BCG Interactive Case Interview Practice #1: Airline Profitability

This BCG case interview is a profitability case, one of the most common types of cases in BCG first-round interviews. To pass your consulting interview and land a consulting job offer, it is critical that you practice and master case interviews.

To successfully solve or pass this case interview, you will need to create a framework to identify the key drivers of profitability, both on the revenue-side and cost-side. Afterwards, you will need to determine which drivers have the greatest impact on profitability. Finally, you will brainstorm ideas to improve the selected driver. Once you've developed an impactful and feasible strategy, you will deliver a case recommendation.

[Dracogame]

The fact that I'm picking the same exact answers as you for the same reasons is giving me a lot of joy. I CAN DOOO IT!!!! 🔥🔥🔥

[kjql]

This is so useful! I did this case in the library before and had a lot of questions and uncertainties. Your video helped me understand them better.

[micolm.agliati]

Amazing, thank you! Just a quick question: at 18:11 doesn't it make more sense to look first at capacity utilization and then to price discounts..? Because if the flights are full all the time it would be hard to sell any further "quantity" (service) no? :)

[marika]

Very helpful, articulate, and clear explanations. I love following along with your thought process, makes concepts easy to understand!

[TheDatashe]

This is awesome! Very clear and very articulate.

One question on your answer at 11:06, agree and appreciate that current data is better than historical data in most cases. However, in this case, I'd imagine reviewing historical price increases and impact to demand would give you a better understand pricing impacts. To me, this is more contextually relevant to the data point you should be seeking. Keen to hear your thoughts, thanks!

[srishti]

HI! I came across your channel a while ago and I am so glad that I did. Your videos are very informative and they have been helping me a lot during my case interview preparation. I can't wait to see the upcoming videos you have planned. Thank you so much for this!

[stephenmccarthy]

I follow your math at 13:11 and saw that the test marked "13.33" correct, but how does that "maintain its profits?" Wondering why the correct answer is not "16.666" since sales would need to increase to 1750 to maintain the 20% profit margin. Any input would be greatly appreciated.

[daniloortizgochez]

At 7:30 is clear that the previous answer that you pick was not the right one, could you explain why is the other answer right?

[danswrangbrahma]

Thank you for uploading this, it was a very fun experience solving the case together.

[buzzybee]

Where can I find this on their website, I do not see the case library

[yasinekici]

It was full of insights and valuable strategies to structure the approach. This one kind of teaches how to think step-by-step and think logically, and the importance of moving towards the solution with provided data at hand. Thanks a lot, greetings from Turkey!

[audreylee]

13:10 I'm confused as to how and why the "average ticket price" translates to "sales".. isn't sales/revenue essentially price*quantity? don't we need to solve for quantity also then?

[BandarupalliVenkatasivaPrathik]

Amazing, Thank you! But one dbt that at 27:11 why cant we focus on optimizing the fuel usage despite knowing that fuel prices are bound to increase anyways so what's the point of going with option 2?

[CimolOk-nzyj]

🎯 Key points for quick navigation:

00:00:00 *🛫 Introduction to the Case*
- Overview of BCG interactive cases.
- Introduction to the client's situation: a low-cost carrier airline in Asia.
- Explanation of the task: develop a strategy to maintain profitability despite rising fuel costs.
00:02:18 *📊 Initial Approach*
- Choosing to analyze factors affecting profitability.
- Decision to look at both revenues and costs.
- Identification of the initial focus on revenue drivers.
00:04:55 *🎟️ Revenue Drivers*
- Exploration of revenue drivers including ticket sales and additional revenue sources.
- Decision to focus on ticket sales first.
00:06:07 *💰 Price and Quantity Analysis*
- Analysis of how ticket price changes could impact revenue.
- Introduction of the concept of price elasticity.
00:13:22 *🧮 Calculations and Conclusions*
- Calculation of the necessary price increase to maintain profits.
- Understanding the impact of price elasticity on demand and revenue.
- Conclusion that increasing ticket prices is not feasible.
00:15:42 *🛫 Exploring Quantity Increase*
- Decision to explore increasing the number of passengers.
- Consideration of offering discounts and analyzing load factors.
- Conclusion that increasing ticket sales is not feasible due to high load factors.
00:21:07 *📉 Cost Analysis*
- Shift in focus from revenue to cost reduction.
- Consideration of both fuel and non-fuel costs.
- Initial thoughts on potential areas for cost reduction.
00:23:43 *🔧 Specific Cost Reduction Strategies*
- Identification of fuel costs as a major variable cost.
- Exploration of non-fuel cost reduction options.
- Avoiding premature specific recommendations without data.
00:24:51 *💡 Non-Fuel Cost Reduction Analysis*
- Analysis of the potential impact of reducing non-fuel costs by 5-10%.
- Comparison of cost reduction against the fuel cost increase.
- Non-fuel cost reduction potential: $40-80 million,
- Fuel cost increase: $200 million,
- Conclusion: Non-fuel cost reduction alone is insufficient.
00:26:40 *⛽ Fuel Cost Reduction Strategies*
- Exploration of ways to reduce fuel costs despite the price increase.
- Consideration of optimizing flight network,
- Exploring ways to reduce fuel purchase price,
- Investigating methods to reduce fuel consumption.
00:29:25 *🛢️ Reducing Fuel Purchase Price*
- Options to reduce the fuel purchase price for the client.
- Partnering with other airlines to increase buying power,
- Negotiating better prices with sellers,
- Hedging prices using financial instruments.
00:31:19 *✈️ Flight Network Optimization*
- Evaluation of optimizing the flight network to reduce fuel consumption.
- Canceling low-utilization flights,
- Adjusting fleet mix to increase fuel efficiency,
- Reducing baggage to decrease fuel consumption.
00:34:09 *📈 Long-Term Industry Outlook*
- Analysis of the long-term development of the industry given the price increase.
- Competitors with low margins may exit the market,
- The client’s low cost structure positions it well to maintain profitability,
- Potential for increased market share as competitors drop out.
00:37:22 *🏆 Establishing Price Leadership*
- The client’s ability to establish price leadership in the market.
- Low cost base and high margins support maintaining low prices,
- Financial stability allows sustaining losses longer than competitors,
- Long-term strategy to capitalize on competitors exiting the market.
00:40:15 *🚀 Strategic Recommendations*
- Final recommendations for the client to ensure long-term profitability.
- Maintain low prices to establish price leadership,
- Focus on keeping costs low through strategic measures,
- Leverage financial stability to withstand short-term losses and capture market share.

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[Jordan-xdbv]

18:15 this is where i dropped a dislike, im very sure that discussing about price increase and suddenly going for price discounts is a wrong thing to do. In the next question you hit a dead end by choosing discount on the previous question where you should've chose option 3, i was just hoping that you could clarify that you made it wrong and re-explain how option 3 in the previous is better instead of trying to defend your wrong answer

[BandarupalliVenkatasivaPrathik]

Thanks a lot!, Have a BCG Test today, the one thing I want to ask is at 27:11 why cant option 1 be true like since fuel prices have increased so it makes sense to optimize its usage ryt rather than negotiating for fuel prices, if they have to increase anyways?

[prasenjit_hazra]

Truly optimistic & root cause evolved video! Expecting more at near future....

[ronitmathur]

If the competitors drop prices to gain volumes in tickets, wouldn't the elasticity relationship of price and demand change (lesser negative slope on price-demand plot), should we then decrease price like others or do we then have the incentive to keep the price stable to lose lesser in demand drop than gain in prices, because of lesser elasticity?

[ozlmmmdli]

at about 18th minute, I felt disappointed. Your option 1 was wrong and that's why you lead a dead end. Moving towards promotions directly does not make sense unless you see the full picture.

[qmelanie]

I'm puzzled as to why we are assuming that our client is incurring losses. Previously, it had a profit of $300 million. With an increase in fuel costs by $200 million but a decrease in non-fuel costs by up to $80 million, it would still realize a profit of $180 million. This even leaves room to potentially reduce prices, further accelerating the process of edging out other market players.🤔🤔