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Politics : A US National Health Care System?
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To: J_F_Shepard who wrote (36280)4/29/2014 7:02:44 PM
From: i-node  Read Replies (1) of 42652
 
You know you picked a very poor example to show that selling excess capacity of something may not be good business if you don't pay attention to "marginal cost". It's easy to see that marginal cost of something like a hotel room may be a significant portion of the rent you receive.

The marginal cost of a hotel room is easily determined with a great deal of precision. But airlines have made it a science. About 30% of an airline's operating costs is fuel.

And every occupied seat in a jetliner has a fuel cost associated with it. Airlines measure the cost of a passenger precisely -- from the cost of ticketing and boarding, fuel, and yes, the peanuts and cokes they'll consume on the flight.

And tickets are priced accordingly. If they can make a couple of extra bucks selling tickets before the flight closes they'll do it.

The airline industry has been a money loser since its inception. Today, the few profitable airlines are profitable because they've figured out how to make the most of empty seats. Southwest flights are notoriously packed and that is why they make money.

>> But an airliner with empty seats unsold seats has little extra in marginal cost save maybe extra baggage handling and a few more bags of peanuts

Fuel cost. That's the biggest variable cost. A rough average for airlines is 50RPM (revenue-passenger-miles) per gallon of fuel. A 777-200 takes 10 gallons of fuel to transport a 200 lb person across the country.

I really get the idea you don't understand the basic concepts of fixed vs. variable costs -- your comments about physicians offices make that clear.
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