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    Case #2 - BCG - Airlines

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    akmanov86
    This case involves evaluating the market potential for a startup that offers broadband internet on commercial airlines. The candidate analyzes the size of the addressable market, which is estimated to be around 300 million annual user flights based on 3000 planes with an average of 50 laptop users per flight. The candidate then sets a price point of $15 per flight based on penetration data. Break-even is calculated to be around 8 users per flight at $15 each. Finally, the interviewer probes the candidate on considerations like competition in the space and risks associated with the business model.

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    Case #2 - BCG - Airlines

    Uploaded by

    akmanov86
    4K views4 pages
    This case involves evaluating the market potential for a startup that offers broadband internet on commercial airlines. The candidate analyzes the size of the addressable market, which is estimated to be around 300 million annual user flights based on 3000 planes with an average of 50 laptop users per flight. The candidate then sets a price point of $15 per flight based on penetration data. Break-even is calculated to be around 8 users per flight at $15 each. Finally, the interviewer probes the candidate on considerations like competition in the space and risks associated with the business model.

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    Case #2 - BCG - Airlines

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    This case involves evaluating the market potential for a startup that offers broadband internet on commercial airlines. The candidate analyzes the size of the addressable market, which is estimated to be around 300 million annual user flights based on 3000 planes with an average of 50 laptop users per flight. The candidate then sets a price point of $15 per flight based on penetration data. Break-even is calculated to be around 8 users per flight at $15 each. Finally, the interviewer probes the candidate on considerations like competition in the space and risks associated with the business model.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    4K views4 pages

    Case #2 - BCG - Airlines

    Uploaded by

    akmanov86
    This case involves evaluating the market potential for a startup that offers broadband internet on commercial airlines. The candidate analyzes the size of the addressable market, which is estimated to be around 300 million annual user flights based on 3000 planes with an average of 50 laptop users per flight. The candidate then sets a price point of $15 per flight based on penetration data. Break-even is calculated to be around 8 users per flight at $15 each. Finally, the interviewer probes the candidate on considerations like competition in the space and risks associated with the business model.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 4

    Case #2

    Company: BCG (Round 2)


    Topic: Market Entry
    Industry: Airlines

    About the Case

    This is a market entry case where candidate is required to evaluate the feasibility of a new product
    in conjunction with the airline industry. The candidate should use a comprehensive framework,
    walk the interviewer through it and be prepared for analytical detours throughout the flow of the
    case. The calculations represented here are only one approach and interviewees may take other
    approaches, depending on the assumptions made. The interviewer should be mindful of this and
    allow for flexibility.

    Defining the Problem

    Our client is a start-up with the ability to deliver broadband internet to commercial airlines. How
    would you help them think about their offering?

    Information Gathering

    Read this information well before you administer the case. Share the information in each bullet
    only if the candidate asks for it in a clear and deliberate way. Listen to the candidate’s basic
    framework. If the candidate mentions one of these, mention the information in parenthesis. This
    part of the interview is unstructured so be prepared to jump from one idea to the next.

    1
    l

    Prompt 1: Industry and Market Size -The candidate should include the industry and market size
    in his/her framework.

    Information to be given if asked:

     Broadband for the airlines: There is general interest in the broadband internet from the
    airline industry. The start up would have to invest relatively little up front and would keep
    most of the revenues. They would charge the customers on a per flight pricing model.

     Size of the Market: Ask the candidate to estimate the market size and hand over the first
    Exhibit 1. Also inform the candidate that there are 3000 planes.

    Answer:

    First Coach

    Seats per plane 20 180

    x load factor 0.75 0.75

    = 15 135

    x business travelers 100% 30%

    Laptop users/plane 15 40.5

    Total laptop users/plane = 55.5

    3000 planes x 2000 legs/plane x ~50 laptop users/plane = 300,000,000 approximate annual
    potential user-legs.

    Prompt 2: Pricing - In order to finish the market size, the candidate should ask for the price per
    flight. Hand out Exhibit 2 and ask candidate to set the price.

    Answer:
    Assume 100 passengers (for ease) at the various price/penetration combinations,
    30 users at $5=$150/flight
    25 users at $10=$250/flight20 users at $15=$300/flight
    10 users at $20=$200/flight
    5 users at $25=$125/flight
    Set price at $15.

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    Prompt 3: Break Even – Given the information already revealed in the case and the information
    below the candidate should calculate a break-even point.

    Information to be given if asked:

     The company has discovered that if they can generate $250,000 per plane in annual
    revenue, they will be profitable installing the technology on that plane.

    Answer:
    250,000/2000 legs/plane = $125/leg
    $125/$15 about 8 users/leg
    50 laptop users/leg, and at $15, there’s a penetration rate of 20%, so we estimate 10 users/leg.
    Yes, they should break even.

    Prompt 4: Other factors – Probe the candidate for breadth and understanding of new market
    entry. Ask him/her about the following aspects of this project.

    Competition – The interviewer should probe deeper into the competition especially w.r.t.
    Intellectual Property. For this case, the company has the patent on the high speed connection.
    But, what about low-speed?—Airlines

    Risks – Ask the candidate which risks are associated with the business model. Use your
    judgment when considering their answers.

    Interviewee’s Commentary/Notes

    Like some cases, we just crunched numbers until we were out of time. He had a lot of different
    exhibits. There was no way someone could get through all of them. Cases don’t always flow
    neatly. The interviewer will jump around and direct you where he wants to be at that particular
    time. Other people who did the case the same day talked about different things. He also didn’t
    ask me to wrap up. When I got feedback on the case, he told me I did a really good job, so don’t
    let things like that bother you.

    3
    l

    Exhibit 1

    Exhibit 1 Passenger mix by cabin


    First
    Annual flights legs per plane 2000 Business 100%
    Average seats per plane 200 Leisure 0%
    Average load factor 75%
    Cabin seating: Coach
    First class 10% Business 30%
    Coach 90% Leisure 70%

    Note: 90% of business travelers carry laptops; 0% of Leisure travelers carry laptops

    Exhibit 2

    Price Elasticity

    30

    25

    20
    Price

    15 price per leg

    10

    0
    0 5 10 15 20 25 30 35
    Penetration (% of business passengers using service on
    any given flight)

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