Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Chapter 11, Problem 5PS
Summary Introduction

To discuss: Reason of flying older models makes money while competitors are flying newer planes.

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What drives the basic economies of the airline industry? The refining industry?2. How is Delta different from other airlines?3. How would owing the Trainer Refinery help Delta manage its fuel costs in the future? Is this offset by operation cost?4. What impact does buying an oil refinery have on Delta as a company? Is this a good strategic move? Why/why not?5. How does the merger between Delta and Virgin Airlines impact the company as a whole?
Break into teams and identify costs that an airline such as Delta Air Lines would incur on a flight from Green Bay to Minneapolis. (1) Identify the individual costs as variable or fixed. (2) Assume that Delta is trying to decide whether to drop this flight because it seems to be unprofitable. Determine which costs are likely to be saved if the flight is dropped.
It is often said that the variable cost associated with a passenger of a low-cost airline carrier such as EasyJet or Ryanair is zero and this allows the airline to offer flights to customers at a very low price or even free. Explain whether you agree with this statement.
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