Manon's Econ Blog

Advice to JAL: how to make more profit

Posted on: November 8, 2009

There is an economic recession in the world today. People’s income decreased, and so did demand, as shown on the diagram below.

People are more willing to travel with low-cost companies because it takes a small proportion of their income. If we assume that revenue increases as demand is inelastic, then that is what JAL should aim for.Reducing the cost will help to lower the price of the ticket, as shown on the diagram below (this will not bring the revenue back to its original position but it will be better).

One way of reducing it is to reduce the number of hostesses by plane. This will not only reduce the costs of wages but also food. Airplanes still need hostesses, but less would not make much of a difference for passengers. Another way is to have more seats by plane; the cost will be more spread among passengers, and therefore the ticket can be cheaper. Some planes fly without being full, cheap tickets should be affordable soon before the departure of the plane so that JAL could still make a profit out of these seats supposed to be empty. Flying half empty is a waste of money because there are still as many hostesses, and as much food, and air used, as if they were full. In general, waste should be avoided as much as possible. Each possibility to avoid waste should be taken in consideration.
These options will reduce the cost of the flight, and therefore the plane ticket. People, since they will be spending a smaller portion of their income, will fly more; and, as the quantity demanded increases, revenue will increase as well.
jal_plane1

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