Rait Kalda, vice president of operations for AS Estonian Air, faced a challenge: how should address Estonian Air projected increase in intra-European air demand in the face of high fuel costs, the challenges of competition, economic uncertainty, and last year’s loss? If Kalda assessment led to expand Estonian Air fleet, he had to decide what level model would achieve operational efficiency, meet workload demands and fulfill various other performance and financial metrics. In … Read more »

Rait Kalda, vice president of operations for AS Estonian Air, faced a challenge: how should address Estonian Air projected increase in intra-European air demand in the face of high fuel costs, the challenges of competition, economic uncertainty, and last year’s loss? If Kalda assessment led to expand Estonian Air fleet, he had to decide what level model would achieve operational efficiency, meet workload demands and fulfill various other performance and financial metrics. To fully understand Kalda challenge, the first case presents the reader with a brief summary of the Estonian economy, the aviation industry and the three types of competitive airline industry groups-traditional airlines, low cost carriers and regional airlines. This is followed by an overview of Estonian Air competitors and their opportunities for growth. The case provides detailed information on the advantages and disadvantages of the Boeing 737 jet, the Bombardier Q400 turboprop and a used Saab 340A turboprop. Finally, the case of Estonian Air combines internal analysis and growth strategy, with appropriate input from conversations between Rait Kalda and the Vice President for Finance and Administration, Andrus Aljas. Students are required to complete an operational analysis of factors such as capacity, fuel savings and utilization. If Estonian Air has decided to expand in fact, it is the case that the airline continued renting the aircraft with its previous practice. With recent financial statements, information that is presented in the case, students can also prepare a basic net present value (NPV) model and scenario analysis for each of the aircraft leasing alternatives. Finally, students have the opportunity to combine both qualitative and quantitative factors to support their analysis.
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from
Karen Popovich,
D Lander,
Robert Letovsky
Source: North American Case Research Association (NACRA)
16 pages.
Release Date: 1 December 2011. Prod #: NA0135-PDF-ENG
Estonia Air Big Buy HBR case solution

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