What is American Airlines' degree of operating leverage?

2. What is the degree of financial leverage?

3. What is the degree of combined leverage?

4. Is leverage good or bad?

 

CFO MEETING NOTES:

TICKETS SOLD YTD: 10,000,000 AIRLINE TICKETS

	YTD TOTALS ($MM)
SALES	6,215
FIXED COSTS	2,161
TOTAL VARIABLE COSTS	1,508
EBIT	2,546
INTEREST EXPENSE	554

 

BREAK-EVEN ANALYSIS:

	DOLLARS
FIXED COSTS	$1,575,000,000
PRICE PER UNIT	$627
VARIABLE COST PER UNIT	$213

 

GRAPH:

 

FORMULAS:

 

Revenues and costs Loss Profit Total revenue Total costs Variable costs Fixed costs