Problem Definition
AeroLink is a mid-size European airline operating a fleet of 42 Airbus A320neo aircraft, generating EUR 1.8 billion in annual revenue. Following an aggressive post-COVID expansion, the airline added 28 new routes between 2023 and 2025, primarily targeting underserved city pairs across Europe and the Middle East. The strategy was designed to capture pent-up travel demand and establish AeroLink in markets vacated by failed competitors during the pandemic downturn.
However, the expansion has strained the airline's economics. Approximately 40% of new routes — 11 routes — are underperforming, with load factors below 65% compared to the network average of 82%. The airline's cost per available seat kilometer (CASK) has risen to EUR 0.058, significantly above its closest competitor EuroJet at EUR 0.049. The EUR 0.009 gap translates to a substantial cost disadvantage at network scale. As a result, AeroLink's EBIT margin has eroded to 3%, well below the industry benchmark of 8-10% for well-run European carriers.
The board is divided. Some directors want to cut all underperforming routes immediately and return to the pre-COVID network footprint. Others argue the new routes need more time to mature and that cost discipline, not network shrinkage, is the real issue. The CEO has asked your team to evaluate the route network, identify which routes to cut and which to protect, and develop a plan to bring CASK in line with competitors. The target is to restore EBIT margin from 3% to 8% within two years — what is your plan?
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- Single fleet type (A320neo, 180 seats) to minimize maintenance complexity
- The airline's hub is at a secondary European airport with lower landing fees than legacy hubs
- Labor agreements limit crew redeployment across base cities without renegotiation
- Fuel costs are hedged at current market rates through mid-2027
- 60% of tickets sold through third-party OTAs; the competitor benchmark is 40%
- Network connectivity (connecting passengers) accounts for 15% of total traffic
- AeroLink operates from four crew base cities
- Average aircraft utilization is 9.2 block hours/day vs. 11.5 at EuroJet
- The Athens-Dubai route was launched to serve growing business travel demand between Southern Europe and the Gulf
Question 1Structuring
Prompt: "How would you structure your analysis to determine which routes AeroLink should cut, which it should invest in, and how to close the CASK gap?"
Hint · Structuring
Build 3–4 branches that are specific to this client and question, not a generic framework. Check they don't overlap and together cover the problem.
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A strong structure covers three interconnected pillars:
Pillar 1 — Route Economics (Which routes earn their keep?)
- Contribution per flight: Revenue per flight (seats x load factor x yield) minus operating cost per flight
- Weekly and annual contribution to identify total network impact
- Load factor trajectory: Is the route ramping up or stagnating?
Pillar 2 — Cost Gap (Where is the EUR 0.009/ASK leaking?)
- Decompose CASK into categories and benchmark each against competitor
- Identify structural gaps (fuel hedging, airport fees) vs. addressable gaps (crew productivity, maintenance efficiency, distribution costs)
- Quantify the savings potential of each category
Pillar 3 — Network and Fleet Optimization (What is the system-level impact?)
- Connecting traffic: Does cutting Route A reduce passengers on Route B?
- Fleet redeployment: Can freed aircraft grow profitable routes?
- Crew and base implications: Does cutting a route allow consolidation of a crew base?
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Provide this question before sharing any exhibits. The candidate should build a custom framework, not recite a generic profitability tree.
Good (3): Identifies two pillars — route-level profitability and cost reduction — but treats them independently. May default to a revenue vs. cost split without tailoring to airline-specific metrics. Mentions load factor as the key metric for route evaluation.
Strong (4): Builds a three-part framework: (1) Route-level contribution analysis using airline metrics (load factor, yield, RASK vs. CASK), (2) CASK gap decomposition by cost category to identify addressable vs. structural gaps, (3) Network effects — recognizing that cutting a feeder route may hurt the load factor of connecting routes. Explicitly states that load factor alone is insufficient and yield per passenger matters.
Excellent (5): All of the above, plus: (1) Introduces a route maturity lens — new routes need 12-18 months to reach steady-state load factors, so cutting too early destroys option value, (2) Considers fleet redeployment — freed aircraft from cut routes can be redeployed to expand high-performing routes, creating a double benefit, (3) Flags that CASK and route decisions are interdependent — cutting low-utilization routes mechanically improves CASK by increasing average aircraft utilization.
Question 2Numeracy
Prompt: "Let me share some route data with you. (Hand Exhibit 1.) Looking at the three routes with the lowest load factors — Athens-Dubai, Madrid-Lisbon, and Milan-Prague — calculate each route's contribution per flight and annual contribution. Based on your analysis, which route should AeroLink prioritize for cuts?"
Hint · Numeracy
Write the formula before you plug in numbers, keep units and zeros explicit, and sanity-check the order of magnitude at the end.
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Provide Exhibit 1. If the candidate asks about cost allocation: "The operating cost per flight in the exhibit includes all direct and allocated costs for that route — fuel, crew, maintenance, airport fees, and overhead allocation."
Exhibit 1Selected Route Performance (Q4 2025)
| Route | Weekly Flights | Seats | Load Factor | Yield/Pax | Op. Cost/Flight (EUR K) |
|---|---|---|---|---|---|
| London-Barcelona | 14 | 180 | 80% | EUR 100 | 12.0 |
| Paris-Rome | 12 | 180 | 85% | EUR 110 | 12.5 |
| Amsterdam-Berlin | 10 | 180 | 70% | EUR 80 | 7.0 |
| Athens-Dubai | 4 | 180 | 52% | EUR 340 | 25.0 |
| Madrid-Lisbon | 8 | 180 | 58% | EUR 65 | 6.0 |
| Frankfurt-Stockholm | 7 | 180 | 64% | EUR 115 | 10.5 |
| Munich-Warsaw | 6 | 180 | 88% | EUR 90 | 8.0 |
| Milan-Prague | 5 | 180 | 60% | EUR 80 | 7.5 |
Source: AeroLink case file
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Step-by-Step Solution
Step 1 — Revenue per flight
| Athens-Dubai | Madrid-Lisbon | Milan-Prague | |
|---|---|---|---|
| Seats | 180 | 180 | 180 |
| Load factor | 52% | 58% | 60% |
| Passengers | 94 | 104 | 108 |
| Yield per pax | EUR 340 | EUR 65 | EUR 80 |
| Revenue/flight | EUR 31,960 | EUR 6,760 | EUR 8,640 |
Passengers rounded to nearest whole number (93.6 -> 94, 104.4 -> 104). Accept any reasonable rounding.
Step 2 — Contribution per flight
| Athens-Dubai | Madrid-Lisbon | Milan-Prague | |
|---|---|---|---|
| Revenue/flight | EUR 31,960 | EUR 6,760 | EUR 8,640 |
| Op. cost/flight | EUR 25,000 | EUR 6,000 | EUR 7,500 |
| Contribution/flight | EUR 6,960 | EUR 760 | EUR 1,140 |
Step 3 — Annual contribution
| Athens-Dubai | Madrid-Lisbon | Milan-Prague | |
|---|---|---|---|
| Weekly flights | 4 | 8 | 5 |
| Weekly contribution | EUR 27,840 | EUR 6,080 | EUR 5,700 |
| Annual (x52 weeks) | EUR 1,448K | EUR 316K | EUR 296K |
Key Insight
Athens-Dubai has the lowest load factor (52%) but the highest contribution per flight (EUR 6,960) — nearly 6x Madrid-Lisbon and 6x Milan-Prague. Its annual contribution (EUR 1.45M) exceeds the other two routes combined (EUR 0.61M). Cutting Athens-Dubai based on load factor alone would destroy the most value in the network.
Priority for cuts: Milan-Prague (lowest annual contribution, slowest ramp per Exhibit 3) then Madrid-Lisbon. Athens-Dubai should be protected and potentially grown.
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Good (3): Correctly calculates revenue and contribution per flight for all three routes. Identifies that Athens-Dubai is profitable. May not calculate annual figures.
Strong (4): Calculates both per-flight and annual contributions. Explicitly calls out the load factor trap — yield per passenger matters more than seat fill rate. Recommends protecting Athens-Dubai.
Excellent (5): All of the above, plus: Frames the insight in terms of revenue quality — business travelers pay 4-5x leisure fares, making low load factors sustainable. Notes that Athens-Dubai's contribution per aircraft-hour is likely the highest in the network given the 3,600 km sector vs. 500-720 km for the other two, meaning the aircraft generates more value per block hour despite fewer weekly frequencies.
Question 3Judgement & Insights
Prompt: "Now look at the CASK breakdown in Exhibit 2 and the route maturity data in Exhibit 3. What are the key drivers of AeroLink's cost disadvantage, and what actions would you recommend?"
Hint · Judgement & Insights
Read the exhibit title, axes and units first. Lead with the ‘so what’, then back it with one or two numbers.
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Provide Exhibits 2 and 3. If the candidate asks about crew structure: "AeroLink operates from four base cities with dedicated crew pools at each base."
Exhibit 2CASK Breakdown: AeroLink vs. EuroJet (EUR cents per ASK)
| Cost Category | AeroLink | EuroJet | Gap |
|---|---|---|---|
| Fuel | 1.80 | 1.70 | 0.10 |
| Crew | 1.00 | 0.80 | 0.20 |
| Maintenance | 0.80 | 0.60 | 0.20 |
| Airport and Navigation | 0.90 | 0.80 | 0.10 |
| Aircraft Leasing | 0.70 | 0.60 | 0.10 |
| Sales and Distribution | 0.40 | 0.30 | 0.10 |
| Administration | 0.20 | 0.10 | 0.10 |
| Total CASK | 5.80 | 4.90 | 0.90 |
Source: AeroLink case file
Exhibit 3Route Maturity and Load Factor Trajectory
| Route | Months Active | LF at Launch | LF Current | Change | Competitor Capacity Share |
|---|---|---|---|---|---|
| London-Barcelona | 36 | 72% | 80% | +8pp | 65% |
| Paris-Rome | 30 | 75% | 85% | +10pp | 68% |
| Amsterdam-Berlin | 8 | 62% | 70% | +8pp | 70% |
| Athens-Dubai | 10 | 44% | 52% | +8pp | 78% |
| Madrid-Lisbon | 6 | 50% | 58% | +8pp | 73% |
| Frankfurt-Stockholm | 9 | 55% | 64% | +9pp | 72% |
| Munich-Warsaw | 24 | 78% | 88% | +10pp | 33% |
| Milan-Prague | 7 | 54% | 60% | +6pp | 64% |
Source: AeroLink case file
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Driver 1 — Crew costs (EUR 0.20 cent gap, 22% of total CASK gap)
- Root cause: Four crew bases for 42 aircraft creates small crew pools at each base, leading to high reserve ratios and deadheading costs
- Action: Consolidate from four bases to two or three, improving crew utilization
- Implication: Directly addresses the largest controllable cost gap; achievable within 12 months through natural attrition and voluntary transfers, but labor agreements create negotiation risk
Driver 2 — Maintenance costs (EUR 0.20 cent gap, 22% of total CASK gap)
- Root cause: Low aircraft utilization (underperforming routes reduce daily block hours) means fixed maintenance checks are spread over fewer ASKs
- Action: Cut 2-3 weakest routes and redeploy aircraft to high-performing routes, increasing daily utilization from approximately 9 to 11 block hours
- Implication: Improves maintenance CASK without changing the maintenance program — pure dilution through higher output
Driver 3 — Distribution costs (EUR 0.10 cent gap, 11% of total CASK gap)
- Root cause: 60% OTA dependency vs. 40% at competitor; OTA commissions run 15-20% vs. 2-3% for direct bookings
- Action: Invest in direct booking channels (app, website) and NDC-based distribution to shift 15-20pp of volume to direct over 18 months
- Implication: Reduces per-booking cost significantly with relatively low capital investment
Exhibit 3 Insight — Route maturity as a decision filter:
- Routes under 12 months should be evaluated on trajectory, not absolute load factor — the mature routes (London-Barcelona, Paris-Rome) took 24-36 months to reach 80%+ load factors
- Milan-Prague is the weakest new route: only +6pp in 7 months vs. +8-9pp for similarly aged routes (Amsterdam-Berlin +8pp in 8 months, Frankfurt-Stockholm +9pp in 9 months) — this is the strongest cut candidate
- Munich-Warsaw dominates its market (67% AeroLink capacity share vs. 33% competitor) and should be protected and grown as a competitive stronghold
- Athens-Dubai is gaining share in a market where competitors hold 78% of capacity — this resilience despite competitive pressure signals durable demand
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Good (3): Identifies that crew and maintenance are the largest cost gaps (EUR 0.20 cents each, representing 44% of the total gap). Recommends hiring fewer crew and renegotiating maintenance contracts. Mentions that new routes are still ramping up.
Strong (4): Connects CASK to route decisions — underperforming routes reduce aircraft utilization, which inflates crew and maintenance costs per ASK because fixed crew costs and scheduled maintenance are spread over fewer revenue-generating flight hours. Cutting unprofitable routes and redeploying aircraft would mechanically improve CASK. Notes that Milan-Prague has the weakest trajectory (+6pp vs. +8-9pp for peers of similar age) and should be first to cut. Identifies the OTA distribution dependency as an addressable cost lever (60% OTA vs. 40% competitor).
Excellent (5): All of the above, plus three deeper insights:
- So What Level 1: The Sales and Distribution gap (EUR 0.10 cents) maps directly to the 60% vs. 40% OTA dependency — shifting 20pp of volume to direct channels at EUR 2-3 cost vs. EUR 15-20 OTA commission would close most of this gap
- So What Level 2: Athens-Dubai's +8pp improvement despite 78% competitor capacity share suggests strong underlying demand and weak competitive response — adding a 5th weekly frequency could improve per-flight economics through better schedule attractiveness to business travelers who value frequency
- So What Level 3: Four crew bases for 42 aircraft is likely suboptimal — consolidating to 2-3 bases could reduce crew deadheading and reserve ratios, directly addressing the EUR 0.20 cent crew gap. This requires union negotiation (flagged in additional info), making it the key implementation risk
Question 4Synthesis
Prompt: "The CEO has five minutes before the board meeting. What is your recommendation?"
Hint · Synthesis
Answer first: the recommendation, two or three reasons with numbers, then risks and next steps.
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"AeroLink's margin erosion stems from spreading 42 aircraft too thinly across too many new routes. The fix is not to retreat, but to concentrate — fewer routes, operated more intensively, with a leaner cost base.
Three phases over 24 months:
Phase 1 (Months 1-6): Cut and redeploy — targeting EUR 20M EBIT impact
- Cut the 3-4 weakest routes (Milan-Prague, Madrid-Lisbon, and 1-2 others with annual contribution below EUR 500K and weak trajectory)
- Redeploy freed aircraft to add frequency on Athens-Dubai, Munich-Warsaw, and other high-contribution routes
- Net effect: Higher network contribution plus improved fleet utilization
Phase 2 (Months 3-12): CASK reduction — targeting EUR 50M EBIT impact
- Consolidate from four crew bases to two or three, reducing crew deadheading and reserve costs
- Shift 15-20pp of distribution from OTAs to direct channels
- Higher aircraft utilization from Phase 1 mechanically improves maintenance CASK
Phase 3 (Months 6-24): Revenue quality — targeting EUR 20M EBIT impact
- Grow high-yield routes following the Athens-Dubai model — identify 2-3 similar underserved business city pairs
- Allow remaining new routes to mature (most are on healthy +8pp/year trajectories)
- Introduce fare segmentation on leisure routes to lift average yield by 5-10%
Path to 8% EBIT: Current EBIT is EUR 54M (3% of EUR 1.8B). These three phases target EUR 90M of combined improvement, bringing EBIT to approximately EUR 144M — an 8% margin on the current revenue base.
Key risk: Crew base consolidation requires union negotiation. If delayed beyond Month 6, Phase 2 delivers only EUR 30M instead of EUR 50M, and the margin reaches 6.5% — still a major improvement but short of the 8% target. Early engagement with unions — framing consolidation as voluntary transfers with relocation packages rather than layoffs — is critical to the timeline.
What I would not do: Cut Athens-Dubai despite its 52% load factor. Our analysis shows it generates EUR 1.45M in annual contribution — more than Milan-Prague and Madrid-Lisbon combined. Load factor is a misleading metric when yield per passenger varies by 4-5x across routes.
Immediate next step: Complete route-by-route contribution analysis across all 28 new routes to finalize the cut list, prioritized by lowest annual contribution and weakest load factor trajectory."
Contributed by CaseDrill practice community
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Good (3): Recommends cutting the weakest routes and reducing costs. Mentions the Athens-Dubai insight. Provides a directional answer without quantification.
Strong (4): Delivers a structured recommendation with three actions, rough quantification of each, and a timeline. Addresses route portfolio, CASK reduction, and revenue quality. Notes risks and next steps.
Excellent (5): All of the above, plus: Frames the recommendation around a unifying strategic insight — that AeroLink's problem is not over-expansion but under-optimization. The airline needs fewer routes operated more intensively, not a retreat to its pre-COVID network. Quantifies the path to 8% EBIT and identifies the key assumption that must hold. Proposes a phased approach with decision gates.