Air Calabria owns a single jet aireraft and operates between Cantazaro and Venice. Flights leave Cantazaro on Mondays and Thursdays and depart from Venice on Wednesdays and Saturdays. Air Calabria cannot offer any more flights between Cantazaro and Venice. Only tourist-class seats are available on its planes. An analyst has collected the following information:
$$
\begin{array}{ll}
\text { Seating capacity per plane } & 360 \text { passengers } \\
\text { Average number of passengers per flight } & 200 \text { passengers } \\
\text { Flights per week } & 4 \text { flights } \\
\text { Flights per year } & 208 \text { flights } \\
\text { Average one-way fare } & € 500 \\
\text { Variable fuel costs } & € 14000 \text { per flight } \\
\text { Food and beverage service cost (no charge to passenger) } & € 20 \text { per passenger } \\
\text { Commission to travel agents paid by Air Calabria (all tickets } & 8 \% \text { of fare } \\
\quad \text { are booked by travel agents) } & € 53000 \text { per flight } \\
\text { Fixed annual lease costs allocated to each flight } & \\
\text { Fixed ground services (maintenance, check in, baggage handling) } & € 7000 \text { per flight } \\
\quad \text { cost allocated to each flight } & € 4000 \text { per flight }
\end{array}
$$
For simplicity, assume that fuel costs are unaffected by the actual number of passengers on a flight.
Required
1 What is the operating profit that Air Calabria makes on each one-way flight between Cantazaro and Venice?
2 The Market Research Department of Air Calabria indicates that lowering the average one-way fare to $€ 480$ will increase the average number of passengers per flight to 212 . Should Air Calabria lower its fare?
3 Cima-Rosa, a tour operator, approaches Air Calabria on the possibility of chartering (renting out) its jet aircraft twice each month, first to take Cima-Rosa's tourists from Cantazaro to Venice and then to bring the tourists back from Venice to Cantazaro. If Air Calabria accepts Cima-Rosa's offer, Air Calabria will be able to offer only $184(208-24)$ of its own flights each year. The terms of the charter are as follows: (a) For each one-way flight, Cima-Rosa will pay Air Calabria $€ 75000$ to charter the plane and to use its flight crew and ground service staff; (b) Cima-Rosa will pay for fuel costs; and (c) Cima-Rosa will pay for all food costs. On purely financial considerations, should Air Calabria accept Cima-Rosa's offer? What other factors should Air Calabria consider in deciding whether or not to charter its plane to Cima-Rosa?