Seacoast Airlines is a small local carrier that flies among Canada’s Atlantic provinces.

All sales
are economy and the following data are available:
Average full passenger fare $150
# seats on plane 120
Average load factor (# of seats occupied) 70%
Average VC per passenger $40
FC per month $1,800,000
Required: The following parts are independent.
1. What is the BEP in # of passengers and revenues?
2. What is the BEP in # of flights?
3. If Seacoast raises its average full passenger fare to $200, it is estimated that the load
factor will decrease to 55%. What will be the new BEP in flights?
4. The cost of fuel is the largest variable cost. If fuel charges increase as expected, VC per
passenger will rise to $60. What would be the new BEP in passengers and number of
flights?
5. Seacoast has experienced an increase in VC per passenger to $50. And an increase in
total monthly FC to $2M. The company decided to raise the average fare to $180. How
many passengers would be needed to generate an after-tax profit of $600,000 assuming
a 40% tax rate?
6. Seacoast is considering a seat sale. On those seats sold as part of the seat sale, the
ticket price would only be $120. The company feels that this seat sale will increase the
load factor to 80%. Only the additional seats will be sold at the discounted fare.
Additional advertising costs to promote the seat sale will be $100,000. Calculate the pre-
tax profit that this seat sale will generate in one month assuming that the airline will fly
40 flights per day and there are 30 days in the month.
7. Seacoast has an opportunity to obtain a new route. It feels that it can sell seats at $175,
but the load factor is expected to be 60%. There are still 120 seats on the planes.
Seacoast would fly this route 20 times per month. The additional fixed costs on this route
would be $100,000 per month. VC per passenger would remain at $40. Based on this
data, answer the following questions:
a. Should the company obtain the route? Show calculations
b. How many flights would Seacoast need to earn pre-tax profit of $57,500 per month
on this route?
c. If the load factor could be increased to 75%, how many flights per month would the
company need to earn pre-tax profit of $57,500?

Check figures:

4 238.1 flights
 5 23,077 passengers

6 1,052,000 additional profit from seat sale

7a 94,400 additional profit from new route

7b 16.2 # flights required

7c 12.96 # flights required