Question

A study makes the following recommendation
to a no-frills budget airline: the airline ought to offer
heavily discounted flight tickets four hours before a
flight in order to fill up all the seats that are not yet sold,
because any additional revenue will help to offset the
fixed costs of operating the plane. Does this statement
make sense?

Answer 1

Yes, the above statement makes sense.

An airplane operates at a minimum fixed cost that is incurred during each flight. Empty seats that haven't been sold do not reduce the cost of the airlines for a particular flight since the expenses incurred are fixed (fuel, pay to airplane staff, time duration of a flight, et cetera.). Offering the last seats at a discount will only add to the revenue generated by the airlines, while leaving the seats empty will not reduce the cost of a flight by much. Thus, it is preferable to offer the last set of seats on discount to atleast make up the fixed costs incurred.