Star Airlines operates a single aircraft of 180 seats capacity between city 'ND' and 'GA'. The average normal occupancy is estimated at 70% per…

Star Airlines operates a single aircraft of 180 seats capacity between city 'ND' and 'GA'. The average normal occupancy is estimated at 70% per flight. The average one-way fare is 12,500 from city 'ND' to 'GA'. The costs of operation of the flight as collected by an expert analyst are: Fuel cost (Variable) per flight from 'ND' to 'GA' 2,28,000 per flight Food served on flight from 'ND' to 'GA' (no charge to passenger) 270 per passenger Commission paid to Travel Agents (All ticket booking through agents) 7.5% of fare Fixed costs: Lease & landing charges per flight 'ND' to 'GA' 9,12,000 Salaries of flight crew per flight 'ND' to 'GA' 90,000 Note: Assume that fuel costs are unaffected by the actual number of passengers on a flight. You are required to: (i) Calculate the net operating income that Star Airlines makes per flight from 'ND' to 'GA'. (ii) Star Airlines expects that its occupancy will increase to 144 passengers per flight if the fare is reduced to 11,670. Advise whether this proposal should be implemented or not.