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What would be the minimum stand-by fare to increase profits

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Question - Inter-City (IC) Airlines flies the Los Angeles-Las Vegas route. A full plane carries 100 passengers. All seats are first class. Because this is a short flight no food is served. However drinks are served.

The one way (either direction) fare is $420. All tickets are sold through a website operator who receives a sales commission of 10% of fare.

The costs per flight are as follows: Flying Crew = $4.000; Fuel Expenditures = $4,000; Aircraft Rental = $5,000; Airport Gate Fees = $2,000; Ground Personnel Costs = $3,000; Allocated overhead = $2,000.

In the route from Los Angeles to Las Vegas only soft drinks are served. The Cost is $10 per passenger.

In the route from Las Vegas to Los Angeles soft and hard drinks are served. The Cost is $10 per passenger.

Required - IC plans stand-by fares. Stand-by passengers must purchase their drinks. Commission on stand-by-fares is 20%. What would be the minimum stand-by fare to increase profits?

Reference no: EM133144905

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