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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A. Some of the possible drivers of salary cost are Number or Departures, Revenue Ton Miles, Revenue Miles scheduled, Revenue passenger miles and there are countless more you could use.
Delta Airlines in a major American airline company headquartered in Atlanta, Georgia, United States. The company was founded on May 30, 1924. They operate as an extensive domestic and international network. Delta currently operates a fleet of more than 700 aircraft and they employ approximately 80,000 people. In 2011 they were the world’s largest airline in terms of fleet size. Delta Airlines is a very successful company. Part of what makes them so successful is expansion, making good decisions in route selection and hubs location, being service oriented, having a strong operation management, being reactive in terms of prices, and offering low fares.
Southwest Airlines is a company that is known for its low ticket prices and profitability despite the highly risky industry in which it operates. This essay examines the cost behavior, cost volume profit (CVP), activity based costing (ABC), budgeting process, costing and decision making policies of the firm. The essay will discuss how the airline integrates these concepts in its daily operations.
Delta airline uses merger so as to be able to expend its business. In 2008 the company merged with Northwest airlines. It operates in Europe, North America and Asia/Pacific regions. Once the merger was complete, Northwest Airlines and all its constituents become wholly-owned by Delta Airlines. The merger saw to it that Delta Airlines started operating in the Northwest for FY 2008. In the period of two month that is from October of 2008 the time the merger was completed to December of 2008, the company had increased it revenues to $2 billion. Having a flexible nature, allows Delta to improve customer services, and in the long run be able to achieve its strategic objectives.
Though they both are priced for the slimmest of budgets, the price of a round-trip ticket form Kansas City to Denver is about $22 cheaper with Frontier. This minuscule price difference does not seem like a huge difference, but some people would think that it really could help subsidize the difference of quality of service between the two, but Frontier has many other added on fees that Delta does not have, such as paying twenty extra dollars to carry-on luggage, $5 dollars for a can of soda, and another six for just an hour of in-flight entertainment. If someone bought all of these services, which are free with Delta, it would end up being more expensive than the better quality airline! Though if someone were to check their luggage on Delta they would be short an extra $35, while someone flying with Frontier would only have to shell out another fifteen.
4. Discuss the benefits and drawbacks of a binary tree versus a bushier tree. The structure of binary is simple than a bushier tree. Each parent node only has two child. It save the storage space. Besides, binary tree may deeper than bushier tree. The result record of binary may not very refine. 5. Construct a classification and regression tree to classify salary based on the other variables. Do as much as you can by hand, before turning to the software. Data： NO. 1 2 3 4 5 6 7 8 9 10 11 Staff Sales Management Occupation Service Gender Female Male Male Male Female Male Female Female Male Female Male Age 45 25 33 25 35 26 45 40 30 50 25 Salary $48,000 $25,000 $35,000 $45,000 $65,000 $45,000 $70,000 $50,000 $40,000 $40,000
In this particular case, Randy will need to assign the correct numbers to the correct category. For the purposes of this case study, assume T will equal 1 to make the equation represent one year of employment in one of the ice cream shops. For following variables, Nn will equal 50 as there will be 50 applicants total selected to be hired, rxy will represent .30 in one equation representing the interview and job performance and in the other equation, it will represent .50 which will represent the work sample predictor and job performance, SDy will be chosen to represent .20, Ẑs will be .80 because it will be the predictor score of the selected applicants, Na will represent 100, as that is the total number of applicants that submitted applications, and Cy will represent the cost per applicant in the interview and job performance in one equation as 100 and it will represent 150 in the other equation for work sample and job
In 2008, the senior management team at Continental Airlines, commanded by Lawrence Kellner, the Chairman and Chief Executive Officer, convened a special meeting to discuss the firm’s latest quarterly financial results. A bleak situation lay before them. Continental had incurred an operating loss of $71 million dollars—its second consecutive quarterly earnings decline that year. Likewise, passenger volume was significantly down, dropping by nearly 5 percent from the prior year’s quarter. Continental’s senior management needed to act swiftly to reverse this trend and return to profitability.
However, if we look at hours plowed as the cost driver, the amount of hours plowed per day actually decreases from 100 to 97.92. Thus, Sam must be overestimating the amount of overtime pay incurred per day, further increasing the need for him to increase the standard rates of his cost drivers.
1. There are a few trends in the US airline industry. One is consolidation, wherein existing players merge in an attempt to lower their costs and generate operating synergies. The most recent major merger was the United Continental merger, which is still an ongoing affair, but has created the largest airline in the United States by market share (Martin, 2012). Another trend is towards low-cost carriers. In the US, Southwest has been a long-running success and JetBlue a strong new competitor, but in other countries this business model has proven exceptionally successful. The third major trend is the upward trend in jet fuel prices, and the increasing importance that this puts on hedging fuel prices and capacity management (Hinton, 2011).
With this offer, you can earn 50,000 bonus miles when you make $2,000 purchases in the first 3 months. Also, if you make a Delta purchase in the first three months, you can receive an additional $50 bonus. On purchases through Delta, you will receive 2 miles for every dollar. Every day purchases are worth 1 mile per dollar. With every Delta flight, the first checked bag is free, which could save you around $200 per trip for a family of four.
Based on the scatterplots on CTenure, Comp and Res, convenience stores 5, 8, 40, 42, 44 and 75 are dropped from the model as these stores seemed to be too much of an outlier. Moreover, Res is not used further as it is now constant for all other stores (i.e. Res = 1). As already mentioned in the case, it appears that after checking for the three regression assumptions (i.e. the zero mean, constant variance and normality assumption; independence is not an issue here as it is not time-series data), the relationship between employee tenure and store level performance is not linear. From Appendix B, the residual plots on MTenure as well as CTenure show a more parabolic than a linear relationship. Hence, as is suggested by Bowerman, O’Connell and Murphree (2009, p. 635) a quadratic regression model is used to solve for this non-linearity, by adding the two variables MTenure_Squared and CTenure_Squared. From the summary output in Appendix C it can be seen that CTenure and CTenure_Squared turn out to be insignificant, whereas Visibility is only marginally significant at the 10%-level. Therefore, it can be concluded that only manager tenure has a significant positive influence on store level performance. More specifically, the final model looks as follows:
Throughout the 1930’s, the company operated various mail and passenger routes between Florida, Texas, South Carolina, Georgia, and even an international route to Peru. By the middle of the century, Delta had
New technology: Internet (60% of seats were booked on-line), paperless operation, computerized, Reservation operation (not using call center)
This paper will review the case study of Delta Airlines which was suffering like all its competitors with rising fuel costs which averaged anywhere between 30 to 50 percent of its total operating costs. This paper will answer six questions which will help identify what the company did to handle the high cost of fuel. The questions that I will answer will include the following.