Delta’s New Song: a Case on Cost Estimation in the Airline Industry

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Delta’s New Song: A Case on Cost Estimation In the Airline Industry Contents Question 1 2 Question 2 3 Question 3 4 Question 4 7 Question 5 8 Question 1 8 Question 2 9 Question 3 11 Question 4 13 Appendix 1 13 Appendix 2 19 Question 1 There are several possible factors that seem more relevant to be as a cost diver to estimate Delta’s salaries: * Available Ton Miles * Number of Departures(thousand) * Revenue Passenger Miles * Revenue Ton Miles * Revenue Miles scheduled Salary cost for Delta consists of the payment to flight attendants and pilots so it can be determined by the hours flown. The miles and the time flown are correlated so between these cost drivers, available ton miles seems …show more content…

When we use multiple regressions to estimate the salary cost which one of the variable is the one that has the best R square in the single regression part, we definitely have a bigger R square. In this case also the R square for multiple regressions is bigger than the R square for single regression so it’s an improvement compare to the model estimated in question 2. Advantage and Disadvantage This technique (multiple regressions) takes more than one cost drivers into consideration so the estimation would be more close to the salary cost that we have already. In this problem the multiple regressions (0.861549482) has the bigger R square than single

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