Case Prompt:
A major airline is thinking about buying a route that goes from Tokyo to New York. They want to figure out if this route is a good idea or not. The best way to do this is by looking at how much money they can make (profitability analysis). It's about seeing if the money they get from selling tickets is more than what it costs them to operate the route. To decide, they'll also need to think about how many people will want to fly, what other airlines are doing, and how much it will cost to run the planes.
Suggested Approach:
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Profitability Analysis:
- Check if the money they make from selling tickets (revenue) minus what it costs to operate the route (costs) gives them a profit.
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Factors for Revenue:
- Understand how many people want to fly and at what price. Also, check what the competition is doing and if they can attract passengers from other airlines.
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Factors for Costs:
- Estimate how much it will cost for fuel, landing rights, and other necessary expenses.
Analysis:
The airline needs to carefully calculate if they'll make more money from this route than it will cost to operate it. This involves considering how many people will choose to fly, what they'll pay for tickets, and how much it will cost to run the flights. Also, it's important to think about the impact on other routes they have, like Tokyo-LA and Tokyo-New York, and decide what's better—losing passengers to cannibalization or to competitors.
