I know this should be solved by demand and supply, but have no idea how to do it. Can someone help out? Thanks!
How many commercial airplanes in the world?
Hi there,
I would be happy to share my thoughts on it:
- First of all, I would approach this market size estimation by estimating the number of airlines in different regions (both major cross-regional and smaller regional ones) and the average fleet size per airline. You might also apply the approach to just one region - preferably the one in which you are located - and extrapolate for other regions; however, chances are high that this would distort the result.
- However, please keep in mind that most major strategy consulting companies have not used standalone market size estimations for a long time. While this does not mean it never happens, this type of case study question may not be very meaningful for both the candidate and interviewer, as only a few skills are being tested.
- That being said, simpler market size estimations may still be a part of a case study, for instance when estimating the revenues of the client company is required.
If you would like a more detailed discussion on how to best prepare for your upcoming interviews, please don't hesitate to contact me directly.
Best,
Hagen
Hi there,
That's a fun question.
My suggestion would be to always try to give it a go first and then ask for feedback on your approach. You'll get more out of the forum this way.
Another thing you can try is ChatGPT - ask it to give you feedback on your approach or for it to suggest several ways of doing this market sizing / estimation exercise. It's a great tool for improving your interviewing / casing skills if used right.
In terms of structuring, I'd recommend you read the following guide that provides a great methodology for top-down and bottom-up structuring of problems (including market sizing questions).
How to structure and answer brainstorming questions
Best,
Cristian
Hi there,
You'll learn a lot more from this by trying it out yourself first! Why don't you post your approach here and we can provide commentary?
Hint: This isn't really demand or supply. Think about how many flights there are per day in a given country/region. Extrapolate to the world. Then, think about how many planes would be needed for this.
How to approach market sizing
It's very simple: Do the approach the is the easiest for you given the question.
Are they asking you to estimate something where you don't even know where to begin from the top (maybe you have 0 clue as to the market size of the industry, the GDP of that country, etc. etc.)? Then do bottom-up!
Alternatively, does it seem impossible to do a realistic from-the-ground-up estimation of something (perhaps it requires just far too many steps and assumptions)? Then do top-down!
Fundamentally, you need to take the approach that just makes the most sense in that circumstance. Quickly think about the key assumptions / numbers required and whether you 1) Know them or 2) Can reasonably estimate them. If you can, go ahead!
An Example
He's a Q&A for a great market sizing question here asking to estimate # of electric charging stations in a city in 10 years:
This one could be answered top-down (as I did) by estimating population of the city, # of drivers/ cars, etc. etc.
OR, it could be answered bottom-up by estimating # of stations you see per block (or # of gas/petrol tanks), % increase this might be over time (or # of EV stations that would be needed per gas tank given EV stations take 10 times as long), and # of blocks you'd estimate the city to have.
Take a look here for additional practice! https://www.preplounge.com/en/management-consulting-cases/brain-teaser/intermediate/taxis-in-manhattan-market-sizing-229
Great question!
So I would personally look at this based on the number of people in the world, break it down by income and whether they're travelling for business, and then figure out how many planes are needed.
A. How many leisure trips are taken each year?
- There are 7B people in the world. Only the very richest can fly, so I'm going to say that only 5% of the population can afford to take flights. So that's 350M people. You could break this down further by income decile to be a bit more targeted, or by country. This I think broadly checks out - it's roughly a group the size of America which across all countries makes sense.
- I'm going to assume that on average they fly once every 10 years, so that's 35M trips a year, 70M flights (round trip)
B. How many business trips are taken each year?
- I'm going to assume that 1% of that 5% of the population who flies, flies for business. So that's 3.5M people
- I'm going to assume that on average they take 2 trips a year, so that's 7M trips, 14M flights.
C. How many planes?
- I'm going to assume that the average flight is 2 hours long (this is somewhere between short haul domestic and long haul) and that planes spend 30mins on the ground refuelling etc., so that's 2.5 hours per flight per day. So a plane can do almost 10 flights a day. 365 flights a year.
- We have 70M + 14M flights = 84M flights, with 365 flights per plane per year, so we need 84M/365 = 230k planes
Sense check, 230k planes sounds high, so I may want to revisit how many people are able to fly - it may be closer to 2.5% of the population.
Hope that helps!
1. Estimate how many passengers fly per year (for example, take x% of population of developed countries and y% of developing countries, assume each does z flights per year)
2. Estimate how many passengers a plane holds and how many flights it takes per year.
3. Divide one by the other and Voilá!