STRATEGY

PERFORMANCE
EVALUATION
CHICAGO START-UP AIRLINE
AUGUST 2021
Phoebe Larner
PERFORMANCE
To optimise Company X’s corporate revenues, whilst ensuring
METRICS
prolonged profitability and aiding the firm’s future strategic
direction.

INSIGHTS To extract insights from an advanced flight portfolio – focusing

on loss-making, profit-generating and viable areas.

STRATEGIC
To offer a final recommendation on the strategic direction of
IMPLIC AT IONS
the firm.

AGENDA
2
FINANCIALLY UNVIABLE AREAS

Focus Point 1 3
 ACCOUNTING FOR 0.41% OF COMPANY X’S TOTAL
REVENUE, FLIGHT ROUTE ORD-SLC REPRESENTS THE
LOWEST ROUTE REVENUE CONTRIBUTOR.

ORD-SLC

• Accounts for 0.41% of Company X’s

Total Flight Count.
• A negliable amount.
• Route ORD-SLC’s Total Revenue
falls significantly below Company
X’s 4.17% average.
• Maximum Average Ticket Price is
27% less than the firm’s Average of
$595.42.

REVENUE BY FLIGHT
ROUTE Financially Unviable Areas 4
 144 FLIGHTS FACE SUBJECTIVITY TO AN EQUALLY
LOW REVENUE CONTRIBUTION. COMBINED, THEY
ACCOUNT FOR ONLY 0.6% OF COMPANY X’S TOTAL
REVENUE.

FLIGHT REVENUE

• Company X’s Average Flight

Revenue = $45,106.
• 144 of Company X’s Flights
are constrained to a revenue
of $17,077.50.
• Widespread
underperformance.

REVENUE BY
FLIGHTS Financially Unviable Areas 5
 348 OF COMPANY X’S FLIGHTS ARE SUBJECT
TO A TICKET PRICE $170.51 BELOW THE FIRM’S
AVERAGE PRICE.

AVERAGE TICKET
PRICE

• Company X’s Average Ticket

Price = $285.51.
• 348 Flights charge, on
average, a price of $115.
• ORD-DTW = Flight Route
subject to the lowest Average
Ticket Price.

AVERAGE TICKET
PRICE Financially Unviable Areas 6
 ACCOUNTING FOR 46.27% OF COMPANY X’S
FLIGHTS, AIRCRAFT TYPE B737 FACES SUBJECTIVITY
TO THE HIGHEST FUEL COST PER MILE.

B737

• Accounts for 46.27% of Company

X’s Flights.
• Minimal difference in Seat Capacity
between Aircraft Types.
• 4 person difference between
B737 and A320.
• Aircraft B737’s Fuel Cost per Mile
is 3.65 times more expensive than
A320.

AIRCRAFT FUEL
COST PER MILE Financially Unviable Areas 7
VIABLE PROFITABILITY

Focus Point 2
 EACH ACCOUNTING FOR $915,750 OF COMPANY X’S
TOTAL REVENUE, 4 OF THE FIRM’S FLIGHTS
ACCOUNT FOR THE LARGEST FLIGHT REVENUE
CONTRIBUTIONS.

TOTAL REVENUE BY
FLIGHTS
• Top 4 Contributors:
• Flight 8202
• Flight 8279
• Flight 6243
• Flight 1819
• All 4 Flights follow the ORD-DCA
Route and charge an Average Ticket
Price of $5,500.
• Max Ticket Price.

TOTAL REVENUE BY
FLIGHTS Viable Profitability 9
 ACCOUNTING FOR 9.63% OF COMPANY X’S TOTAL
REVENUE, FLIGHT ROUTE ORD-LAX ACCOUNTS FOR
THE LARGEST ROUTE REVENUE CONTRIBUTOR.

ORD-LAX

• Company X’s Average Flight

Contribution = 4.17%.
• ORD-LAX accounts for 7.25%
of the firm’s total Flight
Count.

TOTAL REVENUE BY
FLIGHT ROUTE Viable Profitability 10
 7 OF COMPANY X’S FLIGHTS CHARGE THE MAXIMUM
AVERAGE TICKET PRICE WHICH IS 19.35 TIMES AS
HIGH AS THE FIRM’S AVERAGE.

AVERAGE TICKET
PRICE

• Company X’s Average Flight

Ticket Price = $284.20
• Company X’s highest
Average Route Ticket Price =
ORD-DCA

AVERAGE TICKET
PRICE Viable Profitability 11
INVESTMENT OPPORTUNITIES

Focus Point 3 12
 INSIGHT DERIVED FROM A SCENARIO MANAGER
ANALYSIS EXPLORING THE PROFITABILITY OF AN
ADDITIONAL ROUTE INDICATES THE NEED TO
TARGET HIGH OR NORMAL GROWTH AREAS.
CAGR (2015-2020)
NORMAL 3%
HIGH GROWTH 8.30%

OVERVIEW LOW GROWTH -3.30%

• To maximise profitability, you’d require a High

Growth with Margin Effect Environment.
• However, this additional route would evoke
some level of profitability within the
‘Normal’ Demand market too.
• The Route Addition lacks viability in a ‘Low
Growth’ Demand Market.
• CAGR becomes negative.

CHICAGO TO
ATLANTA ROUTE
VIABILITY Investment Opportunities 13
 PROFITABLE VIABILITY EXCEPTIONS DERIVED FROM
A TWO-WAY DATA ANALYSIS APPROACH FOCUSED
ON COST IMPLICATIONS AND PASSENGER NUMBERS.
Passengers
$5,100 150 160 170 180 190 200
$30 $7,200 $8,700 $10,200 $11,700 $13,200 $14,700
Input Parameters - ORD to ATL
$32 $6,180 $7,680 $9,180 $10,680 $12,180 $13,680
Passengers 170 $34 $5,160 $6,660 $8,160 $9,660 $11,160 $12,660
Miles 510

Costs per Mile

$36 $4,140 $5,640 $7,140 $8,640 $10,140 $11,640
Revenue per Passenger $150 $38 $3,120 $4,620 $6,120 $7,620 $9,120 $10,620
Cost per Mile $40 $40 $2,100 $3,600 $5,100 $6,600 $8,100 $9,600
Total Revenue $25,500 $42 $1,080 $2,580 $4,080 $5,580 $7,080 $8,580
$44 $60 $1,560 $3,060 $4,560 $6,060 $7,560
Total Costs $20,400
$46 ($960) $540 $2,040 $3,540 $5,040 $6,540
Profit per Flight $5,100 $48 ($1,980) ($480) $1,020 $2,520 $4,020 $5,520
$50 ($3,000) ($1,500) $0 $1,500 $3,000 $4,500

INSIGHTS

• FLIGHTS WILL LACK PROFITABILITY IN THE FOLLOWING CIRCUMSTANCES:

• Cost per Mile $46, Passenger Count <= 150
• Cost per Mile $48, Passenger Count <= 160
• Cost per Mile $50, Passenger Count <= 170

CHICAGO TO
ATLANTA ROUTE
VIABILITY Investment Opportunities 14
 SIMULATION PROJECTS 83% PROBABILITY OF
VIABLE PROFITABILITY IN PURSUIT OF AN
ADDITIONAL FLIGHT ROUTE.

INSIGHTS Route Miles per Flight

Annual Flights
Proposed
Total Miles Min Cost per Mile Max Cost per Mile
Revenue Per
Passenger
ORD-ATL 510 385 196,350 $30 $50 $150

Passengers per Annual Passenger

Likelihood bins
• 83% probability of Flight Revenue
profitability – with 0% 150 $8,662,500.00
40% 175 $10,106,250.00
projections of an annual 70% 185 $10,683,750.00
average profit of $1.69 90% 135 $7,796,250.00
million.
Summary Information
• Indicating Route Average annual profit $1,690,993
Viability. Probability of profit 83%
Establish the route?

CHICAGO TO
ATLANTA ROUTE
VIABILITY Investment Opportunities 15
 THE FEASIBILITY OF A CHICAGO TO ATLANTA
ROUTE ADDITION IS EXCEEDED BY OTHER
INVESTMENT OPPORTUNITIES.
New Route More Flights for Technology Process
Initiatives More Sales Reps
(ORD-ATL) existing routes Investment Improvement Plan

Decision Variables 0 0 1 1 1 Objective

Net Benefit $275,630 $2,943,234 $824,594 $2,840,045 $1,224,404 $4,889,042

New Route More Flights for Technology Process Total Cost Budget
Constraints More Sales Reps
(ORD-ATL) existing routes Investment Improvement Plan

Total Cost $10,990,650 $21,826,243 $7,075,000 $13,398,817 $2,925,000 $23,398,817 <= $25,000,000

INSIGHTS

• In order to maintain Total Costs below the $25 million budget, the
estimated net benefit of the additional route is exceeded by the
combination of Technology Investment, More Sales Reps and a
CHICAGO TO Process Improvement Plan.
ATLANTA ROUTE
VIABILITY Investment Opportunities
 FINAL RECOMMENDATIONS

ALTER DEFAULT SHIFT INVESTMENT MARKETING CAMPAIGNS

AIRCRAFT TYPE STRATEGY
Explore the possibility of switching from Continuously assess strongest levers of
Aircraft B737 to A320 where possible. profitability. Potential to withdraw Flight
Route ORD-SLC and, instead, invest in more
profitable streams.
Increase quantity of marketing campaigns –
directed at increasing uptake of low-revenue
generating routes & flights.

Chicago to Atlanta Route isn’t the most

profitable, viable option.
20XX Pitch Deck 17
THANK YOU
Phoebe Larner

18