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Your client is SkyLink Airlines, a regional carrier operating several short-haul routes across the Midwest. The CEO is concerned that despite steady passenger growth, overall profitability has stagnated.
They’ve asked you to review the airline’s portfolio of routes. You’ve been given an exhibit showing route-level performance, where each dot represents a city route. The size of the dot corresponds to the total tickets sold, the x-axis shows average ticket yield ($/passenger), and the y-axis shows the operating margin (%) for that route.
Analyze the exhibit. Which routes should SkyLink expand, maintain, or cut? What strategic next steps should they take based on your findings?
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Your answer:
📋 Solution:
First, note that the exhibit shows three key dimensions: average ticket yield (x-axis), operating margin (y-axis), and tickets sold (dot size). The task is to determine which routes to expand, maintain, or cut.
- Start by scanning the axes.
- Routes in the upper-right (high yield, high margin) are the best performers.
- Routes below the x-axis (negative margin) are losing money and candidates for exit.
- Routes in the middle need closer inspection.
- Identify strong performers.
- Chicago has 5M tickets sold, strong yield, and a 15% margin.
- Detroit has smaller volume (1.2M) but the highest yield at $200 and a 20% margin.
→ These two routes are highly profitable and should be expanded.
- Spot weak performers.
- Minneapolis (0.6M tickets, -10% margin) is both small and unprofitable.
- Cleveland (0.8M tickets, -5% margin) is similarly unattractive.
→ Both are clear candidates for cutting or restructuring.
- Evaluate “middle ground” routes.
- Kansas City (2.5M tickets, modest yield, ~5% margin). The market is big, but profitability is low. Improving efficiency could make this viable.
- St. Louis (1.2M tickets, ~12% margin). Smaller, but consistently profitable, so it may be worth maintaining.
- Synthesize.
- Expand: Chicago, Detroit
- Maintain / Improve: Kansas City, St. Louis
- Cut: Cleveland, Minneapolis
