in this video we'll go through an interactive case from BC G's case library these interactive cases on BC G's website are pretty cool in that they try to simulate an interview experience by asking you questions and giving you prompts based on the answers that you submit so before we get started please take a quick second to give this video like to help with the YouTube algorithm let's begin today we'll discuss the case of our client a low-cost carrier airline that is among the largest in Asia after initial losses when it was established a few years ago has finally become profitable the company's profitability is now threatened however by sharp increase in fuel prices to the tune of more than 50% the client is therefore questioning its business model and looking to develop an immediate response to the situation that will ensure a return to profitability your task is also to help develop a strategy to ensure that the company remains profitable for the years to come so at first glance this seems like a fairly straightforward profitability case I'm predicting that we'll probably have to break down the drivers of profitability and identify which kind of levers of profitability we can pull to pretend the company to profitability so let's see how this goes all right so our interviewer is Mickey who will guide us through this interview very cool okay so how would you approach this case I've got three options here to choose from option one is saying that we want to understand what affects demand for our client services option two suggests that we need to increase sales option three suggests looking at factors that affect our clients profitability so here I'm clearly gonna go with option three we want to look at what are the factors affecting the profitability so we can prioritize and identify which one we want to focus on I think option one here looking at demand that's more on the revenue side we still don't know whether you know this is a revenue or cost solution that we're gonna end up finding for the second option it also suggests looking to increase sales I think this is a proposal that's pretty you know premature we don't have any information that suggests we need to increase sales so therefore I would go with option three so we can look at both revenues and costs as you know to identify what factors impact profitability great what factors should we explore for their impact on our clients profitability okay option one profitability is revenue minus costs because costs are going up the client's to find ways to increase revenue again we probably need to look at both revenue and costs so I'm ruling this one out profitability is significantly affected by the market situation so I'd like to explore what competitors are doing so there's nothing wrong with looking at competitors but I think this will probably come later on in the case we really need to identify what is the driver we want to prioritize whether it's on the revenue side or cost side and so looking at three I think this one the client needs to either increase revenues decrease costs or both so I'd like some information on these key drivers that's basically exactly their approach that we're looking for so we're going to go with option three here okay which of these factors would you like to explore first so we could either look to increase revenues or we could look to lower costs I think at this point there is no wrong answer here you can start with either I think by the end of the case you'll probably you know have looked into both of these areas so it really doesn't matter so we're just going with the revenues first for this but you know looking at costs first would be just as great okay all right what do you think are the key drivers of revenues for a client okay so three options again here I think that ticket sales would be the key driver I think that's true but I think there's also other you know factors that contribute to revenue such as you know the meals they serve on planes baggage fees etc so I don't think answer ones that complete answer to says it would be driven by ticket sales and other sources of revenue okay so that would include the sources that we listed an option three revenues would be a function of the number of passengers so while that is true I think answer two is a bit more precise it says and it lays out that our revenues our ticket sales and other sources of revenue which is basically non ticket sales which makes it a very kind of mici answer because you're looking at ticket sales and non ticket sales very clean very clear so I'll go with option two here okay that's mostly right for our client revenues are primarily driven by ticket sales but our client also has some additional sources of revenue what do you think our client can do to increase revenues two options let's see so the first one says they want to explore the option of increasing ticket sales first the client needs to either increase the price of tickets or the number of customers because revenue is you know quantity times price okay so one that makes total sense right if you want to increase revenues either increase quantity or you increase price or you do some combination of both let's look at answer choice - this says I'd like to explore the option of increasing non ticket sources of revenue an increase in these sources of revenue could have a tremendous effect on the overall revenues of the company okay so we need to decide whether to prioritize ticket sales or non ticket sales since revenues it says is primarily driven by ticket sales I'm gonna lean towards answer one here we can always come back and look at you know non ticket sale revenues but I think answer one here lays out that we're gonna start with the biggest driver of revenues and answer one also clearly breaks it down into quantity and price so we're going to go the option one here okay how would you like to proceed okay three options the first option says revenue from ticket sales need to go up they will go up if customers buy more tickets so the client has to work toward increasing the number of customers by offering discounted ticket prices so part of this is true but we don't really know whether we should be increasing prices to increase revenues or discounting prices to increase quantity I think suggesting offering discounted ticket prices where we have you know no data yet is premature answer so I don't really like answer one for answer two ticket sales are a function of ticket prices a number of tickets sold so increasing one or both of these would increase ticket sales great I think that's very clear very me see kind of way of doing things option three I'd like to investigate whether it would be possible to increase ticket prices so here for option three it's fine but it's it's not as you know mici or you know completely exhaustive as option two so I'm going to lean to four now it's a slightly better answer than three okay how would you go about exploring the feasibility of increasing ticket prices answer choice one says I'd like to find out more about the LCC business model okay seems reasonable if you understand the business model you can understand how changing prices will impact revenues option two says they want to look into the competition I assume they're facing a similar situations again I think at this point it's too early to start looking at competitors and doing benchmarking you know the first step in these profitability cases we really need to identify what lever of profitability where they're on the revenue or cost side we need to focus on to return the company to profitability an answer three says I'd like to investigate whether there are other factors such as regulatory mechanisms that will prevent an increase in ticket prices so answer three here's so specific focusing on regulatory mechanisms and in addition this focus is on you know kind of what are the constraints of increasing ticket prices whether than focusing on whether or not it makes sense to increase ticket prices so don't like option 3 I think option 1 is our best choice here to first understand the business model to understand the impact of increasing ticket prices on revenues ok.well revenues for LCC players are mainly driven by ticket sales most operators in the LCC market offer low fares in order to provide attractive pricing for consumers and thereby stimulate demand therefore keeping costs low as well as achieving growth to increase revenues are key components of their business model okay that makes sense you keep prices low so that you get more consumers to buy and more tickets end up being sold so let's see what our answer choices are here number one says we need to reduce prices to attract more customers again there's no data to back this so I think this would be a premature recommendation answer to says I think increasing prices is not a real option for us because we may lose out on competition so ticket prices should remain stable again there's no data backing this right we have a hypothesis that if prices increase quantity decreases but does price increase large enough such that it offsets the decrease in quantity that's the key question we really need to know answer choice 3 says even though pricing is very competitive I'd like to determine whether an increase in prices could increase sales revenue so here I think we go with answer 3 we really need to you know calculate or figure out whether increasing prices will increase revenues or decrease revenues overall answer choice 1 and 2 there's no data backing them so let's go with the answer choice 3 okay how would you determine that so we could look at the data on current sales and prices that's answer choice one answer choice two we could look at past data on the impact of a ticket price increase in sales and answer three is we could look at sales data for the competition and draw conclusions so here I think it's always best to go with you know data that your own company has because competitors might be competing in slightly different markets slightly different customer segments they might be doing different routes so that might not be an apples-to-apples kind of benchmark to look at so among one into current or historical data always lean towards current data as it's the latest historical data could be a chance it could be a bit outdated so I would slightly lean towards answer choice one here because it's focusing on current data all right so here's the relevant data okay so I think we have a first math calculation problem here by what percentage does the client need to increase the average ticket price to maintain its profits you're giving the following information we have sales profit margin expected field price increase and that current fuel costs are half as high as non fuel costs and what percentage does the client need to increase the average ticket price to maintain profits okay so I think here we basically need to figure out how much field costs are increasing by and we would need to increase sales by that same amount and calculate what percentage increase in sales that would be so if sales is 1500 million and profit margins 20 percent that means costs are 80 percent of that so 80 percent of 1500 million is 1200 million okay and we know that of the 1200 million in costs fuel costs are half as high as non fuel costs so if feel costs are 400 million non feel is 800 million and that gets us the 1200 million in costs so fuel costs 400 million the expected field price increase is 50 percent 50 percent increase on 400 million is 600 million right so it increases by 200 million so if costs go up by 200 million sales also need to go up by 200 million to maintain the same amount of profits so sales would need to go from 1500 to 1700 so in terms of a percent increase that is 200 million over 1500 million which is roughly 13.3% all right correct okay so we have a first chart here and this question asks if prices were increased by 13.3% what would be the impact on demand okay so we have price on the y-axis and demand on the x-axis right and I think this charts basically saying if price goes up by one percent demand will go down by two percent and this is basically a graph of price elasticity which measures you know how much quantity sold changes for a given change in price so if things are very elastic a small drop in price will have a huge change in quantity sold versus if things are inelastic changes in price don't really impact the quantity of units sold so here we have the elasticity being if price goes up by one percent demand goes down by two percent right so if we increased sales price by 13.3% then demand should go down by twice that so that's twenty six point six percent so looking at our answer choices here demand would definitely change and it would drop by twenty six point six percent option three here great so what do you conclude from your calculations okay so answer choice one says that price is elastic okay a hike in prices would lead to a drop and tickets sold therefore we should resist the temptation to increase prices I agree with that although price goes up quantity sold goes down way more such that overall revenues go down answer choice 2 says that basically says that increasing prices by 13.3% would increase revenue sufficiently you know that's wrong increasing prices would decrease revenues in answer choice 3 says that prices are inelastic and we clearly know that's wrong from the previous elasticity chart prices are elastic if price goes up 1% demand goes down by 2% so answer choice 1 here is the clear one so you're saying that increasing ticket prices is not a feasible option how would you like to proceed now okay answer choice one says that they want to look into increasing the number of tickets sold exploring ways of increasing the number of passengers okay I think that makes the logical next step right we chose to focus on revenues we looked into the possibility of increasing prices you know we hit a dead end there so now we can look into the possibility of increasing quantity sold and so choice 2 says that because prices is not a workable option we should look into costs so I do think we'll need to look into costs but I think it logically doesn't make sense to do that now we're looking further into revenues we explored price we now need to explore quantity before I feel comfortable moving on to costs to kind of fully and rigorously go through the revenue kind of driver of profitability so while I do think we're looking to cost later I think it makes more sense to continue focusing on revenue in particular quantity before we dive into costs so answer choice 1 okay so what would you like to know to judge the feasibility of this option okay three choices first choice says we want to know if the client could offer discounts to attract more customers that seems logical right we considered price increases so now we can consider price discounts in order to drive up quantity second choice says we can opt for bigger aircraft to accommodate more passengers so this one doesn't really make much business sense for an airline to change their aircraft is a huge cost and I don't think proposing this very specific solution right now makes a ton of sense given the client is experiencing a decline in profits and answer choice 3 says that they want to know whether most of the client's flights are flying at full capacity if not they could look to increase capacity utilization I I do like this idea but I think it makes more logical sense to explore a price decrease whether that impacts quantity given that we just looked into doing a price increase I think for utilization that factors more on the cost side right if an airline is more utilized you have lower costs because you need to fly fewer planes so answer choice 3 is something more on the cost side and we're still focused on revenues so I answer choice 3 doesn't make that much sense so we'll go with answer choice 1 okay this would have a similar effect to reducing ticket prices giving that load factors are very high there isn't much upside in reducing ticket prices in fact doing so might actually reduce revenues what other options could we consider okay so seems like we've hit a dead end here we can't toggle price whether increasing it or decreasing it and it doesn't seem like we can really increase quantity since I said that load factors are very high okay so we'll probably want to shift directions here so let's see what the answer choices give us answer choice one says does the client have any unused capacity the client could look at wastes to increase the occupancy of its existing flights and answer choice two says the client could opt for bigger aircraft to accommodate more passengers again I don't like going with bigger aircraft aircraft is huge fixed cost and seems really unlikely that the client would be able to pull that you know lever to fix its profitability problems so I'd have to go with answer choice one here looking at unused capacity I feel like one actually contradicts them saying that load factors are very high so I don't totally love answer choice one but it's the better choice compared to answer choice two so I'm just going to go with one okay what you're trying to ask about is called the load factor yes the load factor for most flights is at or near industry best practice it will be difficult to improve this further okay no new information here let's see what the answer choices say answer choice one says that they should find measures to increase the number of customers to increase revenues I think we hit this dead end already so that's probably not it answer choice - well it doesn't look like the client can take any measures at least in the short term to increase the number of tickets sold so I think answer choice to make sense here that's the right conclusion we basically can't really increase quantity okay how would you like to proceed now the client could provide value-added services to passengers and the client could approach new areas cargo is one example so answer choice one I think logically makes a lot of sense we are focused on revenues we looked at revenues from ticket sales so now we can look into revenues from non ticket sales so number one is very clear very logical number two is you know such a random specific answer looking into cargo you know totally out in left-field doesn't make a lot of logical sense to pursue this thinking right now so the answer 1 here is a clear choice okay our client is pretty active in this area and is at industry best practice for ancillary revenue so it looks like there isn't much additional opportunity here we've seen that increasing non ticket sources of revenue doesn't look like a feasible option how would you like to proceed so we've reached a dead end here it looks like you know on the revenue side there's really nothing we can do so let's see what answer choices we have the first one says because increasing non ticket revenue is not feasible I'd like to explore how the client could increase revenue from ticketing and Matua says I would like to see if the client could increase the number of customers so to is clearly a dead end we've kind of explored that so that leaves no choice as to answer one I don't really understand what this case means by increased revenue from ticketing I thought we already covered that by looking into ticket sales but you know I for sure at this point no option to is a worse option than one so I'm gonna go with option one I would have liked to propose moving onto costs at this point I feel like we've hit a dead end on revenue and then that makes the logical choice but that's not an answer choice here so we'll go with one and see what happens okay how would you like to proceed okay so it seems like we're shifting into costs now answer choice one says fuel costs are the largest component however since fuel costs have gone up the client can't do much about its field costs so we could look into non fuel costs so we have no data to suggest that the client can't do anything on fuel costs I think we need to consider both feel and on fuel costs at this point the answer choice 2 says fuel costs have increased and staff costs are difficult to reduce I would like to explore whether the client would reduce costs related to maintenance and overhaul again this is a very specific cost that's being called out I much prefer if we just started by thinking about costs as fuel costs and non vo costs and then identifying you know which are the cost levers we can pull and it seems like that's why I answer choice three says here focus on feel and non fuel costs and we should explore whether the client could purchase fuel at lower prices or look at reducing non fuel costs so I think three here is the very me see clear kind of logical answer okay fuel costs are the most important lever and variable costs but the client can try to reduce non fuel costs too so answer choice one says the client should look at discontinuing the least utilized flights to reduce fuel consumption answer choice two says the client should look at reducing non fuel costs and answer choice 3 says fuel costs are going to increase reducing non filled costs would compensate for that so here answer choice 1 is a very specific very strong kind of hypothesis of recommendation I don't think there's much data I'd be too extreme to suggest that at this point 2 and 3 are both suggesting looking at non fuel costs answer choice 2 says the client should look into it while answer choice 3 says that non fuel cost would compensate for that so we don't know if non fuel costs is a lever that can effectively be pulled to return the client to profitability so I wouldn't necessarily say that it's going to compensate for it that's a bit too strong so I'm gonna go with answer choice 2 here okay well that's a feasible suggestion our past experience suggests that we may be able to reduce non fuel costs by five to ten percent in the short term but do you think that would be enough given the steep hike in fuel prices you may need the following information sales are 1500 million profit margin is 20 percent fuel price increases 50 percent and current fuel costs are half as much as non fuel costs okay that's the same information we got before so to do this math problem right we need to first figure out you know how much reducing non field costs by five to ten percent translates to and we know that fuel costs have gone up by 200 million so we need to see if the non field costs decrease is greater than or less than 200 million which would help us answer whether or not decreasing non fuel costs would solve our profitability problem so from the previous calculations we know fuel costs are 400 million non fuel costs are 800 million and if non fuel costs go down by five to ten percent it would go down by 40 to 80 million dollars right so if non field goes down by 40 to 80 and fuel goes up by 200 million decreasing non fuel costs doesn't solve our problem so let's see our answer choices here answer choice one non field costs would go down by 40 to 80 that's the correct number fuel costs go up by 200 it suggests the client should look at ways of reducing fuel costs I agree with that you know non fuel costs dead end we still want to focus on costs now let's go back to fuel costs answer choice two says it would reduce by thirty to sixty million that's not the right number we calculated forty to eighty million so answer choice one here is correct okay how can the client nevertheless reduce fuel costs when fuel prices have increased the client could optimize its flight Network the client could take steps to reduce the fuel purchase price the client could think about reducing fuel consumption I think these are all three great suggestions I would slightly lean towards reducing fuel purchase price I think it makes sense if prices I've gone up we can look into possibly renegotiating them back down that seems like the most you know straightforward obvious hypothesis or answer the optimizing the flight Network and reducing fuel consumption I think are also great ideas but I would like to kind of first focus on whether or not we can reduce the field price and if we can't reduce the field price then if we pay the same amount of price for fuel can we find ways to save fuel and so that's basically what answer one-in-three are suggesting but I think it first makes more sense to focus on deciding whether or not we can actually reduce the price so that's answer choice 2 okay how can the client reduce the fuel purchase price the client should partner with other airlines to establish buying cooperatives the client should negotiate a better fuel price with sellers and the client can reduce the volatility and fuel prices by hedging prices with the help of financial instruments so I think these are all three you know answer choices that make a lot of sense in terms of feasibility the client should negotiate a better fuel price with sellers I think this could be difficult I think option one here establishing buying cooperatives to increase buying power option one is slightly more feasible in my opinion than option two if you partner with other airlines you have a you know larger buying power and more negotiating leverage then if you just negotiated with the fuel sellers itself option three is the client can reduce the volatility by hedging prices with financial instruments so three doesn't really now that I think about it reduce fuel purchase price it just reduces volatility so that doesn't really kind of answer or solve the question we're looking for so one and two both contribute towards decreasing fuel price and here I go with option one just because I think it's slightly more feasible okay so difficult to negotiate in the short term buying cooperatives Stan limited chance of success okay so it doesn't seem like we can really reduce prices so let's see what we want to do next answer choice one says we could look at reducing fuel usage by adjusting its fleet mix to increase fuel efficiency and reducing the amount of baggage that seems feasible answer choice two says the client could optimize its flight network by canceling connections on which utilization is blow the break-even point this would help reduce fuel consumption so both are basically trying to find ways to make feel more efficient to save money that way I lean more towards answer choice one here I think canceling connections is such a strong kind of hypothesis and recommendation perhaps we can avoid canceling anything and instead focusing on adjusting fleet mix or reducing baggage which I think would have less of a brand impact than you know canceling flights so I'm gonna go with answer choice one here okay the clients fleets relatively new and it is already feel efficient reducing the baggage limit is too small a lever what are other options available okay so option choice one we could analyze competitors buying patterns or look at takeover opportunities to bring in more revenue so this one's a red flag to me we're focused on cost here not on revenue so I immediately don't like answer choice one answer choice two says that that client could optimize its flight now by cancelling connections okay so this is the same option we got before so looking here I'd towards hands with choice two we're still focused on costs and answer choice one is you know jumping to revenue which just doesn't make sense logically so answer choice two here let's see what how that is this is the feasible option but how would it affect the clients image in the market moreover reestablishing these connections in the next boom phase would entail substantial cost what are the other available options answer choice one says it'd be difficult to reduce costs and answer choice two says the client would have to look for more opportunities in the market in order to offset the inevitable losses on the cost side here we looked at non field costs dead end we looked at fuel costs both in terms of decreasing price and increasing fuel efficiency or fleet mix routes or canceling flights I think we've clearly hit a dead end here in terms of cost so I think that's basically why I answer choice one is saying difficult to reduce costs is difficult to come up with measures to reduce costs in the short term however that does not mean that the client has no options left to ensure long term profitability how would you approach this okay so I think at this point we've basically hit a dead end saying both on the revenue and cost side there's really nothing we can do in the short term to return their client to profitability so now there's a transitioning point in the case where we're gonna now focus on long-term profitability so let's see what the answer choices are here to answer choice one the client could look at retrenching staff and drastically reducing operations retrenching staff and reducing operations that's a short-term thing so that doesn't really make much sense option choice to the client cannot increase sales reduce costs the client will need to increase ticket prices in order to pass on some of the cost increase to customers again that's wrong we looked into increasing ticket prices and found that you know that decreases revenues so to is wrong option choice 3 it looks like profits would deteriorate in the short term but I'd like to look to investigate whether the situation can be salvaged over a longer period so that I think that's exactly what we want right we're focusing on longer-term given we can't do anything in the shorter term what information would you need for this okay one I'd like to know what the competition is doing this might give us some ideas okay feasible - I'd like to know how the client has tackled such a situation in the past okay three the clients ability to withstand losses in the short term would really depend on its margins compared with those of competitors do we have any data on this I'm leaning towards answer choice three here if our client has some kind of cost advantage then in the short term the client would experience a decline in profitability but competitors would also experience a decline and eventually competitors that have higher cost structures would probably be forced out a go bankrupt or exit the market so kind of that's my hypothesis for going with answer choice three answer choice two looking at how the client has tackled such a situation in the past it seems feasible but I don't think it's as strong as answer choice three similarly looking at what the competition is doing competitors can be totally different different markets different customer segments they might not be low-cost carriers it might not make for a very apples to apples comparison to kind of immediately dive into that kind of competitor benchmarking so slightly leaning towards answer choice three here graphs show about the clients costs and margins as compared to that of its competitors so we have a bar chart here let's take a look at what we have we have average ticket price and total revenue on the y-axis so it looks like average ticket price is indicated by the green and yellow bars while the total revenue is indicated by these dots here and on the x-axis we have the LCC industry costs and margins and so each bar represents a different airline player this bar represents us because it represents client and we know that the green here indicates cost per ticket the yellow indicates profit per ticket and we've covered that the blue dots are revenue so a couple of key takeaways here one is that our client has the lowest cost structure this is because the height of their green bar is much lower than anyone elses on top of that our client also has the highest profit per ticket because the height of this yellow bar is much greater than that of competitors in terms of profit margin our client also has the highest margin because the fraction of this bar that is yellow is the highest compared to that of competitors a third key takeaway here is that our client is the second largest player in terms of revenue at fifteen hundred million dollars so those are the three key takeaways here let's look at the answer choices answer choice one says that the client size suggests it can sustain losses but its costs are high that's wrong because its costs are actually low and so choice two says the clients total revenues are way below that of most of its competitors therefore margins are low that's wrong margins are high for our client answer choice three says that the client's costs are high and margins are low again that's wrong our client has low costs and margins are much higher than competitors answer choice for says on a relative basis the margins are high but on an absolute basis they are lower than those of competitors again this is wrong the margins are high both on a relative and absolute basis so that leaves us with answer choice 5 the client has a low-cost base thus it is best suited to keep prices down it's size suggests that it can sustain losses for some time that's right the clients cost base is low compared to that of competitors therefore it has the largest potential to keep prices down moreover its size suggests financial stability which means it can sustain losses for some time too what do your findings imply about the clients ability to assume price leadership so the client is in a good position to establish price leadership the client needs to increase prices the client needs to reduce prices so 2 & 3 here are wrong we already calculated that we should not increase or reduce prices or hurts revenues I think the only conclusion we can make here is that the client is in a good position to establish price leadership if other competitors lower prices our client can also lower prices and since we have a lower cost structure we will have higher profits or we'll be able to sustain losses longer than that of competitors so I answer choice 1 given its low costs and high margins the client is in good position to keep prices low and maintain price leadership okay so we're looking at this graph again looking at the graph how would you assess the long term development of the industry given the price increase even before I look at the answer choices I think in the long term a lot of airlines will drop out because they have a higher cost structure if prices continue to drop these higher cost structure airlines can no longer make a profit off of sales so they'll drop out and so I think then our client will have an opportunity to take on more market share and more customers from kind of these competitors that have dropped out of the market so let's see what we have here number one says companies have high margins given that demand is inelastic prices across the board would increase so that's wrong prices are elastic option choice two competitors have low margins given that demand is elastic and price increases are not possible many companies will not be able to maintain their profitability in the long run I agree with two that's basically the prediction we made the answer choice three given that price increases are not possible the players with the largest revenues will fare better as they control the largest market share I don't agree with this it's the players with the lowest cost structure that are gonna fare better answer choice for the total revenues for the industry have grown with an increase in ticket prices increasing ticket prices seems to be a viable way of remaining profitable no we previously calculated increasing prices actually decreases revenues and finally answer choice five many companies have low margins given that demand is inelastic so already know this is wrong because demand is elastic so answer choice to hear companies have low margins demand is elastic price increases not possible so many companies will not be able to maintain profitability in the long run great what does this imply for the industry in the long run the answer choice one there would be no need for action the current players would continue as they do now okay I think it's never really a good answer if you're saying there's no action right there's at least something you need to kind of focus your attention on answer choice too many loss-making players would think about leaving the industry there may be opportunities in the longer term for stronger players including our client to take over routes great exactly what kind of we predicted I like answer choice two here answer choice three the industry would be more attractive and more players could enter the market that's wrong the industry would you know is not an attractive industry and players would actually be dropping out of the market so clearly answer choice two here what would you like to recommend to the client okay answer choice one the client slow costs and financial stable position implied that it can keep prices down and sustain losses for some time thus it should not increase prices and thereby try to establish price leadership in the market okay I agree with that the answer choice 2 since the client is a stronger player it can take over other weaker players so while I do think the client can capture share from other players in the longer term it's not really kind of taking it over it's more so waiting for the other players to leave the market due to the clients low cost leadership so my recommendation here is answer choice 1 is there anything else okay though the client has low costs that small size puts a question mark on its financial stability so I don't agree with that so I don't like answer choice one answer choice - yes ultimately the clients low-cost base is the source of its competitive Vantage I agree with that it should keep costs low through measures such as buying cooperatives or optimization of its flight network with a low-cost base and its price leadership in the market the client would be able to increase profitability in the long run I think answer to here is a great choice we have a low-cost basis which is the competitive advantage that a client has and we should prioritize keeping costs low to sustain our competitive advantage right and so then it answers the question of what can we do in the longer term and our solution is in the shorter term will absorb losses but in the longer term as other players drop out of the market we can begin to take on more routes more customers and increase profitability answer choice 3 the client's high costs and small size means it should not be able to keep prices low that's wrong our client has low costs right and again our clients not that small so the answer choice 2 here is our definitive answer all right so it looks like we've finished the case it seems like the interactive case also scores you on rigor business judgment structuring and synthesis so let's see how this goes so well looks like we did quite well huh the box is the 90th percentile so I think kind of the approach we went through made a lot of sense right in this case we tried to focus on taking a logical approach we focused on revenues first looked into price then looked into quantity then we looked into costs we looked into fuel costs and non fuel costs we concluded that in the short term we couldn't do anything so we looked for things in the longer term so that kind of logical approach to kind of completely and exhaustively cover all of the major drivers of profitability and all of our different options I think that was basically the key of solving this case again profitability cases there are very common cases in first round interview so you definitely want to prepare for them they are pretty straightforward to do once you've done a couple of them feel free to take a stab at doing this case on your own and let me know in the comments section below how well you did on this case if you want to see more case walkthrough videos like this please consider giving this video a like and subscribe to my channel for the latest videos