48891322 airlines case study

8/6/2019 48891322 Airlines Case Study

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THE STRATEGY OF MODERN AIRLINES

By:

Manish kumar

Rakesh kumar

Sunil

Navin

Uma shankar



1st CASE

For 80% capacity no. of seats = (80/100)*300 = 240

Variable cost = $20*240 =$ 4800

Fixed cost = $ 50,000

Revenue /sales = $250*240 = $ 60,000

Sales = $60000

(-) Variable cost = $4800

Contribution = $55200

(-) Fixed cost = $50000

Profit = $5200

Profitability = profit/sales = (5200/60000)*100

Profitability = 14.44%

Contribution/sales = (55200/60000)*100 = 92%

P/V Ratio = 92%

BEP = Fixed Cost/PV Ratio

BEP = $54,347

Cost Incurred = Fixed Cost + Variable Cost= $50000 + $4800

Cost Incurred = $54800



2nd

CASE

ECONOMY CLASS BUSINESS CLASS Ist CLASS

SALES = 250*144= 36,000

V.C = 20*144

= 2,880

F.C =(144/240)*50000

= 30,000

SALES = 500*72= 36000

V.C = 40*72

= 2880

F.C 1 = (72/240)*50000

= 15000

F.C 2 = 2500

TOTAL F.C = 17500

SALES = 1000*24= 24000

V.C = 100*24

= 2440

F.C 1 = (24/240)*50000

= 5000

F.C 2 = 2500

TOTAL F.C = 7500

SALES= 36000(-) V.C = 2880

CONTR.= 33120

(-) F.C = 30000

PROFIT = $3120

PROFITABILITY=

PROFIT/SALES= 3120/36000

=8.67%

CONTRIBUTION/SALES =

33120/36000

.92

PV Ratio= 92%

BEP= F.C/PV Ratio= (30000/.92)

BEP = $ 32609

SALES= 36000(-) V.C = 2880

CONTR.= 33120

(-) F.C = 17500

PROFIT =$ 15620

PROFITABILITY=


=43.38%


33120/36000

.92

PV Ratio= 92%


BEP = $19022

SALES= 24000(-) V.C = 2440

CONTR.= 21560

(-) F.C = 7500

PROFIT = $14060

PROFITABILITY=


=58.58%


21560/24000

.898

PV Ratio= 89.8%


BEP = $ 8532

Total Cost Incurred = [2880+30000] + [2880+17500] + [2440+7500] = 63200

Total Revenue = 36000 + 36000 + 24000 = 96000

TOTAL PROFIT= 3120+15620+14060 = $32800



QUESTIONS

Q1. List all the benefits of segmentation to all the stakeholders of the airlines.

Ans. Shareholders are individuals who own stock (also called shares) in a

company in hopes of making a profit. If the company does well, they stand to

make money based on how many shares they bought (own). However, if the

company does badly, then the shareholder stands to lose his/her investment

(money).

Stakeholders are individuals who have an interest in a company, or any

organization and are affected by what happens within the institution based on

rules. Policies, regulations, etc. For example, the stakeholders of a college are the

students, staff, faculty, vendors, etc. They may be directly affected (primary

stakeholders) by what the college does or how it operates. A company's

stakeholders are its customers, employees, suppliers, etc.

Because of segmentation the profit and profitability has gone up it has

become cost effective so the part of profit will be transferred to stakeholders.

Employee- bonus, safety, improved infrastructure, services.

Suppliers- increased business

Customers- best quality at reasonable price, more choices

Shareholders- more dividend, increase in value of share

Government- more tax, employment generation

Q2. Who all could be beneficiaries?

Ans. The beneficiaries are

1) Employees

2) Customers

3) Shareholders



4) Government

5) Suppliers

Q3. Do you think any segment is subsidizing to any other segment? If so who towhom? If no why not? What do you understand by absolute satisfaction &

relative satisfaction? Do you think that there is a possibility that any class may feel

relatively dissatisfied although absolutely satisfied? When would that happen?

How would management prevent it?

Ans. No segment is subsidizing for other because they are getting services as per

their fares.

Absolute Satisfaction- Customer is satisfied with the service provided irrespective

Of what others are getting.

Relative Satisfaction- customer feels that there is difference in value service &

satisfaction given to him & to others.

Q4. When can segmentation go wrong? How to avoid segmentation from going

wrong? What precautions to take?

Ans. Price shoud b3e in the ratio of benefits given.When difference in price is not

according to the service provided. No proper marketing is done prior to segment

improper allocation of seats & facilities.

Precautions- understanding the need of different classes and pricing

proportionate to benefit.

48891322 airlines case study

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