More trouble in the skies

The ongoing turmoil in the airline industry continues, with the Irish national airline Aer Lingus announcing worse losses in this BBC news article

This is an excellent article to use with students when teaching Break-even, as it allows you to easily show the impact of the changes it describes. The need to cut fares in order to attract or retain customers means that at any level of output (or capacity utilisation on a plane) the Total Revenue will be lower than previously.

Similarly the higher fuel prices mentioned towards the end of the article will raise Variable and hence Total Costs

All of this obviously has a knock-on effect on the break-even point and profit/loss.

An ideal way to look at this is to give students a sample break-even diagram and get them to illustrate the changes.

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