The Credibility and Market Reputation of Travel International - Research Paper Example

The calculations in the first part illustrate that Westcoast Air co. is currently incurring an operating loss of $31,012.5. This is mainly due to the fact that the costs are exceeding the revenues by a considerable margin. The seating capacity of the aircraft is 380; however, the average number of passengers per flight is even less than 50% of the aircraft’s capacity. This should be a symptom of worry for the Westcoast Air co. as it is not being able to efficiently utilize the capacity of its aircraft.

The roots of this issue might lie somewhere in the marketing, advertising or service strategies of the company. Consequently, the average total revenue per flight is a modest $56,875.0. Though, it covers the variable costs of fuel, food, services and commission reasonably well, resulting in a Gross profit of $36,487.5; the problem arises largely because of high fixed costs. The annual leasing costs, constituting the bulk of the fixed costs along with fixed ground services costs and fixed flight crew salaries, resulting in a hefty sum of $67,500.0. An operating loss, which is the surpassing of revenues by operating costs, is considered to be a perilous warning sign for any business as it is an indication of discrepancies in the operating activities of the company.

The company should lower the average one-way fare to $280 as it not only utilizes the vacant seating capacity of the aircraft by increasing the average number of passengers per flight up to 212, but it also reduces the operating loss incurred by the company per flight.