Richard Cook is very concerned.

Until recently, he has always had the golden touch, having

successfully launched two startup companies that made him a very wealthy man. However, the
timing could not have been worse for his latest start-up a regional airline called Northwest
Commuter that operates on the west coast of the United States. All had been well at the beginning.
Four airplanes had been leased and the company had become fairly well established as a no-frills
airline providing low-cost commuter flights between the west coast cities of Seattle, Portland, and
San Francisco. Achieving fast turnaround times between flights had given Northwest Commuter an
important competitive advantage. Then the cost of jet fuel began spiraling upward and the company
began going heavily into the red (like so many other airlines at the time). Although some of the
flights were still profitable, others were losing a lot of money.

Fortunately, jet fuel costs now are starting to come down, but it has become clear to Richard that he
needs to find new ways for Northwest Commuter to become a more efficient airline.

In particular, he wants to start by dropping unprofitable flights and then identifying the most
profitable combination of flights (including some new ones) for the coming year that could feasibly
be flown by the four airplanes.

A little over a decade ago, Richard had been an honor graduate of a leading MBA program. He had
enjoyed the management science course he took then and he has decided to apply spreadsheet
modeling to analyze his problem.

The leasing cost for each airplane is $30,000 per day. At the end of the day, an airplane might remain
in the city where it landed on its last flight. Another option is to fly empty overnight to another city
to be ready to start a flight from there the next morning. The cost of this latter option is $5,000.

The table above shows the 22 possible flights that are being considered for the coming year. The last
column gives the estimated net revenue (in thousands of dollars) for each flight, given the average
number of passengers anticipated for that flight.
a. To simplify the analysis, assume for now that there is virtually no turnaround time between flights
so the next flight can begin as soon as the current flight ends. (If an immediate next flight is not
available, the airplane would wait until the next scheduled flight from that city.) Develop a network
that displays some of the feasible routings of the flights. ( Hint: Include separate nodes for each half
hour between 8:00 am and 7:30 pm in each city.) Then develop and apply the corresponding
spreadsheet model that finds the feasible combination of flights that maximizes the total profit.

b. Richard is considering leasing additional airplanes to achieve economies of scale. The leasing cost
of each one again would be $30,000 per day. Perform what-if analysis to determine whether it would
be worthwhile to have 5, 6, or 7 airplanes instead of 4.

c. Now repeat part a under the more realistic assumption that there is a minimum turnaround time of
30 minutes on the ground for unloading and loading passengers between the arrival of a flight and the
departure of the next flight by the same airplane. (Most airlines use a considerably longer turnaround
time.) Does this change the number of flights that can be flown?

d. Richard now is considering having each of the four airplanes carry freight instead of flying empty
if it flies overnight to another city. Instead of a cost of $5,000, this would result in net revenue of
$5,000. Adapt the spreadsheet model used in part c to find the feasible combination of flights that
maximizes the total profit. Does this change the number of airplanes that fly overnight to another
city?