American Airline Essay Example | Topics and Well Written Essays - 500 words

American Airline - Essay Example At the same time, it maximizes on the profits whenever apparent (Oliver, 108). In addition, this strategy trims down the stiff competition from rival airlines and enhances quality services (Koontz, 439). To understand how the airline maximizes profits and selling amount needed to determine the optimal mix of fare for this flight, the super 80 jet with a carrying capacity of 125 to calculate was provided. Exhibit 1 shows past information of this flight’s cumulative graph and shows that the fare for this flight ranges from $170-$750 per seat. Chances are that 20-25 booking opportunities will be vacant for us to retain the customers, as all tickets are refundable. This gives us enough time to bid new prices for the flight before any booking announcement has taken place. Additionally there is a 15% and 20% no show flow of local passengers, and obviously, demand is greater for the lower charge than the higher charge; hence, no fiscal records for no-shows. Profits are an unconstructive action due to spoilage and over-sale penalties, yet it is an affirmative action due to the optimal mix fares. The percentage of cost incurred due to spoilage is $150 each, and the penalty for over-sa le is $100 per passenger for five passengers and below, $250 per passenger for six to ten passengers and $500 per passenger for eleven and more passengers. Fares are determined by the rule of supply and demand; that is, when the departure date is near, and the fare decreases when the flight is sparsely booked, and seats start to run out the fare increases. In regard to the super 80 jet, the capability of bidding the prices is used to compel acceptance or rejection of bookings, which is from $170-$750 per seat. For example, a customer asked for the pro-rated fare, which is greater or equal to your bid price, the entire passengers are accepted with the same fare, thus determining the proceeds. As stated earlier, profits are determined