Question

It might seem that an airline could increase profits by reducing airfares on all its flights in order to encourage discretionary travel and thus fill planes. Offers of across-the-board discount fares have, indeed, resulted in the sale of large numbers of reduced-price tickets. Nevertheless such offers have, in the past, actually cut the airline's profits. Which one of the following, if true, most helps to resolve the apparent discrepancy described above? (A) Fewer than 10 percent of all air travelers make no attempt to seek out discount fares. (B) Fares for trips between a large city and a small city are higher than those for trips between two large cities even when the distances involved are the same. (C) Across-the-board discounts in fares tend to decrease revenues on flights that are normally filled, but they fail to attract passengers to unpopular flights. (D) Only a small number of people who have never before traveled by air are persuaded to do so on the basis of across-the-board discount fares. (E) It is difficult to devise an advertising campaign that makes the public aware of across-the-board discount fares while fully explaining the restrictions applied to those discount fares.

Short answer

Option (C) best resolves the discrepancy by explaining how discounts reduce revenue on flights that usually sell out.

Step-by-step solution

Identify the Discrepancy

The discrepancy in the provided situation is that while offering discounted fares increases ticket sales, it still results in reduced airline profits. This seems counterintuitive since selling more tickets typically leads to higher profits.

Analyze Options for Relevance

Examine each option to find which one addresses the discrepancy: - (A) discusses travelers seeking discounts but doesn't address profit issues. - (B) mentions fare differences between city sizes, unrelated to discounts. - (C) discusses how discounts affect revenues, potentially explaining profit issues. - (D) focuses on new travelers being unpersuaded, which doesn't explain reduced profits. - (E) talks about advertising but doesn't explain reduced profits.

Evaluate Option C

Option (C) explains that discounts reduce revenue on flights that already sell out, meaning reduced fares earn less money on busy flights while not filling unpopular ones. This directly relates to why the airline's profits decrease despite increased ticket sales.

Key concepts

Airline Industry Economics

The economics of the airline industry are complex, often involving a balance between various revenue streams and operational costs. Airlines derive income primarily from ticket sales, but also additional services like baggage fees and in-flight sales. However, they face high fixed and variable costs related to fuel, aircraft maintenance, crew salaries, and airport fees.
Thus, profit margins can be significantly affected by changes in ticketing strategies or external factors such as fuel prices.
When airlines offer blanket discounts, the intention is to boost passenger numbers, capitalizing on economies of scale.

• Increased occupancy rates theoretically lead to lower per-unit costs.
• However, strategic pricing is essential since not all flights equally benefit from reduced fares.

Promotional discounts might boost short-term sales numbers but can also undermine profitability if not correctly targeted.

Profit Maximization Strategies

Airlines utilize varied strategies to maximize profits, including dynamic pricing and targeted discounts. These methods focus not only on filling seats but also ensuring that the fares align with providing net revenue gains.
Dynamic pricing is a common strategy, where airline fares fluctuate based on demand, booking lead time, and competitive factors.
Effective profit maximization involves:

• Identifying high-demand flights where price reductions can fill leftover capacity without losing revenue from filled seats at higher prices.
• Offering targeted discounts that can boost travel during off-peak times without cannibalizing full-price sales on popular routes.

The overall goal is to fine-tune pricing to increase total profit, not just ticket sales.

Discrepancy Resolution in Logic

Resolving discrepancies in logical reasoning problems is key to understanding complex situations. Here, the challenge lies in explaining how increased ticket sales can correspond to lower profits. Part of logic analysis is to identify unseen factors that could produce such outcomes.
The scenario involves identifying why more tickets sold at a discount could equate to less profit.
In logic problem-solving:

• Look for contextual details, such as the typical occupancy of flights and whether selling additional tickets at a reduced rate might just replace higher-paying fares.
• Understand the nuances between sales volume and profitability, as seen in declining revenues from full flights.

Thoroughly evaluating such discrepancies often provides critical insights into the underlying business impact.

Logical Reasoning Question Types

In the context of LSAT logical reasoning, questions often revolve around identifying assumptions, weaknesses, or contradictions in arguments. This kind of question tests the ability to connect disparate ideas to resolve apparent inconsistencies or provide explanations.
With airlines offering cuts in fares yet seeing profits dip, a logical reasoning question asks one to find a hidden cause or effect.
Types of logical reasoning questions include:

• Argument-based questions, which require identifying and correcting assumptions in a given scenario.
• Inference questions, where the task is to deduce conclusions from available information.
• Discrepancy resolution questions, like this exercise, that ask to explain unusual outcomes, such as increased sales but decreased profits.

Successfully answering these requires meticulous attention to the provided options and sometimes counterintuitive thinking to see beyond the surface details.