Koreana Airline (KA) has recently been suffering from decreases in the number of passengers in its many routes. KA currently sells tickets on reservation basis only. One of the marketing managers who took a cost accounting course last year observes that many KA planes fly with 10% to 20% of vacant seats, which means one or two dozens of additional tickets per plane may be sold to stand-by passengers at airports for those vacant seats to increase ticket revenues. She also notes that cost increases due to those additional passengers will be limited to those for foods and beverages served during the flights since the consumption of fuel and other capacity related costs will not be affected by those additional passengers. Hence she proposes discounted prices for those last-minute ticket sales to stand-by passengers which will be determined at the levels very below the regular prices but very above the incremental costs mentioned.

Do you agree with her proposal? Explain briefly why or why not you will support her proposal. You have to mention both pros & cons of her proposal and present your conclusion.

Answer rating: 100% (QA)

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