Business Game Presentation of Management Audit

Royal Absolute Airlines

EREN KONGUPAMELA GUTIÉRREZ

PALOMA PÉREZTANGUY ROUSSEAUX

RAÚL MARKOSGEOFFROY BESLINJAVIER SÁNCHEZ

Index

I) Overview

II) Operations

III) Marketing

IV) Sales

V) Human Resources

VI) Finance

VII) Recommendations

Organizational Chart

Vision: We believe that travellers deserve the best.

Mission: Providing the best flying experience to our customers.

Strategy: Luxury Standard.

Slogan: An Absolute pleasure!

STRENGHTS WEAKNESSES • Good organization.• Relevant worksheets and records.• Great team cohesion• First in Quality.• First in Reliability.• Proper fare sales.• Adequate routes positioning.• More and more stable financial

statements.• Double designation with a major

airline.

• No dividends paid yet.• High cumulative net income.• Low employees’ compensations.• Three standard companies already in

the region.

OPPORTUNITIES THREATS

• We are they only standard-luxury company.

• Market shows potential good trends.

• Monopoly in market R.• Royal Absolute Airlines in top 3.

• Phoenix and Blue Wings in markets D and E.

• Skyline in routes 6F, 14F, 29F.• Flash in route 16F.• High prices pressure.• Increase in fuel price, cost per mile,

insurance.• Considerable marketing pressure.• Volatile demand.

Recommendations

SHORT TERM LONG TERM

• Focus on advertising (Q9 & Q10) & promotion (Q11) .

• Giving priority to internal employees rather than external people for new jobs positions.

• Keep the capital leasing.• Maintaining our $0,39 ticket

price. • Keep the trend of positive net

income.• Considerably increase our

Cash. • Increase passenger load on

markets F & R.• Reach break even point in 4D,

7E & 14F.

• Strengthen our brand notoriety/awareness.

• Continue to be the best employer of the industry.

• Maintain our 0% employee turnover.

• Increase our total market share to 25%.

• Be the leader in market F & R.• Enter market A.• Close markets D & E.• Keep our Standard luxury

strategy.• Get positive cumulative net

incomes• Pay dividends.• Reduce operating costs.• Increase our stock price.

Operations: Aircraft Schedule

Aircraft Type Quarter AircraftDaily Flights Total Miles max Miles Embraer Brasilia 1 1 4 1 580 2000

2 2 7 3 020 4 0003 2 9 3 780 4 000

Embraer ERJ135 4 2 12 4 800 4 8005 2 12 4 780 4 8006 2 11 4 780 4 8007 2 10 4 400 4 8008 2 11 4 820 4 800

1 2 3 4 5 6 7 80

1,000

2,000

3,000

4,000

5,000

6,000

Total Milesmax Miles

Fleet Decisions

Quarters Decisions taken

0 Sell 3 Beechcraft 1900 Lease 1 Embraer Brasilia

1 Lease 1 Embraer Brasilia

2 Keep our 2 leasing Embraer Brasilia

3 Terminate to lease 2 Embraer Brasilia Capital Lease of 2 Embraer ERF 135

4 Keep our 2 capital lease Embraer ERJ 135

5 Keep our 2 capital lease Embraer ERJ 135

6 Keep our 2 capital lease Embraer ERJ 135

7 Keep our 2 capital lease Embraer ERJ 135

8 Keep our 2 capital lease Embraer ERJ 135

Maintenance

Quarte

r 0

Quarte

r 1

Quarte

r 2

Quarte

r 3

Quarte

r 4

Quarte

r 5

Quarte

r 6

Quarte

r 7

Quarte

r 80

2

4

Maintenance Decisions (cost $ per aircraft per quarter)

Maintenance Decisions (cost $ per aircraft per quarter)

Quarte

r 0

Quarte

r 1

Quarte

r 2

Quarte

r 3

Quarte

r 4

Quarte

r 5

Quarte

r 6

Quarte

r 7

Quarte

r 80

100,000

200,000

300,000

400,000

500,000

Passenger Service Costs ($)Maintenance Costs ($)

Insurance

1 2 3 4 5 6 7 8 90

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

Insurance

Fuel

General Increase: 0,14 USD Average Increase: 0,02 USD Assumed Increase: 0,02 USD

Q 0 Q 1 Q 2 Q 3 Q 4 Q 5 Q 6 Q 7 Q 8 0

0.2

0.4

0.6

0.8

1

1.2

1.4

Fuel Spot Price Fuel Contract

Operating Expense

1 2 3 4 5 6 7 8 9

-1,000,000

-500,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

Operating Expense Operating Profit and Loss

1 2 3 4 5 6 7 8 9

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

ROAD in %

Load Factor

1 2 3 4 5 6 7 8 90.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Load Factor Break Even

Marketing

Marketing Investment

ROM Evolution

Seats Sold

Sales

Q0 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q80%

2%

4%

6%

8%

10%

12%

14%

16%

18%17%

4%

6%7%

10%

17% 16%

15%

16%

Market Share

Absolute; 16.27%

Phoenix ; 16.21%

Blue Wings; 18.00%Skyline; 10.72%

UFC; 19.14%

Flash; 19.66%

4D

Absolute36%

Phoenix31%

Blue Wings33%

Absolute Phoenix Blue Wings

7E

Absolute41%

Phoenix24%

Blue Wings35%

Absolute Phoenix Blue Wings

14F

Abso-lute62%

Skyline38%

Absolute Skyline

26F

Absolute62%

Skyline38%

Absolute Skyline

16F

Abso-lute38%

Flash62%

Absolute Flash

6F

Abso-lute61%

Skyline39%

Absolute Skyline

100% Market Share in routes 19F, 17R

and 20R

Market F lights Available s eats

S eats s old P as s enger L oad

B reakeven Variation F are

4D 2 74 41 55,40% 60,04% -4,64% O ne month6F 1 37 23 62,20% 60,04% 2,16% O ne month7E 2 74 42 56,80% 60,04% -3,24% O ne month14F 1 37 21 56,80% 60,04% -3,24% O ne month16F 1 37 23 62,20% 60,04% 2,16% O ne month17R 1 37 28 75,70% 60,04% 15,66% O ne month19F 1 37 25 67,60% 60,04% 7,56% O ne month20R 1 37 28 75,70% 60,04% 15,66% O ne month26F 1 37 24 64,90% 60,04% 4,86% O ne month

Human Resources:Employee Turnover

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q80.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

Training Budget

Q0 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q80

5000

10000

15000

20000

25000

30000

10002000

4333

10500

14750

16250

20167

23333

26333

10002000 2000

20000 2000022000

24000 24000

27000

Average Industry Training Budget Absolute Budget

ROI of HR Budget

Q0 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8

Ab-solute ROI

21.234 -185.469 -284.2055

-28.0762 -41.7309 -5.7539090909090

9

14.383541666666

7

7.0372083333333

3

6.3078148148148

2

Av-er-age In-dustry ROI

21.234 -64.9665 -27.542810985460

4

-12.464095238095

2

-10.210979333333

3

-0.5001770433566

43

7.3354407365167

5

4.0485864083772

6

2.9885694755629

8

-325.00

-275.00

-225.00

-175.00

-125.00

-75.00

-25.00

25.00

75.00

Absolute ROI Average Industry ROI

Finance: Evolution of Net Income & Gross Revenues

Q0 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8

-1,500,000

-1,000,000

-500,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

Evolution

Gross Revenues Net Income

Finance ratios

Finance ratios

Finance ratios

CDs

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

1800000

Invested in CDsNet cash of Quarter

Balance Sheet

Efectivo $85,785  Inversiones a corto plazo $0  

cuentas por recibir $596,304     Activos Circulantes

Totales  $682,089

 Coste Aeronave $2,500,000  

Menos Depreciación -$800,000  Neto Aeronave $1,700,000  

Instalaciones/Equipo-Neto $100,000     Total Activos Fijos   $1,800,000

 Total Activos   $2,482,089

 cuentas por pagar $344,070  

Préstamos a Corto Plazo $150,000    Total actual de pasivos   $494,070

 Préstamos a Largo Plazo $300,000  

   Pasivo Total   $794,070 

acciones comunes $1,500,000  Beneficio Acumulado $188,019  

   Total Capital   $1,688,019 

Total Pasivo & Capital   $2,482,089

P&LIngresos Brutos $1,490,761   100.0%

− Comisiones $135,659   9.1%

− Reembolsos $119,260   8.0%

+ Ingresos por Intereses

$0   0.0%

   Ingresos Netos   $1,235,842 82.9%

Operaciones de Vuelo $293,299   19.7%

Combustible $225,253   15.1%

Mantenimiento $254,192   17.1%

Servicio al Pasajero $195,532   13.1%

servicio de comida de cabina

$0   0.0%

Seguro $10,260   0.7%

Gastos de Marketing $5,000   0.3%

añadir Compensación Empleados

$0   0.0%

Calidad y Formación $1,000   0.1%

Contratación/costos de entrenamiento

$24,000   1.6%

presupuesto de labor social

$0   0.0%

Coste de Investigación de Mercados

$31,000   2.1%

Gastos de Intereses $10,500   0.7%

Pago Alquiler $0   0.0%

Gastos Administrativos

$100,000   6.7%

Depreciación $48,750   3.3%

Otros Gastos $0   0.0%

   Gasto Total de Operaciones

  $1,198,786 80.4%

   Pérdida/Ganancias Operativa

  $37,056 2.5%

Beneficios Netos Carga

$0   0.0%

Otros Ingresos $0   0.0%

   Beneficios Antes de Impuestos

  $37,056 2.5%

Menos Impuestos sobre la renta (40%)

$14,822   1.0%

   Beneficios Netos   $22,234 1.5%

dividendos pagados   $2,000 0.01/sh

Cash Flow Statementefectivo a principio de periodo $93,521  

redención de CD $0  

ingresos brutos (60%) $894,457  

cuentas por recibir $427,018  

acciones vendidas $0  

recursos de préstamo $0  

otros ingresos $0  

ingreso de efectivo totales (a)   $1,414,996

comisiones + reembolsos $254,919  

gastos operacionales (70%) $805,966  

cuentas por pagar $245,504  

impuestos sobre la renta $14,822  

pago de préstamo $6,000  

compra de CD $0  

dividendos $2,000  

compra de maquinaria $0  

total de salida de efectivo (b)   $1,329,211

efectivo neto (a)-(b)   $85,785

préstamo de sobregiro   $0

efectivo al final de periodo   $85,785

Dividends

Q0 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8

-2500000

-2000000

-1500000

-1000000

-500000

0

500000

Cummulative Net Income

Stock Price

Q0 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

$50.00

Stock price