P
ProHub
English 简体中文 繁體中文
Medium Profitability Pricing Customer Loyalty

The Value of Loyalty

#Transportation #Travel & Hospitality

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 tests quantitative profitability analysis by requiring candidates to model incremental revenues and costs across customer segments before reaching a recommendation. The structure moves from identifying key customer differences, calculating revenue shifts, determining loyalty program costs, and finally assessing overall viability—a strong example of structured problem-solving in pricing and customer economics.

Estimated Time 26 minutes
Difficulty Medium
Source Queen's
24 / 100
Your client is Southwest Air. The CEO wants to institute a loyalty program to boost the number of deluxe seats sold on a given flight. He believes that this strategy will be a good way to capture market share from competitors. How would you evaluate this proposal?

Clarifying Information

  1. Policy is designed so that each mile flown in a deluxe seat per year earns 1 point
  2. Points can be redeemed for free flights at a rate of 10,000 points per flight in a deluxe seat
  3. Deluxe seats cost $500, plus $2 per mile
  4. Regular seats are $300, plus $1 per mile
  5. Instituting this program will cause business travelers to take deluxe seats 75% of the time and recreational travelers to take deluxe 50% of the time.
Mock Interview
Interviewer

Your client is Southwest Air. The CEO wants to institute a loyalty program to boost the number of deluxe seats sold on a given flight. He believes that this strategy will be a good way to capture market share from competitors. How would you evaluate this proposal?

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

Southwest Air CEO proposes a loyalty program to increase deluxe seat sales. The case requires calculating incremental revenues (business segment gains $4,500, recreational gains $1,200) against incremental costs of loyalty rewards (business costs $750, recreational costs $500), yielding strong per-person profit margins that make the program worthwhile, though with caveats about capacity and competitive assumptions.

Key Insights:

  1. Customer segmentation is critical: business travelers (40 flights/year at 250 miles each) drive much higher value than recreational travelers (4 flights/year at 1,000 miles each)
  2. Incremental analysis requires separate before/after calculations for revenue and cost, not just aggregates
  3. Loyalty program cost is determined by redemption value (miles flown × points earned ÷ points per free flight × deluxe seat cost), not by participant acquisition
  4. Missing analysis considerations include new customer acquisition from competitors and capacity constraints if free flights require new flight additions

Practice More Case Interview Questions

Browse 835+ real consulting case interview examples from top firms. Filter by difficulty, company, industry, or case type. Or try our AI mock interview for instant feedback and scoring.

Browse All Cases How to Practice Case Interviews