In-flight Broadband

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Interviewer-led (McKinsey style)
Topics:
Market entry , Pricing , Profitability analysis
In-flight Broadband In-flight Broadband
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Problem Definition

Our client is a startup that can deliver broadband internet aboard commercial flights.The company owns a patent on a necessary technology. They want to know whether their current business model is valid.

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Question on the case: In-flight Broadband

Question on market size

In-flight Broadband
Most recent answer on Feb 29, 2020
<p>The potential market size for this case is determined by calculating the revenue per flight based on the price elasticity diagram. It's said that because the potential per flight is the highest at $15, the market size is $15 * 99m (potential users) * 20% (users that will buy at $15) = $297m. However, if we price it at $15 shouldn't we be able to grab the willigness to pay of those that would pay more than $15? Meaning our potential market size would be 99m (potential users) * (20% (WtP = $15) + 10% (WtP = $20) + 5% (WtP = $25)) * $15 = $520m.</p> <p>Did I misunderstood something or is there a mistake in the solution?</p>
Hello, Everytime that you see an exhibit like this, you have to consider only the percentage related to you price. In other words, it's like people that would pay more than 15$ are already included in your 20%. Does i ... (read entire answer)
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Exhibits

In the beginning, only business travelers are viewed as potential clients

Penetration for flat-rate Internet vs. price (i.e.: % of business passangers expected to use the service on any given flight.)

Additional Information

  • We assume that the average client uses 100 MB per flight

Before sharing this information, let the interviewee estimate the average data used per customer!
  • The total revenue per customer is set at $15. This is independent of the amount of data each customer uses.
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