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Medium Growth Strategy Profitability

Sardine Airlines

#Transportation

Practice this intermediate growth strategy case interview question in the Transportation sector. Includes detailed problem prompt, clarifying questions, structured framework, and expert recommendation. Part of ProHub's 835+ consulting case library.

ProHub Comment

This case tests the candidate's ability to synthesize financial data from multiple exhibits to identify the root causes of profit decline, then develop actionable recommendations. The case specifically trains candidates to distinguish between cost-cutting opportunities (SG&A) and areas where cost reduction is constrained by regulatory or strategic considerations (maintenance, marketing). The interviewer guidance reveals that multiple solution paths exist, but certain constraints (FAA maintenance supervision, CEO priorities on marketing) eliminate obvious options.

Estimated Time 26 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% (INTERVIEWER GUIDANCE: 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

An ultra-low-cost airline facing competitive pressure and declining profits needs strategic advice. Analysis of financial statements reveals SG&A as the primary profit driver (increasing from 15% to 20% of revenue). The recommended solution focuses on outsourcing customer service to reduce costs by ~$38M and relocating headquarters to a lower-cost hub to achieve the CEO’s 20% profit margin target.

Key Insights:

  1. Passenger revenue declined 0.37% in 2015 despite historical growth, indicating competitive market saturation and the primary threat to profitability
  2. SG&A expenses grew from $309M (15% of revenue) in 2014 to $428M (20% of revenue) in 2015—this line item, not fuel or landing fees, is the key lever for profitability improvement
  3. Within SG&A, three categories drive growth: Marketing ($24M increase), Rent ($40M increase), and Customer Service ($52M increase)—marketing is protected by leadership, leaving rent and customer service as viable cost reduction targets
  4. Regulatory constraints matter: the FAA removed Sardine from maintenance supervision in June 2015, making any maintenance cost cuts risky and thus an inappropriate recommendation despite the 10% of revenue spending
  5. The case demonstrates that good consulting requires understanding not just what can be cut, but what should not be cut due to strategic, regulatory, or operational constraints