The financial plan depends on the number of revenue hours flown each month in our aircraft.
The most important assumptions crucial to our success are:
Breaking down our monthly fixed costs enables us to calculate how much the aircraft needs to be flown each month to maintain profitability. Our monthly fixed costs include:
The following chart and table summarizes our break-even analysis.
With monthly fixed costs of hangar rent, renter and instructor insurance, an engine overhaul fund, aircraft loan, planned maintenance and inspections, and fuel, we can actively market our aircraft to obtain the correct number of students to exceed our expenses while making the aircraft convenient for the students to schedule for training and rental.
A loss is expected for the first few months while a student base is carefully chosen and constructed. We hope to increase our number of flight hours flown each month by 25% until the break-even point is reached. At that time, we will assess the number of students and the number of hours being flown to determine how many more students and renters we want to increase our profits and maintain good aircraft availability.
NOTE: You will notice in the year 2003 that the company is showing a net loss for the year. This is the year that we estimate the aircraft engine will require a factory overhaul. This expense ranges from $13,000 to $20,000, depending on several variables. Therefore, we have chosen to show an overhaul expense of $15,000 for that year. However, this was only shown to demonstrate the effect of not properly saving for the overhaul expense. We have allocated a certain percentage of each flight hour toward the engine overhaul savings fund which will cover all of our expenses, thus, hopefully returning Lansing Aviation to a net profit for 2003.
The following cash flow projections show the amounts anticipated from the first few months during the student accumulation period through the company's rental saturation.
Cash flow is critical to our success, for payment of the insurance and aircraft loan payments as well as the fuel costs required to operate and the hangar to house the airplane.
The balance sheet in the following table shows some very important information regarding our short-term and long-term financial goals.
We expect to see flat ratios of profitability during the first year while we build our customer base. We expect these ratios to improve in the second and succeeding years. The following table shows the projected ratios for Lansing Aviation. The Industry Profile comes from Standard Industry Code #8299, Schools and Educational Services.
Our long-term plan is based primarily on the short-term future of the business. If the aircraft is able to support its expenses, then the future of Lansing Aviation and our long-term goal plan can be successfully accomplished.
Our long-term plan contains the following elements: