Reference no: EM133446619

Case: Airline companies have to schedule an effective "blocked time" for each flight route. The definition of blocked time is the time between the scheduled departure time and the scheduled arrival time. Airlines have to consider cost tradeoffs to make the blocked time decision. When a jet arrives earlier than its scheduled arrival time, a "jet idle cost" is incurred. That is, if a jet arrives too early, it has to either park at a gate or wait for an available gate. In those cases, the jet continues to burn fuel, which is very costly. On the other hand, when a jet arrives later than its scheduled arrival time, a "customer delayed cost" is incurred. This cost represents the potential loss of dissatisfied customers due to the flight delay.

A flight scheduler has to plan a blocked time for Flight #300 from ATL to JFK. Based on the historical data, the actual travel time follows a normal distribution with a mean of 90 minutes and a standard deviation of 10 minutes. Northeast Airlines estimates the jet idle cost is $80 per minute and the customer delayed cost is $200 per minute. (Hint: You do not need to consider any other costs or intangible costs. The cost of $80 and $200 is either the underage cost or the overage cost, and you need to decide which cost ($80 or $200) is the underage cost and which is the overage cost.)

1. What is the optimal blocked time for Flight #300?

2. In the airline industry, the service level is defined as "the probability that a jet arrives before its scheduled arrival time". After some internal studies, Delta Airlines realizes that its service level is lower than its major competitors, whose service level is 95%. Suppose that Delta wants to match the same service level, what would be the blocked time?