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
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.
5. I used the Average Ton Miles as well for Jet Blue because it had the lowest R square for the previous example. (202,610-60,246)/(49-16)=142,364,000/33,000,000= 4.314. This doesn’t tell us a lot in direct correlation because it only takes one variable and it takes the two extremes of that variable.
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 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.
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).
Virgin Australia which was formerly called Virgin Blue is the Australia’s second largest airline. The airline was started in 2000 by British business tycoon Sir Richard Branson and former Virgin Blue CEO Brett Godfrey. The airlines started as low-cost carrier, but went on to become a “new-world carrier” (Virgin Blue media release, 2011). This low cost airline went on to become a full-service airline by 2012 with the name of Virgin Australia. Since the year 2000 the airlines grew rapidly and posed threat to Qantas airline and over the years Virgin Blue looking at the marketing trends and characteristics of the aviation industry grew into a Full Service Airline and is considered a four star airline by research consultancy firm Skytrax.
A more efficient way to determine the total cost of drivers would be for Sam to use plow hours as a cost driver, and plug his average base wage rate and budgeted hours into this equation:
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
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.
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.
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.
New technology: Internet (60% of seats were booked on-line), paperless operation, computerized, Reservation operation (not using call center)
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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