COMMA CLOUD AIRLINES

STRATEGY FOR THE

SOCIALLYDISTANCED WORLD

CASE STUDY
 Susan Smith, CEO of Comma Cloud
airlines, has a board meeting coming
up—and she’s dreading the thought
of it. The market has already been
very competitive, and then the airline
industry nosedived as the world
came to a halt during the COVID-19
lockdowns. This had a huge impact
on Comma Cloud’s finances. The
epidemic has altered the way people
travel, at least temporarily, now that
social distancing has become a way
of life. Comma Cloud is the largest
low-cost carrier operating across
Europe, and Ms. Smith needs to
figure out how to steer through the
turbulence. As a CEO, Susan would
want to minimize the financial hit, in
light of these developments as well
as identify untapped opportunities
in different segments like marketing,
logistics, and so on. At the board
Background
Introduction
Enterprises in all industries are
strategizing ways to adjust to lock
downs and social distancing in the
wake of COVID-19. The entire aviation
industry has been disrupted. Especially
with potentially prolonged social
distancing, they are trying to figure out
a way to survive for the next several
months, if not longer.
Many airports have taken measures
such as
• Shutting down food courts and
lounges
• Closing the bathrooms every 2
hours for sanitization
• Altering seating arrangements in
the main terminal area
Comma Cloud airlines
Susan Smith is the CEO of Comma
Cloud airlines, a low-cost airline
operating in Europe, headquartered in
Germany. Comma Cloud is the largest
airline in Europe (by passengers carried
meeting next week, she has to
present a turnaround strategy for your
company.
The Case Challenge
Ms. Smith and Comma Cloud airlines
have identified that, to remain
profitable and competitive, they
need a better strategy to deal with
the current situation. As a consulting
partner, you are expected to perform
a detailed analysis and solution to
align with post-COVID precautionary
and preventive guidelines and identify
estimated impact on the financial
health of the company.
Ms. Smith identified a few areas
of opportunity for the airline to
incorporate for you to peruse, consider,
and analyze.
and fleet-size), with a 28% Europe-
based market share as of March 2020.
The airline operates about 1,500
flights per day to 90 destinations (63,
domestic; 27, internationally). Being
a low-cost carrier, Comma Cloud
offers only economy- class seating.
To keep fares low, Comma Cloud
doesn’t provide complimentary meals
on any of its flights, although it does
have a buy-on-board, in-flight meal
program. It also does not offer in-flight
entertainment, apart from the in-
flight magazine it publishes. Comma
Cloud does offer premium services,
such as a pre-assigned seat, multiple
cancellations and priority check-in, for
a higher fare.
Socially distanced world
With the breakout of COVID-19,
countries across the world imposed
lockdowns. Comma Cloud’s cash
flows were significantly affected for
4 months. The combined effect of
these two factors have led to not
only weak financial health but also
to limited capability to raise capital
for its turn-around plan. In this bleak
environment, Comma Cloud is trying
Potential Opportunities
1. Alter the revenue mix:
• Segment and broaden revenue
channels
• Justify additional costs, being
sensitive to passengers and
the board
2. Enhance promotion and
communication strategies:
• Promote sanitization strategy
of the airline fleet and staff
• Promote additional
precautionary measures for
in-flight catering
3. Additional areas:
• Additional service lines at the
airport
to reduce every avoidable cost, as well
as find out creative ways to increase its
revenues. However, the safety of your
passengers and crew is of paramount
importance; they cannot afford any
compromise on this front.
Following are some of the ideas that
Ms. Smith and Comma Cloud has come
up with while brainstorming on this
situation:
• Additional charges for carrying
extra baggage
• Charge for articles offered at
sanitization booths
• Initiate at-airport food and
beverage kiosk; leverage the fact
that airport lounges are closed
As part of its COVID-19 sensitivity,
Comma Cloud has discussed the below
principles to accommodate social
distancing.
In-flight:
• Limit seat occupancy: empty middle
seat
• Offer to cancel or reschedule if the
passenger is dissatisfied with the
seat offered
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 • Limit in-flight catering: Catering
available only for long flights
• Remove magazines from the aircraft
to avoid contact between the
passengers
• Increase sanitation and onboard
cleaning
At airports: Case facts
• Increase the number of self-help Facts and figures related to your
kiosks for generating boarding airlines can be referred from the below
passes figures:
• Reduce the per-passenger baggage • Financial health [Q1 2020]
allowance to reduce contact during
• Breakup of major costs
baggage drop
• Market positioning
• Increase the number of sanitization
booths offering face masks, • Revenue mix
sanitizers, and disinfecting wipes • Route mix
• Key market trend

Exhibit 1. Income statement Figures in Mn “$M. Exhibit 3. Balance sheet. Figures in

Mn “$M.
Income statement FY2020-21 Trend regarding Assets end of
previous year FY2020-21
Revenue 8913.5 6% Cash on hand 4057
COGS 4040 21% Inventory 3.3
Gross profit 4873 -3% Other current assets 275.6
SG&A expenses 1773 32% Total current assets 4405
Other operating income/ -1084 9% Plant, property and 10456
expense equipment
Operating expense 7736 20% Long term investments 263
Operating income 1177 -40% Goodwill and intangible 169.5
Total non-operating -79 22% assets
income/expense Total long term assets 10939
Pre-tax income 1098 -42% Total assets 15344
Income taxes 73.07 -61%
Income after taxes 1024.8 -40%
Liabilities + SE FY2020-21
EBITDA 1919.1 -26%
Total current liabilities 4743
EBIT 1177 -40%
Long term debts 3861
Basic shares outstanding 231 -3%
Other non-current liabilities 166
EPS 4.44 -37% Total long term liabilities 4561
Total liabilities 9305
Exhibit 2. Key financial ratios. Common stock net 7.87
Retained earning 4842
Key financial ratios Comma Cloud airlines
Other shareholder equity 355
Current ratio 0.9286
Shareholder equity 6038
Debt/equity ratio 0.6988
Total liabilities & shareholder 15344
Gross margin 54.67 equity
Operating margin 13.2
EBITDA margin 21.53
Asset turnover 0.58
Book value per share 26
Free cash flow per share 2.36

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 Exhibit 3. Balance sheet. Figures in Mn $.

CFO FY2020-21 CFI FY2020-21

Net income/loss 1024 Net change in Property plant -1791
Total depreciation and 741 and equipment
amortization Net acquisitions / -100
Other non cash items 93 divestitures
Net change in long term -17
Total non cash items 835
investment
Change in account -2.2 Investing activities - Others 747
receivables
Cash flow from investing -1160
Change in inventories 0.926
activities
Change in accounts payable 375
Change in assets/liabilities -10 CFF FY2020-21
Total change in assets/ 476 Net long term debt -373
liabilities
Debt issuance/retirement 0
net - Total
Cash flow from operating 2336 Financing activities -others -615
activities
Cash flow from financing -989
activities

Exhibit 5. Market positioning. Exhibit 6. Revenue and mix margin.

Revenue mix Share of Net margin Revenue mix Share of Net

business business Margin
Passenger revenue 90 12% Passenger revenue 90 12%
Corporate booking 30 24% Corporate booking 30 24%
Non-corporate booking 60 6% Non-corporate booking 60 6%
Cargo revenue 4 8% Cargo revenue 4 8%
Other revenue (add-on 6 60% Other revenue (add-on 6 60%
services, e.g., advance seat services, e.g., advance
assignments, carry-on seat assignments, carry-
luggage, in-flight beverages, on luggage, in-flight
entertainment) beverages, entertainment)

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