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Medium Profitability Cost Reduction

Transantiago

#Transportation #Non-profit
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 27 minutes
Difficulty Medium
Source IESE
10 / 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
Mock Interview
Interviewer

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.

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

Transantiago faces a 63 MM USD deficit after COVID-19 demand impacts. The candidate must analyze revenue from ticket sales and operating costs, evaluate multiple scenarios, and recommend balanced solutions considering both financial viability and social consequences of serving 5+ million users.

Key Insights:

  1. Public sector cases require balancing financial and social impacts—price increases hurt low-income users while cost cuts reduce service quality
  2. Scenario analysis is critical when forecasts are uncertain—the pessimistic case shows student demand could drop 100%, dramatically worsening the deficit
  3. Structure the solution presentation clearly: action first, then reasons, then explicit risk acknowledgment, then forward-looking recommendations
  4. COVID-19 impacts multiple variables simultaneously (demand, fuel costs, workforce needs)—understanding interconnections between these drivers is essential