January 09 Essay

January 2009

1a. One way in which Eastern Airways could measure whether it has achieved an increase in capacity utilisation could be by measuring the number of passengers that are on each flight (i.e. output), and comparing it with the total number of passengers that each flight could handle (i.e. max output).

b. One possible consequence for Eastern Airways of their decisions to operate in a niche market that targets business travellers is that, due to low numbers of customers, they will expect a high cost-per-unit. This high cost-per-unit will then make it substantially harder for the business to have high, safe, profit margins without charging a price that is considered too high.
However, the company can help overcome this consequence by adding value to their flights in various ways. These added values may allow the business to increase their price by a larger amount than the added value costs, therefore making more profit. For example, one added value that they could us could be hot meals; if the airline provides compulsory hot meals on all its flights, it may be able to increase the price of the flights and, therefore, increase its profit margins.
Another possible consequence for Eastern Airways of its decision to operate in a niche market would be the company’s price. Due to the fact that the business operates in a niche market, it is more likely to have to charge a higher price than some low-cost airlines (such as RyanAir), because they include more features in which the low-cost airlines do not. These higher prices may then cause the business traveller’s business to reconsider their choice in favour of choosing a low-cost airline to attempt to minimise their travel expenses.
However, as mentioned above, the company can attempt to combat this by adding value to their flights. Extra features, such as more baggage weight, can be included to allow for business passengers to gain more from the flight than just simply going from one place to another....