Let's solve a

consulting
case
Problem Statement
Your client is an Indian
Airlines company and
they have recently been
facing issues with
decline in profitability.
Identify reasons and
make suggestions to
turnaround the
situation.
 Interview Thread
Interviewee: I would like to know a little
more about the client such as its route
coverage, its positioning with customers and
about its competitors.

Interviewer: Sure, assume that client just

operate flights between Delhi and
Bangalore. Its customers value both
experience and price and there are multiple
competitors in this segment.

Interviewee: Okay, since when is the client

facing the issue of decline in profitability and
is this issue specific to client or is being faced
by competitors also?

Interviewer: Client is facing the issue since

last 6 months and this issue is specific to the
client only.
Interviewee: Thanks, I believe that I have
enough information to start on with this
case. Profits could be estimated as difference
of revenues and costs. Therefore, I would like
to start with understanding how has
revenues and costs changed since the issue
started.
Interviewer: So revenues have actually
increased but costs have increased by even a
higher margin leading to a decline in
profitability. Please start with analyzing the
reasons why revenues might have gone up.
Interviewee: That’s interesting to know!
Different sources of revenue for an airline
would be ticket revenue, F&B sales and other
check-in services. Which of these have
increased?
Interviewer: Ticket revenues have increased.
Why might it be so?
Interviewee: Ticket revenues could increase
because of no. of tickets sold or because of
average ticket price. Which of these 2 have
increased?

Interviewer: No. of passengers travelling have

increased.

Interviewee: Okay, it could be because of

increase in no. of trips or average occupancy
per trip. What has increased?

Interviewer: Average occupancy has increased.

What might lead to it?
Interviewee: It could be because of the increase
in overall demand or increase in our market
share where customers are preferring us more
now.
Interviewer: Yes, it is because that customer
preference has increased for us.
Interviewee: Customer preference for us can be
because of internal and external factors.
Interviewee: External factors would include
any changes made by competitors in their
service quality or ticket price. Internal factors
would include any changes made by the
client to improve their service quality.
Interviewer: Good! Client has improved their
service reputation with the customers and
hence customers are preferring them more.
Let’s hold on to the revenue side and look at
what might have changed at cost side now.
Interviewee: Sure, cost to the airline could be
analyzed across the value chain where
important milestones could be marked as
pre-flight, during flight, and post-flight.
“Pre-flight” would include major headers
such as ticket distribution and airport
operations from airport entry to passenger
onboarding.
“During flight” would include flight operating
expenses and F&B expenses.
Interviewee: “Post-flight” would include flight
maintenance and passenger support costs. Other
than these, there would be employee salaries
and other support costs required across the
value chain.
Interviewer: Good, we know that flight operating
expenses have increased. Which components do
you think can lead to this increase?
Interviewee: Flight operating expenses would
primarily include flight ownership cost (flight
carrier can be purchased or leased) and fuel
expenses. Has anyone of these 2 components
increased?
Interviewer: Yes, we know that cost of the fuel
component has increased. What could be the
possible reasons for it?
Interviewee: Fuel costs can increase because of
either increase in fuel consumption or increase in
unit price of the fuel. Which of these 2 have
increased?
Interviewer: Fuel consumption has increased.
Interviewee: Total fuel consumption depends on
number of trips covered and fuel per trip.
Further, fuel per trip depends on the average
distance covered per trip and fuel required per
unit of distance. We earlier identified in the
revenue analysis that total trips have remained
the same. Therefore, either the avg distance per
trip or fuel required per unit of distance has
increased. Which of these 2 has increased?
Interviewer: Good! It’s the latter that has
increased. The identified reason for this is that
the flight’s refueling process has changed.
Earlier it used to fill up the tank to 50% of the
capacity at both Delhi and Bangalore airports.
But now they are refilling to 100% just at Delhi
airport to cover the entire round trip which
means that the average weight of fuel carried
by the flight has increased leading to low fuel
efficiency.
Interviewer: This explains the entire reason of
increase in costs. Now, going back to revenue
side, can you think of reason(s) which might
have led to increase in overall service
quality?
Interviewee: Sure, since carrier is now re-
fueling just at 1 airport, it might mean that
overall fueling setup time has reduced which
could lead to better time management in
preparing flight operations and hence better
customer experience.
Interviewer: Exactly! What would be your
recommendations for the client?
Interviewee: In terms of fueling operations,
the only way is to go back to the previous
configuration of refueling at both airports
but then it would reverse the benefit of
improved customer experience which client
got from the new configuration.
Interviewee: Therefore, I would suggest the
client to keep up with the current system of
refueling just at the Delhi airport and look for
other ways to improve in profitability aspect
such as additional revenue from tickets by
increasing ticket price or additional revenues
from other services. Higher ticket price is also
justified because of improved quality and
customer experience.

Interviewer: Thank you. Good job!

That's a wrap!
 Framework
Profit
(decreased)

Revenue Cost
(increased) (increased)

Pre- During Post-

Number of Average price flight flight flight
passengers of ticket

Internal factors Operating F&B

Expenses expenses
External factors

Ownership Fuel cost

cost

Fuel Unit price

consumed of fuel

No. of trips Fuel required per trip

Fuel per unit

distance
Distance
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