Week 5 Individual Assignment

Business Research Project

Descriptive Statistics and Interpretation

Qiana Reynolds

QNT/561

1/16/17

Dr. Heidi Carty

Business Research Project

Dyeus Airlines, an international airline, was founded in 2013. Dyeus Airlines is facing challenging competition from other, larger airlines around the world. In the hopes of competing with the various airline companies, Dyeus has decided to pilot a system where the airline waives all excess luggage fees. Most airlines charge a fee for excess baggage, as well as overweight luggage, and it will be the strategy of Dyeus Airlines to waive the first two pieces of luggage from all additional fees. Due to weight restrictions of the Federal Aviation Administration, any bag over the weight of 50 pounds will be subject to a $50 fee for special handling guidelines.

Hypothesis-The Hypothesis is “Boarding times will be faster when the first two checked bags are free.” The Null Hypothesis, then, is “There is no difference in boarding times when the first two checked bags are free.” The Independent Variable is whether or not the first two checked bags are free. The Dependent Variable is the flight boarding times.

Dyeus Airline's independent variable is quite simple. This variable will stand alone and is not affected by any other variable. Dyeus Airlines will not charge extra baggage fees moving forward.

By not charging for two bags per ticket, it is Dyeus Airlines’ belief that the boarding and unloading of the plane will be quicker, which will mean more precise timing in connecting flights. By pushing the luggage away from overhead storage, they can get the passengers in and out of the plane faster.

Business Problem- Many airlines charge for extra luggage for two reasons one fuel cost and the other is a 7.5% excise tax on tickets. According to the real reason, airlines charge checked fees, and it's not what you think "the 7.5% federal excise tax on domestic tickets applies to airfare and not to ancillary services. So as long as airlines can unbundle, they get a portion of the transportation cost out from under that tax” (Leff, 2015). The airline is maybe losing because they are not charging for the extra bag fee because they will not be receiving a portion of the transportation fee. For Dyeus Airlines to be successful in not charging for the extra baggage and the overnight luggage the company will have to be successful in making sure that all customers understand that luggage cannot weigh over 50 pounds to avoid charging the $50 fee for the special handling guidelines. Dyeus Airline may be able to recoup some of the portions of the transportation fee because they will be saving on fuel with the luggage not weighing as much, the loads will be lighter.

When there are charges for the amount of bags that a customer can bring, customers will generally attempt to stuff one bag to the max to avoid the excess baggage fees. By looking only for the weight of the bags, we can determine the overall weight of the plane, and adjust accordingly. In 2009, the airline industry saw its worst performing year in recent memory. (Garrow, 2009) The cause of poor revenue was due in part to the economic recession that the world felt. To make up for lost revenue, various airlines started to charge extra fees for baggage fees.

With overall fuel prices seeing a steady ebb and flow, another item that Dyeus Airlines can utilize is fuel hedging. Fuel hedging is when a company that uses large amounts of fuel or crude oil, can purchase the oil at an agreed upon price, and will pay that price throughout the year. Many airlines choose not to utilize fuel hedging, and just pass the extra cost onto the customers. (Garrow, 2012) By utilizing this technique, our fuel costs can be determined with enough time to have steady pricing. Knowing how much our fuel costs will be is going to be an integral part of our overall costs for tickets.

Literature Review

Flight delays are one of the most expensive costs that an airline company may ever have to deal with. In the year 2010, researchers from the University of California reported that domestic flight delays within the US alone between the year 2007 and 2010 cost an approximate thirty-three billion shillings (Guy, 2017). To mitigate these unexpected costs, airline companies increase flight costs I order to have the customers pay for the costs related to the flight delay. As a result, the prices offered by the airline companies for their services are high in anticipation of the costs brought about by the delay. As a result of the high cost, the demand for air transport has drastically reduced. Such expenses imposed on customers are camouflaged as costs of food and drinks, missed connections or flight cancellation. As a result, any strategy that would lead to reduced costs of airline services would have a direct impact on the prices offered by the carries companies, and hence that paid by customers, ultimately increasing the demand for such services. One such strategy would be the proposed waiver on customer bags. Such a waiver would reduce the amount of time spent in loading and offloading luggage in the planes, making it easier and faster for customers to settle and reducing delays (Guy, 2017). Delays increase expenses due to increased fuel consumption, more demand for foods and drinks and incur further consequences to customers when they are unable to make it to their destination within the planned time.

In another separate research report, it was established that while customers have to carry luggage when traveling to certain places, they can cut the prices they pay by reducing the luggage they carry. Most airline companies charge extra costs for heavier luggage to cater for special handling guidelines and the tax imposed by the authorities. Such a step increases the fee due to be charged to the customers. Increased fee discourages many customers since they have to pay a lot of money for services they could access at lower prices (de Wit & Zuidberg, 2012). However, the research found, if the customers could check their luggage before leaving their places to ensure that they only carry the necessary items, they might end up reducing the amount due. Practically, if a customer can reduce their luggage to below 50 pounds, they may not have to be charged. However, sometimes this might not be possible, while at other times the luggage may just be a few pounds heavier than 50 pounds, making the customers fail to enjoy the benefit associated with reduced luggage weight. When a customer divides their weight into three different bags each below 50 pounds, they still will have to pay for special handling guidelines since the luggage is considered as one. With this in mind, any effort to waiver costs of the first few bags would help in reducing the costs to be paid by customers since they can be allowed to divide their luggage into bags that are lighter than 50 pounds, then enjoy a waiver on a few of those bags.

The volume of flyers based on lower luggage costs is unlikely to increase, mainly because the companies operating such flyer will not enjoy as much profit as those that incur such costs. First and foremost, extra costs are an advantage to the airline companies since the can be able to foot fuel bill without having to spend any money that will reduce their profits. Second, extra charge for luggage helps the airline companies pay the tax accrued to such luggage handling. Therefore, with so much at stake, it is highly unlikely that airliners will embrace a reduction in the cost of luggage at the expense of their profit. What this means is that those companies that are brave enough to embrace a reduce luggage fee may end up enjoying the advantage for a long time, thus making more profits than those that charge such extra fees (Barrett, 2004). Also, the fact that some companies are making more profits by cutting on luggage costs may force some other airliners out of business, with the ultimate effect of lowering the volume of flyers, a factor that will be very advantageous to the flyers that do not charge extra for luggage.

Sampling

The target population, in this case, will be a large number of travelers who use Dyeus Airlines. Of this, a sample of travelers will be selected. This population has been selected since they are best placed to offer information on whether the waiver on the bags will lure them into making repeat deals with the airline company. Since they are already well versed with other factors that may affect their dealing with the company, it will be assumed that the only variable that would affect their future transactions with the company is the waiver offered on the first two bags in their luggage. The sampling method will be simple random sampling. This will ensure that all the travelers have equal chances of being selected as a sample, and that the choosing of any of the travelers as a sample will purely depend on chance. Respondents will be protected by not asking for their names or any form of personal information. In this way, they will feel more ready to provide accurate information without fear of being haunted by their information. To ensure the validity of data, the researcher will discuss the project design with relevant authorities and colleagues at every stage of the project.

Data collection

Data collection will be based on observation. Under his method of data collection, the researchers will record the flight delays per plane, the cost of the flight in comparison to other flights, the cost per passenger with less baggage and the cost per baggage. The number of customers who buy tickets will be observed to identify whether there are any changes. The observation will also check whether the number of bags in the planes decreases or increase as the days go by. Data collected will be stored in a computer with enough security to ensure that the information is not accessed by unauthorized people. The data will also be backed up online to ensure that even if something happens to the computer to make it lose information, the data can still be retrieved elsewhere.

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Descriptive Statistics

Cost of Baggage more than 2 bags ($)

Central Tendency: mean = 45.5

Dispersion: standard deviation = 5.5

Number: n = 10

Min/Max: 40 and 55

Confidence Interval: There is 95% confidence that the population average is between -42.0909 and 48.9090 dollars.

Flight Delays (in minutes)

Central Tendency: mean = 4.5

Dispersion: standard deviation = 4.3

Number: n = 10

Min/Max: 0 and 12

Confidence Interval: There is 95% confidence that the population average is between -1.8348 and 7.1652 minutes.

Descriptive Statistics Interpretation

Cost of Baggage more than 2 bags ($)

The cost of baggage more than 2 bags was studied in 10 random days in a month. The amount was observed to be between $ 40 and 55. The average was observed to be $45.5 with a standard deviation of 5.5. There is 95% confidence that the population average is between -42.0909 and 48.9090 dollars.

Flight Delays (in minutes)

Flight delay was observed in 10 random days in a month. The delays in minutes observed were between 0 and 12 minutes. The average delay was 4.5 minutes with a standard deviation of 4.3. There is 95% confidence that the population average is between -1.8348 and 7.1652 minutes.

Appendix A

Raw data used in the analysis

	Cost of Baggage more than 2 bags
	Day			Amount ($)
	1			40
	2			40
	3			55
	4			45
	5			50
	6			50
	7			50
	8			45
	9			40
	10			40
				455
Mean
5 . 45 $ 10 455 10 40 40 45 50 50 50 45 55 40 40 .... 10 10 2 1 = = + + + + + + + + + = + + = - - - - x x x x x x n
Standard deviation
40		-5.5		30.25
40		-5.5		30.25
55		9.5		90.25
45		-0.5		0.25
50		4.5		20.25
50		4.5		20.25
50		4.5		20.25
45		-0.5		0.25
40		-5.5		30.25
40		-5.5		30.25
				272.5

	Flight Delays
Day		Minutes
1		10
2		12
3		5
4		8
5		3
6		0
7		3
8		4
9		0
10		0
		45
Mean
Standard deviation
10		5.5		30.25
12		7.5		56.25
5		1		1
8		3.5		12.25
3		-1.5		2.25
0		-4.5		20.25
3		-1.5		2.25
4		-0.5		0.25
0		-4.5		20.25
0		-4.5		20.25
				165.25

Appendix B

Charts and Tables

Appendix C

Descriptive Statistics

Descriptive statistics	Cost of baggage more than 2 bags	Flight delay
Count	10	10
Mean	45.5	4.5
Sample standard deviation	5.5	4.3
Sample variance	30.2778	18.3611
Minimum	40	0
Maximum	55	12
range	15	12
Confidence interval 95% lower	-42.0909	-1.8348
Confidence interval 95% higher	48.909	7.1652
Half-width	45.5	4.5
T(df=99)	1,984	1.984
1st quartile	40	1.2
Median	45	3.5
3rd quartile	51.25	7.8
Mode	40	0
Low extreme	0	0
Lower outliers	0	0
High outliers	0	0
High extremes	0	0
Normal curve GOF
P value	0.6454	0.0918
Chi-square(df=5)	2.7	19.023
E	13	13

References

Barrett, S. D. (2004). How do the demands for airport services differ between full-service carriers and low-cost carriers?. Journal of Air Transport Management, 10(1), 33-39.

Brueckner, J. K., Lee, D. N., Picard, P. M., & Singer, E. (2015). Product unbundling in the travel industry: The economics of airline bag fees. Journal of Economics and Management Strategy, 24(3), 457-484. doi:10.1111/jems.12106

de Wit, J. G., & Zuidberg, J. (2012). The growth limits of the low cost carrier model. Journal of Air Transport Management, 21, 17-23.

Garrow, L. A., Hotle, S., & Mumbower, S. (2012). Assessment of product debundling trends in the U.S. airline industry: Customer service and public policy implications. Elsevier Transportation Research Part A, 255-268. doi:10.1016/j.tra.2011.09.009

Guy, A. (2017). Flight delays cost $32.9 billion, passengers foot half the bill. Berkeley News. Retrieved 6 January 2017, from http://news.berkeley.edu/2010/10/18/flight_delays/

Leff, G. (2015, April 21). The Real Reason Airlines Charge Checked Bags Fees... And It's Not What you Think. Retrieved from http://http://viewfromthewing.boardingarea.com/2015/04/21/the-real-reason-airlines-charge-checked-bag-fees-and-its-not-what-you-think/

Scotti, D. (5/01/2015). The impact of baggage fees on passenger demand on U.S. air routes. Transport Policy(43), 4-10. doi: 10.1016/j.tranpol.2015.05.017

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