SkyJet (B): Alternate Sales Channels

Other airlines offer to pay SkyJet to fly passengers on its planes (this is one purpose of an alliance
among airlines). For example, Air France often flies passengers from Paris to Miami. A few of
Air France’s passengers then go on from Miami to Houston, while other passengers are headed to
Chicago.

Assignment
1. Air France asks SkyJet to reserve 5 seats on SkyJet’s flights from Miami to Houston, to be
used for connecting Air France passengers. Air France offers to pay $104 per seat. Should
SkyJet accept the offer?
2. In addition to the offer in Question 1, Air France offers SkyJet $285 per seat to reserve 10 seats
for passengers traveling from Miami to Chicago. Should SkyJet accept this second offer?

Now return to the base case, with no demand from Air France. There is another sales channel
available to SkyJet: Priceline.com. Specifically, SkyJet can transfer a block of seats to Priceline
for sale on its web site. After the transfer, those seats are not available for sale by SkyJet.
3. Based on sales data, SkyJet expects to collect $80/seat for every single-leg Phoenix-Houston
ticket it transfers to Priceline. Assume that Priceline reaches new customers and does not
cannibalize SkyJet’s current demand. How many Phoenix-Houston seats should SkyJet trans-
fer to Priceline?

This case was written by Professors Robert A. Shumsky and Stephen G. Powell of the Tuck School of Business at Dartmouth College.
© 2013 Trustees of Dartmouth College. All rights reserved. For permission to reprint, contact the Tuck School of Business at 603-646-3176.