Strategic Analysis

For Chicago Based

Airline
07/03/2024 Sukanya Saha SAFCBA_07.03.2024v.1
Agenda
Introduction
Loss analysis
Profitability analysis
Strategic considerations for adding Chicago to Atlanta route
The end

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Loss analysis:
Aircraft analysis:
 The most common type of aircraft across all
flights is- B737
 B737 has the highest fuel cost per mile which
is one of the major reasons for revenue loss
 Below 5 flights which generate the least
revenue- Flight no. -2455,5839,463,6928,4083
 The maximum average ticket price for all types
of aircraft is 5500$. Flight ID vs Aircraft Type
 A320 has the lowest revenue and number of 5000
4500
flights, suggesting potential areas for 4000

improvement. 3500
3000 Total
2500

Route analysis: 2000

1500
 ORD-SLC has the lowest revenue and average 1000

ticket price, indicating underperformance. 500

0
Investigate factors like: A319 A320 B737

 Low customer awareness

 Frequent delays B737 is the most common
 Insufficient service type of aircraft
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Profitability analysis:
Aircraft analysis:

 The most common type of aircraft across all flights

is- B737
 Flights which generate the highest revenue- Flight-
8202, 8279, 6243, 1819
 B737 aircraft has the highest average ticket price
 Route ORD-LAX contributes highest revenue(9.63%)
Route analysis: Flight ID vs Aircraft Type
5000
4500
 The ORD - LAX route stands out with the highest 4000
3500
overall revenue and a strong average ticket price. 3000 Total
We should consider increasing the frequency of this 2500
2000
route or exploring similar high-demand 1500
destinations. Analyze if further optimization is 1000
500
possible through: 0
A319 A320 B737
 Targeted marketing
 Premium service offerings.

4
Business case: Should we add ORD-ATL?

The outlays from the Project evaluation are presented below.

Project flows (Outlays) 1.Project planning estimates a $250K

$ 400,000
initial investment to secure capacity.
$ 300,000 2.The marketing and sales department
$ 200,000 provides an estimate a $100K
increment in profit for the first year
and $50k for the next 4 years.
$ 100,000

$0
1 2 3 4 5 6

-$ 100,000
For any profit below 57%, the net present
-$ 200,000 value of the Project is above zero.
-$ 300,000

IRR 57%

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Business case: Should we add ORD-ATL?
The airline operations team determined the demand in the coming year, and the simulation of
profit based on the probability of Passenger occupancy gives the following conclusion
Route Miles per Flight Annual Flights Proposed Total Miles

ORD-ATL 510 385 196,350

Likelihood bins Passengers per flight Annual passenger revenue

0% 150 $8,662,500.00
40% 175 $10,106,250.00
70% 185 $10.683,750.00
90% 135 $7,796,250.00

Summary Information
Average annual profit $1,439,004

Probability of profit 87%

Establish the route? YES

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Business case: Should we add ORD-ATL?

Operating Income
$2,500,000

$2,000,000

$1,500,000

$1,000,000

$500,000

$0
Baseline High growth with Low Growth with
margin impact margin impact

In every scenario the operating

income is positive.

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 IRR 57%

Positive
operating
income
High probability of positive
profit in the coming year

Observation & Recommendation:

 Revenue growth rate is consistently increasing from FY2025 to FY2028
 Profit per Flight on the proposed Chicago-to-Atlanta route would be around $5100
 Average annual income would be around $1,630,573 with 83% probability of profit
 It is highly recommended to commence the new route- Chicago to Atlanta

We recommend that the

company add the Chicago
Atlanta route

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Thank you