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Medium Competitive Response Profitability

Travel Wizard

#Transportation #Technology
ProHub Comment

This case requires candidates to think creatively about a disruptive technology threat while conducting rigorous quantitative analysis. The key is estimating demand for the teleportation service between London and New York, then calculating the resulting customer churn across different cabin classes. Candidates must recognize that first-class passengers represent the highest revenue risk and consider both the immediate financial impact and longer-term strategic implications.

Estimated Time 27 minutes
Difficulty Medium
Source IESE
10 / 100

The R&D team of Travel Wizard, a technology innovator, just announced that they have successfully invented a teleportation device which they plan to launch commercially next month. This device consists of a transmission room and a receiver room which can be placed at any distance and this one-of-a-kind device will be able transport a passenger between the two rooms within seconds.

Your client is the owner & CEO of SG Airlines, one of the biggest airlines in the world and she wants to know a few things: (1) How many customers should they expect to lose to Travel Wizard? (2) What will be their annual reduction in profit as a result?

Clarifying Information

  1. Assume that SG Airlines loses customers only to Travel Wizard and to no other player
  2. Travel Wizard only has 2 teleportation rooms for now, and does not intend to create any new teleportation rooms
  3. One room will be placed in New York, while the other one will be placed in London. Each room can act as a transmitter or a receiver room
  4. The main objective for the owner/CEO of SG Airlines is to calculate the loss in profit and to give ideas to turnaround the business
  5. SG Airlines is not looking to enter the teleportation business
Mock Interview
Interviewer

The R&D team of Travel Wizard, a technology innovator, just announced that they have successfully invented a teleportation device which they plan to launch commercially next month. This device consists of a transmission room and a receiver room which can be placed at any distance and this one-of-a-kind device will be able transport a passenger between the two rooms within seconds. Your client is the owner & CEO of SG Airlines, one of the biggest airlines in the world and she wants to know a few things: (1) How many customers should they expect to lose to Travel Wizard? (2) What will be their annual reduction in profit as a result?

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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SG Airlines faces a competitive threat from Travel Wizard’s teleportation device connecting London and New York. The CEO needs to understand how many customers will switch and what the profit impact will be. Through market sizing and demand estimation, candidates calculate approximately 500 lost passengers daily (~180,000 annually), resulting in $363 million lost revenue but maintaining $783 million in revenue next year due to growth assumptions.

Key Insights:

  1. Disruptive technologies can significantly threaten incumbents even with limited initial deployment (only 2 locations)
  2. Premium customers (first class) are most price-sensitive to innovative alternatives and represent outsized revenue risk despite lower volume
  3. Market sizing requires understanding capacity, utilization, and differential churn rates across customer segments
  4. Even major revenue losses may not eliminate business viability if margins are understood and alternative revenue streams are explored
  5. Strategic response requires both defensive measures (pricing, service improvements) and potentially offensive moves (entering new markets or developing competing technology)