1. Do you agree or you disagree?
I disagree with this reasoning since it assumes that there are no variable costs. The cost-per-seat-mile is the common unit of measurement which airlines use to measure their efficiency. It is usually obtained by dividing the operating costs of an airplane by the available seat miles, that is, the total seas available to carry a passenger in an airplane (King, 2017). It, therefore, means that whenever an airplane is in the sky, all the seats in the airplane are divided by the total number of operating costs. It does not matter whether the airplane is operating at full capacity or not. What this implies is that airplane costs for a passenger for an entire journey varies, depending on the total number of passengers occupying the available seats. When the seats in an airplane are fully occupied, then the passengers would share the same costs. However, when the seats are not occupied, it means that the cost would instead increase. To put it into perspective, it is important to note that these costs vary because the eventual revenues also vary, depending on the number of passengers on the plane.
2. What would you suggest to estimate the cost of a flight?
The best method to estimate the cost of a flight is to break down the costs into fixed and variable costs. The fixed costs, such as necessary crew and the pilots on the plane, do not change, irrespective of the capacity of the airplane. These should first be calculated. Next, variable costs should be calculated. These costs vary based on the number of passengers, including fuel and air hostesses. After calculating these costs, it then becomes possible to combine them get an estimate of the cost of a flight.
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Reference
King, J. M. (2017). Business strategy and airline models for operating managers. In Airline Operations (pp. 31-43). Routledge.
