Case Type: pricing & valuation; new business.
Consulting Firm: Celerant Consulting 2nd round job interview.
Industry Coverage: Airlines.
Case Interview Question #00198: Our client EasyJet Airline Company (LSE: EZJ) is a global airline headquartered at London Luton Airport (IATA: LTN, ICAO: EGGW, previously Luton International Airport), United Kingdom. It carries more passengers than any other UK-based airline, operating domestic and international scheduled services on 500 routes between 118 European, North African, and West Asian airports.
EasyJet Airline has proven successful with their efficient operations, even during the recent financial crisis. They are now considering starting a new flight service between Paris and London. There is a larger effort ongoing in making a business case for this flight service and you have been giving the assignment of setting a price for the new Paris-London flight. How would you go about pricing the tickets?
Possible Answer:
Interviewee: So, our client EasyJet is a global airline considering launching a new flight route between London and Paris, and they want to know how to price the tickets?
I think the best way to focus this case will be analyzing the company’s costs need to start-up the line, wonder the income different from the flight ticket and consider the lowest price the company can offer the flight. The next step should guess the flight’s frequency, days/hours of flight and compare with other airlines (not only lowcost but also standar ones, while there should time ranges when no lowcost company is flying) and compare to our lowest price.
I wouldn’t really care about car or EuroStar services, while this competence should be taking into account by the other air companies’ prices, you are entering a new market, no a new product so you should majorly base on your direct competence.
very good points. totally agree
I would also look at fleet sizes and airport sizes of different airliners.
- If other airliners use cost based pricing and have smaller fleet and airport, which give lower fixed cost. As a consequence, the ticket price could be cheaper. (Just a point can be mentioned, difficult to quantify that)
The interviewee hopes for some additional revenue per customers. For example revenue from baggage handling, car rent, hotels and similar … Was the interviewee know the type of passenger? If most passengers are businessman not tourist, (usually businessman have fewer baggage, sleep at company’s place, picked up by company’s car – according to my habit, actually) How can we measure the additional revenue?
I could be wrong, but I think additional revenues are not the major focus in pricing the new flight. Basically this case is all about comparing different competitors’ prices and then offering a price that would make the new flight competitive.