PRIN.OF CORPORATE FINANCE
PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 11, Problem 21PS
Summary Introduction

To discuss: Reason of flying older models makes money while competitors are flying newer planes.

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Which theory of the firm is most applicable to explain the rise of the low cost airline industry? Explain your answer.
What drives the basic economies of the airline industry? The refining industry?2. How is Delta different from other airlines?3. How would owing the Trainer Refinery help Delta manage its fuel costs in the future? Is this offset by operation cost?4. What impact does buying an oil refinery have on Delta as a company? Is this a good strategic move? Why/why not?5. How does the merger between Delta and Virgin Airlines impact the company as a whole?
Airline pricing, considerations other than cost in pricing. Costal Airways is about to introduce a daily round-trip flight from New York to Los Angeles and is determining how to price its round-trip tickets. The market research group at Costal Airways segments the market into business and pleasure travelers. It provides the following information on the effects of two different prices on the number of seats expected to be sold and the variable cost per ticket, including the commission paid to travel agents:
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