# Delta Song Case Analysis Essay

820 Words Apr 29th, 2013 4 Pages
Delta Song Case Analysis
Possible cost drivers that will allow us to estimate a salary cost function for Delta are: available seat miles, number of departures, available ton miles, revenue passenger miles, and revenue ton miles. The two cost drivers we chose were revenue passenger miles and available ton miles. The salaries consist of payments to pilots, flight attendants and ticket agents. Their salaries are determined by the number of passengers and cargoes and the miles or hours flown. This is why we chose revenue passenger miles and available ton miles. After calculation we found that the R2 of revenue passenger miles is .1764, and the R2 of available ton miles is .5577. We used scatter plots to show this:

The available ton miles
Multiple Regression We chose revenue passenger miles and available ton miles. The results we got are as follows:

Coefficients Intercept X Variable 1 X Variable 2 -1144.55 1.051937 -72.2955

Standard Deviation 243.2101 0.120829 14.88974

Salary=-1144.55+1.05xavailable ton miles-72.30xrevenue passenger miles R2=0.5577, and strandard deviations are smaller than coefficients, so it is statistically valid. This technique is an improvement over simple regression. This is because this technique uses more cost drivers and provides results are closer to the data given. Questions 1-3 If the conditions are not met, the cost functions will be less useful. The const functions in Question 1-3 are based on the assumption that the wages per hour remain the same and there is no addition labor needed, so it’s useful only under certain conditions. Using the background of the industry and company’s circumstance into consideration, we think these are important:  The present equilibrium between Delta and the labor unions is not interfered. However, issues concerning lowering pilots’ salaries to industry level will not be obstructed by union forces. Also, employees other than pilots will not join labor unions to require higher payments. If not, adjustments on cost structure will be weak and Delta Song will turn out to be another Delta Express.  Reducing staffs or cutting salaries are to be formulated. Restrictions about layoffs will directly lead to weak control over budgets, and in

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