Question

Global AirSpan Freightways is considering the purchase of two new airplanes to carry freight. One airplane is needed to fly freight non-stop between Toyko’s Narita Airport (NRT) and Singapore’s Changi Airport (SIN), a trip of 2,869 nautical miles in each direction. The second airplane is needed to fly freight non-stop between Los Angeles (LAX) and the John F. Kennedy (JFK) airport outside New York City, a trip of 2,139 nautical miles in each direction.

Global AirSpan Freightways is evaluating three different models of Boeing aircraft: the Boeing 747-400 aircraft, which can carry 124 tons of freight up to 4,400 nautical miles and costs $228 million per airplane; the slightly smaller but more fuel efficient Boeing 777 aircraft, which can carry 104 tons of freight up to 4,895 nautical miles and costs $253 million per airplane; and a third option of the Boeing 767-300, which can carry 60 tons of freight up to 3,200 nautical miles and costs $168 million per airplane. Global AirSpan Freightways intends to finance the purchase of any aircraft by borrowing capital at approximately 6% annual fixed interest rate. This payment information, as well as other relevant cost information, is summarized in the table below:

Aircraft Model	Monthly Fixed Debt Payment on Airplane ($ US)	Other Monthly Fixed Expenses of Airplane ($ US)	Total Monthly Fixed Expenses of Airplane ($ US)	Operating Cost per Ton/Mile of Airplane ($ US)*
Boeing 747-400	1,367,000	50,000	1,417,000	1.50
Boeing 777	1,517,000	50,000	1,567,000	1.28
Boeing 767-300	1,007,000	40,000	1,047,000	1.70

*The operating cost per ton/mile is how much it costs to carry one ton of freight for one nautical mile.

Global AirSpan Freightways can earn $4 revenue per ton/mile on all US domestic routes, including the LAX-JFK route that requires a new airplane. (Thus, Global AirSpan Freightways collects 4*2139 = $8,566 for each ton flown between LAX and JFK.) Competitive pressures, however, keep Global AirSpan Freightways prices lower on all international routes, including the NRT-SIN route discussed here, where it earns only $2 in revenue for every ton/mile. If Global AirSpan Freightways purchased a Boeing 747-400, how many ton/miles of freight would that aircraft need to carry each month to breakeven, if it were assigned to any US domestic route?

	a.	566,800.0 ton/miles
	b.	2,834,000.0 ton/miles
	c.	576,102.9 ton/miles
	d.	354,250.0 ton/miles
	e.	455,217.4 ton/miles

Answer 1