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Medium Profitability Market Sizing

The Flying Metro

#Airlines/Infrastructure #Transportation
ProHub Comment

This is a comprehensive market sizing and financial modeling case emphasizing supply-side analysis. The candidate must accurately calculate airport capacity, passenger flow, market demand, and apply financial metrics (NPV via perpetuity formula) to determine investment viability. The case tests quantitative precision and strategic thinking about competing transportation modes.

Estimated Time 26 minutes
Difficulty Medium
Source IESE
10 / 100
Your client “Y Invest” is a Private Equity (PE) firm that is considering to buy the rights to construct, build and operate a solo metro line that would connect Times Square in Manhattan (the City Center) to JFK Airport (major airport and one of the world’s busiest airports) in New York. The line operates in both directions (from & to the airport). The firm has hired you to help them determine whether this is a good investment opportunity or not?

Clarifying Information

  1. The goal is to have a positive NPV and to sell the asset the first year that is ready to operate
  2. We forecast that the construction time will be of 1 year
  3. No other metro lines go from the City Center to this airport
  4. Initial Investment is not an issue
  5. 2 Major companies are competing with us
  6. The PE firm has an expertise and has a focus on metro/subway projects
  7. There are 3 Major Airports in NYC – Just focus on JFK for this case, others are not relevant
  8. There are 4 Runways at John Kennedy (JFK) International Airport
  9. Assume that the PE firm has the rights to operate the project for 99 years (only needed for perpetuity formula later on)
Mock Interview
Interviewer

Your client "Y Invest" is a Private Equity (PE) firm that is considering to buy the rights to construct, build and operate a solo metro line that would connect Times Square in Manhattan (the City Center) to JFK Airport (major airport and one of the world's busiest airports) in New York. The line operates in both directions (from & to the airport). The firm has hired you to help them determine whether this is a good investment opportunity or not?

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...
Score coming soon
Practice this case with AI Mock Interview

A PE firm evaluates acquiring rights to build and operate a metro line connecting Manhattan’s Times Square to JFK Airport. Success requires supply-side market sizing (runway capacity, daily operations), identifying target customer segments (comparing taxi, rideshare, bus, and pickup transportation), pricing strategy, and NPV calculation to assess investment return.

Key Insights:

  1. Market sizing should start from supply-side constraints (airport capacity: 4 runways × operations hours) rather than population demand
  2. Customer segmentation and willingness-to-pay analysis reveals pickups as the target market (highest usage share at 33%, lowest satisfaction at 5) indicating pricing opportunity
  3. Ticket pricing strategy bridges competitive analysis ($15-$21 range) with value capture from the underserved pickup market segment
  4. Perpetuity formula application (NPV = Annual Profit / (Interest Rate - Growth Rate)) determines break-even investment at $2,000M CAPEX with $100M annual profit
  5. Zero NPV outcome requires qualitative justification (branding, strategic value, optimization potential) and risk mitigation discussion beyond pure financial metrics