Transatlantic Airlines report Essay

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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 …show more content…

Quick look at the summary table helps us identify that the proposed quick fix is the least value destructing policy out of three policies. It has the lowest mean of total costs, the lowest probability of exceeding £10,000 as well as the narrowest range of the cost.

To be more assured, we have additionally conducted probability dominance analysis (figure 2), which tells that both current and quick fix policy have deterministic dominance (always better) then no overbooking policy (green line). Whereas the quick fix (blue line) has stochastic dominance over currently employed policy (red line). The outcome of current policy maybe occasionally better than our proposed solution, but in the majority of cases the quick fix policy will be better.

Figure 2 Probability dominance analysis

Policy optimization

In order to identify the optimal booking policy we have conducted simulation with 40 different booking levels for business and economy. As these two variables are independent, we have conducted consequential analysis. Results for business class level booking are in (figure 3). The detailed information about tested values is in Appendix B.

Figure 3 Optimal booking policy

We have observed that the lowest expected value of total costs is achieved at 427 and 133 accepted reservations for economy and business respectively. The comparison of current policy against new policy can be found in table

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