Delta's new song: a case on cost estimation in the airline industry.

Issues in Accounting Education, August, 2004 by Sedatole, Karen L.

ABSTRACT: This case provides the opportunity to use various empirical techniques (i.e., high-low method, simple regression, and multiple regression) in the estimation of cost functions. The case uses the airline industry as the setting for this analysis and, in particular, focuses on the efforts of Delta Airlines to plan for salaries, the cost category that dominates its income statement. The case provides the data and the opportunity to learn the details of cost function estimation, but more importantly, it provides a rich setting in which issues related to the interpretation of these cost functions can be discussed. Finally, the entry of Delta into the low-cost carrier segment with its formation of Song provides a unique opportunity to think about how the cost...