Air Canada operates five flights daily between Toronto and Phoenix during the winter. One flight leaves Phoenix at 12:10 AM. The plane, a Boeing 737, has a capacity of 120 passengers. During the past month, the flight has averaged only 24 passengers, a
Load factor of 20 percent. A load factor of 50 percent (60 passengers)is needed for the flight to break-even. What unique aspect of services does this situation describe?

Question

Quizplus · Accepted Answer

This situation describes the concept of service inventory, which refers to the fact that services cannot be stored and must be sold as they are produced. In this case, Air Canada has a service inventory of flights between Toronto and Phoenix, but due to low demand, they are unable to sell enough tickets to break even.

Air Canada Operates Five Flights Daily Between Toronto and Phoenix