Carrier flying between frankfurt and barcelona

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Reference no: EM133492539

Case: Lufthansa operates a carrier flying between Frankfurt and Barcelona. The competition on this route has been very intense in recent years. The management would like to understand better the sensitivity of their profits to certain business variables The revenues and costs are given below as follows:

Standard fee for a single route $60

Variable cost per passenger $2

Fixed cost per flight per route $4200

Each aircraft has 160 seats. The average passenger load is 80%.

The director believes that the company's profits are most sensitive to changes in ticket prices, costs, or volume. The following scenarios have been proposed:

Scenario 1: 10% reduction in the fare per passenger

Scenario 2: 10% increase in costs

Scenario 3: 10% reduction in the number of passengers

Required:

Question: You are required to test the three scenarios. State all the assumptions you make

Reference no: EM133492539

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