Question

air atlantic is considering a new service between paris and calgary. it can use existing aeroplanes, each of which has a capacity of 240 passengers, for one flight a week with fixed costs of $90,000 and variable costs amounting to 50% of ticket price. if the airline plans to sell tickets at $600 each, what can you say about their proposed service?

Answer 1

The proposed service of Air Atlantic between Paris and Calgary would result in a loss of $18,000 per flight.

Step-by-step explanation:

Based on the information provided, we can analyze the proposed service of Air Atlantic between Paris and Calgary.

The airplanes used for this service have a capacity of 240 passengers. With one flight a week, the airline would have a fixed cost of $90,000 per week.

Considering that the variable costs amount to 50% of the ticket price, and the tickets are priced at $600 each, the variable cost per ticket would be $600 * 0.5 = $300.

Now, let's calculate the total revenue per flight: $600 * 240 = $144,000.

The profit per flight can be calculated as follows: Profit = Revenue - Total Costs = $144,000 - ($90,000 + ($300 * 240)) = $144,000 - ($90,000 + $72,000) = $144,000 - $162,000 = -$18,000.

From this analysis, we can determine that the proposed service would result in a loss of $18,000 per flight.