How can RedBus improve its profitability?
Updated: Apr 20, 2020
Here is another interviewer led case of a medium complexity, including structuring, math, creativity and exhibit reading questions. Can you solve it?
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Our client is RedBus, one of several operators of iconic double-decker public transport buses in London. Over the past three years RedBus have experienced declining profitability, as a result of reduced demand for buses due to growth in affordable taxi services, such as Uber. The client is looking to improve profitability.
Additional information:
Single-decker bus capacity: 30
Double decker bus capacity: 60
Cost of a ride is £1.50
Q1: How would you approach helping our client?
Q2: What is the breakeven number of passengers for a double decker bus?
Exhibit 1 - RedBus Financial and Operational Metrics
Q3: The client has shared passenger information on 5 of its routes. What can you learn from the information?
Exhibit 2: Number of passengers by route and time of day
Q4: Math: Unfortunately, the frequency of buses is regulated and RedBus cannot reduce it. However, RedBus is considering acquiring single decker buses to fully operate on some routes, and during off-peak hours on others. Their investment threshold is a 3 year payback period. Should they do it?
Exhibit 3 - Single decker bus economics
* Other costs are the same as for a double decker bus; assume 350 days per year
Q5: Creativity: After looking at the cost side, RedBus would like to evaluate some ideas for increasing revenues.
Recommendation: We are meeting with the CEO of RedBus, what would you tell her?
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