Though first class represents less than 5 percent of all seats flown on long-haul routes, and business class accounts for 15 percent, those seats combined to generate 40 to 50 percent of airlines’ revenue, according to Peter Morris, the chief economist at Ascend, an aviation consulting firm. After its merger with Continental last year, United Airlines kept its first-class cabin only on some international routes that used to be served by United but not on those flown by Continental. It is also installing new flat-bed seats across its fleet in business class.
1. According to the video, what was the price of a coach seat versus a business class seat versus a 1st class seat on a flight from the U.S. to Zurich, Switzerland?
2. Based on your answer in #1, assume that a plane going to Zurich has 230 coach, 50 business seats, and 20 first-class seats? What would be the gross revenue?
3. Based on your answer in #2, what would the expenses be in order to achieve a 50 percent net revenue?
4. How many times more is a first-class seat as compared to a coach seat, based on your answer in #1?
5. Discuss how you think an airline decides to configure its seating options. What is the linkage between this type of decision and cost or managerial accounting?
Mouawad, J. (2011). Taking First-Class Coddling Above and Beyond, The New York Times, Nov. 20 (Retrievable online at http://www.nytimes.com/2011/11/21/business/taking-first-class-coddling-above-and-beyond.html?pagewanted=1)
Video. (2011). In First Class, A World Apart, New York Times Video (Retrievable online at http://video.nytimes.com/video/2011/11/21/business/100000001182807/in-first-class-a-world-apart.html)