Giant Airlines operates out of three main \"hub\" airports in the United Stales.

Question

Giant Airlines operates out of three main "hub" airports in the United Stales. Recently Mosquito Airlines began operating a flight from Reno. Nevada, into Giant's Metropolis hub for $190. Ginat Airlines offers a price of $425 for the same route. The management of Giant is not happy about Mosquito invading its turf. In fact, Giant has driven off nearly every other competing airline from its hub, so that today 90% of flights into and out of Metropolis are Giant Airline flights. Mosquito is able to offer a lower fare because its pilots are paid less, it uses older planes, and it has lower overhead costs. Mosquito has been in business for only 6 months, and it services only two other citics. It expects the Metropolis route to be its most profitable. Giant estimates that it would have to charge $210 just to break even on this flight. It estimates that Mosquito can break even at a price of $160. Within one day of Mosquito's entry into the market. Giant dropped its price to $140, whereupon Mosquilo matched its price. They both maintained this fare for a period of 9 months, until Mosquito went out of business. As soon as Mosquito went out of business. Giant raised its fare back to $425. Answer each of the following questions. Who are the stakeholders in this case? What are some of the reasons why Mosquito's breakeven-point is lower than that of Giant? What are the likely reasons why Giant was able to offer this price for this period of time. while Mosquito couldn't? What are some of the possible courses of action available to Mosquito in this situation? Do you think that this kind of pricing activity is ethical? What are the implications for the stakecholders in this situation?

Explanation / Answer

a) Gaint Airlines,         Genarally a single person can't establish and maintain that much big airlines. If compare to Mosquito Airlines Gaint Airlines is big one, that's why definitely Gaint airlines has stake holders. b) Mosquito Airlines is smaller than Gaint Airlines, and it has very less expenses and few incomes that's why it has low break even point than Gaint Airlines. c) Gaint Airlines is very big firm it has so many resources and market share, it can cover this loss from their retained earnings because it is charging so much cost for each ticket, and also it has great experience in this sector, that's why it has retained earnings. But Mosquito Airlines has no experience, no retained earnings, because it has started just six months back. So it can't maintain stability in prices. d) Mosquitos started business just six months back, it is small business organization, old plains, cheaper salaries to pilots, and low overhead charges these all things are covered business some words better. If company not having this type of things it has to bear more losses. e) For every company their living ness is important, if once it got losses it has to loose their market share, and goodwill also. In this above situation Gaints steps are 100% correct, if once it gave chance to another company it can't get that position in future. Company getting profits only for distributing to the stockholders. Thank you....

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