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Problem 4 . National Budget Airlines has just been awarded a new route between Y and Z , and will use a leased plane to

Problem 4. National Budget Airlines has just been awarded a new route between Y and Z, and will use a leased plane to fly 2 full circuits per day (4 daily flights). There are other carriers on the route and the passenger demand is uncertain. You are in charge of considering three options to lease for this route. Planes will fly approximately 14 hours per day for 365 days per year. The annual lease cost includes all maintenaance and other consumables except fuel. Cost of jet fuel is estimated at $6? gallon. The annual lease/maintenance cost (LMC) in millions, the fuel consumption rate in gallons per hour, and the seat capacity per plane are provided next.
\table[[Plane,LMC/Y,G/hr,Capacity],[737,$26.4,900,200],[787,$33.6,1,750,270],[777,$32.1,2,700,350]]
Assume there are three possible demand / revenue scenarios:
A.220 passengers/ flight and $380? passenger-flight.
B.280 passengers / flight and $480? passenger-flight.
C.320 passengers/flight and $530? passenger-flight.
To do
Develop a payoff table (in $MY). Implement in Excel and have the cost of fuel as a refenced variable (see X-Tree example where the cost per container is referenced from Cell D3).
Determine the decision for each model with no probabiltiy estimate (optimistic, conservative, min-max regret).
What is the decision if the probabilities are A=20%,B=45%,C=35%
Create a sensitivity analysis graph for the cost of jet fuel from $3 to $10.
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