Transatlantic Airlines report
Executive summary
We have analyzed the existing booking policy of TransAtlantic Airlines and identified potential cost saving.
The implementation of the suggested new booking policy would lead to reduction of total expected costs per flight on average by £8,100.
Furthermore, the new policy would increase the predictability of total costs per flight. With 90% confidence new costs will be in a range £750 and £4,800 as compared to the current range of £1,900 to £20,300. The comparative description of the policies is presented in table 1.
Analysis of existing policy quick fix
Base case model
The foundation of current policy is based on the analysis in table 1. We observe that the total costs for both classes are £6,250. The analysis of existing model indicates that there are two controllable variables in yellow (booking level in both classes) and two uncontrollable variables in green (no-show %).
Table Foundation of existing policy
The available data indicates that current policy assumes some empty seats on the plane. As there is no immediate justification to this assumption, overbooking of the plane should be targeted to minimize the costs.
Table Quick policy fix
By increasing the booking level for both classes, £0 costs can be achieved (table 2).
Scenario analysis
TransAtlantic does not have data retention policy in place. Hence, TransAtlantic has applied the consensus of experts for the scenario analysis. The percentage of no-shows varies between 3% and 8% in economy class and 15%-30% in business.
Our calculations indicate that base case scenario is equal to the best case scenario. The main reason is that both cases of over- and under booking the company incurs costs, therefore the cost minimization is only achieved when the number of passengers in each class taking the flight is equal to the corresponding capacities (table 1).
In the worst case scenario, we assume the maximum no-show in both classes.
We have analyzed the existing booking policy of TransAtlantic Airlines and identified potential cost saving.
The implementation of the suggested new booking policy would lead to reduction of total expected costs per flight on average by £8,100.
Furthermore, the new policy would increase the predictability of total costs per flight. With 90% confidence new costs will be in a range £750 and £4,800 as compared to the current range of £1,900 to £20,300. The comparative description of the policies is presented in table 1.
Analysis of existing policy quick fix
Base case model
The foundation of current policy is based on the analysis in table 1. We observe that the total costs for both classes are £6,250. The analysis of existing model indicates that there are two controllable variables in yellow (booking level in both classes) and two uncontrollable variables in green (no-show %).
Table Foundation of existing policy
The available data indicates that current policy assumes some empty seats on the plane. As there is no immediate justification to this assumption, overbooking of the plane should be targeted to minimize the costs.
Table Quick policy fix
By increasing the booking level for both classes, £0 costs can be achieved (table 2).
Scenario analysis
TransAtlantic does not have data retention policy in place. Hence, TransAtlantic has applied the consensus of experts for the scenario analysis. The percentage of no-shows varies between 3% and 8% in economy class and 15%-30% in business.
Our calculations indicate that base case scenario is equal to the best case scenario. The main reason is that both cases of over- and under booking the company incurs costs, therefore the cost minimization is only achieved when the number of passengers in each class taking the flight is equal to the corresponding capacities (table 1).
In the worst case scenario, we assume the maximum no-show in both classes.