Denver-based Frontier Airlines provides service to 39 cities in the United States and Mexico. Frontier operates a fleet of 37 aircraft including sixteen 134-passenger Boeing 737-300 jets. The manager of operations of Frontier Airlines is trying to decide whether to adopt a new discount fare. Focus on one 134-seat 737 airplane now operating at a 56% load factor. That is, on average the airplane has .56 * 134 = 75 passengers. The regular fares produce an average revenue of $.12 per passenger mile.

Suppose an average 40% fare discount (which is subject to restrictions regarding time of departure and length of stay) will produce three new additional passengers. Also suppose that three of the previously committed passengers accept the restrictions and switch to the discount fare from the regular fare.

1. Compute the total revenue per airplane-mile with and without the discount fares.

2. Suppose the maximum allowed allocation to new discount fares is 50 seats. These will be filled.

As before, some previously committed passengers will accept the restrictions and switch to the discount fare from the regular fare. How many will have to switch so that the total revenue per mile will be the same either with or without the discount plan?