Question

How does an airline, which has high fixed costs, achieve greater efficiency without compromising profitability? Answers have to provide very specific analysis. [remember: specific does not mean in great detail.]

Answer 1

Airline which has higher fixed cost achieves greater efficiency because the higher is load factor of the airline the more fixed cost will spread among the passengers and therefore they are able to attain the efficiency. At a certain amount of revenue earned on every passenger , the airlines are able to cover the fixed cost and then they start earning or generating profits. So it all depends on the load factor of the airline because if the load factor of the just half then then there will be more burden of fixed cost on every passenger and then they will not be able to attain the efficiency.