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Medium Profitability

Sardine Airlines

#Transportation

Practice this intermediate profitability 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 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 26 minutes
Difficulty Medium
Source Duke
24 / 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
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
Practicing...
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Practice this case with AI Mock Interview

Sardine Airlines, an ultra-low-cost carrier, faces declining profits despite growing revenues. The candidate must analyze financial data to recommend cost reductions targeting the 20% profit margin goal. The solution focuses on relocating headquarters and outsourcing customer service to reduce SG&A expenses.

Key Insights:

  1. SG&A increased from 15% to 20% of revenue year-over-year, identifying the primary profitability driver
  2. Three SG&A components drive growth: Marketing ($24M increase), Rent ($40M increase), and Customer Service ($52M increase)
  3. Strategic constraints exist: marketing cannot be cut (competitive necessity), maintenance cannot be cut (FAA oversight), forcing focus on customer service and rent
  4. Headquarters relocation to Tulsa or Hartford saves 40% on rent (~$34.4M); overseas call center transition saves ~$38M
  5. Customer service quality degradation and one-time moving costs are key implementation risks

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