Question 3 (6 marks) There are 4 cities and 6 city-pair markets in an airline's network. Demand per city-pair market is 50 passengers per day per direction (i.e., 50 outbound passengers and 50 inbound passengers). The ticket price per passenger per trip is $100. The cost of operating one flight is $4000 with an 80-seat aircraft and $6000 with a 150-seat aircraft. Point-to-point Hub-and-spoke 50 A B A 50 50 50 50 B D -50 (a) Assume all demand must be accommodated. Please use the information provided above to demonstrate that hub-and-spoke network allows the airline using larger aircraft and hence achieving lower cost per passenger. (Hint: Considering profit, which aircraft is the best in point-to-point network? Which is the best in hub-and-spoke network?) (4 points) (b) Following part (a), given that hub-and-spoke network incurs lower cost per passenger, why do many low-cost carriers choose point-to-point network? Please provide two reasons. (2 points)