2-41 Analysis of Airline Results

Actual operating statistics for the three months ended June 30 in a Continental Airlines

quarterly report tollow:

Revenue passengers carried

Revenue-passenger-miles(000s)

Scheduled aircraft miles flown

Available seat-miles (000s)

Passenger load factor

Yield per revenue-passenger-mile

Current

Year

946,603

549,179

9,472,766

971,028

56.6%

Preceding

Year

1,044,697

577.071

8,595,308

839,720

$

A revenue-passenger-mile is 1 passenger carried 1 mile. For example, 2 passengers carried 800

miles would be 1,600 revenue-passenger-miles.

.0884

* Total revenue divided by revenue-passenger-miles.

The president of Continental commented:

"In the second quarter, airline revenues were nearly $64 million, a 25.6% increase

compared with the preceding year. Revenue-passenger-miles, however, declined 5%,

primarily as a result of weakened economic conditions. Meanwhile, the yield per

passenger-mile increased 32% as a result of several fare increases made to counter

spiraling costs

1. a. Compute the total passenger revenue in the second quarter of the preceding year.

b. Also compute the passenger load factor.

2. Compute the yield per revenue-passenger-mile in the current year.

3. Assume that variable costs during the current quarter were 5 per revenue-

passenger-mile. Also assume that the yield per revenue-passenger-mile was unaf-

fected by the increase in the load factor. Suppose the passenger load factor had

increased from 56.6% to 57.6%; compute the increase in operating income that

would have been attained.