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Overbooking flights 
20080710 

From DON: Overbooking by Airlines
This is a simplified version of calculations used by airlines when they overbook
flights. They realize that a certain percentage of ticketed passengers will cancel
at the last minute. Therefore, to avoid empty seats, they sell more tickets than
there are seats, hoping that just about the right number of passengers show up.
We will assume that the noshow rate is five percent.
For a flight with 220 seats, the airline wants to find how sensitive various
probabilities are to the number of tickets it issues. In particular, it wants to
calculate
a) the probability that more than 225 passengers show up
b) the probability that more than 220 passengers show up
c) the probability that at least 215 seats will be filled
d) the probability that at least 210 seats will be filled.
To assess the benefits and drawbacks of issuing various numbers of tickets on an
airline flight with 220 seats, create a table showing as many different scenarios
as possible (table only on one page when printed) and use a second page for
your analysis and recommendation to the airline. Which are the good cases,
which are the bad cases for the airline? Answered by Janice Cotcher. 


