Airway Express has an evening flight from Los Angeles to New
York with an average of 80 passengers and a 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 for
each flight is $11,000. The fixed costs for the plane are $3,000 per day
whether it flies or not. (a) Calculate and compare the profit under each
(b) Should Airway Express continue providing the flight between Los Angles and
New York? Even if Airway Express decides not to fly, it still has to pay the
fixed costs of $3,000 per day. The evening flight with the return flight the
next afternoon is counted as 1 day, not two days.
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