Puddle Jumpers Airlines, Inc. is a new consumer airline in its formative stages. It was created to fill a gap in the domestic short-haul travel market. This is due to the lack of low cost service from Anytown in the U.S.A. A new airline could capture significant air travel business in Anytown due to the lack of low-cost service from and to Anytown.

Puddle Jumpers has a history of managing start-up airlines. Private Jet Airlines was previously managed by the same management. The company grew from one Boeing 727 to 16 MD80 series airplanes. Four years ago, revenues grew to $130million in a period of two years.

According to our research, projections and calculations, air travel between Anytown and other cities is sufficient to bring in a significant amount of revenue in the first year. Six aircraft are used and some short-haul routes are included. These sales figures were based on load factors only 55% for year 1. Second year revenues are expected to more than doublewith additional aircraft and expanded routes. Year two load factors are 62%. Due to the nature and demand of travel in the target markets, the Puddle Jumpers plan could see a faster ramp-up than Private Jet. Puddle jumping’s target market needs more flights than Private Jet, which is why the frequency required to service them is greater.

These sales levels are expected to produce a respectable gross profit in the initial operational year. The second flight-year will see exponential growth. Year one profits will represent a modest percentage of sales. They will continue to grow with the economies developed in year two. The overall operating long term profit target for the company will be 16% of total sales, as net profits in years four-five. Part of the due diligence package is the company’s long-term plan. This plan makes fiscal year 2 the first operational years.

Before revenue can begin, cash will be burned in the first year of operations. This is due to the organizational and regulatory obligations of a new air carrier. To cover these expenses, it is necessary to invest.

Below is a chart that shows the highlights of the business plan we have used over the last three years. Gross Margin here is quite high since the only costs included in this calculation are travel agent commissions, credit card discounts, and federal excise taxes. Travel agent commissions are calculated on 30% of sales even though management feels the actual number will not exceed 10% of sales.

NOTE: Numbers in charts and tables in this sample plan are shown in thousands (000&#8217); for display purposes.

1.1 Objectives

These are the objectives of the Company:

1. To obtain required D.O.T. F.A.A. certifications on or before month eight.
2. To begin revenue service within the first year.
3. To raise sufficient “seed” and “bridge” capital in a timely fashion to financially enable these objectives.
4. To commence operations with two McDonnell-Douglas MD-80 series aircraft in month one, four by end of month four, and six by end of month six of flight operations.
5. To add one additional aircraft per month during the second year, for a total amount of 18 at the year’s end.

1.2 Mission

Puddle Jumpers International Airlines, Inc. has a mission to provide safe, efficient, low-cost consumer air travel service. Our service will emphasize safety as its highest priority. We will use the best-maintained and most up-to-date aircraft. We will never compromise on maintenance. We will strive to operate our flights on time. We will offer friendly, courteous, ‘#8220’ no frills service.

1.3 Keys to Success

Here are the keys for success

• Obtaining the required governmental approvals.
• Securing financing.
• Experienced management. (Already in Place).
• Marketing involves resolving channel problems and barriers of entry as well solving problems with large advertising or promotion budgets. Even in the face of expected competition, targeted market share must still be achieved.
• Product quality. Safety should always be the first priority
• Services delivered on time, costs controlled, marketing budgets managed. It is easy to focus on growth and neglect profits. Rapid growth will be restricted to ensure that maintenance standards are both precise and measurable.
• Control of your budget.

The over-all cost per ASM (available seat mile) is pegged at 7.0 cents or less in 1996 dollars. Puddle Jumpers are among the lowest four airlines operating in the short-haul market because of their ASM factor. (US Air, the dominate carrier in the Anytown market, averages 12.0 cents per ASM by comparison). The only three airlines that have lower operating expenses also use older, less reliable equipment. Southwest has the lowest short haul cost in the airline sector at 6.43c per ASM.