Small Planes Limited have a 37 seat plane. The owner of the company hears that t

Question

Small Planes Limited have a 37 seat plane. The owner of the company hears that the “big guys” are selling extra tickets more than seats. He wants to sell 40 seats on his flights in hopes to rake in some extra money. You are his financial advisor. You need to lead him in the correct direction.

Use MiniTab to perform statistical analysis on the most profitable number of tickets for the airline to sell from a financial and reputation (if someone was bumped off their flight and they write about it on Facebook, etc. what that would do for business. What if 15% of people were bumped from the flight? Would there be a lot more bad talk about the airline?)

***Use P(no show) = .0995 for all scenarios even though in real life this may vary by type for flight, destination, type of ticket, etc. Also, use the cut-off for overbooking being “unlikely” as P(overbooking) .05***

Explanation / Answer

Solution:-

P(Show) = 1 - 0.0995 = 0.9005

n = 40

x = 38

By applying binomial distribution

P(x,n) = nCx*px*(1-p)(n-x)

P(x > 38) = 0.22583

Yes more than 15% of people were bumped from the flight. yes there be a lot more bad talk about the airline.

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