Case 075Stock pitchWarm up

On the spot, give a two-line thesis on Aeronvik Aerospace after a quality grounding cut deliveries from 400 to 280 aircraft, and name the one number that would change your view.

SchrodersNew York · 2025

The situation

Aeronvik Aerospace builds single-aisle passenger jets. After a quality lapse, the regulator capped its output and deliveries this year will be 280 aircraft instead of the planned 400. The company will burn about Rs 3,000 crore of cash this year. Its order backlog is 3,200 aircraft, eight years of output at the planned rate, and no large customer has cancelled.

From the annual report: each delivered aircraft brings in about Rs 60 crore of cash after its direct costs, and the company holds Rs 9,000 crore of cash. The stock has fallen sharply since the grounding.

Your task

Give a two-line thesis, either way, that you could defend, then name the one number that would change it.

Quick check

Roughly how many aircraft a year must Aeronvik deliver to stop burning cash?

Worked solution

Try it on paper, then open one step at a time.

30-second answerThe answer to give first

Thesis: Aeronvik's 3,200-aircraft backlog is intact, so the grounding is a delivery-rate problem that defers cash rather than destroying demand; the business recovers if output climbs back above its cash breakeven of about 330 aircraft a year. The one number is monthly deliveries against about 27.5. If they stay below that for long, the balance sheet, not the backlog, sets the value.

Step 1What does a two-line thesis need to contain?

A friend asks whether a popular restaurant that shut its kitchen for a month after a hygiene notice is finished. A good answer is short: the queue outside is still there, so it is a reopening problem, not a demand problem, and it is fine if it is back to full service before its savings run out. A two-line thesis has the same parts: what the market is getting wrong or right, the one driver that decides it, and the number that would prove you wrong. Interviewers ask for it on the spot to see whether you can find the driver without a model.

Step 2Is the backlog the reason to be calm?

Only partly. A backlog is orders waiting, not cash. At 400 a year, 3,200 aircraft is 8.0 years of output; at 280 it is 11.4 years. The 120 aircraft not delivered this year are deferred, not lost, but at Rs 60 crore of cash each that is Rs 7,200 crore pushed out of this year, which is exactly the swing from a Rs 4,200 crore inflow to a Rs 3,000 crore burn. A backlog is only as valuable as the rate at which the factory can deliver it, and every extra year of waiting gives customers a reason to cancel or demand compensation.

The same backlog, two delivery rates: years of output Aeronvik has to work throughPlanned: 400 a year8.0 yearsGrounded: 280 a year11.4 years024681012years of deliveries to clear 3,200 aircraftThis year: 120 aircraft deferred x Rs 60 crore of cash each = Rs 7,200 crore of cash pushed out,turning a Rs 4,200 crore inflow into a Rs 3,000 crore burn. The orders are still there; the cash is late.A backlog is worth what the factory can deliver, at the rate it can deliver it.
At 400 aircraft a year Aeronvik's 3,200-plane backlog is 8.0 years of output, but at 280 it stretches to 11.4 years, and the 120 deferred aircraft push Rs 7,200 crore of cash out of this year.
Step 3Which number would change the view?

Work back from the burn. At 280 aircraft the company collects Rs 16,800 crore and burns Rs 3,000 crore, so its fixed costs are about Rs 19,800 crore a year. Each aircraft covers Rs 60 crore, so cash breakeven is 330 aircraft a year, about 27.5 a month. Monthly deliveries against 27.5 is the one number: above it the company stops burning and the backlog starts turning into cash; below it the burn continues and Rs 9,000 crore of cash lasts about 3 years.

The one number: deliveries a month, against a breakeven near 28-4,000-2,00002,0004,000250300350400Deliveries, aircraft a yearcash flow, Rs crorebreakeven 330 a year= 27.5 a month280 now: -3,000400 plan: +4,200Cash of Rs 9,000 crore covers 3 years at today's burn
With each aircraft bringing Rs 60 crore against fixed costs of about Rs 19,800 crore, Aeronvik burns Rs 3,000 crore at 280 deliveries, earns Rs 4,200 crore at 400, and breaks even near 330 a year, about 27.5 a month.

So the two lines are: the backlog is intact and the grounding defers cash rather than destroying demand; the business recovers if monthly deliveries climb back above about 28 within the regulator's timetable. Then say the limit in a third breath: the per-aircraft cash figure assumes no penalty payments to airlines for late delivery, and those could raise the breakeven.

Where candidates lose it

Candidates answer with a description of the problem, deliveries cut and cash burning, which the interviewer already said. A thesis has to take a side on what the problem means, and name the number that decides it.

The other loss is treating the backlog as value in the bank. Orders are worth nothing until delivered, and a slower rate both delays the cash and invites cancellations.

What the interviewer asks next

  • Airlines start asking for compensation of Rs 5 crore per late aircraft. What happens to breakeven?
  • How would you tell from monthly data whether the regulator's cap is lifting?
  • What would make you think the backlog itself is weakening?

Asked at Schroders, Equity Research, New York, 2025 (Wall Street Oasis): had to come up with a 2-line thesis on the spot

Company names and figures are illustrative.