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BCG Hard Investment Decision Growth Strategy Financial Analysis

GREEN AIRLINES

#Airlines #Aviation
ProHub Comment

This is a sophisticated case requiring candidates to move beyond surface-level financial analysis. While the revenue calculations appear favorable ($10M/month), the real strategic challenge lies in understanding why a small regional airline should enter a highly competitive market dominated by larger carriers, and how to create value through a buy-operate-sell strategy rather than long-term operations.

Estimated Time 15 minutes
Difficulty Hard
Source IESE
50 / 100
Due to the recent bankruptcy of a major airline, the aviation authority from Brazil recently opened an auction for landing and takeoff slots in one of the country’s biggest airports. A slot is the right to land and depart from an airport during a given period of time. Green Airlines, a small, regional airline operating in the North part of the country, was offered 10 slots, for the total price of $100M. If Green accepts to buy the slots, it would have to operate them for at least 5 years. The owner and CEO of Green Airlines approached your firm looking for an advice on whether they should buy the slots or not.

Clarifying Information

  1. An airport slot is a permission granted by the owner of an airport designated, which allows the grantee to schedule a landing or departure at that airport during a specific time period.
  2. Green airlines currently does not operate in that particular airport
  3. Green airlines currently only does regional flights and has no plans to include international flights in its offerings
  4. Green airline currently does not have the necessary planes to operate the slot. Management will need to lease 5 airplanes to operate the 10 slots.
  5. The $100M that Green Airlines would have to pay is a one-off payment due before operations start
  6. The main objective of the owner/CEO is financial gain
  7. Green Airlines can sell the slots, but only after five years of operation
  8. If Green Airlines does not buy the slots, they will be sold to another airline