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Medium Profitability

Sardine Airlines

#Transportation #Airlines
ProHub Comment

This case requires candidates to diagnose a profitability decline using financial statements and identify that SG&A (specifically customer service and rent) is the primary driver. The case tests analytical skills in cost-structure analysis and strategic decision-making under constraints, as marketing and maintenance cannot be cut due to competitive and regulatory considerations.

Estimated Time 15 minutes
Difficulty Medium
Source Duke
50 / 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% (net income/total revenue)
  4. If the interviewee asks about revenues/costs give them Exhibit 1, Statement of Operations