Reference no: EM13918958

Reconsider the Leisure Airlines problem from Section 5.2. The demand forecasts shown in Table 5.3 represent Leisure Air's best estimates of demand. But because demand cannot be forecasted perfectly, the number of seats actually sold for each origin-destination- itinerary fare (ODIF) may turn out to be smaller or larger than forecasted. Suppose that Leisure Air believes that economic conditions have improved and that their original fore- cast may be too low. To account for this possibility, Leisure Air is considering switching the Boeing 737-400 airplanes that are based in Pittsburgh and Newark with Boeing 757- 200 airplanes that Leisure Air has available in other markets. The Boeing 757-200 airplane has a seating capacity of 158 in the coach section.

a. Because of scheduling conflicts in other markets, suppose that Leisure Air is only able to obtain one Boeing 757-200. Should the larger plane be based in Pittsburgh or in Newark? Explain.

b. Based upon your answer in part (a), determine a new allocation for the ODIFs. Briefly summarize the major differences between the new allocation using one Boeing 757- 200 and the original allocation summarized in Figure 5.5.

c. Suppose that two Boeing 757-200 airplanes are available. Determine a new allocation for the ODIFs using the two larger airplanes. Briefly summarize the major differences between the new allocation using two Boeing 757-200 airplanes and the original allocation shown in Figure 5.5.

d. Consider the new solution obtained in part (b). Which ODIF has the highest bid price? What is the interpretation for this bid price?

Text Book: An Introduction to Management Science: Quantitative Approaches to Decision. By David Anderson, Dennis Sweeney, Thomas Williams, Jeffrey Camm, James Cochran.