1. Airway Express has an evening flight from Los Angeles to New York with an average of 80 passengers and a return fligh

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1 Airway Express Has An Evening Flight From Los Angeles To New York With An Average Of 80 Passengers And A Return Fligh 1 (307.65 KiB) Viewed 11 times

Based on the computation:
a) Should the airline replace its night flight from LosAngeles with a morning flight? Why?b) Should the airline remain in business? Why?
1. Airway Express has an evening flight from Los Angeles to New York with an average of 80 passengers and a return flight from New York to Los Angeles the next afternoon with an average of 50 passengers. The plane makes no other trip. The charge for the plane remaining in New York overnight is $1,200 and zero in Los Angeles. The airline is contemplating eliminating the night flight out of Los Angeles and replacing it with a morning flight. The estimated number of passengers is 70 in the morning flight and 50 in the return afternoon flight. The one-way ticket for any flight is $200. The operating cost of the plane for each flight is $11,000. The fixed costs for the plane are $3,000 per day whether it flies or not. Given: One way ticket for any flight = 200, Passengers in evening = 80, Passengers in afternoon = 50, Operating cost of plane for each flight = 11, 000, Fixed costs for the plane = 3,000, Overnight Charge = 1, 200 Option 1: Evening flight from LA to NY; return flight the next afternoon Total Revenue = Ticket price x No. of passengers = 200 x (80+50) = 26,000 Total Variable Cost = (Operating cost of plane for each flight x 2) + Charge for plane remaining in New York =(11,000 x 2) + 1, 200 = 23, 200 Total Cost = Total Variable Cost+ (Fixed costs for the plane x 2) = 23, 200+ (3,000 x 2) = 23,200 + 6,000 = 29, 200 Total Profit = Total Revenue - Total Cost = 26,000 - 29, 2000

Given: One way ticket for any flight = 200, Passengers in morning = 70, Passengers in afternoon = 50, Operating cost of plane for each flight = 11, 000, Fixed costs for the plane = 3,000, Overnight Charge = 0 Option 2: Replacing the flight with a morning flight; return flight the next afternoon Total Revenue = Ticket price x No. of passengers = 200 x (70+50) = Total Variable Cost 24,000 = Operating cost of plane for each flight x 2 = 11,000 x 2 = 22,000 Total Cost = Total Variable Cost + Fixed costs for the plane = 22,000 + 3,000 - 25,000 Total Profit = Total Revenue - Total Cost = = 24,000 - 25,000 = 1, 000 (Airway Express will lose 1,000 if they choose to switch)