Question: Ashcroft Airlines flies a six-passenger commuter fight once a day to Gainesville, Florida. A nonrefundable one-way fare with a reservation costs $129. The daily demand for this flight is given in the following table, along with the probability distribution of no-shows (where a no-show has a reservation but does not arrive at the gate and forfeits the fare):
Ashcroft currently overbooks three passengers per flight. If there are not enough seats for a passenger at the gate, Ashcroft Airlines refunds his or her fare and also provides a $150 voucher good on any other trip. The fixed cost for each flight is $450, regardless of the number of passengers.
(a) Set up a simulation model and calculate Ashcroft's profit per flight. Replicate the calculation N times each to calculate the average profit per flight.
(b) Ashcroft Airlines would like to investigate the profitability of overbooking 0, 1, 2, 3, 4, and 5 passengers. What is your recommendation? Why?