RegionFly: Cutting Costs in the Airline Industry Harvard Case Solution & Analysis

RegionFly is a small, private airline specializing in ultra -premium services. After being founded after "Golden Age of airline journey," RegionFly's financial performance was strong for several decades. Not only were premium service providers influenced more substantially, but the recent wave of mergers and acquisitions involving large airlines also leveraged new economies of scale, thereby reducing costs and increasing the competitive pressure on air travel prices. As a consequence of the deterioration in their own financial performance, a larger supplier recently obtained RegionFly, and several top managers were replaced.

Furthermore, top management introduced a new product profitability criterion to be used in support of tactical decisions associated with the makeup of the product mix offering. The application of the new criterion led to the elimination of two of the seven routes included in the portfolio of RegionFly. To the surprise of top management, however, the cost cutting and merchandise -cutting measures did not result in an improvement in the profitability of the company, which, in fact, deteriorated further. As the profitableness of another course falls under the brink, management is faced with an important decision: should the merchandise profitability standard be enforced, thus removing just one more route from the portfolio? "RegionFly: Cutting Costs in the Airline Business" provides an introduction to costs allocations, to the evaluation of product profitability, and to the impact of the methodology used to allocate fixed costs on strategic decisions, like removing product lines or business segments.


This is just an excerpt. This case is about FINANCE & ACCOUNTING

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RegionFly: Cutting Costs in the Airline Industry

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