Major Airlines like American, Delta, and Continental are struggling to meet the challenges of budget carriers such

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Question:

Major Airlines like American, Delta, and Continental are struggling to meet the challenges of budget carriers such as South west and JetBlue. Suppose the Delta CFO has just returned from a meeting on strategies for responding to competition from budget carriers. The vice president of operations suggested doing nothing: “We just need to wait until these new airlines run out of money. They cannot be making money with their low fares.” In contrast, the vice president of marketing, not wanting to lose market share, suggests cutting Delta’s fares to match the competition. “If JetBlue Charges only Rs. 75 for that flight from New York, so must we!” Others, including the CFO, emphasized the potential for cutting costs. Another possibility is starting a new budget airline within Delta. The CEO cut the meeting short, and directed the CFO to “get some hard data.”
As a start, the DFO decides to collect cost and revenue data for a typical Delta flight, and then compare it to the data for a competitor. Assume she prepares the following schedule:
DeltaJetBlue
Route: New York to Tampa Flight 1247Flight 53
Distance1,000 miles1,000 miles
Seats per plane 142462
One-way ticket priceRs.80-Rs.621* Rs. 75
Food and beverage Meal Snack
Excluding food and beverage, the CFO estimates that the cost per available seat mile is 8.4% for Delta, compared to 5.3% for JetBlue. (That is, the cost of flying a seat for one mile –whether or not the seat is occupied – is 8.4% for Delta, and 5.3% for JetBlue.) Assume the average costs of good and beverage is Rs. 5 per passenger for snacks and Rs. 10 for a meal.
Requirements
Use the data to determine the following for JetBlue:
The total cost of Flight 53, assuming a full plane (100% load factor)
The revenue generated by Flight 53, assuming a 100% load factor
The profit per Flight 53, given the responses to a. and b.
The analysis in this project is based on several simplifying assumptions. As a team, brain-storm factors that your quantitative evaluation does not include, but that may affect a comparison of Delta’s operations to budget carriers.