South Central Airlines SCA operates a commuter flight betwee

South Central Airlines (SCA) operates a commuter flight between Atlanta and Charlotte. The regional jet holds 49 passengers and currently SCA only books up to 49 reservations. Past data shows that SCA always sells all 49 reservations, but on average, two passengers do not show up. As a result, with 49 reservations, the flight is often being flown with empty seats. To capture additional profit, SCA is considering an overbooking strategy in which they would accept 51 reservations even though the airplane holds only 49 passengers. SCA believes that it will be able to always book all 51 reservations. The probability distribution for the number of passengers showing up when 51 reservations are accepted is estimated as follows:

SCA receives a marginal profit of $100 for each passenger who books a reservation (regardless whether they show up or not). The airline will also incur a cost for any passenger denied seating on the flight. This cost covers added expenses of rescheduling the passenger as well as loss of goodwill, estimated to be $130 per passenger. Develop a spreadsheet simulation model for this overbooking system. Simulate the number of passengers showing up for a flight (Do 100 simulations). Assume the airline collects revenue from every ticket booked, even if the passenger doesn\'t show up.

Solution