Suppose the following costs for a 10-hour round-trip flight apply to the time frame and expenses of an unscheduled 5-hour charter flight from Baltimore to Las Vegas (and return the next day) on a seven-year-old Boeing 737–800 with 120 occupied seats. Some costs listed in the table have been aggregated up to the flight level from a seat-level decision where they are incurred. Others have been allocated down to the flight level from an entry/exit or maintain-ownership company-level decision. Still other costs vary with the go/no go flight-level decision itself. Your job is to analyze each cost item and figure out the “behavior of cost”—that is, with which decision each cost varies. Fuel and landing fees =$5,200 Quarterly airframe maintenance re: FAA certificate = $1,000 Unscheduled engine maintenance per 10 flight hours =$1,200 Pro rata time depreciation for seventh year of airframe = $7,200 Flight pay for pilots per round-trip flight = $4,200 Long-term hangar facility lease = $6,600 Annual aircraft engine operating lease = $7,100 Base salaries of headquarters personnel = $2,000 Food service with seat-by-seat purchase and JIT delivery at each departure = $2,400 Airport ground crew baggage handling for two flight arrivals = $450 5.) Charter contracts are negotiable, and charter carriers receive many contract offers that do not promise $300 prices or 80-percent-full planes. Should the airline accept a charter flight proposal from a group that offers to guarantee the sale of 90 seats at $250? Why or why not?
Suppose the following costs for a 10-hour round-trip flight apply to the time frame and expenses of an unscheduled 5-hour charter flight from Baltimore to Las Vegas (and return the next day) on a seven-year-old Boeing 737–800 with 120 occupied seats. Some costs listed in the table have been aggregated up to the flight level from a seat-level decision where they are incurred. Others have been allocated down to the flight level from an entry/exit or maintain-ownership company-level decision. Still other costs vary with the go/no go flight-level decision itself. Your job is to analyze each cost item and figure out the “behavior of cost”—that is, with which decision each cost varies.
Fuel and landing fees =$5,200
Quarterly airframe maintenance re: FAA certificate = $1,000
Unscheduled engine maintenance per 10 flight hours =$1,200
Pro rata time
Flight pay for pilots per round-trip flight = $4,200
Long-term hangar facility lease = $6,600
Annual aircraft engine operating lease = $7,100
Base salaries of headquarters personnel = $2,000
Food service with seat-by-seat purchase and JIT delivery at each departure = $2,400
Airport ground crew baggage handling for two flight arrivals = $450
5.) Charter contracts are negotiable, and charter carriers receive many contract offers that do not promise $300 prices or 80-percent-full planes. Should the airline accept a charter flight proposal from a group that offers to guarantee the sale of 90 seats at $250? Why or why not?
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