Break-Even Analysis

The general formula for calculating break-even units is Break-Even Units = Total Fixed Costs / ( Unit Selling Price Unit Variable Cost )

For airlines, costs are mainly fixed, variable cost is negligible, and break-even is calculated for load factor instead of units. The formula for calculating break-even load factor is Break-Even Load Factor = Cost per Available Seat Mile / Yield per Passenger Mile

QUESTION 5

By how much would a 8% increase in compensation raise the CASM for each aircraft? Compensation is currently $140,000 per aircraft per quarter. Each aircraft flies 2,000 miles per day, has 45 seats, and flies 80 days per quarter. Show calculations.