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Medium Profitability

Transantiago

#Transportation #Non-profit

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 candidates' ability to analyze profitability under uncertainty in a public sector context. The key challenge is working through demand forecasting across multiple COVID-19 scenarios, calculating cost impacts from price and operational changes, and then developing solutions that balance financial viability with social impact considerations.

Estimated Time 27 minutes
Difficulty Medium
Source IESE
19 / 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
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Practice this case with AI Mock Interview

Transantiago faces a projected deficit of 63 MM USD in 2021 due to COVID-19 demand reduction. Candidates must analyze scenarios showing normal ticket demand declining 20% and student ticket demand declining 63%, calculate costs with reduced operations and lower commodity prices, identify the deficit, and recommend balanced solutions addressing revenue, costs, or hybrid approaches.

Key Insights:

  1. Scenario analysis is critical - the pessimistic case shows 30% loss of normal tickets and complete loss of student ridership, requiring risk-aware recommendations
  2. COVID-19 creates offsetting effects: demand drops but fuel/electricity costs decrease and operations reduce, partially mitigating revenue loss
  3. Solutions require balancing financial necessity with public sector social mission - price increases or service cuts create equity concerns for low-income users
  4. Forecasting risk dominates the analysis - all numbers are projections that could vary significantly, suggesting phased implementation rather than permanent changes

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