Refer to the information on lines 32-34 and 42–46. Assume the average capacity utilisation will be the same on the proposed international routes as on domestic flights. Calculate SA's forecast average total revenue for one international flight.

Mark scheme

Marking points from the official mark scheme (Feb/Mar 2017). The mark or mark type is shown in brackets.

1. [1] Economy 126 × 99% = 124.74 seats
2. [1] Business 16 × 67% = 10.72 seats
3. [1+1] Acceptable to round up or down: 125 economy + 11 business OR 124 economy + 10 business
4. [2] 124.74 x $150 = $18 711
5. [2] 10.72 x $400 = $4 288
6. [6] Total $22 999
7. [2] 125 x $150 = $18750
8. [2] 11 x $400 = $4400
9. [6] Total $23 150 (usual rounding rules)
10. [2] 124 x $150 = $18600
11. [2] 10 x $400 = $4000
12. [6] Total $22 600 (rounded seats sold down)
13. [1] $25 300 (Full capacity revenue)
14. [1] Capacity utilisation formula: Current capacity (or seats sold)/maximum capacity (or seats available) × 100
15. [K] Selling a mix of products or in this case service levels is a way of appealing to different groups of customers with different needs. (not strictly speaking price discrimination as different service but give credit).
16. [K] This is a key decision for SA as it changes aspects of marketing mix
17. [K] Understanding of price elasticity of demand.
18. [APP] Possibility of ‘disappointing’ leisure travellers, due to less seats available.
19. [APP] Case suggests that business travellers demand is more price inelastic than leisure travellers, they are more concerned about comfort and flexibility.
20. [APP] Comparison of calculation in (a) with same fares but using original mix of seats, i.e. 138 economy and 12 business (allow full capacity calculation).
21. [APP] Full capacity: Old configuration $25500; New configuration $25300.
22. [APP] Existing capacity: Old configuration $23709; New configuration 22 999.
23. [AN] Consider how SA’s product may differ from others, or not, what is USP?
24. [AN] Impact of price elasticity on demand and revenues and profits.
25. [AN] In order to attract increased number of business travellers SA may need to spend more on advertising than if predominantly just trying to attract leisure users.
26. [AN] Impact on cost of staffing as business travellers will have higher expectations of service than leisure travellers.
27. [EVAL] Market research suggests levels of demand and elasticity, but how accurate is this?
28. [EVAL] Can the mix of seats be changed according to the route?
29. [EVAL] To what extent may business traveller demand be affected by economic changes?
30. [EVAL] Overall judgement in advising SA, supported by the most important factors in the case.