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Managerial Economics Analysis

Essay Instructions:

The WSJ recently presented data suggesting that United Airlines was not covering its costs on flights from San Francisco to Washington D.C. The article quoted analysis saying that United should discontinue this service. The costs per flight (presented in the article) included the costs of fuel, pilots, flight attendants, food, etc. used on the flight. They also included a share of the costs associated with running the hubs at the two airports, such as ticket agents, building charges, baggage handlers, gate charges, etc Suppose that the revenue collected on the typical United flight from San Francisco to Washington does not cover these costs. Does this fact imply that United should discontinue these flights? Explain.

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Managerial Economics
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Managerial Economics
The recent article published by WSJ suggests that the United Airlines flight from San Francisco to Washington is not a profitable venture since it does not cover its costs. The fact that it is making losses does not mean that the company should discontinue the flights (Samuelson et al., 2021). Instead, I would recommend that the airline analyses the variable costs that arise during the flight, such as paying flight attendants, pilots, good, fuel, and running the hubs. The company might be making a loss in the short term, but it still has an opportunity to make improvements to make higher profits.
If the airline intends to continue the flights, it is imperative to make changes, leading to higher profits. The airline operates in a very competitive market whereby it is impossible to influence the market price of some products and services that the a...
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