Cash Flow and Marketing

Airline Performance Review and Analysis TKL Air Lines will be an American Airline that will be operating in the multiple routes across North America in the United States, Canada and Mexico. TKL will provide the cargo and passenger services serving more than 30 destinations. The company will also be serving up to 10 million customers yearly, and more than 1,500 customers for the daily flight. TKL's major activities will include inbound logics, operations, outbound logistics, services, marketing and sales.

Our company will focus on the underserved and unserved routes to the meet the needs of the unmet market demands. We will be serving the niche market where the market demand is generally unmet to meet the key traffic demand on some key seasonal, regional and variable routes. Moreover, we will integrate the latest information and electronic technologies to enhance maximum efficiency as well as cutting the marketing and operating costs.

Mission Statement Our mission statement is as follows: We will be filling up the niche markets in the cargo and travel market across North America in the United States, Canada, and Mexico. We intend to achieve profitable and high achievement by serving the key routes that are currently unserved or poorly served where a significant unmet passenger and cargo demand exist. We intend to enhance efficiency and enhance the quality control by delivering the highest level of operations, service and safety for all passengers.

General Strategy The TKL Airline will use the latest aircraft to take the advantage of the regional route using the latest aviation technologies to improve efficiency as well as enhancing customer satisfaction. We will also use the latest navigation equipment to achieve a high level of punctuality, reliability, customer satisfaction and safety. Our start-up costs will be apportioned in the following areas: First, we will lease three regional jet aircraft with middle-to-large-size having the 99-seat British-made jet. We will also buy additional two Avro jets that include RJX85 or RJX100.

We will assure the timely payment of the aircraft based on our sufficient cash reserve, and we will finance our operating costs in the first six months. We will set aside the marketing costs, public relations and advertising costs. We will also set aside the costs to set up our website that will offer online sales, internet marketing and reservations. We will also set aside costs of training, recruiting and the costs of certifying the ground and flight operational crews.

We will use our cash reserve to cover our operating costs within six of starting the operations. We will also use the cash to cover the legal and administrative costs for our business operations. Our start-up expenses are revealed in Table 1 below: Table 1: START-UP EXPENSES ($000) Start-up Expenses Legal & consulting $200 Route & market study $100 Office supplies, stationery etc.

$10 Brochures & marketing materials $30 Design consultants $60 Corporate insurance $20 Office rent $50 Software & systems development $100 Expensed equipment & office furniture $150 Eight Expensed vehicles $100 Public relations & advertising $80 Crew, staff training & manuals $60 Other $30 TOTAL START-UP EXPENSES $990 Start-up Assets Cash Required $10,400 Start-up Inventory $150 Other Current Assets $50 Long-term Assets $200 TOTAL ASSETS $10,800 Total Requirements $11,790 START-UP FUNDING Start-up Expenses- to-Fund $990 Start-up Assets- to- Fund $10,800 TOTAL FUNDING REQUIRED $11,790 Assets Startup Non-Cash Assets f $400 Start up Cash Requirements $10,400 Additional Cash Raised $0 Starting Date Cash Balance $10,400 TOTAL ASSETS $10,800 Liabilities & Capital Liabilities Current Borrowing $600 Long-term Liabilities $0 Accounts Payable $390 Other Current Liabilities $0 TOTAL LIABILITIES $990 Capital Planned Investment Private investment $10,800 Other $0 Additional Investment Requirement $0 TOTAL PLANNED INVESTMENT $10,800 Loss of Start-up Expenses ($990) TOTAL CAPITAL $9,810 TOTAL CAPITAL & LIABILITIES $10,800 Total Funding $11,790 Our company headquarters will be located at the Delaware.

The state is selected based on its low-profit tax rate regime. Moreover, Delaware state regulatory environment is conducive to a newly aviation business. Our operation location is selected because of its sufficient parking and landing slots. The ability to interconnect multiple carriers is another criterion for selecting our business location. Our business location will be able to support a high number of cargo and passenger traffic. We also consider the availability of skilled workforce in the area.

Financial Analysis We will use the market research through observation, economic segmentation, interview with airline professionals and future projections to identify our customers and the airfare to charge. We will use the industry average airfare to charge the customer. Our target customers will be as follows: • Business travelers - 15% • International Organizations and Government travelers - 10% • Leisure and regional Resident Personal travelers - 20% • Leisure and diaspora personal travelers - 10% • Leisure and personal travelers - 5% • Seasonal holiday travelers - 10%.

Table 2 provides our market analysis for the next five years: Table 2: MARKET ANALYSIS YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 Potential Customers Growth CAGR Reg Res Pers & Leis 20% 130,000,000 156,000,000 187,200,000 224,640,000 269,568,000 20.00% Business 15% 5,000,000 5,750,000 6,612,500 7,604,375 8,745,031 15.00% Government & IO 10% 1,500,000 1,650,000 1,815,000 1,996,500 2,196,150 10.00% Diaspora Pers & Leis 10% 10,000,000 11,000,000 12,100,000 13,310,000 14,641,000 10.00% Seasonal Holiday Traveler 10% 20,000,000 22,000,000 24,200,000 26,620,000 29,282,000 10.00% Personal & Leis 5% 260,000,000 273,000,000 286,650,000 300,982,500 316,031,625 5.00% Other 20% 5,000,000 6,000,000 7,200,000 8,640,000 10,368,000 20.00% Total 10.82% 431,500,000 475,400,000 525,777,500 583,793,375 650,831,806 10.82% Our pricing strategy will be part of our marketing strategy. Our weekday and weekend airfare will focus on premium and value travelers willing to pay high prices. Moreover, we will offer low airfares for the economic class, and the discount rate for people paying in advance.

Additionally, we will offer child and infant discount for the family travelers. We forecast to record more than $41.5 million of RPMs (Revenue Passenger Miles) in the first year of our operations. However, the RPMs is projected to increase to $95.1 Million in the second year. Our CASM ("Cost per Available Seat Mile") will be $2.1 in the first year, and will increase to $4.5 million in the second year.

Our three-year sales forecast is as follows: SALES FORECAST YEAR 1 YEAR 2 YEAR 3 Sales Scheduled Passenger Revenues $37,653,000 $88,642,656 $139,694,250 Scheduled Cargo Revenues $2,282,000 $4,132,800 $5,473,300 Special Flights Passenger Revenues $1,483,200 $2,013,600 $3,502,000 Special Flights Cargo Revenues $34,560 $43,200 $72,000 Package trips $79,000 $270,000 $405,000 Other $0 $0 $0 TOTAL SALES $41,531,760 $95,102,256 $149,146,550 Direct Cost of Sales Year 1 Year 2 Year 3 Scheduled Passenger Revenues $1,995,120 $4,309,920 $5,989,354 Scheduled Cargo Revenues $0 $0 $0 Special Flights Passenger Revenues $85,680 $104,340 $167,300 Special Flights Cargo Revenues $0 $0 $0 Package trips $31,600 $108,000 $162,000 Other $0 $0 $0 Subtotal Direct Cost of Sales $2,112,400 $4,522,260 $6,318,654 Our company is able to record revenue based on our effective marketing operations, quality services and competitive pricing that we offer our customer.

We forecast that will realize $1.39 Million in the net income in the first year. Our projected income statement is as follows: PRO FORMA PROFIT AND LOSS YEAR 1 YEAR 2 YEAR 3 Sales $41,531,760 $95,102,256 $149,146,550 Direct Cost of Sales $2,112,400 $4,522,260 $6,318,654 Production Payroll $1,638,562 $3,307,744 $4,766,445 Non-Salary Operational Costs $29,642,941 $57,732,304 $80,052,471 TOTAL COST OF SALES $33,393,903 $65,562,308 $91,137,570 Gross Margin $8,137,857 $29,539,948 $58,008,980 Gross Margin % 19.59% 31.06% 38.89% Operating Expenses Sales and Marketing Expenses Sales and Marketing.