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2015JULB02046
PGDM-FINANCE
Assignemnt-2
Scenario:
Several airports have opened in major cities in USA, opening the market for new
routes. In order to price flights on these routes a major airline collected information
on 638 air routes in the United States.
Summary
We are exploring this data and based on the information available we are
predicting the average fare on the new route for next quarter based on
information of previous quarter.
The variables considered for the analysis are
S_CODE
HI
E_CODE
S_INCOME
S_CITY
E_INCOME
E_CITY
S_POP
COUPON
E_POP
NEW
HI
VACATION
SLOT
FARE
GATE
DISTANCE
PAX
Correlations
COUPON
COUPON
Pearson Correlation
DISTANCE
.747**
.497**
.000
.000
638
638
638
.747**
.670**
Sig. (2-tailed)
N
DISTANCE
FARE
Pearson Correlation
FARE
Sig. (2-tailed)
.000
638
638
638
.497**
.670**
Sig. (2-tailed)
.000
.000
638
638
Pearson Correlation
.000
638
Inferences:
1. After exploring the numerical variables I fell there is a significant amount of
correlation between Fare and distance, coupon and Fare.
2. On drawing a scatter plot, we can predict that with a change in distance the
fare is changing in positive direction.
3. Distance can be a best single predictor out all other variables for Fare.
#2. Explore the categorical predictors (excluding the first 4) by computing the
percentage of flights in each category. Create a pivot table that gives the average
fare in each category.
Solution:
Column
Labels
Controlled
Count of
SLOT
Free
182
percentage
456
71.47
%
28.53%
Grand
Total
638
100%
This says that in 71.42% of all cases endpoint airport is free and 28.53% is
slot controlled.
Column
Labels
No
Yes
Count of
SW
444
Percentile
69.59%
194
30.41
%
Grand
Total
638
100%
This says that only 30.41% of all air routes is served by South West Airways
and 69.59% of all air routes are served by remaining.
Column
Labels
No
Yes
Count of
VACATION
468
percentage
73.35%
170
26.65
%
Grand
Total
638
100%
This says that in 26.65% of all routes is Vacation route and 73.35% is not a
Vacation route.
Column
Labels
Constrained
Count of
GATE
percentage
124
19.44%
Free
514
80.56%
Grand
Total
638
100%
This says that in 80.56% of all cases endpoint airport is free and 28.53% is
GATE constrained.
SLOT
Average of
FARE
186.059395
6
150.8256798
160.876677
1
Gate
Average of
FARE
193.129032
3
Free
Grand
Total
153.0959533
160.876677
1
Slot
Yes=1
No=0
Yes=1
No=0
Free=1
Controlled=
0
Free=1
Constrained
=0
Model Summary
Model
Square
Estimate
R Square
.887a
Adjusted R
.787
.782
35.46850
ANOVAb
Model
1
Sum of Squares
Regression
Residual
Total
df
Mean Square
2896483.535
13
222806.426
785001.174
624
1258.015
3681484.709
637
Sig.
177.110
.000a
a. Predictors: (Constant), PAX, NEW, GATE, VACATION, DISTANCE, S_INCOME, SLOT, HI,
E_INCOME, SW, S_POP, E_POP, COUPON
b. Dependent Variable: FARE
Coefficientsa
Standardized
Unstandardized Coefficients
Model
1
Std. Error
(Constant)
12.699
27.379
COUPON
3.755
12.194
-2.396
VACATION
SW
Coefficients
Beta
Sig.
.464
.643
.010
.308
.758
1.875
-.024
-1.277
.202
-35.644
3.617
-.207
-9.855
.000
-40.970
3.744
-.248
-10.944
.000
HI
.008
.001
.191
8.510
.000
S_INCOME
.001
.001
.057
2.334
.020
E_INCOME
.001
.000
.083
3.666
.000
S_POP
3.401E-6
.000
.135
5.213
.000
E_POP
4.363E-6
.000
.157
5.781
.000
SLOT
-16.245
3.847
-.097
-4.223
.000
GATE
-20.579
4.002
-.107
-5.143
.000
DISTANCE
.075
.004
.637
20.948
.000
PAX
.000
.000
-.151
-5.969
.000
NEW
Inferences:
For a positive coefficient of Independent Variable (beta), the fare
increase with increase in value of Independent Variable. The
amount of change is dependent on beta.
For a negative coefficient of Independent Variable (beta), the fare
decreases with increase in value of Independent Variable. The
amount of change is dependent on beta.
#4. Using model (3), predict the average fare on a route with the
following characteristics:
COUPON=1.202, NEW=3, VACATION=No, SW=No, HI=4442.141, S
INCOME
= $28,760, E INCOME=$27,664, S POP=4,557,004, E
POP=3,195,503, SLOT=Free,
GATE=Free, PAX=12782, DISTANCE=1976 miles.
Solution:
^
F = 12.699+3.755*1.202-2.396*3-35.644*040.970*0+0.008*4442.141+0.001*28760+0.001*28664+
(3.401E-6)*4557004+(4.363E-6)*3195503-16.245*120.579*1+0.075*1976+0.00*12782
^
F=$114.64