https://americanairlines.gcs-web.com/static-files/42ca77e3-9908-4abb-bb54-3f653e4e33c1

1.What is Express Operations' operating cost per ASM? What is its operating cost per RPM? What drives the difference between these two numbers?

2.Calculate the same numbers for US Airways' mainline operations. Why is the difference between cost per RPM and cost per ASM larger for Express than for mainline? You answer should address the root cause of the difference and not simply re-state how one number is larger than the other.

3.We want to model what profits would have been had fuel cost been 30% higher. We will focus on US Airways' income statements (pg. 79 & 89) and rederive net income under the fuel cost increase. For this analysis we will assume airfares would have adjusted to the cost increase and that fuel, maintenance, rental fees, landing fees and half of labor costs are variable costs and all other costs are fixed costs.

a. What percentage of total costs are variable costs?

b. In percentage terms, how much would per-unit variable costs increase in response to a 30% increase in fuel prices?

c. Using the Lerner index and assuming a constant elasticity of demand, calculate the expected average price increase resulting from a 30% increase in fuel prices.

d. Infer the company's elasticity of demand from the Lerner index.

e. Using the elasticity inferred above, what is the expected change in revenue from a 30% increase in fuel prices.

f. What is the expected change in total variable costs resulting from a 30% increase in fuel prices.

g. What would have US Airways' net income been in fiscal year 2012 had fuel prices been 30% higher?