OptiJet Airlines provide daily service for commuters traveling from South to MidWest. One of the fare classes for this flight has been set at $250. The airline has set aside a capacity of 25 passengers in this fare class. Historical passenger demand for these seats in this fare class has been fit to a normal distribution with mean 27.18 and standard deviation 3.14. If demanded, the airline will typically accept more reservations than the seat capacity since only 90% of all customers who have a reservation show up for the flight. This policy is called overbooking. If the flight is overbooked, anyone who shows up but does not receive a seat on the plane receives $350 in compensation in addition to a full refund of the ticket price. The variable cost of transporting a passenger and his/her luggage on this flight is $100. The fixed cost of operating the flight is $2,500. To maximize expected profit from operating this flight, how many reservations for the flight should this airline accept? Develop a simulation model in the spreadsheet file. What would be the best strategy for the airline?
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OptiJet Airlines provide daily service for commuters traveling from South to MidWest. One of the far...
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