Several airlines have recently intensified their fierce

IMO A..

below is the reasoning

A. More discounted, advance purchase tickets are purchased than are actually used.- This explains why the gains from the new Plan will be enourmous. More Discounted--> More Tickets Purchsed--> More Probability of Ticket Cancellations due to short period of 2 days-->So more tickets Purached than actully used..and since these tickets are non-refundable the gain is more to Airline


B. Tickets requring 30day advance purchase are not profitable for airlines.-This Doenst explain why the gains from the new plan will be more.

C. Few business travelers have taken advance of 30day advance purchase tickets - Irrelevent

D. Airlines will have to discontinue offering 30day advance purchase tickets when they begin offering 2-day advance purchase tickets. -This Doesnt lead tho the Conclusion

E. The majority of the 2 day advance purchase tickets offered by a given airline will be sold to passengers who have not previous flown on that airline.- Out of Scope

ykaiim.. Please post the OA

Straight A.

Reasons:
On Negating the Option A the premise does not hold.

This is because if Less tickets are used then most of the purchased tickets are refunded and the Planes are flying with empty seats leading to loss in revenue.

Several airlines have recently intensified their fierce competition for business by offering tickets that, if purchased 2 days in advance, cost as much as 40 percent less than the heretofore lowest-priced “super-saver” tickets, which require a 30-day advance purchase. The airlines’ long-term gains from tickets bought under this new plan will be enormous because, unlike earlier discount tickets, these are not refundable.

The above statements say that more people purchase tickets in advance. The passage assumes that lots of these tickets go unused. So the airlines gains from these unused tickets because they are not refundable. Any statement which states that the tickets are not used would be the right answer.

The author assumes which of the following about discounted airline tickets in predicting long-term gains in airline revenue?
(A) More discounted, advance purchase tickets are purchased than are actually used.
This statements mentions that the tickets are not used. hence this is the right answer.

(B) Tickets requiring 30-day advance purchase are not profitable for airlines.
Passage is not concerned whether the 30 -day advance purchase is profitable or not.

(C) Few business travelers have taken advantage of 30-day advance purchase tickets.
Not mentioned and irrelevant. Even if they take advantage of the advance tickets it is not profitable for the airlines in terms of revenue.

(D) Airlines will have to discontinue offering 30-day advance purchase tickets when they begin offering 2-day advance purchase tickets.
This is a consequence of the conclusion. Not an assumption.

(E) The majority of the 2-day advance purchase tickets offered by a given airline will be sold to passengers who have not previously flown on that airline.
Not an assumption and totally irrelevant.

Good one;
Answer A, there was confusion between C and B. The B option 30-day advance purchase are not profitable for airlines; They are not profitable thats way the airlines have introduced 2 day adv. purc. tickets. So its wrong. Option C - if few passengers purchased that 30 day adv. pur. tic. then it will weaken the argument conclusion. Option A is also controversial; but you can guess, since few tickets are used hence the airline needs to refund the amount of unused / not needed tickets to customers. The new tickets are non- refundable - will make profits as long term gain.

Advance Purchase Tickets are refundable and hence not profitable.
So, its Simply A..

Thanks.

GMATNinja gmat1393 GMATNinjaTwo nightblade354

Can anyone explain why option 'A' is correct?

Despite the fact that I can understand why (A) will work, would you please critique my following interpretation?

The majority of the 2-day advance purchase tickets will be sold to passengers who have not previously flown on that airline ≈ New customer ≈ New Rev flow ∝ ↑ Revenue

Hi GMATNinja

Thanks for your detailed answer, however, I am a bit confused why option D is not correct.
My thinking was - if airlines don't stop discontinuing 30-day advance purchase tickets then customers will still go ahead with 30D advance tickets as it offer refunds in case of cancellations whereas 2D advance won't offer, hence, for long-term revenues, option D has to be an assumption. Am I going wrong somewhere here, if yes then where exactly?

Question Stem

Several airlines have recently intensified their fierce competition for business by offering tickets, that if purchased 2 days in advance, cost as much as 40% less than the heretofore lowest-priced "super-saver" tickets, which require a 30day advance purchase. The airline's long-term gains from tickets bought under this new plan will be enormous because, unlike earlier discount tickets, these are not refundable.

The author assumes which of the following about discounted airline tickets in predicting long-term gains in airline revenue?

Breakdown of Argument

Premise: To compete, an airline plans to introduce a new type of tickets that cost less than the "super-saver" tickets.
Conclusion: Long-term gains of the airline will increase as the new type of tickets are non-refundable.
Gap: The revenue generated from the new ticket type (with its lower sales price) is more than the revenue generated by the "super-saver" tickets. Thus, the airline will get enormous gains.

Evaluating Answer Choices

A. More discounted, advance purchase tickets are purchased than are actually used.

If customer do not use the the advance tickets then the airline is not generating as much revenue as it could. The gains are not maximized.

Let's negate: A few discounted, advanced tickets are purchased than are actually used.

To me, this does not completely break the argument, but it may go against the airlines gains being enormous.

B. Tickets requiring 30day advance purchase are not profitable for airlines.

This one was tricky. Let's negate: Advance tickets are profitable for airlines. Well, even if they are, the company is looking to make enormous gains. Keyword - Enormous. Their gains before could have been net positive but not enormous. Thus, the negation of this answer choice does not break the argument.

C. Few business travelers have taken advance of 30day advance purchase tickets

I assume the answer choice is saying fewer individuals have taken advantage of the advance purchase tickets.

Let's negate: If many take advantage of the advanced purchase tickets which are refundable, we are not sure how many of them refund the ticket versus not.

D. Airlines will have to discontinue offering 30day advance purchase tickets when they begin offering 2-day advance purchase tickets.

Irrelevant. Whether the airline does or does not cancel the 20-day advance purchase is out of the argument's scope.

E. The majority of the 2 day advance purchase tickets offered by a given airline will be sold to passengers who have not previous flown on that airline.

Irrelevant. The fact that the new ticket type bring in new customer is good for the argument but it is not necessarily the gap between the premise and conclusion.

Thus, according to me, the least incorrect answer choice is A.

This argument is specifically regarding increase in airline revenue; So we are not supposed to be bothered about profits or costs etc.

A. More discounted, advance purchase tickets are purchased than are actually used. Correct. Lets see a scenario. There are 10 seats available. Normal price is $10 and thus discounted price is $6 (because these are discounted by at least 40%). Normal revenue will be 10 x 10 = 100$. To achieve 100$ revenue, we need to sell at least 17 tickets (100/6) which is more than available seats. This ligically leads to what option A says.

B. Tickets requring 30day advance purchase are not profitable for airlines. Incorrect Profitable? We dont care.

C. Few business travelers have taken advance of 30day advance purchase tickets. Incorrect. Author need not assume this as his plan can succeed even if no business traveler purchases 30 day advance ticket.

D. Airlines will have to discontinue offering 30day advance purchase tickets when they begin offering 2-day advance purchase tickets. Irrelevant. Plan can suceed without discontinuing old advance tickets.

E. The majority of the 2 day advance purchase tickets offered by a given airline will be sold to passengers who have not previous flown on that airline. Irrelevant.


Please leave Kudos if you like my answers. It motivates me to write more.

Su!

There isn't enough information to determine whether the airlines will have to stop offering 30-day advance purchase tickets in order to achieve enormous long-term gains from the new plan.

Sure, maybe some customers will continue paying more for the 30-day advance purchase tickets because they want the refund option. That's fine. Those customers are paying a premium for that option. So even if the airline takes a hit whenever one of those customers asks for a refund, the airline is still making money from those who don't.

In case that's still not clear, imagine that 100 customers per week buy the 30-day advance purchase tickets before the new plan. And on average, 50% of those customers end up getting a refund. If those tickets are refunded last minute, the airline is in trouble, since they won't have time to resell those 50 seats.

With the new plan, maybe 80 of those 100 customers decide to forgo the refund option in order to save 40% on the tickets. That still leaves 20 customers WITH the refund option. Since (in our example) 50% end up getting a refund, that means the airline might lose out on 10 seats. That's not ideal, but it's better than losing out on 50 seats!

The airline could still profit even if they continue offering 30-day advance purchase tickets, so (D) is out.

But now imagine that the airline NEVER ends up with empty seats, even if people exercise the refund option. In other words, the airline is able to resell any of the tickets that are refunded. In that case, there's nothing to gain from the new plan. The airline will only LOSE money because now they are selling tickets for less money. That's why, unlike (D), (A) must be assumed.

For anyone else who missed it, here's an explanation of each answer choice: https://gmatclub.com/forum/several-airl ... l#p2369308.