Puddle Jumpers Airline

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Regional Airline Business Plan

Financial Plan

Adequate financing is essential for a start-up airline. Our strategy remains a "seed" to "bridge" to "IPO" progression. This has served as a successful model for airline starts in the past. Because of the amount of capital required to start an airline management feels it is restricted to this funding path. Once four to six airplanes are up and flying the company can continue to operate profitably for an indefinite period of time in the event additional capital becomes unavailable on attractive terms.

7.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following table. They key underlying assumptions are:

  • We assume a slow-growth economy, without major recession.
  • We assume of course that there are no unforeseen changes in technology to make products immediately obsolete.
  • We assume access to equity capital and financing sufficient to maintain our financial plan as shown in the tables.
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 0.00% 0.00% 0.00%
Other 0 0 0

7.2 Key Financial Indicators

In the airline business the most important measurements are cost per Available Seat Mile and the System Utilization Factor. If seat costs are kept below 7 cents and utilization is at 50% or better, the airline will operate profitably.

7.3 Break-even Analysis

When we take out all operational costs for flying aircraft and include only fixed overhead and aircraft leases the company can break even on the first six airplanes by maintaining sales just over $2 million per month or approximately $24 million in year one. This is less than 25% of our expected sales forecast but it indicates that the company could survive without adding planes and routes for an indeterminate period with load factors of less than 15%.

NOTE: For display purposes in this sample plan, numerical values in tables and charts are shown in thousands (000's).

Break-even Analysis
Monthly Revenue Break-even $28
Assumptions:
Average Percent Variable Cost 0%
Estimated Monthly Fixed Cost $28

7.4 Projected Profit and Loss

Our profits improve from a low percent of sales in year one to a modest percent of sales in year two and are expected to peak at a respectable percentage in year three and thereafter. In gross numbers, we create healthy profit in the second operational year.

NOTE: For display purposes in this sample plan, numerical values in tables and charts are shown in thousands (000's).

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $0 $110,000 $216,925
Direct Cost of Sales $0 $0 $0
Other Costs of Sales $0 $0 $0
Total Cost of Sales $0 $0 $0
Gross Margin $0 $110,000 $216,925
Gross Margin % 0.00% 100.00% 100.00%
Expenses
Payroll $332 $8,511 $11,138
Marketing/Promotion $0 $0 $0
Depreciation $0 $0 $0
Rent $0 $0 $0
Utilities $0 $0 $0
Insurance $0 $0 $0
Payroll Taxes $0 $0 $0
Other $0 $0 $0
Total Operating Expenses $332 $8,511 $11,138
Profit Before Interest and Taxes ($332) $101,489 $205,787
EBITDA ($332) $101,489 $205,787
Interest Expense $0 $0 $0
Taxes Incurred $0 $0 $0
Net Profit ($332) $101,489 $205,787
Net Profit/Sales 0.00% 92.26% 94.87%

7.5 Projected Cash Flow

This business plan cash flows positively from the initial infusion of investment forward. It will continue to produce cash as long as sales targets are met. Borrowing may only be required if seasonal fluctuations occur or if expansion plans are further accelerated.

The chart below illustrates the accumulation of first year cash during formative stage.

NOTE: For display purposes in this sample plan, numerical values in tables and charts are shown in thousands (000's).

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $0 $110,000 $216,925
Subtotal Cash from Operations $0 $110,000 $216,925
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $13,850 $0 $0
Subtotal Cash Received $13,850 $110,000 $216,925
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $332 $8,511 $11,138
Bill Payments $0 $0 $0
Subtotal Spent on Operations $332 $8,511 $11,138
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $332 $8,511 $11,138
Net Cash Flow $13,518 $101,489 $205,787
Cash Balance $13,558 $115,047 $320,834

7.6 Projected Balance Sheet

The projected balance sheet illustrates the growth of the net worth of the business and may also be utilized to estimate future stock values based upon industry multiples.

NOTE: For display purposes in this sample plan, numerical values in tables and charts are shown in thousands (000's). 

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $13,558 $115,047 $320,834
Other Current Assets $0 $0 $0
Total Current Assets $13,558 $115,047 $320,834
Long-term Assets
Long-term Assets $22 $22 $22
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $22 $22 $22
Total Assets $13,580 $115,069 $320,856
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $0 $0 $0
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $0 $0 $0
Long-term Liabilities $0 $0 $0
Total Liabilities $0 $0 $0
Paid-in Capital $14,200 $14,200 $14,200
Retained Earnings ($288) ($620) $100,869
Earnings ($332) $101,489 $205,787
Total Capital $13,580 $115,069 $320,856
Total Liabilities and Capital $13,580 $115,069 $320,856
Net Worth $13,580 $115,069 $320,856

7.7 Business Ratios

The important business measurement ratios are presented here based upon projections for Puddle Jumpers. Business ratios for the years of this plan are shown below. Industry profile ratios based on the NAICS code 481111, Scheduled Passenger Air Transportation, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 0.00% 97.20% 11.52%
Percent of Total Assets
Other Current Assets 0.00% 0.00% 0.00% 43.73%
Total Current Assets 99.84% 99.98% 99.99% 65.07%
Long-term Assets 0.16% 0.02% 0.01% 34.93%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 0.00% 0.00% 0.00% 32.81%
Long-term Liabilities 0.00% 0.00% 0.00% 25.84%
Total Liabilities 0.00% 0.00% 0.00% 58.65%
Net Worth 100.00% 100.00% 100.00% 41.35%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 0.00% 100.00% 100.00% 55.90%
Selling, General & Administrative Expenses 0.00% 85.78% 76.98% 31.28%
Advertising Expenses 0.00% 62.07% 52.09% 0.66%
Profit Before Interest and Taxes 0.00% 92.26% 94.87% 0.16%
Main Ratios
Current 0.00 0.00 0.00 1.65
Quick 0.00 0.00 0.00 0.92
Total Debt to Total Assets 0.00% 0.00% 0.00% 65.97%
Pre-tax Return on Net Worth -2.44% 88.20% 64.14% 0.20%
Pre-tax Return on Assets -2.44% 88.20% 64.14% 0.60%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 0.00% 92.26% 94.87% n.a
Return on Equity -2.44% 88.20% 64.14% n.a
Activity Ratios
Accounts Payable Turnover 0.00 0.00 0.00 n.a
Payment Days 0 0 0 n.a
Total Asset Turnover 0.00 0.96 0.68 n.a
Debt Ratios
Debt to Net Worth 0.00 0.00 0.00 n.a
Current Liab. to Liab. 0.00 0.00 0.00 n.a
Liquidity Ratios
Net Working Capital $13,558 $115,047 $320,834 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales n.a. 1.05 1.48 n.a
Current Debt/Total Assets 0% 0% 0% n.a
Acid Test 0.00 0.00 0.00 n.a
Sales/Net Worth 0.00 0.96 0.68 n.a
Dividend Payout 0.00 0.00 0.00 n.a