identical air$12,000 and an additional cost of $40 per seat. These craft. Should BlueSky take the discount? In decidnumbers are calculated from all costs associated with ing this, you may assume that BlueSky operates 3 the flight, including fuel, labor, and maintenance. The banks per weekday through Houston, and that the cost parameters for the other five flights in each bank revenues and demands for every bank on every weekin and out of Houston are nearly identical because all day are equal to the demands in Tables 1 and 2 of the six flights are approximately the same length. (A) Case
