Case Interview Question #00189: Your client US Airways, Inc. is a major airline based in Tempe, Arizona, United States. The airline is an operating unit of US Airways Group (NYSE: LCC) and is the 6th largest airline by traffic and 8th by market value in the country. US Airways operates major hubs in Charlotte, Phoenix and Philadelphia and maintains focus city operations at Ronald Reagan Washington National Airport.
The U.S. domestic airline industry is extremely competitive and airline companies frequently sustain large losses. Consequently, decisions that involve even small outlays of cash are carefully considered.
Question #1: The client US Airways has ugly planes. Should it re-paint them?
- Most airlines paint their planes to match their corporate logo or as part of a brand image campaign.
- US Airways has updated its brand image/marketing materials, but has not yet painted its planes.
- The client US Airways’ planes are currently painted with a logo/image dating from the mid-1980’s in colors currently considered out-of-date.
- The airline industry is a fixed-cost business. Adding passengers does not increase costs very much. Thus, the client should do whatever is required to fill the planes.
- If customers think the planes are ugly, they will fly an airline with better-looking planes.
- The customer segment that cares about plane appearance is the vacation traveler who travels out of non-hub cities.
- Re-painting planes costs about $500,000 per plane, the expected revenue increase due to painting planes is 1%.
- US Airways’ fleet currently has 350 mainline jet airplanes and total Revenues of $10 billion.