Startup Airline to grow and position in the

Market
P R E PA R E D B Y

TA N M AY M O R E
Issues covered
1. Where is the airline most loosing money?
2. Where is the airline most profitable?
3. Will adding a new route (ORD-ATL) increase airline profit?
Mostly loosing money
Aircraft (B737) has the highest fuel cost and has the highest usage among
the airline.
Flight ID vs Aircraft Type
5000

4500

4000

3500
Flights Count

3000

2500 Total

2000

1500

1000

500

0
A319 A320 B737

AirCraft Type
Mostly loosing money
Flights with the lowest ticket price($115) which lead to the lowest total flights
revenue.

Total Revenue by Flight

1000000

900000

800000

700000

600000
Total Revenue

500000

400000

300000

200000

100000

0
Flight3769Flight7898Flight7459Flight2493Flight9168 Flight118 Flight8442Flight3024Flight2325Flight8792Flight8488Flight8074Flight7849 Flight513 Flight2866Flight1327Flight1920
Mostly loosing money
Flight route ORD-SLC which has the lowest percentage from the total route
revenue.

Total Flight Route Revenue Percentage

9.63%
8.78%

7.24%
6.39%
5.79% 5.97%
5.32% 5.39% 5.55%
4.90%
4.53%
3.68%
3.36% 3.47% 3.50% 3.51% 3.54%
2.77%
1.74%
1.33%
0.96% 1.00% 1.24%
0.41%

I LL
LC D W SP LT HL CO H A R S
DC
A
PH
X IA AS FW SE
A TL
- JF
K N O AX
D-
S B W - IA DT M -F -C -P M - IA - LG E W BO - - - M -L D - -A DE - SF -L
D- D - D- D D D - D D - D- D D D D - D D D D- D D
OR OR O R
OR
D
OR OR OR OR OR
D OR OR OR
D
OR OR OR OR OR OR
D
OR OR OR OR OR OR
Mostly Profitable
Flights with the highest ticket price ($5,500) lead to the highest flights total revenue.
Total Revenue by Flight
1000000

900000

800000

700000

600000
Total Revenue

500000

400000

300000

200000

100000

0
Flight3769 Flight128 Flight5623Flight6046Flight7345Flight7064Flight8316Flight4485Flight9251Flight6872Flight6285 Flight907 Flight618 Flight5420Flight2460Flight2866Flight6639Flight8153
Mostly Profitable
Flight Route ORD-LAX which has the highest percentage from the total route
revenue.

Total

9.63%
8.78%

7.24%
6.39%
5.79% 5.97%
5.32% 5.39% 5.55%
4.90%
4.53%
3.68%
3.36% 3.47% 3.50% 3.51% 3.54%
2.77%
1.74%
1.33%
0.96% 1.00% 1.24%
0.41%

I LL
LC D W SP LT HL CO H A R S
DC
A
PH
X IA AS FW SE
A TL
- JF
K N O AX
D-
S B W - IA DT M -F -C -P M - IA - LG E W BO - - - M -L D - -A DE - SF -L
D- D - D- D D D - D D - D- D D D D - D D D D- D D
OR OR O R
OR
D
OR OR OR OR OR
D OR OR OR
D
OR OR OR OR OR OR
D
OR OR OR OR OR OR
Adding new route
Adding Chicago to Atlanta Route will increase profit to the company.

Three scenarios were conducted to preview the potential profitability and growth of this new
route to Atlanta under different market environments for demand growth.

Scenario Summary   Scenario 1 Scenario 2 Scenario 3

    Current Values: Baseline High growth with margin impact Low Growth with margin impact
IF          
  Revenue Growth Rate 5.0% 5.0% 8.0% 3.0%
  Gross Margin 40.0% 40.0% 45.0% 32.0%
  SG&A Expense as % of Ticket Revenue 27.5% 27.5% 30.0% 30.0%
THEN          
  Gross Profit $3,597,885 $3,597,885 $4,636,562 $2,623,590
  Operating Income $1,665,023 $1,665,023 $2,221,181 $701,614
  Revenue Growth Rate 2.0% 2.0% 2.0% 2.0%
The Airline Operations Team has provided us with a brief summary of their outlook on
demand over the coming year.
Annual Flights Revenue Per
Route Miles per Flight Total Miles Min Cost per Mile Max Cost per Mile
Proposed Passenger
ORD-ATL 510 385 196,350 $30 $50 $150

Passengers per Annual Passenger

Likelihood
Flight Revenue

Estimated Passengers 40% of the time 150 $8,662,500.00

Estimated Passengers 30% of the time 175 $10,106,250.00
Estimated Passengers 20% of the time 185 $10,683,750.00
Estimated Passengers 10% of the time 135 $7,796,250.00

We used those information and created 90 simulations of the average annual profit using the Cost
per Mile and Passenger Revenues which ended up with the following summary information.

Summary Information

Average annual profit

$1,725,480
Probability of profit 88%
Establish the route?
Thank You