Case Assignment 5
Case Analysis 5
I do not feel that discontinuing the flights from San Francisco to Washington D.C. is necessarily the best option in this scenario. I feel that the use of marginal analysis is warranted in this scenario, as well as United viewing the other calculations from WSJ to ensure their accuracy. Marginal Analysis is defined as the process of identifying the benefits and costs of different alternatives by examining the incremental effect on total revenue and total cost caused by a very small (just one unit) change in the output or input of each alternative (Business Dictionary). This brings me to my official point, if the marginal analysis conducted by WSJ were fully accurate; they would not include the price from operating the two hubs in San Francisco and Washington D.C. as they are standard fixed costs for United for other routes (whether the San Francisco/D.C. route is present or not). Based on this fact, I do not see that United Airlines should discontinue the flight, I think they should continue the flights, perform the marginal analysis again (this time omitting the costs for operating the hubs), and check their numbers for revenue against the numbers obtained by measuring the airfare dollars brought in since by definition is what the marginal revenue of a flight should consist of.
Marginal analysis. (n.d.). Retrieved September 15, 2012 from http://www.businessdictionary.com/definition/marginal-analysis.html