What impact might a 4% increase in compensation have on the break-even load factor for an...

Question

Question

What impact might a 4% increase in compensation have on the break-even load factor for an airline?

business finance

Answer 1

Answer #1

For an airline:

Compensation is broadly a fixed cost
It's an additional cost
If it increases by 4%, it will increase the total cost base over which break even has to be achieved.
Break even load factor is given by = Cost per available seat mile / Yield per passenger mile
Since, increase in compensation will increase the cost per available seat mile, this will automatically translate into increase in break even load factor for the airline.

Answer 2

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