Airline Company Business Plan (Strategy and Implementation Summary)

Executive Summary

Company Summary

Services

Market Analysis Summary

Strategy and Implementation Summary

Puddle Jumpers's market presence will be achieved by relying on the strategy of identifying and serving a specialized niche market well.

• Media executions will utilize local media, which is highly targeted and cost effective on a cost-per-impression basis.
• Air operations will be centralized and cost effective.
• Reservations will be centralized and cost effective.
• Marketing will be media generated to the leisure market and combined media/direct sales generated to corporate accounts.

Marketing Strategy

Marketing is targeted locally. The advantage of a local and highly identifiable market is that media selections can be limited in scope. There is no need for a national media program to launch Puddle Jumpers. The most effective media is expected to be outdoor billboards. Private Jet relied heavily on a dozen well-placed billboards in and around Atlanta to build a $100 million plus business.

Other media will be local spot TV on highly visible programs such as local news and sports. Also, local radio. Newspapers and other print will not be used.

Pricing Strategy

Due to its low cost operating structure, Puddle Jumpers will be able to offer service at less than 50% of the competitive airfares to our selected destinations from our Atlanta hub. Projected fares are as follows:

The first column is for 14-day advance purchase. These fares are non-cancellable and nonrefundable. The second column is for fares purchased inside of 14 days. The third column is current D.O.T. published average fare for all carriers.

Promotion Strategy

Promotion will be primarily outdoor advertising, radio, and TV targeted at the Atlanta business and leisure traveler.

In addition the company will employ a public relations firm for both consumer and financial purposes.

The combined amount budgeted for advertising, public relations, and reservations will be held under 15% of sales. Thus, the first year expenditure in these categories is expected to be $16.5 million. Past experience with Private Jet has demonstrated that this expenditure is sufficient to launch airline service in a single hub.

Sales Strategy

In addition to other marketing programs outlined the company will also market via the World Wide Web. We will establish our own web site with reservation, purchase, and payment capability.

Marketing Programs

In order to attract the Atlanta business traveler without the use of frequent flyer miles, the company will make direct sales contacts with the travel departments of Atlanta-based corporations and businesses. It is expected that our cost structure will be attractive to these businesses. Atlanta is now the third largest banking center in the U.S. and the Atlanta area economy in general is growing faster that the national average. We expect business travel to amount to at least 50% of our over-all revenue.

The sales personnel and salaries required to execute the direct sales strategy are included in these projections.

Sales Forecast

The company is forecasting annual sales in year one of flight operations at $110 million. Year two of flight operations will reach $216 million. Assumptions made for load factors are: 55% in year one, 62% in year two.

The year two numbers are based upon adding more flights and more airplanes to the routes already served. This will enable us to maximize profits within the market we have created without incurring the additional expense of opening new markets. It also allows for more controlled growth and eliminates the risks, early on, of the loss of control of operational procedures that can occur either with de-centralization or growth that is too rapid.

The basis of the sales projections illustrated in the chart below have been outlined in the "Market Analysis" section of this plan.

The company has also prepared five-year projections that are based upon expanded service to additional market areas. This five-year plan is a part of our due diligence package. Direct costs of sales are not included here but are instead reflected as a revenue discount in the projected P&L statement. These sales costs consist of travel agent commissions, credit card discounts, and federal excise taxes.

Milestones

The following table lists important program milestones, with dates and managers in charge, and budgets for each. The milestone schedule indicates our emphasis on planning for implementation.

Management expects that the current regulatory climate will loosen shortly. We expect it to be a long-term advantage to well operated airlines. We feel that 1996 is the ideal time both to invest and to start an airline.

The costs of adding airplanes are figured on the basis of first and last payment in advance plus one month's lease payment.

Management Summary

Financial Plan