Clearway Airlines

Student or Team Name:

Diversi⌥cation—Cargo

A diversi�ca�on strategy involves entering mul�ple arenas in order to expand your business

while reducing the risk of a decline in demand in core markets. Your airline starts o" as a

passenger-only carrier, but you have the op�on to enter the cargo business. If you decide to

haul cargo, it will be loaded into the cargo bays of your passenger aircra& up to the maximum

takeo" weight of the aircra&. In case there are more passengers and cargo than the aircra& can

handle, the excess cargo will be held un�l the next 'ight out or placed on another carrier.

Passengers will not be bumped to make room for more cargo, and there is no provision for

having all-cargo aircra&.

If you want to ini�ate cargo service, you must budget at least $10,000 per quarter for cargo

marke�ng. Spending more than $10,000 will provide addi�onal funds for promo�ng the new

service. Poten�al cargo revenues are es�mated at $25,000 per route per quarter, but it will take

about three quarters to build up the business and generate a pro�t.

Respond to the following ques�ons based on the informa�on above.

1. Airline X provides service on six di�erent routes. What is the poten�al revenue the

company could take in from the cargo business?

2. Would it make sense for Airline X to spend $100,000 on cargo marke�ng the 'rst quarter it

is in the business? Why or why not?

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Student or Team Name:

3. Besides the cargo marke�ng budget, what addi�onal costs do you expect to incur if you

expand into the cargo business?

4. Does it make sense for your team to enter the cargo business? Why or why not?

1. Student or Team Name: Lauren Moya
2. Question 1: If Airline X offers services on a complete of six distinct routes, then the agency can possibly earn more than one hundred and fifty thousand dollars in revenue if each of the six route brings in twenty five thousand in revenue per quarter. The risk is low in profitability, the value of cash is quite excessive, for example, a total of twenty two thousand was spent on advertising and initiation then at the third quarter, one route alone should start gaining in profits.
3. Question 2: Considering the Cargo Service is only a way to enhance income, the smartest choice will be to keep on regarding it as a side mission, hence, putting a more modest sum into that service.
4. Student or Team Name_2: Lauren Moya
5. Question 3: Beside marketing costs, additional costs that can be anticipated might be salary, if we expand with this service additional employees might be needed. Another extra expense can be for lost or damaged items and getting the website up-to-date regarding these new services.
6. Question 4: It completely makes sense to enter the cargo business. This is a great opportunity to raise revenue even during the slow seasons. It is additionally a great way to utilize every one of the aircrafts assets to there full capacity