Case Name :      Estonia Air’s Big Buy

Authors :           Karen Popovich, D Lander, Robert Letovsky

Source :             North American Case Research Association (NACRA)

Case ID :            NA0135

Discipline :        Entrepreneurship

Case Length :    16 pages

Solution sample availability : YES

Plagiarism : NO (100% Original work)

Rait Kalda, vice president of operations for AS Estonian Air, faced a challenge: how should Estonian Air address projected increases in intra-European flight demand in light of high fuel costs, competitive challenges, economic uncertainty, and last year’s net loss? If Kalda’s assessment led to expanding Estonian Air’s fleet, he had to decide which plane model would achieve operational efficiencies, satisfy load factor requirements, and meet various other performance and financial metrics. In order to fully comprehend Kalda’s challenge, the case first presents the reader with a brief synopsis of Estonia’s economy; the airline industry; and the three types of competitive airline industry groups- legacy carriers, low cost carriers, and regional carriers. This is followed by an overview of Estonian Air’s competitors and its opportunities for growth. The case provides detailed information regarding the advantages and disadvantages of the Boeing 737 Jet, the Bombardier Q400 Turboprop, and a used Saab 340A turboprop. Finally, the case summarizes Estonian Air’s internal analysis and growth strategy, with pertinent input from conversations between Rait Kalda and the vice president of finance and administration, Andrus Aljas. Students are required to complete an operational analysis on factors such as capacity, fuel savings, and utilization rates. If Estonian Air does indeed decide to expand, the case states that the airline will continue with its past practice of leasing the aircraft. Using current financial statements, as well as information presented in the case, students can also prepare a basic net present value (NPV) model and scenario analysis for leasing each of the aircraft alternatives. Finally, students have the opportunity to combine both qualitative and quantitative factors to support their analysis.