TKL Airlines Business Plan: Performance and Financial Analysis

Introduction and Company Overview

TKL Air Lines will be an American airline operating on multiple routes across North America, including the United States, Canada, and Mexico. TKL will provide cargo and passenger services serving more than 30 destinations. The company will serve up to 10 million customers yearly and more than 1,500 customers on daily flights. TKL's major activities will include inbound logistics, operations, outbound logistics, services, marketing, and sales.

Our company will focus on underserved and unserved routes to meet unmet market demand. We will serve the niche market where demand is generally unmet, addressing key traffic demand on seasonal, regional, and variable routes. Furthermore, we will integrate the latest information and electronic technologies to enhance maximum efficiency while reducing marketing and operating costs.

We will be filling niche markets in the cargo and travel sector across North America — in the United States, Canada, and Mexico. We intend to achieve profitable and high-quality outcomes by serving key routes that are currently unserved or poorly served, where significant unmet passenger and cargo demand exists. We intend to enhance efficiency and quality control by delivering the highest level of operations, service, and safety for all passengers.

TKL Airline will use the latest aircraft to take advantage of regional routes by employing cutting-edge aviation technologies to improve efficiency and enhance customer satisfaction. We will also use the latest navigation equipment to achieve high levels of punctuality, reliability, customer satisfaction, and safety.

Mission Statement and General Strategy

Our start-up costs will be apportioned across the following areas. First, we will lease three regional jet aircraft of middle-to-large size, specifically the 99-seat British-made jet. We will also purchase an additional two Avro jets, either the RJX85 or RJX100. We will assure timely payment for the aircraft from our sufficient cash reserve and will finance our operating costs for the first six months.

We will set aside funds for marketing costs, public relations, and advertising. We will also allocate costs for setting up our website, which will offer online sales, internet marketing, and reservations. Additional funds will cover training, recruiting, and certifying ground and flight operational crews. Our cash reserve will cover operating costs within the first six months of starting operations, as well as legal and administrative costs for business operations.

Our start-up expenses are detailed in Table 1 below:

Table 1: START-UP EXPENSES ($000)

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

Startup Expenses and Funding

Assets
Start-up Non-Cash Assets: $400
Start-up Cash Requirements: $10,400
Additional Cash Raised: $0
Starting Date Cash Balance: $10,400
TOTAL ASSETS: $10,800

Liabilities & Capital
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 in Delaware. This state was selected based on its low profit-tax rate regime. Moreover, Delaware's regulatory environment is conducive to a newly established aviation business. Our operating location was also chosen for its sufficient parking and landing slots, its ability to interconnect multiple carriers, its capacity to support a high volume of cargo and passenger traffic, and the availability of a skilled local workforce.

We will use market research through observation, economic segmentation, interviews with airline professionals, and future projections to identify our customers and determine appropriate airfares. We will use the industry average airfare as a benchmark. Our target customer segments are 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

Regional Resident Personal & Leisure: Growth 20% | Year 1: 130,000,000 | Year 2: 156,000,000 | Year 3: 187,200,000 | Year 4: 224,640,000 | Year 5: 269,568,000 | CAGR: 20.00%
Business: Growth 15% | Year 1: 5,000,000 | Year 2: 5,750,000 | Year 3: 6,612,500 | Year 4: 7,604,375 | Year 5: 8,745,031 | CAGR: 15.00%
Government & International Organizations: Growth 10% | Year 1: 1,500,000 | Year 2: 1,650,000 | Year 3: 1,815,000 | Year 4: 1,996,500 | Year 5: 2,196,150 | CAGR: 10.00%
Diaspora Personal & Leisure: Growth 10% | Year 1: 10,000,000 | Year 2: 11,000,000 | Year 3: 12,100,000 | Year 4: 13,310,000 | Year 5: 14,641,000 | CAGR: 10.00%
Seasonal Holiday Traveler: Growth 10% | Year 1: 20,000,000 | Year 2: 22,000,000 | Year 3: 24,200,000 | Year 4: 26,620,000 | Year 5: 29,282,000 | CAGR: 10.00%
Personal & Leisure: Growth 5% | Year 1: 260,000,000 | Year 2: 273,000,000 | Year 3: 286,650,000 | Year 4: 300,982,500 | Year 5: 316,031,625 | CAGR: 5.00%
Other: Growth 20% | Year 1: 5,000,000 | Year 2: 6,000,000 | Year 3: 7,200,000 | Year 4: 8,640,000 | Year 5: 10,368,000 | CAGR: 20.00%
Total: Growth 10.82% | Year 1: 431,500,000 | Year 2: 475,400,000 | Year 3: 525,777,500 | Year 4: 583,793,375 | Year 5: 650,831,806 | CAGR: 10.82%

Financial Analysis and Market Projections

Our pricing strategy will be a core component of our marketing strategy. Weekday and weekend airfares will cater to both premium and value travelers willing to pay higher prices. We will also offer low airfares for economy class passengers and discount rates for advance purchases. Additionally, we will offer child and infant discounts for family travelers.

We forecast recording more than $41.5 million in Revenue Passenger Miles (RPMs) in the first year of operations. RPMs are projected to increase to $95.1 million in the second year. Our Cost per Available Seat Mile (CASM) will be $2.1 in the first year, rising to $4.5 million in the second year. Our three-year sales forecast is as follows:

SALES FORECAST

Scheduled Passenger Revenues: Year 1: $37,653,000 | Year 2: $88,642,656 | Year 3: $139,694,250
Scheduled Cargo Revenues: Year 1: $2,282,000 | Year 2: $4,132,800 | Year 3: $5,473,300
Special Flights Passenger Revenues: Year 1: $1,483,200 | Year 2: $2,013,600 | Year 3: $3,502,000
Special Flights Cargo Revenues: Year 1: $34,560 | Year 2: $43,200 | Year 3: $72,000
Package trips: Year 1: $79,000 | Year 2: $270,000 | Year 3: $405,000
TOTAL SALES: Year 1: $41,531,760 | Year 2: $95,102,256 | Year 3: $149,146,550

Direct Cost of Sales

Scheduled Passenger Revenues: Year 1: $1,995,120 | Year 2: $4,309,920 | Year 3: $5,989,354
Scheduled Cargo Revenues: $0 across all years
Special Flights Passenger Revenues: Year 1: $85,680 | Year 2: $104,340 | Year 3: $167,300
Special Flights Cargo Revenues: $0 across all years
Package trips: Year 1: $31,600 | Year 2: $108,000 | Year 3: $162,000
Subtotal Direct Cost of Sales: Year 1: $2,112,400 | Year 2: $4,522,260 | Year 3: $6,318,654