Airline grounds planes to rise above financial cloud

HighFlierCo, a major US airline, brought in Bain to help assess options for improving its fleet, a major asset, to boost growth. Bain determined the cost of owning a plane throughout its lifespan and found the optimal time to own and operate aircraft. Bain recommended restructuring the fleet, resulting in $140 million in value created.

HighFlierCo, a major U.S. airline, had recently encountered significant financial troubles. Increased competition and focus on business travelers were raising the importance of frequency share and cost per plane mile versus cost per seat mile.
To lift out of its financial slump, the company was trying to improve its fleet management — a crucial aspect of success in an asset-intensive business.
HighFlierCo was considering whether to exercise purchase options on 10-20 new aircraft. The company also wanted to determine the impact and desirability of grounding 60 current aircraft.
HighFlierCo brought in Bain to help assess these options as part of an overall turnaround strategy.

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To determine the true cost structure for the life of a plane, Bain proposed a new methodology that retained the concept of matching capacity and demand but offset the bias toward large aircraft.

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Based on the observation that the optimal time to own/operate an aircraft is during years 20 to 30 in its lifespan, Bain recommended restructuring the fleet.