Southwest Airlines A Different World Lga Expansion Value Assume That You Have Been Tasked By Southwest Airlines Swa 1 (278.31 KiB) Viewed 52 times
SOUTHWEST AIRLINES: A DIFFERENT WORLD - LGA EXPANSION VALUE Assume that you have been tasked by Southwest Airlines (SWA) CEO Gary Kelly to determine the financial implications of moving into the LaGuardia market (LGA). Based on the facts provided in the case, you have been asked to create a flexible model that can take into account the possible impacts if LGA operations affect Southwest's larger operations or its brand image. In addition, you will have to balance that potential down-side with the potential upside of running eight (8) flights (or four pairs of flights) in and out of LGA. First, gather the following information from the case: How many seats are in a 737? What is the typical load factor for a Southwest flight? What the average Southwest ticket price? ● Based on historical information, what is the operating income percent (of sales) for Southwest? In other words, of each dollar that Southwest brings in as revenue, how much does it get to keep? Recreate this structure: How Much is Operating Profit from LGA Ticket Sales Alone Worth? $ From LGA Tkt Sales #Flights/Day (max) x% Of Flights Cancelled/Day Ex 6b = # Of Flights Cancelled/Day = Net Flights / Day x Days / Yr = Flights Flown / Yr x Seats Available / Flight = Total Seats Avail/Yr x Load Factor Ex 2 = Total Seats Sold / Yr x Avg Price / Ticket = Sales / Yr x Operating Margin % Ex3 = Operating Margin $ /yr Please provide Gary Kelly with your best analyses to the following questions: 1. How much is in operating margin (profit) is moving into LGA expected to bring in per year? Which of the variable in this model are you most 'iffy' or unsure about? Why? What range would you expect that variable to be in?
2. BONUS: Conduct a sensitivity analysis on the variable and your neighbor's variable, across the ranges that you discussed. Page 1 of 2
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