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Final term project of

Essentials of Aviation Management


Course:

BS Aviation Management
Course Instructor:

Sir Nadeem Ansari

Submitted by:

Names
Mohsin Azhar Shah (GL) Saqib Mehmood Saad Shoaib Arslan Aslam IbrahimTariq

Roll #
9205 9207 9210 9234 9239

Airline Business Plan


Executive Summary
Pakistan Airline Industry is mainly confined but not limited to three main destinations i.e. Lahore, Karachi, and Islamabad. Therefore most of the air traffic exists between these three destinations. Currently there are only 3 airline operators in Pakistan i.e. PIA, Air Blue and Shaheen. Air Blue and Shaheen are operating on specific routes where as PIA holds most of the market share and operates on all the routes in the country. Air routes between Lahore Karachi and Karachi Islamabad can be considered as the busiest routes in terms of air traffic. Pak Air airline is a new airline in its formative stages. It is being organized to take advantage of a specific gap that exists in the domestic travel market. The gap exists in the form of less number of flights being operated between the busiest routes i.e. Lahore Karachi and Karachi Islamabad. Therefore a low cost service coupled with the demand of passengers travel on these routes indicates that a new entrant airline could be expected to capture a significant share of market on these routes and also on those un served and underserved routes in the country. Pak Air airline mission will be to provide safe, efficient, low cost consumer air travel service. It is expected that the air travel customers preference is for low fares without compromising on issues of safety or on- time performance. Therefore the newest and best maintained aircrafts available will be operated to serve the purpose. The airline will also strive to operate its flight on time and will provide friendly and courteous no frill service. Pak Air airline expenses can be further reduced due to only a single type of aircraft is operated as there will be significant reduction in the cost, maintenance and training expense. Available technology has now provided the opportunity to eliminate the physical ticket altogether which means substantial amount of ticketing expense can be further reduced, resulting in increased profits for the airline. Pak Air intends to have its own reservation agents available via a toll free or UAN number. In addition, Pak Air will also have its own website where schedules are available and customers can book their own reservations and buy tickets online. The most effective media of advertising will be expected to be the outdoor billboards. Other media used will be TV, newspapers, and magazines. In addition to these marketing programs, the company will also market via World Wide Web. We will initiate our business with 3 ATR and 1 Beech craft Super King Air350i for chartered flights, firstly we will fly on domestic routes and after five years of normal operations we will go for flying on global routes. The head quarters will be in Lahore and initially point to point model and then hub and spoke model will be followed by Pak Air airline.

In the end it can be concluded that Pakistan air industry factors favor inauguration of a new airline to meet the demand for additional, low fare higher-quality passenger service.

Objectives:
To establish and operate a new regional airline To provide passengers and cargo services in unserved and little served areas of the region and serving under-served routes on which high demand currently exists. To commence operations with 3 ATR 72-600 aircrafts and one King Air 350i aircraft till three years and after three years, three more aircrafts shall be inducted to our fleet (including a Learjet), thus having a fleet of six aircrafts. After total 5 years of operations, a total of nine aircrafts shall be owned by the company. To implement an organizational and marketing strategy that will, beginning in the first year of flight operations, achieve average passenger load factors in the 50-65 percent range, depending on route and season, and increasing thereafter to the 75-90 percent range while expanding the business, thereby maximizing revenues and return on investment while minimizing risk. To achieve net operating profits in the [XYZ] percent range within the first 12 months of flight operations, an annualized return-on-investment of approximately [XYZ] percent by the end of the second year of operations, and steady growth enabling rational expansion of the airline thereafter. To achieve the projected results starting with three midsized regional aircraft, growing to five aircrafts by the end of the three year of operations, To commence revenue service in year two.

Vision:
The vision of Pak Air airline is to becoming a leading airline in a global context by providing the best passengers and cargo services with economical travel and also providing chartered service to the customers.

Mission:
Pak Air airline has a mission to serve passengers and cargo clients safely and efficiently with friendly and courteous low frills service. We will serve both unserved and little served and underserved routes of the country. We will start

to fly globally after five year of service in the country and after 3 years cargo services would be initiated. We will operate best and new aircraft. By utilizing the latest aviation, electronic, and informational technologies, and by designing effective and efficient systems and building in quality control from the outset, we aim to ensure the highest level of service, operations, and safety, all based around the needs, wants, comfort, and convenience of the passenger and the cargo clients.

Keys to Success:
Starting operations with new western fleet of aircrafts (higher level of safety and low maintenance costs) Experienced, trained and professional management team. Securing finance. On time flights and safety superiority. Aggressive marketing depicting different features as compared to our competitors. Establishing a high level of operational oversight and quality control. served routes and city pairs

Identification, through careful market research, of unserved or under Use of advanced electronic and information technology to reduce staffing
and other operational costs. Maintaining flexibility that enables the airline to always respond and adapt to changing market conditions and opportunities, without being erratic, and employing equipment, scheduling, and staffing on a basis that is sufficient to get the job done properly, efficiently, and at a high rate of return, without "overkill" or fielding costly excess capacity or, conversely, unduly cancelling scheduled flight operations. Identifying, developing, and quickly and cost-effectively exploiting opportunities for new markets, new market concepts, and expanded sales potential.

Airline Business Licenses and Permits:


Before planning, implementing and commencing any type of operation, we will have to meet those requirements and permits applied by the local /governmental and international authorities.

We will get approval from Civil Aviation Authority of Pakistan to start an


airline and the regulations would be followed by the company. We would get approval from International Civil Aviation Organization before operating our flights on global routes.

Start-up Summary:
Within one year of operation revenue will be focused and in third year, revenue will be expanded and more customers would be retained. Purchasing three regional ATR 72-600 aircraft; a high-wing, twin turboprop aircraft optimized right from the start for efficiency, operating flexibility and passenger comfort; and one aircraft King Air 350i for domestic chartered flights. 1. Provision of a sufficient cash reserve to assure timely payment of the leasing or finance payments and operating costs of the aircraft through at least the first six months of operations. 2. Provision of a sufficient cash reserve to assure timely payment of the leasing or finance payments and operating costs of the aircraft through at least the first six months of operations. 3. Marketing, advertising, and public relations costs, including costs of setting up a website capable of offering flight and fare information and making online sales and reservations, and related Internet marketing, as well as conventional print and broadcast advertising, and public relations activities. 4. Costs associated with recruiting, training, and certifying flight and ground operational crews. 5. A reserve to cover overall operating costs, aside from aircraft operating costs, over at least the first six months of operations. 6. Administrative and legal costs incurred in setting up the business and the airline operations. Assumptions governing start-up costs are shown in the following table and chart.

Start-up

Requirements

Start-up Expenses Legal and consulting Route and market study Office supplies, stationery etc. Brochures and marketing materials Design consultants Corporate insurance Office rent Software and systems development $200,000 $100,000 $10,000 $30,000 $60,000 $20,000 $50,000 $100,000

Expensed equipment and off. furniture $150,000 Expensed vehicles (8) Public relations and advertising Crew, staff training and manuals Other Total Start-up Expenses $100,000 $80,000 $60,000 $30,000 $990,000

Start-up Assets Cash Required Start-up Inventory Other Current Assets $10,400,000 $150,000 $50,000

Long-term Assets Total Assets

$200,000 $10,800,000

Total Requirements

$11,790,000

Start-up Funding

Start-up Expenses to Fund Start-up Assets to Fund Total Funding Required

$990,000 $10,800,000 $11,790,000

Assets Non-cash Assets from Start-up Cash Requirements from Start-up Additional Cash Raised Cash Balance on Starting Date Total Assets $400,000 $10,400,000 $0 $10,400,000 $10,800,000

Liabilities and Capital

Liabilities Current Borrowing Long-term Liabilities $600,000 $0

Accounts Payable (Outstanding Bills) $390,000 Other Current Liabilities (interest-free) $0 Total Liabilities $990,000

Capital

Planned Investment Private investment Other Additional Investment Requirement Total Planned Investment $10,800,000 $0 $0 $10,800,000

Loss at Start-up (Start-up Expenses) ($990,000) Total Capital $9,810,000

Total Capital and Liabilities

$10,800,000

Total Funding

$11,790,000

Company Location and facilities:


Among the locations under study are the following eight:
1. Lahore, Pakistan 2. Karachi, Pakistan

3. 4. 5. 6. 7. 8.

Islamabad, Pakistan Sialkot, Pakistan Gawader, Pakistan.

Peshawar, Pakistan
Quetta, Pakistan; Gilgit, Pakistan

The headquarters of Pak Air airline will be in Lahore, Pakistan that will serve both northern and southern areas of Pakistan as being in the centre of the country. Other regional bases or offices would also be in other cities of Pakistan (un served and under served), we will fly on domestic routes between these destinations mentioned above. After five years of operations as we will expand our network globally. We will run our business by establishing business step in Dubai, UAE and so on. Most routine maintenance or line maintenance will be performed itself by the airline at the base location, with some more minor maintenance and repairs relegated to other locations in the route network. Heavy maintenance and repair work will be contracted out to established and experienced service providers, reducing the need for the new airline to maintain its own extensive maintenance and repair teams and facilities. The airline will, however, perform its own normal line maintenance at home base and will utilize locally available services away from home. Aircraft also may be based at key airline hub locations away from the home business base as well. Sufficient apron and hangar space for staging, parking, and storing, as needed on a short-term basis, up to the entire initial three-aircraft fleet will be required at the base location and any other hub locations selected. As the fleet expands over time, additional parking and storage space will be needed either at the main base location or at regional hubs in the airline route network. Additionally, sufficient office space, preferably in one central location at or near the base airport, will be required to house the airline's main administrative offices and its central reservations system. While the airline may consider establishing its own sales offices in key market locations, in general sales will be handled through a combination of Internet marketing utilizing the airline's own website as well as other Internet travel websites, designated general sales agents in given locales, and regular travel agencies everywhere.

Airline Model to be Followed


Both point to point and hub and spoke model would be followed by Pak Air airline. Initially, flights will operate on domestic routes by following point to point model e.g. Lahore to Karachi and from Karachi to Lahore back, Lahore to

Skardu, one flight per month. With the passage of time, almost after five 5 years when the airline will be in a condition to fly on international routes then hub and spoke model would be followed when we will have enough fleet of aircraft. This same situation will be for cargo service when it starts. Initially point to point and after 5 years hub and spoke model would be followed. The headquarters of Pak Air airline will be in Lahore, Pakistan that will serve both northern and southern areas of Pakistan as being in the centre of the country.

Targeted Customers:
Target customers for Pak Air airline will be middle to upper class level people according to economical conditions.

Services
There are following points to describe properly the services offered to the customers;

3.1 Service Description


Pak Air airline will divide services into two main categories: passenger services and cargo services. We will start passenger service now but cargo service will be initiated after three years of normal operations of passenger service after that a cargo plane will be owned by the airline and then cargo service will be started. We would also serve our customers with the facility of chartered flying by getting one 1 aircraft especially for chartered flying.

3.2 Competitive Comparison


Fortunately, several of the key distinguishing characteristics planned for Pak Air airline not only will enable it to fare extremely well in both levels of competitive comparison, but will actually be achievable at a savings in cost and resources. In other words, by being smart, Pak Air airline can be significantly better than its competition while at the same time accruing lower overall costs, a remarkably good combination. In comparing Pak Air airline to its competitors in Asia, it is important to look at those factors that determine how most travelers choose an airline.

Safety, actual and perceived; Safety will be its first priority.

Range of fares offered; Range of fares will be provided according to the economical conditions of the people.

Destinations served; Both served, underserved and un served routes/ destinations.

Availability of seats; Seats would be available and passengers would be cared by arranging the seats without extra charges when a passenger will be in emergency or we will charge according to the location of the seat available in the aircraft.

Convenience of flight schedules, times of arrivals and departures; Our flight schedules will be as much convenient for our customers, as possible.

Availability of different classes of service; Main two classes will be there; Business class and Economic class, each class contains two categories, one would be served with high service and other would be provided no frills depending on type of route and time consumed to the destination.

Onboard comfort, service, meals, and amenities; Onboard comfort and good services are assured to all categories of customers, however, the meals services will be provided to the premium customers only.

Type, Age and condition of aircraft; Operations will be started from newest western built aircraft.

Ease and efficiency of reservations and ticketing; Reservation system or ticketing will help people to book flights conveniently.

Reliability and on-time departures and arrivals; Punctuality of flights is in vision of Pak Air airline.

Quality control Quality department will focus on every operation performed in the airline.

Reliable baggage handling

We will give as good services as possible, to avoid baggage lost.

3.3 Fulfillment
The primary issue regarding sourcing is the question of the type and source of aircraft to be employed in the Pak Air airline's fleet.

Aircraft

selection:

potential fleet aircraft and manufacturing sources are being considered and evaluated, including the following:

Three 3 high-wing, twin engine turboprop aircraft ATR-600 1 one twin-turboprop Civil utility aircraft Beech craft Super King Air 350i Aircraft Specifications
Seating baggage Capacity Range: full fuel Maximum cruise Speed (kt) Take off field length

ATR72-

Beech craft Super King Air 350i


1+9, Max Pax 11
71.3 cu. ft

1,606 nm 313 kt

3,300 ft

Outsourcing of services: Maintenance:


All regular "A" and "B" maintenance will be performed by Pak Air airline personnel at our own leased facilities at each airport served. We will also have tools and parts inventory at each site. Pak Air management feels that it is both necessary and prudent in today's regulatory environment to perform this regular and routine maintenance "in house". Periodic "C" and "D" overhauls and major maintenance will be outsourced to ATR manufacturers.

Ground Handling:
Airplane parking services, baggage loading and unloading, and baggage and freight handling services will be outsourced at all airports.

Food Service:
All condiments and beverages served on Pak Air airline flights will be purchased from in-flight food service providers.

3.4 Technology
Efficiency and convenience through use of the most up-to-date informational and electronic technologies, in addition to modern aviation and navigational technologies, are guiding principals of Pak Air airline.. Among the technological features Pak Air airline will offer are:

Internet marketing and online reservations (e-reservations) and sales (e-sales) that will provide quick and easy access to airline schedules, flight availability, reservations, and ticketing to a wide range of customers worldwide. This eliminates payment of agency commissions and keeps costs low - savings that can be passed on to the customer. Electronic ticketing (e-ticketing) which will enable passengers to obtain their tickets online and avoid the need to obtain paper tickets from airline offices, travel agencies, or at the airport. It also frees the airline from having to stock, track, and issue tickets and maintains paper trails of them. Again, more savings for both the airline and the customer. Electronic check-in (e-check-in) that will virtually eliminate waiting in line to check-in for e-ticketed passengers, enabling them to confirm their identities, obtain their boarding passes, and check-in their baggage (and even purchase tickets upon check-in) utilizing a user-friendly kiosk that eliminates those last-minute frustrating waits to get to the counter. And it also greatly reduces the airline's needs to staff check-in desks, control long lines, employ local contract ground staff, and expend money and resources on an antiquated system that only adds to the traveler's inconvenience and frustration. Another win-win situation for both airline and passenger. Electronic cargo tracking (e-cargo tracking) is the same basic idea as e-baggage tracking, and will use the same basic system, only for tracking cargo and parcels. Electronic financial control (e-finance) will enable complete electronic financial control and monitoring of the airline's finances, clear advantages.

Future Services:
Pak Air airline will provide cargo service in future after three 3 years of normal operations and after three years total 5 aircrafts would be owned by the airline which of one is only for cargo or freight plane. (Point to point flight) In future, a service of free miles will be offered to the customers.

Market Analysis Summary


The market combines a variety of elements all of which demand a higher quality of air service than often currently available: 1. Business travelers requiring convenience, reliability, speed, and schedules built around business needs. 2. Government and international organization travelers, requiring the same elements. 3. Personal and leisure travelers who have the money to travel by air and who increasingly demand a higher level of service and convenience, but at an economical cost. 4. Seasonal (primarily summer, with some limited niche markets in the winter period) holiday travelers, primarily destined for Greece, Turkey, and the islands of the Mediterranean. Cost, reliability, convenience, and destination are their concerns. Pak Air airline will appeal to all these distinct groups by offering better quality service (and in some cases, offering service where none now exists), at a higher level of safety, comfort, and convenience, and at reasonable fares, than currently available. The new airline also will focus on the niche markets identified in the Service Description section of this plan, enabling it to better serve and to become identified as the carrier of choice for those markets.

4.1 Market Segmentation


A complete market analysis and segmentation will require a specific passenger and destination survey, the cost of which is included in the Start-up Costs for the airline. Preliminary analysis (based on a variety of methods, including observation, interviews with travel- and airline-industry professionals, economic segmentation, future projections based on marketing plans, and experience with the region and market) for planning purposes, however, indicates the following approximate market segmentation overall (considerable variations, of course, would be anticipated depending on route, season, and other factors):

Business - 15% Government and International Organizations - 10% Regional Resident Personal and Leisure Travelers - 20% Seasonal Holiday Travelers - 10%

4.2 Service Business Analysis


4.2.1 Main Competitors
The new airline's main competitors will vary depending on market and route served, and the category of passenger. For the most part, competition can be expected as follows: Pakistan International Airline Cooperation. Air Blue International Airline. Shaheen International Airline. Other small airlines. Other airlines acquired aircrafts for chartered flights.

The extent of competition (and what is listed here is not comprehensive) dictates the importance of the new airline's three-prong strategy to seek out un served and under-served routes and city pairs, key niche markets where it can effectively compete or create its own market, and meeting peak travel demands on key regional, seasonal, and intermittent routes. It also points out the importance of standing out from the crowd through offering a higher level of service and convenience, and utilizing technology and a service-oriented staff to achieve recognition and passenger preference right from the outset.

Strategy and Implementation Summary


Target un served and under-served markets, seek out niches and unmet demand, and offer a higher level of service and a higher standard than our competitors. Pak Air airline will utilize technology to reduce costs and offer better service and greater convenience to the passenger.

5.1 Marketing Strategy


Marketing will be targeted locally. The advantage of a local and highly identifiable market will be that media selections can be limited in scope. There will be a need for a national media program to launch Pak Air airline. The most effective media is expected to be outdoor billboards. Other media will be local spot TV on highly visible programs such as local news and sports. Also, Newspapers will be used. TV ads will be shown with curiosity to capture the attraction of the people. In addition to other marketing programs outlined the airline will also market via the World Wide Web. We will establish our own website with reservation, purchase, and payment capability.

5.1.1 Pricing Strategy

Like everything else about it, the new airline's pricing strategy will also set it apart from the pack and will form a key aspect of its overall marketing strategy. It is almost a stock joke, the unwieldy and impenetrable forest of airline tariffs and fares and promotions (often available for something like three seats on a flight - and that is meant to win customers) common in the industry today. Few things have garnered the notoriety and degree of customer suspicion and dislike that airline pricing has, and yet there are few moves afoot to improve the situation. We intend to change that, and will not only make our business more predictable and "user-friendly" to the passenger, but also will help fill our planes and make our financial direction more predictable and clear to our management and our bankers as well. The game plan is simple enough, offer customers good service to places they want (or need) to go to, and at a fair and predictable price. Competition on the basis of price alone has spelled disaster for more than one carrier (start-up and veteran alike), and once down that slippery slope it is hard to turn back. And while price is clearly an important factor driving the marketplace, it is by no means the only one. It will not be our aim to be the lowest-priced competitor in the market (though we may be on occasion). Nor will we seek to be the highest priced, either. Fairness, clarity, and a rational fare basis, combined with better service and greater convenience than offered else where, will be our guiding principles. Essentially, we will work from only two sets of fares (existing for market segmentation purposes) for our service:

Weekday fares, in both Value and Premium (aimed primarily at business travelers who are willing to pay a higher price to be able to go and come back during the week). Stay-over weekend fares, in both Value and Premium (aimed more at the personal or leisure traveler for whom price is more important than traveling mid-week).

The only variations on those fares (not new fare bases) will be these:

Set, publicized discounts for early reservations and purchasing tickets in advance. Set, publicized discounts for reserving and ticketing online, electronically. Seasonal and certain peak-period adjustments to the basic fares, or adjustments due to spikes in fuel prices and the like. Infant and child discounts based on the original fare (up to free in the case of infants). And possibly a stand-by fare (call it the "Gambler Fare") for people who are willing to take what's available at the last minute (helps us fill seats, helps them get on a nearly full flight, and it does not have to be radically discounted from the normal fare - probably no more than 5 percent discount - since the normal fare will be just that, a normal fare, and not some outrageously priced gouger).

Given our stress on electronic reservations and ticketing, most tickets will be paid for in advance of the departure date, which means the new airline - again, as part of its marketing strategy and offering a higher level of concern for the traveler - should avoid the common and much detested practice of overbooking. This also is where stand-bys can help fill any voids that may occur.

In addition, fares for the most part should be based on some rational system that is calculated on distance and actual costs, and not simply what the market will bear. One must wonder how much legitimate business is lost to the industry simply because many passengers cannot and will not pay the near-equivalent of a round-the-world fare only to go between two neighboring countries in Europe. Here is an example of how this user-friendly fare system will work for the London-Berlin route:

Value Fare is $XXX for weekday round-trip travel. Value Fare is $XXX - 20 percent for Saturday stay over round-trip travel. Value Fare one-way is one-half the round-trip cost of $XXX + 10 percent. Premium Fare is Value Fare plus 30 percent (for any category. So you can stay over Saturday and travel Premium for only 10 percent more than the regular weekday Value fare - this will help fill Premium seats and get people used to the idea of traveling Premium during the rest of the week, too). Reserve and pay for your ticket on the airline's website, and receive a 5 percent discount on whatever the fare is (a lot cheaper than paying a 9 or 10 percent commission plus reservation-system handling charges, and it gets the customer to be e-ticketed, other advantages for the airline as well as the customer. And it beats operations like EasyJet that only offer a flat 2.50-British pound sterling discount, regardless of the fare). Reserve and buy your ticket up to 30 days in advance, and take another 15 percent discount. Or reserve and buy your ticket up to 14 days in advance, and take a 10 percent discount. Up to seven days in advance, and a 5 percent discount. So essentially, the maximum discount is 40 percent (20 percent for Saturday stay over, 15 percent 30day-advance purchase, and 5 percent online reservations and ticketing. Predictable for the traveller, predictable for the airline). Fly Premium weekends and reserve 30+ days in advance online, and you fly at 10 percent less than weekday Value fare - another marketing hook. And since the basic fare will be a "fair" one, the airline will not be staging loss-leaders even with the steepest discount. But no one is likely to complain about the fare, either. Go non-stop, or make connections if you need to - no penalty if you don't disembark at the interconnect and if the fare to the interconnect point is equal to or less than the fare to the passenger's stated destination, as it would be in most cases. Otherwise the higher fare is charged to eliminate the argument (it's all in the computer's database). And that's it. Unless there is an adjustment for seasonality or other special conditions. No impenetrable forest of fares. Few promotions needed (though they might be used from time-to-time). No reading the small print on the back of the ticket or trying to make out the "fare basis" (except maybe for those through tickets connecting to or from another carrier). How can the customer not love it? The only real danger is that it could set a new trend for the industry.

5.1.2 Promotion Strategy


The overall concept and design of the airline sets the stage for its promotion. Marketing and promotion will stress the unique qualities of the airline and the points that set it apart. Strong public relations combined with well-placed,

well-designed, distinctive advertising appealing directly to people who are the airline's prospective customers will help get the word out. Special effort will be made to develop and operate a highly functional, fast, rock-solid, and user-friendly website for online information, reservations, and e-ticketing. Internet marketing, combined with conventional non-Web marketing, will steer people to the website. The more customers use the website, the easier and more pleasant the experience will be for them, and the more economical and efficient, and predictable, will be the process for the airline. Promotion will be primarily outdoor advertising, TV targeted in Pakistan for business and leisure travelers.

5.2 Sales Strategy


The airline's sales strategy will flow from its overall concept and marketing approach. Mass marketing, but with a personal touch utilizing airline employees as spokesmen and women to explain that "move with safe and comfort will aim to steer as many people as possible either to the airline's website, or to its telephone-based customer-service representatives. While clients are free to utilize their own travel agents, and the airline may also want to be accessible through general travel sites, the more customers that can be encouraged to use the airline's own reservations and ticketing services. E-reservations and e-ticketing, combined with e-check-in, will make the most sense for any customers who have online access, and also for the airline itself. But nonetheless, the airline must not lose sight of the fact that many people do not have access to the Internet, or do not care to use it to arrange their travel, or perhaps just prefer a more personal touch, and so other means of access will always be readily available. The regional and specialized sales and marketing managers, as explained in the section on Personnel, will concentrate their effort on targeting specific clients that have the potential to offer corporate or group travel (including contract arrangements), or who are potential air-cargo customers. The airline will not have the resources to field a large sales team, and so these regional managers must target their efforts, and the airline must effectively utilize its mass marketing methods as well as the Internet to attract individual travelers who, once they experience the new airline, hopefully will feel a close affinity toward it and will become loyal and happy customers. In order to attract the business travelers the company will make direct sales contacts with the travel departments of Pak Air airline. It is expected that our cost structure will be attractive to these businesses

5.2.1 Sales Forecast

The following chart and table show the projected sales figures for Air Leo.

Sales Forecast Year 1 Sales Scheduled Passenger Revenues Scheduled Cargo Revenues Special Revenues Flights Passenger $37,653,000 $88,642,656 $139,694,250 $2,282,000 $1,483,200 $34,560 $79,000 $0 $4,132,800 $2,013,600 $43,200 $270,000 $0 $5,473,300 $3,502,000 $72,000 $405,000 $0 Year 2 Year 3

Special Flights Cargo Revenues Package trips Other Total Sales

$41,531,760 $95,102,256 $149,146,550

Direct Cost of Sales Scheduled Passenger Revenues Scheduled Cargo Revenues

Year 1 $1,995,120 $0

Year 2 $4,309,920 $0

Year 3 $5,989,354 $0

Special Revenues

Flights

Passenger

$85,680 $0 $31,600 $0 $2,112,400

$104,340 $0 $108,000 $0 $4,522,260

$167,300 $0 $162,000 $0 $6,318,654

Special Flights Cargo Revenues Package trips Other Subtotal Direct Cost of Sales

Management Summary
The management of Pak Air will be highly experienced. There will not be one on the management team who has not already performed his or her function in aviation industry instead of some trainees. We will not in the business of training key people. We intend to hit the ground running with a highly qualified and experienced management team. But some faculty will be required to train like new members on OJT or apprenticeship or Pilots for safety and control the cost. .

6.1 Organizational Structure


The company will be organized into five major departments: 1. 2. 3. 4. 5. Administration Operations Finance Commercial Training & Development Department.

The levels of organization (reflected in the personnel and salary chart in the Personnel section of this plan) are as follows:

President and chief executive officer (who reports to the Board of Directors of the airline company). Vice president and general manager. Functional vice presidents for the core areas of commercial activities, finance, and operations. Directors covering sales and marketing, communications, human resources, flight safety, flight operations, ground operations, maintenance, and information systems. Managers in sales and marketing, as well as in station management functions. Professional, engineering, ground handling, service, and other support personnel.

On the flight side, which reports to the director of flight operations and also responds to the director of flight safety, there are only three levels of personnel:

Captain; First officer; Flight attendant.

The overall objective is to foster an atmosphere of cooperation and shared responsibility to the overall mission, which will provide the customer and client with the best possible, safest, and most satisfying experience with the airline.

Personnel Plan:
Personnel Plan Year 1 Production Personnel Captains (2 per aircraft) First Officers (2 per aircraft) Flight Attendants (9 per aircraft) Subtotal $84,705 $48,000 $86,400 $219,105 $93,175 $52800 $95,040 $241,015 $101,645 $57600 $103,680 $262,925 Year 2 Year 3

Sales and Marketing Personnel Director of Sales & Marketing $40,000 $44,000 $43,560 $39,600 $47,520 $174,680 $48,000 $47,520 $43,200 $51,840 $190,560

Regional Sales & Marketing Mgrs (3) $39,600 Sales & Marketing Assistants (6) Customer Assts (12) Subtotal Service/Reservations $36,000 $43,200 $158,800

General Personnel

and

Administrative

President & CEO Vice President & General Manager Vice President Commercial Vice President Finance Vice President Operations Vice President Development Vice President IT & IS Subtotal Training &

$180,000 $144,000 $126,000 $126,000 $126,000 $126,000

$198,000 $158,400 $115,500 $115,500 $115,500 $115,500

$207,900 $166,320 $121,275 $121,275 $121,275 $121,275

$702,000

$702,900

$738,045

Other Personnel Director of Communications Director of Human Resources Director of Flight Safety Director of Flight Maintenance Director of Ground Operations Director of Information Systems $54,000 $54,000 $54,000 $54,000 $54,000 $54,000 $59,400 $59,400 $59,400 $59,400 $59,400 $59,400 $374,000 $62,370 $62,370 $62,370 $62,370 $62,370 $62,370 $404,200

Station Managers (1 per major $140,000 station) Ground Service Pers (3 per maj $315,000 station) Maintenance Engineers (8) $200,000

$837,925 $260,000 $78,400 $132,000 $78,800

$909,450 $275,200 $81,920 $138,600 $82,960

Bookkeeping & Finance Personnel $64,000 (3) Information Systems Personnel (5) Professional Support Personnel (3) $120,000 $68,000

Secretarial/Admin (3)

Asst

Personnel

$51,000 $40,000

$59,100 $52,000

$62,220 $55,040

Customer Relations Personnel (2) Subtotal

$1,322,000 $2,228,625 $2,383,810

Total People

84

90

94

Total Payroll

$4,140,062 $6,825,869 $8,508,015

Financial Plan:
This section of the plan offers the core elements for evaluating the financial viability of the proposed new airline. All the key elements are presented to offer a frank appraisal of the venture and the opportunity it presents. The airline will begin operating with just three 70-passenger regional aircrafts, with very low load factors, beneath 25 percent of capacity, and at fare levels that in all likelihood are lower than reasonably expected on the planned route network. These assumptions were taken to ensure a conservative approach to the financial planning, and to demonstrate that even with these constraints the proposed airline can be profitable as early as the first year of operations. Again, it should be stressed that even with the considerable constraints, the airline can be expected to carry upwards of 300,000 passengers in its first year, and to reach profitability within the first year of operations, with significant growth in both revenues and cash generated thereafter.