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Medium Profitability Cost-Benefit Analysis

Transantiago

#Transportation #Public Sector
ProHub Comment

This case tests the candidate's ability to build a comprehensive profitability model for a public sector organization under crisis conditions. It requires strong quantitative skills to connect demand forecasts with cost impacts, scenario analysis thinking to understand downside risks, and stakeholder awareness given the social impact of transportation decisions.

Estimated Time 15 minutes
Difficulty Medium
Source IESE
50 / 100
Transantiago is the public transportation system of Santiago de Chile. It is managed by the Ministry of Transportation and has more than 5 million users, integrating all the city’s urban buses and subway. Transantiago’s main source of revenue is the one generated by the tickets sold. They have two types of tickets. One normal ticket, that has a price of 2 dollars per trip, and one discounted tickets, that has a price of 1 dollar. With this revenue, plus a fixed subsidy of 900 Million USD, Transantiago must cover all their operating costs of the year. Suppose it is April 2021. The Ministry of Transportation has called you because, After Covid-19, Transantiago has been experiencing a substantial decrease in the demand and is worried if they to cover all their operating costs. That’s why they want you to investigate all the possible impacts of Covid-19 and see how they will be able to cover all their operating costs this year.

Clarifying Information

  1. The main goal is to see if they will be able to cover all their operating costs this year
  2. The only actual source of revenue is the transportation tickets sold
  3. Each ticket can be used in buses and subway or mixing both
  4. The only price discrimination is if it is a student or not