Explore BrainMass

Profitability with Older Airplanes

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

New-model commercial airplanes are much more fuel-efficient than older models. How is it possible for airlines flying older models to make money when its competitors are flying newer planes? Explain briefly.

I believe because the price of the older planes drop drastically when they are purchased in the second-hand market allowing the airlines to make up for some of the costs that are attributed to higher fuel consumption. Older planes are often used on routes where fuel efficiency is less important such as shorter routes where less fuel, weight and passenger number and ticket sales are involved
Do you think at some point there is a trade-off between a new plane and an old plane? You mention where one plane outweighs the other, but in the end, do you think the financials just might even out? It seems like you are either going to spend the money upfront, with the old plane, or later with the new one. It seems that one would just have to weigh out where all the variables play out and where they are most beneficial to "you."

© BrainMass Inc. brainmass.com October 17, 2018, 12:42 pm ad1c9bdddf

Solution Preview

There are likely leases or loans on the newer planes. Also with this, like autos, the replacement insurance and the taxes ...

Solution Summary

This solution contains an expert perspective that explains in detail how an airline that utilizes older model planes can still be profitable.

Similar Posting

Economies of Scope/Logistics/Break Even

9. (a) What is the meaning of economies of scope? How do they differ from economies of scale? (b) What do learning curves show? How do they differ from economies of scale? What is the usefulness of learning curves as a managerial tool? What is the reason for rising international trade in inputs and the use of foreign trade in inputs and the use of foreign labor?

15. (a) What is logistics? (b) What are the forces that are likely to lead to the rapid spread of logistic management in the future?


3. Airway express has an evening flight from Los Angeles to New York with an average of 80 passengers and return flight 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 would be 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 is for each flight is $11,000. The fix costs for the plane are $3,000 per day whether it flies or not. (a) Should the airline replace its night flight from Los Angeles with a morning flight? (b) Should the airline remain in business?

3(b) is asking whether Airway Express should continue providing the
flight between Los Angeles and New York.

4. Electric utility companies usually operate their most modern and efficient equipment continuously (i.e., round the clock) and use their older and less efficient equipment only to meet period of peak electricity demand. (a) What does this imply for the short-run marginal cost of these firms? (b) Why do these firms not replace all their older equipment with new equipment in the long-run?

11. The Goldberg-Scheinman Publishing Company is publishing a new managerial economic text for which it has estimated the following total fixed and average variable costs.

Total fix costs: $10,000

Copy editing $70,000

Selling and promotion $20,000

Total fix costs $100,000

Average variable costs: $6

Printing and binding
Administrating costs 2

Sale commissions 1

Books discounts 7

Author's royalties 4

Average variable costs $20

Project selling price $30

(a) Determine the breakeven output and total sales revenues and (b) determine the output that would generate a total profit of $60,000 and the total sales revenues at that output level; draw the cost-volume-profit chart.

View Full Posting Details