Europe Rail Tunnel

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Problem Definition

The airlines covering the Cologne to London route are facing a competitive threat from a new rail tunnel connecting Britain and Germany by train.

Which all factors do you think the airlines should consider before reacting to this threat?


Short Solution

The carriers should look at service differentiation, convenience, price and cost and capacity/operations before responding to the threat.

Detailed Solution

Paragraphs highlighted in orange indicate hints for you how to guide the interviewee through the case.

The airlines should evaluate the following factors -

I. Service Differentiation

Along with looking at the journey duration, the carriers should also evaluate passenger's comfort in both means of transportation and the frequency of trains/airplanes to have.

II. Customer Convenience

Factors such as ease of reaching station/airport, boarding should be considered. The airlines should also analyze how much would different customer segments be affected by this new rail tunnel.

III. Price &Cost

It is important to analyze the price sensitivity of different customer segments and the price advantage of one form of transport over another.

Implications of a price war should also be analyzed.

IV. Operations efficiency

The airlines should also focus on the efficiency of their operations. (Example - Would the firm be able to shift to a smaller airplane in case the market share decreases?)

A great answer would also include the following factors:

  • Relationship marketing or customer loyalty
  • Europe regulatory structure
  • Effects of change in fuel prices

Difficult Questions

If the interviewee solves the case very quickly, you can come up with more challenging questions.

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