Reference no: EM13863700
ColumbiaAir Inc offers low cost air travel between Columbia, SC and NYC. ColumbiaAir's invested captial is $6,000,000, corresponding to the investment in the two planes the company owns. Each of the two planes can carry 50 passengers. Each plane does 12 daily trips from Columbia to NYC and 12 daily trips from NYC to Columbia. The price is $100 for a one way ticket.
The current load factor is 70 percent (i.e. 35 seats are sold on the average flight). The annual cost of operating the service and running the business is $60,000,000 (including all costs, such as labor, fuel, marketing, gate fees, etc.). The company operates 365 days a year.
-What is the current ROIC?
-At what load factor does Columbia Air breakeven? (I.e. at what load factor is Columbia Air's ROIC = 0?)
-Re-set the average load factor to 70%.
The NYC airport has just told Columbia Air that they will have more limited access to gates. Specifically, Columbia Air will only be able to fly 22 flights per plane per day instead of 24 flights per plane per day. Columbia Air's costs do not change at all. What is their new ROIC?
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