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Medium Profitability

Sardine Airlines

#Transportation
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This case teaches candidates to drill down into cost structures systematically, moving from high-level observations (SG&A growth) to specific expense drivers (Marketing, Rent, Customer Service). The interviewer guidance strategically steers candidates away from cutting maintenance (regulatory risk) and marketing (stakeholder priority), forcing them to identify the actual levers for profitability improvement. The case rewards structural thinking—identifying that rent and customer service outsourcing are both viable, offering significant savings totaling $78.8M.

Estimated Time 27 minutes
Difficulty Medium
Source Duke
10 / 100

Sardine Airlines is an ultra low-cost carrier with flights throughout the continental United States. They have hub airports in Oakland, California; Tulsa, Oklahoma, and Hartford, Connecticut. Sardine Airlines is facing increased pressure from other low-cost carriers such as Cattle Car Air and Soul Airlines.

Sardine Airlines has faced declining profit for the past year. Sardine’s CEO, Penny McPincher, has asked your team for advice on how to reverse the profitability trend.

Clarifying Information

  1. Sardine Airlines competes primarily on having the lowest cost fares and offering minimal service
  2. Due to its business model Sardine Airlines has a culture of cost savings that can be passed to the customer
  3. Sardine Airlines is trying to grow profit margin to 20% (profit margin is net income/total revenue)
  4. If the interviewee asks about revenues/costs, give them Exhibit 1, Statement of Operations
Mock Interview
Interviewer

Sardine Airlines is an ultra low-cost carrier with flights throughout the continental United States. They have hub airports in Oakland, California; Tulsa, Oklahoma, and Hartford, Connecticut. Sardine Airlines is facing increased pressure from other low-cost carriers such as Cattle Car Air and Soul Airlines. Sardine Airlines has faced declining profit for the past year. Sardine's CEO, Penny McPincher, has asked your team for advice on how to reverse the profitability trend.

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
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Practice this case with AI Mock Interview

A low-cost airline facing profitability decline needs to achieve a 20% profit margin. Candidates must analyze financial statements to identify that SG&A costs (particularly customer service and rent) have grown disproportionately, then develop actionable recommendations to cut these costs through headquarters relocation and outsourcing the call center to reduce expenses by $78.8M.

Key Insights:

  1. Profitability analysis requires breaking down aggregate cost categories into specific drivers—the $428M SG&A expense masks that only 3 areas (Marketing, Rent, Customer Service) are materially growing
  2. Stakeholder constraints matter: Marketing and maintenance are off-limits despite high costs, narrowing the solution space and reflecting real-world consulting complexity
  3. Location arbitrage and operational outsourcing (moving HQ to cheaper markets, offshore call centers) are viable cost reduction levers in service industries
  4. The 20% target profit margin ($57.6M added profit) is the quantitative north star that helps candidates evaluate which cost reductions meaningfully move the needle