ZestMoney Case Study – Growth Team

Situation
ZESTAIRLINE’s JFK-LAS route has not been performing as expected and senior management is
considering closing that route. To replace it, they are considering starting JFK-AUS service.

JFK-LAS (New York, NY to Las Vegas, NV)

This route was created to serve the booming Las Vegas market. Las Vegas is one of the top
tourism destinations in the US and attracts a large number of visitors each year. In addition, it has also
become a sought-after convention site, adding to the number of people flying there.
American Airlines began operating 4 non-stop flights (two round-trips) between JFK and LAS in
2015. After 2 years of operations, this route has yet to meet the high performance expectations set when
it started. Tough competition from low cost carriers has kept prices low. Additionally, there are 3 other
airlines, each offering more daily non-stop services between Las Vegas and New York, than
ZESTAIRLINE. Over the past few months, performance on this route has declined further.

JFK-AUS (New York, NY to Austin, TX)

During the past decade, Austin has become an important technology center for the US. The city
has rapidly evolved into one of the most important business centers in the Southwest. In addition, Austin
is a popular destination for musicians, earning it the title of ‘Live music capital of the world.’
The New York City area has one of the largest ports in the country and billions of dollars of exports
flow through there every year.
After extensive research, ZESTAIRLINE has developed what it believes is an acute forecast of
traffic and cost for this route. The proposed strategy is to start with 2 non-stop flights (one round-trip) per
day with the possibility of expanding service if the route performs well.

ABC Inc.
ABC Inc., a Top 100 technology company, headquartered in Austin and with several offices
across the US, has expressed interest in a non-stop JFK-AUS route several times. ZESTAIRLINE is very
interested in signing a corporate deal with ABC.
ABC executives regularly travel between offices and clients from around the world visit the
company’s headquarters. The company has an assembly facility located just outside of Austin that ships
products around the world. ABC uses a local cargo company to handle its shipping needs, but they have

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expressed dissatisfaction with their current cargo services and would be likely to switch to ZESTAIRLINE
Cargo if there is a corporate travel agreement with ZESTAIRLINE.

Your Assignment
Due to airport constraints, ZESTAIRLINE cannot operate JFK-LAS and AUS-JFK simultaneously.
Your boss is out of the office and the VP just asked you to analyze both markets and come up with a
recommendation for the route ZESTAIRLINE should operate going forward. This analysis will be
presented to senior management and will significantly influence the final decision.

Please submit:
1. A brief presentation outlining your recommendation as to which route
ZESTAIRLINE should fly and marketing / customer segmentation strategies for this
route.
Your memo should include:
• The route you recommend and why you chose that route
• Marketing strategies to support that route
• Customer segmentation and targeting strategy
• Other factors that should be considered when making the decision

2. An excel spreadsheet summarizing your calculations. The data is summarized at

the end of this case.
Please show all your calculations making sure you address the following:
• What is the expected annual profit / (loss) for each route in dollars?
• What is the expected margin for each route?
• Include any other calculations you feel are relevant to your decision.

For this case use a 30 day month and a 365 day year.
List any assumptions you make.

Once you have completed the memo and spreadsheet save both files as:
(First Name)(Last Name).ppt or .xls
e.g.: JohnSmith.ppt and JohnSmith.xls

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Data
JFK-LAS AUS-JFK
Flights per day 2 flights = 1 Round trip* 4 2
Load Factor % of seats filled per flight 70% 88%
Aircraft Type 757 757
Seats per Aircraft 180 180
Flight Miles Each way 2,200 1,500
Fixed Cost Per flight $20,000 $17,000
Variable Cost Per passenger $17 $20
Cargo Fixed expenses Per month $225,000 $300,000
Cargo Variable cost Per kilo of freight $1.00 $1.20

JFK-LAS* AUS-JFK*
% of Total Pax Round-trip Fare* % of Total Pax Round-trip Fare*
Business 20% $650 25% $550
Leisure 35% $425 55% $300
Internet 45% $295 20% $270

* Roundtrip data - revenue is split equally between each flight

JFK-LAS AUS-JFK
Avg Market Rate Per kilo $1.60 $1.80
Total Monthly Demand for Freight Kilos 600,000 720,000
Average Baggage per Flight Kilos 20,000 23,000
Freight and Baggage Capacity Kilos 30,000 30,000

Additional information impacting ZESTAIRLINE’s network

• ABC Inc has an annual air travel budget of $30M, excluding JFK-AUS. If the company were to
sign a contract with ZESTAIRLINE, Sales Planning estimates the company will shift 15% of this
$30M spending to ZESTAIRLINE.
• If the JFK-LAS route is cancelled, ZESTAIRLINE will lose $4 million annually in corporate travel
to other network destinations (other than JFK-LAS).

Definitions
Cargo Load Factor = Freight Kilograms Shipped/ Available Freight Kilograms

NOTE:
Please restrict your analysis to the above data. Do NOT use any external data in your calculations.

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