Airlines Give Away Millions of Tickets Each Year Through Their

question 87

Essay

Airlines give away millions of tickets each year through their frequent flyer programs,with the typical airline awarding a free ticket for each 25,000 miles flown on the airline.The average airline ticket costs $500 and is for a 2,500-mile round trip.Given this information,evaluate the following statement:
Airlines could have the same effect on demand by eliminating their frequent flyer programs and simply lowering the average ticket price by 10 percent.

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Definitions:

Brokerage Fee

A charge levied by a broker for facilitating transactions between buyers and sellers.

Unrealized Gain

An increase in the value of an asset that has not been sold, hence the profit is not yet realized.

Trading Investments

Securities purchased and held primarily for selling them in the near term to generate income on short-term price differences.

Consolidated Financial Statements

Combined financial reports of a parent company and its subsidiaries, showing the financial results as if they were a single entity.