Interviewer view · keep this screen to yourself
A low-cost rival enters an airline's best route
You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.
Case timer
00:00
1. Read the prompt aloud
Read it slowly, then pause. Let the candidate ask questions before they structure.
A full-service Australian airline flies about 2,000 passengers a day from Sydney to Melbourne, and about the same number back; the case works on one direction. A low-cost rival has just started flying the route at much lower fares. How should the airline respond?
Format note: Candidate-led: you drive the analysis and ask for fares, costs, and customer segments; the interviewer answers and challenges.
2. Answers to clarifying questions
Give these answers only if the candidate asks. If they ask something not listed, give a sensible answer or say it does not matter here.
If asked: Why has the rival entered this route?
Answer: It is a low-cost airline growing fast in Australia, and this is the busiest route it does not yet fly.
If asked: Is its cost per seat lower than ours?
Answer: Yes, clearly, so it can keep low fares for a long time.
If asked: What does the client want to protect: passengers or profit?
Answer: Profit on the route.
3. The hypothesis a strong candidate states
Listen for an early, testable guess like this one. It does not need to match word for word.
A rival with lower costs can win a fare war, so my hypothesis is that we should not match fares, and should instead protect the passengers who value what we offer, such as business travelers, and cut capacity to fit.
4. A model structure
Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.
- Compare route profit under each response, one move ahead
- Understand the move: can the rival last?
- Key: Options: match, hold, a basic fare for leisure, change capacity
- Profit per day under each, and the point where the answer flips
5. The working, step by step
Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.
Step 1: Profit today
What a strong candidate does: Candidate: "What do we earn per passenger?" Interviewer: "The average fare is AUD 200, and contribution after fuel, fees, and catering is AUD 80."
Contribution today (AUD a day): 2,000 × 80 = 160,000
Step 2: Option 1: match the rival
What a strong candidate does: Candidate: "What is the rival charging?" Interviewer: "About AUD 130." Candidate: "Matching cuts AUD 70 from every fare, which leaves almost nothing, even if we keep every passenger."
Contribution if we match (AUD a day): 2,000 × (80 - (200 - 130)) = 20,000
Step 3: Option 2: hold fares
What a strong candidate does: Candidate: "Who flies with us?" Interviewer: "40 percent are business travelers, and we expect to lose about 5 percent of them. The other 60 percent are leisure travelers, and we could lose 40 percent of them."
Contribution if we hold (AUD a day): 2,000 × (0.4 × 0.95 + 0.6 × 0.6) × 80 = 118,400
Step 4: Option 3: a basic fare for leisure
What a strong candidate does: Candidate: "What if we offer leisure travelers a basic fare of AUD 150, with no bag and no changes?" Interviewer: "That keeps about 85 percent of them, at AUD 30 of contribution each."
Contribution with a basic fare (AUD a day): 2,000 × 0.4 × 0.95 × 80 + 2,000 × 0.6 × 0.85 × 30 = 91,400
Step 5: When would the basic fare win?
What a strong candidate does: Interviewer: "What if the rival adds flights and leisure losses grow?" Candidate: "Holding stays better for leisure travelers until we lose about 68 percent of them."
Leisure loss at which the basic fare wins (%): (1 - (0.85 × 30) ÷ 80) × 100 = 68.13
Step 6: Capacity to remove
What a strong candidate does: Holding loses about 520 passengers a day, close to three full flights of 180 seats. Flying those seats empty would add cost for no revenue.
Lost passengers in 180-seat flights: (2,000 - 2,000 × (0.4 × 0.95 + 0.6 × 0.6)) ÷ 180 = 2.89
The recommendation to listen for
At the end, say: "The CEO walks in. What is your recommendation?"
Hold fares, protect business travelers, and cut about three daily flights on the route. First, matching the rival would cut contribution from AUD 160,000 to AUD 20,000 a day, because the rival's lower costs let it charge fares we cannot afford. Second, holding keeps about AUD 118,400 a day, more than a leisure basic fare at about AUD 91,400, and holding stays better unless leisure losses pass about 68 percent. Third, the passengers we lose fill almost three flights, so moving those aircraft to other routes protects profit further. Invest in what business travelers value, such as schedule and lounges, and review the leisure basic fare if leisure losses pass 60 percent.
Risks a strong answer names: The rival may add many more flights, pushing leisure losses higher; Cutting flights may hurt the schedule that business travelers value; Some business travelers may switch if their employers change travel rules.
Next steps: Track bookings by segment weekly for the first three months; Identify the three flights with the most leisure passengers to cut or move; Survey business customers on schedule and lounge priorities.
Strong versus weak
A strong answer
Asked why the rival entered and whether it could last, compared four options on profit by segment, found the point where the answer flips, and adjusted capacity.
A weak answer
Matched the rival's fares to keep market share, which kept every passenger but wiped out almost all the route's contribution.
Score the candidate
Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.
This case has no exhibit. Score Exhibit reading on how the candidate used the data you gave them: did they pick out the number that matters and say what it means?
Total
0 out of 25
Score all five criteria to see the band and the feedback template.