Airline companies regularly provide operating statistics with their financial statements. In 2012, North America Airlines reported that it had approximately 61,000 million seat-kilometres available, of which 68.1 percent were filled. (A seat-kilometre is one seat travelling one kilometre. For example, if an airplane with 100 seats travels 400 kilometres, capacity is 100×400=40,000 seat-kilometres.) The average revenue was $0.1310 per revenue-passenger-kilometre, where a revenue-passenger-kilometre is one seat occupied by a passenger travelling one kilometre. In 2011, approximately the same number of seat-kilometres were available, but only 65.6 percent of them were filled at an average revenue of $0.1251 per filled seat-kilometre. North America calls the percentage of seat-kilometres available that are filled with passengers its load factor.

1. Compute North America’s passenger revenue for 2012 and 2011.

2. Assume that North America’s variable costs were $0.05 per revenue-passenger-kilometre in both 2011 and 2012 and that fixed costs are $3,000 million per year each year.

• Compute North America’s break-even point at the 2011 level of revenue per passenger-kilometre. Express it in both revenue-passenger-kilometres and as a load factor (that is, as a percentage of available capacity used).
• Compute North America’s break-even point at the 2012 level of revenue per passenger-kilometre. Express it in both revenue-passenger-kilometres and as a load factor (that is, as a percentage of available capacity used).

3. Suppose North America maintained the same level of seat-kilometres available in 2013, had revenue of $0.13 per revenue passenger-kilometre, and maintained the same level of fixed and variable costs as in the previous two years. Compute the load factor necessary to achieve an operating income of $400 million.