tim(yet another new home) wrote:
> "nobody" wrote in message
> news:453174E2.57608B3F@nobody.org...
> > "tim(yet another new home)" wrote:
> >> 2) The high fixed costs of owning a plane make it more sensible
> >> to run it at a loss on some flights than have it sitting on the
> >> ground making an even bigger loss.
> >
> >
> > No. If operating a plane with revenus that don't cover operating costs
> > (fuel, airport fees, crews etc), then you make matters worse.
>
> Well of course.
>
> This is not the same as "Legacy carriers must think of every passengers
> as a profitable one and charge them so that they are profitable."
>
> which was the part I was replying to. Charging them so that they
> are profitable requires covering all of the costs. All that may need
> to be covered are the marginal ones.
>
> tim
Bingo - profit maximization occurs when the marginal revenue equals the
marginal cost.
And no - flying a single airplane at a "loss" where loss is defined as
marginal costs exceeding marginal revenues does not necessarily result
in "making things worse" from a firm perspective.
js
|