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A detailed business plan for a low cost airline company. Course: MGT 368 (ENTREPRENEURSHIP)NORTH SOUTH UNIVERSITY, BANGLADESH.

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Page 1: Business Plan of Budget Airline Company
Page 2: Business Plan of Budget Airline Company

Prepared By:

Nafees Imtiaz – 102 0009 030

Abdullah Al Zubair – 082 044 030

Al Inzamam Akhtar – 101 0676 030

Salman Daud – 101 0600 030

Mohammad Towaha Sakin - 091 0218 030

Prepared for:

Abdullah Al Mamun (Ahm)

Lecturer, North South University.

MGT368

Section 1

INDEX

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Page 3: Business Plan of Budget Airline Company

Topic Page no.

EXECUTIVE SUMMARY 4

PROFILE OF THE TEAM 7

COMPANY OVERVIEW 8

INDUSTRY OVERVIEW AND ANALYSIS 21

MARKET OVERVIEW 24

VALUE CHAIN AND OPERATIONAL PLAN 25

MARKETING PLAN 27

HUMAN RESOURCE STRATEGY 31

FINANCIAL PLAN 39

CONCLUSION 42

APPENDIX 43

EXECUTIVE SUMMARY

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Page 4: Business Plan of Budget Airline Company

Ababil Airways is a new low cost consumer airliner in its formative stages. It aims to locate in

Dhaka city, with its head office based on Gulshan area and hub in Hazrat Shajalal International

Airport, Dhaka. This report has been prepared to illustrate a carefully detailed Business Plan for

starting our company. The major highlights of this report includes a Company Overview, which

includes the Mission and Vision Statement of our company as well as Key services and

strategies, Industry Analysis and Market Overview of our company, Value Chain Analysis and

Operation Plan, Marketing Plan and HR Strategy and lastly, a Financial Plan, showing the

projected profit and loss for 5 years, as well as a Balance Sheet, showing the amount of capital

required, which is Tk. 114,093,750.

Ababil Airlines looks forward to start its operations by providing low cost passenger

transportations in the following routes:

i. Dhaka to Chittagong Chittagong to Dhaka

ii. Dhaka to Sylhet Sylhet to Dhaka

iii. Dhaka to Cox's Bazar Cox's Bazar to Dhaka

The pivotal competitive advantage of Ababil Airways is its extra-ordinary low fares for the

customers, which will be possible due to its low cost business strategies. High aircraft

utilization, productive, skilled and multi functioning employees, no frills, courteous but limited

passenger service with an aggressive and focused management structure should allow it to reach

its goals.

Market factors favour inauguration of a new airline in Bangladesh to meet the demand for

domestic passengers linking the major cities with fast mode of air transportation. This new

airline will base its business and marketing strategies on achieving high and profitable, load

factors through absorption of unmet demand, on which high unmet demand currently exists or

can be readily developed. Market research shows that "mean-and-lean" operations in

Bangladesh airline industry while still meeting the needs and desires of the traveling public,

with the low fares, will not only survive, but can prosper.

In addition, the proposed new airline will be designed around, and operated utilizing, the most

up-to-date electronic, informational, and aviation technologies to ensure low operating and

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Page 5: Business Plan of Budget Airline Company

marketing costs, maximum efficiency in deployment of its resources, and a high level of

customer service and convenience. And it is this final element - dedicating the airline, its staff,

and its organization to providing a high level of customer service and convenience, and

efficiently meeting the needs, wants, comfort, and safety of the passenger - that will assure the

proposed airline's rapid acceptance in the marketplace and its long-term growth and success.

The characteristics leading to the success and profitability of this new carrier will be:

Provision of low cost but high-quality service on domestic routes that currently are poorly

served, or under-subscribed by existing carriers, thereby setting both a new trend and a new

pace in air service in the country.

High Aircraft Utilization: Implementing the regions fastest turnaround time at only 25 minutes,

assuring lower costs and higher productivity.

Low Fare, No Frills: Providing guests with the choice of customizing services without

compromising on quality and services.

Employment of cost-effective, up-to-date regional aircraft that will be sized right for the market

and the route, leading to higher load factors, reduced costs, improved efficiency and flexibility,

greater passenger comfort and satisfaction, and higher net profits. Outfitting these aircraft with

the latest aviation technologies and navigational equipment will help ensure the highest level of

reliability, punctuality, safety, and customer satisfaction.

Utilization of the latest electronic and informational technologies in sales and marketing;

reservations, ticketing and check-in; scheduling and resource planning; cargo tracking; and

operational oversight. Such techniques as internet marketing, reservations, and sales; electronic

ticketing and check-in; online quality control, resource planning, operational oversight, cargo

and baggage tracking, and customer service, all will reduce staffing requirements while offering

ease-of-use and greatly enhanced access by, and convenience to, the customer.

Ensuring a low cost, friendly, cooperative, enjoyable, yet highly professional face to the

customer. In short, the goal of this new airline is to be known to the passenger by its proposed

tagline, “Low Fares. Superior Service”.

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Page 6: Business Plan of Budget Airline Company

2012 2013 2014 2015 2016 2017

-5

0

5

10

15

20

25

Rate of Return

Rate of Return

The above chart shows the Rate of Return our company will be generating for the next five

years. Initially, for the first two years, we will be incurring negative rate of returns, but from

2014 onwards, we will be having positive returns.

This shows that, the feasibility of our company is high and the future prospects of our company

are profitable.

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Page 7: Business Plan of Budget Airline Company

PROFILE OF THE TEAM

Nafees Imtiaz:

Majoring in Finance and Accounting, his contribution to the business plan was analysing the Company profile and coming up with proper Mission and Vision Statement for our company. His work further included listing the Key Products and Services of Ababil Airways, and most importantly, detailing our company’s Value Chain Analysis and Operational Plan.

Abdullah Al Zubair:

Majoring in both Accounting and Finance and Marketing, he is the most experienced member of our team. His major contribution to the plan was analysing the market for our services, and coming up with a Market Overview, which in turn led to the creation of the Marketing plan, done by him. Another major contribution was forming the Financial Plan, which was done with a joint effort with another team member, Al Inzamam Akhtar.

Al Inzamam Akhtar:

Also majoring in Accounting and Finance, he and Zubair worked together to create the Financial Plan of Ababil Airways. Coming up with the necessary costing and revenue calculations, he and Zubair both created a projected Income Statement as well as Balance Sheet, which showed the profitability and the feasibility of our company.

Salman Daud:

The second most experienced member of our team, his excellent work in the Human Resource Strategy and Implementation led to a strong analysis of the recruitment and training procedure and structure of our company. His major is Human Resource Management.

Mohammad Towaha Sakin:

Another major in Marketing, Sakin used his skills to come with the Industry Analysis for our

company, with valuable insight regarding the SWOT and PEST analysis required to understand

the position our company will be in.

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COMPANY OVERVIEW

Name: ABABIL AIRWAYS

Tagline: Low Fares. Superior Service.

Mission Statement:

To offer our customers the most cost effective air transportation service ensuring the best

quality, every day.

Vision Statement:

To be the best low cost airline in the country- in the eyes of our customers, shareholders,

communities and serve people who are currently underserved with poor connectivity and high

fares.

Values

• Commitment to Safety

In each decision and each action, every time, every day.

• Honesty, Trust and Integrity

In all actions with one another, our suppliers and our customers.

• Technical excellence and continuous learning

We strive to do it right, then we improve to do it better.

• Compliance with Regulatory Standards

In all actions and all decisions, every time, everyday.

• Acting with purpose and urgency

We make decisions to do the right thing and then act on it.

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• Respectful Communication and Constructive Disagreement

To get to the best result, together.

• Hard work

We strive to do the difficult things that make our airline better than the others.

• Fun

We are positive people who cherish success, learn from mistakes and enjoy our work.

• Profit

We deliver a sustainable profit to support the growth and improvement of our company.

Company Guidelines for Employees

• Employees should be courteous, well behaved, respectful to all stakeholders of the

company, esp. the passengers

• Employees must not disclose any confidential information about the company to any

external sources including the press, employees of other companies or family members

• Employees should not discriminate between persons based on reasons of race, creed, sex,

social status, religion, nationality, age or physical or mental disability

• Employees must comply with all applicable laws and regulations of Bangladesh, and

perform their tasks with ethics and responsibility

• All assets, funds, inflows and outflows must be recorded in the books

• Bribes or illegal payments of any sort are strictly prohibited

• Alcohol in any form and usage of drugs, except under medical advice, is prohibited

• Employees are expected to maintain a productive work environment free from any sorts of

harassment and disruptive activities, which include:

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Page 10: Business Plan of Budget Airline Company

a) Unwelcome remarks or jokes about issues such as race, religion, disability or age 

b) Displaying racist or other offensive pictures or posters 

c) Inappropriate physical contact such as touching, patting, pinching or punching 

d) Physical assault

e) Employees should give utmost priority to cleanliness of work areas

f) Threats, intimidation and verbal abuse

Corporate Social Responsibility

Ababil Airways have a longstanding commitment of addressing the needs of the society, in

view of its belief that for any economic development to be meaningful, the benefits from

business must trickle down to the society at large. Ababil Airways thinks that the corporate

goals must be aligned with the larger societal goals. The following are some of the societal

responsibilities that the company looks forward to undertake:

Education

• Supporting local primary schools that provide education to underprivileged children

• Merit-based scholarship programs for underprivileged students

Community

• Employment quota for disabled people

• Sponsoring local activities that benefit the youth of the area

Health

• Free eye clinics in remote villages

• Blood donation programs in all the divisions

Environment

• Environment friendly engines in all the aircrafts ensuring less carbon emissions

• “Go Green Project”-creating awareness among the employees about the environment

• Reducing and recycling wastes

• Minimising air and noise pollution

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KEY PRODUCTS & SERVICES

In order minimize costs and hence ticket fares, the products and services offered will be kept

simple. “No-frills” policy will be adapted.

Flight services -Ababil Airways aims to provide flight facility to three destinations in

Bangladesh as follows:

I. Dhaka to Chittagong Chittagong to Dhaka

II. Dhaka to Sylhet Sylhet to Dhaka

III. Dhaka to Cox's Bazar Cox's Bazar to Dhaka

• Online reservations (e-reservations) and sales (e-sales) that will provide quick and easy

access to airline schedules, flight availability, reservations, and ticketing to a wide range of

customers. This eliminates payment of agency commissions and shall keep overall costs

low - savings that can be passed on to the customer.

• Baggage handling services will be provided to all customers in all the airports.

• Electronic ticketing (e-ticketing) which will enable passengers to obtain their tickets

online and avoid the need to obtain paper tickets from airline offices, travel agencies, or at

the airport. It also frees the airline from having to stock, track, and issue tickets and

maintaining paper trails of them. Again, more savings for both the airline and the customer.

• Electronic check-in (e-check-in) that will virtually eliminate waiting in line to check-in for

e-ticketed passengers, enabling them to confirm their identities, obtain their boarding

passes, and check-in their baggage (and even purchase tickets upon check-in) utilizing a

user-friendly kiosk that eliminates those last-minute frustrating waits to get to the counter.

And it also greatly reduces the airline's needs to staff check-in desks, control long lines,

employ local contract ground staff, and expend money and resources on an antiquated

system that only adds to the traveler's inconvenience and frustration. Another win-win

situation for both airline and passenger.

• Comfortable economy class seats. Seats in this cabin feature seats ranging from 20 inches

(51 cm) to 20.9 inches (53 cm) in width. Seat pitch on this cabin class is 31–32 inches (79–

81 cm) 31–32 inches.

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KEY STRATEGIESAbabil Airways make the low fare model possible and create values through the implementation

of the following key strategies:

Key Strategies

i. Safety First: Partnering with the world’s most renowned maintenance providers and

complying with the world airline operations.

ii. High Aircraft Utilization: Implementing the regions fastest turnaround time at only 25

minutes, assuring lower costs and higher productivity.

iii. Low Fare, No Frills: Providing guests with the choice of customizing services without

compromising on quality and services.

iv. Streamline Operations: Making sure that processes are as simple as possible.

v. Lean Distribution System: Offering a wide and innovative range of distribution channels to

make booking and traveling easier.

vi. Point to Point Network: Applying the point-to-point network keeps operation simple and

lower costs.

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Page 13: Business Plan of Budget Airline Company

BUSINESS MODEL

Ababil airways looks forward to changing the definition of airline industry that air travel is a

luxury and it is only for the upper segment of the population. The key objective of Ababil

Airways is to increase our reach and provide the services to a large segment.

Ababil airways follows the Low-Cost-Carrier business model in the airline industry, which can

be characterized as below

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Simple Product Catering on demand for extra payment Planes with narrow seating and only a

single class

Positioning

Both business and non-business passengers, especially leisure traffic and price-conscious businesspassengers

Point to point traffic with high frequencies

Aggressive marketing

Low Operation Costs Low wages

Low airport fees

low aeroplane rent cost

Low costs for maintenance, cockpit training and standby crews due to homogeneous fleet

High resource productivity

Page 14: Business Plan of Budget Airline Company

EXHIBIT 1: LOW COST CARRIER BUSINESS MODEL

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INDUSTRY OVERVIEW AND ANALYSIS

PEST ANALYSIS

Political Factors:

• Tax Policy: The Company will not fraud with any type of government legislation

system. The rules given by NBR (National Board of Revenue) will be followed in terms of Tax

related issues. Tax payment will be made as per governmental taxation system and time period.

• Employment Laws: “The Employment of Labor Act, 1965” will be followed for

ensuring the implementation of employment laws of Bangladesh. Employees will be maintained

as per law’s systems.

• Environmental Regulation: The Company will try to maintain a living friendly

environment.

• Political Stability: Although there are some political instability in Bangladesh, the

company will adopt some policies against these political instabilities.

• Route Charge: Increase of route charge by the government

Trade Union: Increase in trade union pressure

• Government policies :Change in government policies and regulations which will

definitely affect Aviation Industry

• Tourism: Increase in tourism will work in favour for Ababil Airlines- as it is a low cost

carrier

Economic Factors:

• Economic Growth: The economy of Bangladesh is a rapidly developing market-based

economy. Its per capita income in 2010 was est. US$1,700 (adjusted by purchasing power

parity). The economy has grown at the rate of 6-7% per annum over the past few years. So, the

company can go with their low cost services at this type of economic growth easily.

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• Interest Rates: The interest rate in Bangladesh is a little bit higher than outside money

market. Current borrowing rate is decreased to 12.51% and also lending rate is decreased to

12.51%. So, the company will not have trouble to deal with financial issues related to interest.

• Price Ceiling: High price ceiling of petroleum products & fuels increase costs of

production.

• Unemployment Rates: Unemployment rate slash down to 8.7% in 2011.

• Exchange rates: Depreciation of Bangladeshi Taka.

• Fuel Costs: Energy and fuel costs are cause of uncertainty.

Social Factors:

• Health Consciousness: The Company will adopt stringent health consciousness

policies. It will ensure medical facilities for its employees and customers.

• Population Growth Rate: According to World Bank, Bangladesh has a population

growth rate of 1.1% per annum. So, the company will have the opportunity to bring new

exciting services at low cost for the increased population.

• Life style: Increase in travelling life style

• Prosperity: As the economy is increasing at this moment prospects are now more

interested to fly for vacation which will help our Airline Industry.

• Demographic prospects: Low-Cost Airline will help to attract a wide range of

demographic of prospects.

.

• Emphasis on Safety: The Company will introduce Aviation Safety Action Program

(ASAP). The goal of the Aviation Safety Action Program (ASAP) is to enhance aviation safety

through the prevention of accidents and incidents.

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Technological factors:

• Research and Development Activity: The Company will implement airport technology

research and development program. In this program the role of airports will be to

accommodate the increased traffic safely. The Environment and Energy Research &

Development program of Ababil Airlines will try to reduce significant community noise and

air quality emissions impacts in absolute terms, reduce the impact of aviation greenhouse

gas emissions on global climate (including the rate of fuel burn), improve energy efficiency

(including air traffic operations and alternative fuels development), proactively address

other environmental issues.

• Fuel efficiency: High fuel efficiency, less noise pollution and lessening of carbon

emission by the supplier Boeing Technological expansion. Internet competition being raised

Web sales/services. Low fuel consumption cars. Online check-in, self service checks at Airports

for Ababil Airways passengers which might be too technical but in tune with our prospects

which may make them unhappy. By using proper technology a company can reduce its costs

effectively and also can maintain good relationship with customers.

PORTER`S FIVE FORCES

Bargaining power of suppliers

1. Aircraft Suppliers: Oversupply of Aircraft parts and their engineering technology from

different suppliers. Number of suppliers for Aircraft parts was increased so there is a

fierce rivalry between Airbus and Boeing.

2. Fuel Suppliers: Fuel costs depends on supply and it's supply subject to fluctuations

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Bargaining Power of Buyers

New consumers from different divisions of the country are interested in flying from one

destination to other due to low prices of Airlines.

Distribution power of travel agents is decreasing as prospects used to book tickets from

internet or through direct booking. So it is a threat for travel agents, so they used to offer

complete travel solutions to customers.

Power of buyers is moderate in Bangladesh. The cost involved with switching airplanes is

decreasing as customers can access internet easily to compare and buy air tickets online. More

customers including travel agents and individuals prefer to take the budget airlines rather than

full service airlines.

Threat of substitute products

Availability of Substitutes is quite high for domestic airlines, including bus services, train,

personal cars, etc. These forms of transport may be more convenient and safer than Airways.

Threat of new entrants

Threat of New Entrants is low. The airline industry is so saturated that there is hardly space for

a newcomer even to squeeze its way in. The main concern for this is the cost of entry. The

airline industry is one of the most expensive industries, due to the cost of buying and leasing

aircrafts, safety and security measures, customer service and manpower. Another major barrier

to entry is the brand name of existing airlines and it is really difficult to lure customers out of

their existing brands.

Intensity of Competitive Rivalry

There are more service providers than needed in the local market. The various airlines are

competing for the same customers. The airlines are continually competing against each other in

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terms of prices, technology, in-flight entertainment, customer services etc. Highly competitive

industries generally earn low returns because the cost of competition.

COMPETITIVE ADVANTAGES

With the Low Cost Carrier Ababil Airways have the following competitive advantages over the

competitors in the airline industry, which can be summarized in the following diagram.

EXHIBIT 2: COMPETITIVE ADVANTAGE

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SWOT ANALYSIS

To figure out the internal factors such as strengths and weaknesses, and external opportunities and threats to business objectives, a SWOT Analysis of Ababil Airways is conducted and shown below:

Strengths

i. Low cost operations

ii. Fewer management level, effective, focused and aggressive management

iii. Simple proven business model that consistently delivers that lowest fares

iv. Penetrate and stimulate to potential markets

v. Multi-skilled staffs means efficient and incentive workforce

vi. Single type fleet minimize maintenance fee and easy for pilot dispatch

Weaknesses

i. Service resource is limited by lower costs

ii. Limited human resources could not handle irregular situation

iii. Government interference and regulation on airport deals and passenger compensation

Opportunities

i. Huge market share

ii. Adding customer services or operation as full service airline with low fares

iii. New routes and airport deals

iv. Unprofitable competitors

Threats

i. Full service airlines start cut costs to compete

ii. Entrance of other low cost airlines

iii. High fuel price decreases yield

iv. Accident

v. Aviation regulation and government policy

vi. Increase in operation cost.

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THE INDUSTRY AND PRODUCT LIFECYCLEThe lifecycle of the industry elucidates about the various stages of the industry, from the initial

first entry to till eventual decline. These stages explicate the different stages that the industry

undergoes. There are five stages, such as

1. Development stage

2. Growth stage

3. Shake out stage

4. Maturity stage

5. Decline stage

GROWTH STAGE DEMAND TIME FOR ABABIL AIRWAYS

This analysis is very essential for every organization as it gets into the particular market or an

industry and gives a brief analysis. Ababil Airways has to strategize in accordance to the market

growth, opportunities, industry's entry barriers, competitive level and product differentiation.

Outcomes

The scenario of Bangladesh airline industry is in ‘growth stage'

Motives behind it:

1. High-end competition

2. Low entry barrier

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3. Growth is high

Strategy of low-cost competitor is likely to continue lively in the marketplace.

CORE COMPETENCIES

a) Low cost.

b) Effective, focused and aggressive management

c) Multi-skilled staffs.

d) Online booking

e) Point to point routing

f) Operation of On-Time delivery

g) No Frills Strategy

h) Route policy strategy

Additional Strategic ConsiderationsAbabil Airways emphasise on information technology has driven fundamental changes in the

nature and application of technology in business. The implementation of information

technology in its value chain provides powerful strategic and tactical tools for Ababil, which if

properly applied and used, could bring great advantages in promoting and strengthening the

competitive advantages. So the additional startegic consideration of Ababil is to adopt

information technologies strategically to integrate the operations and coordinate all the business

and management functions. The followings are few system implementations that Ababil

Airways has done in its marketing and sales activities as well as operation activity in the value

chain.

Yield Management System (YMS)

• Anticipates and reacts to the behavior of customers to maximize the revenue - taking into

account the operating cost and shall aid Ababil Airways to optimize prices and allocate capacity

to maximize the expected revenues by 2 levels:

a) Seat – Seats are available at various prices in different points of time. A reservation done at a

later date will be charged more than the one done earlier for the same seat

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b) Route – By adjusting prices for routes / destinations that have a higher demand when

compared to others.

• Results increased revenue (3-4%) by taking advantage of the forecast of the high / low demand

patterns,lower prices as YMS has aided Ababil Airways to increase the revenue by offering

higher discounts, more frequently during off-peak times while raising prices only marginally for

peak times.

Computer Reservation System (CRS)

• An integrated web-enabled reservation and inventory system suite that includes Internet, call

center, and airport departure control functionality.

• Satisfy the unique needs of Ababil Airways implementing a low-cost business model to

transform the business process to efficiently streamline operations.

Enterprise Resource Planning System (ERP)

• An integrated ERP solution powered by Microsoft Business Solutions (MBS) on Microsoft

technology platform which is implemented by Avanade consultants in May 2005.

• With the robust ERP technology platform, Ababil Airways is able to successfully maintain

process integrity, reduce financial month-end closing processing time, speeds up reporting and

data retrieval process.

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MARKET OVERVIEW:

In Bangladesh, the market power of airline companies for local or regional traveling is not too

high. It is well known that Bangladesh is a poor developing country in which per capita income

is below 2 dollars. So the potential customer base is not very strong.

TARGET MARKET:

We divide the market share of the company based on two issues:

1. Income: Mainly people whose monthly income is 40,000 thousand taka minimum use airline

for local traveling. The pie chart of market segment based on income level is given below:

EXHIBIT3: MARKET SEGMENT BASED ON INCOME LEVEL

2. Profession: This is a market segmentation based on profession. In Bangladesh, the business people

and the service holders mainly travel by airlines, which includes many foreigners.

For domestic traveling, the pie chart will give a clear view of that the category of professions and their

percentage of traveling.

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5%10%

30%

55%

40,000-50,00050,000-80,00080,000-100,000100,000+

Page 25: Business Plan of Budget Airline Company

EXHIBIT 4: MARKET SEGMENT BASED ON PROFESSION

55%

20%

10%

5%

10%

Business PeopleService holderTouristStudents others

COMPANY VALUE CHAIN ANALYSIS AND OPERATIONAL

PLAN

Existing core competencies

Low Fare, No Frills- Providing guests with the choice of customizing services without

compromising on quality and services.

Safety- Partnering with the world’s most renowned maintenance providers and

complying with the world airline operations.

World class customer services and agreements with airports

Engineering workmanship. Ababil aims to operate one of the most efficient aircraft

engineering and maintenance organization in the domestic airline industry of

Bangladesh, providing maintenance, inspections, upgrades, re-fits, inventory

management.

Online booking

Point to point routing

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Future Competencies Ababil`s unique resources are its human resources that are its employees. It can build on

this resource by training and developing its existing staff in their jobs to increase their

skills and for achieving excellence in service delivery. It also an impressive number of

fleet which it can further increase by purchasing new carriers for business expansion.

Ababil Airways can further develop its customer services by developing and delivering

standardised way of delivering customer service throughout the organisation. This will

enable everyone to deal with customers in the Ababil Airway`s way. It can also

negotiate cost effective agreements with airports to reduce costs and avail tax incentives

from them.

Competent leadership. This can further be improved by encouraging new and young

talent and by training and developing key employees to become tomorrows’ leaders.

Ababil aims to hire knowledgeable pilots. These pilots need to keep themselves

informed of the changes in international flying regulations to efficiently do their jobs.

EquipmentWe will be leasing three Dash-8-Q 300 planes from US-based commercial aircraft

leasing and financing firm GE Capital Aviation Services (GECAS) for 5 years.

Value ChainTo better understand and analyze the specific activities through which Ababil Airways

can create a competitive advantage, a value chain analysis for airline industry has been

conducted as below to model Ababil Airways as a chain of value creating activities. The

goal of these activities (Inbound logistics, Operations, Outbound logistics, Marketing

and

Sales, and Service) is to create value that exceeds the cost of providing the product or

services, thus generating a profit margin.

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EXHIBIT 5: VALUE CHAIN ANALYSIS OF AIRLINE INDUSTRY

MARKETING PLAN

Ababil Airways targets the travellers who look for low cost flights. The company promises low

cost but the best service fordomestic traveling.

Sales and marketing:

The company targets customers from various income brackets. To make tickets easily available

Ababil Airways sells it online.

The marketing will be in commercial T.V. channels, radio, business magazines etc.

To advertise Ababil Airways the company targeted some magazines which are very popular to

the business people and also by the service holders.

Distribution:

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Initially we will start the business with three routes and we will take fewer passengers because

we are new in this business. To keep things simple, our tickets will be available for online

purchases only. No travel agencies will be used to avoid commission expenses. There will be no

ticket counters in any airports as a part of the low cost strategy.

Advertising / Product promotion :

Initially, we would distribute 20,000 leaflets in major city centre sites in Dhaka, Chittagong,

Sylhet and Cox`s Bazar. After that we would not engage in any direct promotional campaign

throughout the next year. This decision is taken with regard to the fact that the company and its

service, although has an identified market, will start off in a small scale. Then, after break-even

and profit making, the company will think of going larger-scale. So, initially due to the small

size of the business, we would not go for more promotional campaigns for feasibility purposes.

We can also arrange some TVC advertisement so that every potential customer gets to know

about Ababil Airways and its low cost service. When our business will carry its full fledged

activities, we will gain some loyal customers who will always travel through us, we can offer

them the privilege card which will contain 10% discount in every flight. For that reason we will

specially have to focus on the business people. It is also true that students are also our main

target customers, but we have to give special attention to our corporate businessmen, they travel

everyday and they need a low cost airplane service that will serve them the most and will cost

them less. So here we are, Ababil Airlines to help them satisfy their needs and attract them will

some new and exciting promotional features.

We will also give some discounts to all our customers during the month From October to

December and also during the month of Ramadan. That’s how we will carry our promotional

campaigns and advertisings.

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Customer Service :

We will have special arrangements for the customers who will travel in our airlines. We will

provide paid foods inside the aircraft and we will also provide the foods for free to our privilege

card holders. As our business is low cost, so the lowest possible plane fare would be the main

service for the customers.

PRICING

The base fares of our flight services are as follows:

ROUTE TICKET FARE

Dhaka to Chittagong / Chittagong to Dhaka 2800 B.D.T

Dhaka to Sylhet / Sylhet to Dhaka 2500 B.D.T

Dhaka to Cox's Bazar / Cox's Bazar to Dhaka 3350 B.D.T

PRICE BASED ON TIER SYSTEM

EXHIBIT 6 : TIER BASED PRICING

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The company will also follow a tier system for pricing. We shall adopt a simplistic fare structure based

on time value relationship for seats. The earlier the customer books, the cheaper will be the fare will be.

There are 12 fare buckets, each bucket is priced according to our specification. The first few tiers are

targeted to value conscious passengers, but they can only get their hands to extremely cheap tickets if

they book way ahead of time. The mid tier buckets target the captive market. Ones the revenue

collected is sufficient to cover all the operational costs to the flight, the system will then move to the

top tier bucket. This is when prices will start to creep up and our profit grows.

HUMAN RESOURCE STRATEGY

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Key Issues

• Employee branding

• Recruitment process

• Training and development

• Performance appraisal

• Payroll and employee benefit

Employer branding

It is defined as “the image of your organization as a ‘great place to work’". Employer branding

creates this image. The company will try to increase the image of Ababil Airways so employee

will find it as a great place to work .

Recruitment process

Recruitment refers to the process of attracting, screening, and selecting a qualified person for a

job. All companies in any industry can benefit from contingency or retain professional recruiters

or outsourcing the process to recruitment agencies.

Recruitment process in ABABIL AIR WAYS

• Initial selection

• Substantive selection

• Contingent selection

Initial selection:

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It’s goals are to use for preliminary “rough cut” to decide whether the applicants meets the

basic qualification for a job .

Example: applicants form , background check

Substantive selection:

It’s goal is to determine the most qualified applicants from among those who meets the basic

qualifications

Example: written test, performance test, interview.

Contingent selection:

It’s goal is to make final check before making offer to applicants .

Example : drug test , background check .

Applicant receives job offer

Training and development

In the field of human resource training and development is the field which is concerned with

organizational activity aimed at bettering the performance of individuals and groups in

organizational settings. It has been known by several names, including human resource

development, and learning and development

Types of training

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In our airline we give four types of training. The four general skill categories are :

• Basic literacy skill

• Technical skill

• Interpersonal skill

• Problem solving skill

• And new addition of training is ethics training.

Ababil Airways trains its flight crews to the absolute highest standards in the industry. Pilots

with corporate and airline experience are considerately selected to operate Ababil Airway’s

premier aircraft. These flight crews are then provided with the highest quality initial and

recurrent flight training at FlightSafety International, the most highly regarded flight training

school in the world. At FlightSafety our pilots go through rigorous simulator and classroom

sessions taught by the most talented aviation professionals in the industry. These lessons are

taught to advance our pilots overall knowledge in the aviation industry and more specifically the

aircraft we fly, the Hawker 400xp. To conclude training, our crews are evaluated by FAA

examiners who test their skill and knowledge in the classroom and the simulator. This training

is repeated on a semiannual basis guaranteeing that when you fly with Ababil Airways you are

getting a meticulously trained top quality flight crew.

Performance appraisal

Performance appraisal, employee appraisal, performance review, or (career) development

discussion is a systematic and periodic process that assesses an individual employee’s job

performance and productivity in relation to certain pre-established criteria and organizational

objectives. Other aspects of individual employees are considered as well, such as behavior,

accomplishments, potential for future improvement, strengths and weaknesses, etc.

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The three most popular sets of criteria of employee the company shall evaluate:

• Outcomes

• Behaviors

• Traits

EXHIBIT 7: 360 DEGREE EVALUATION

Methods of performance evaluation

• Written essay

• Critical incidents

• Graphic rating scale

• Behaviorally anchored rating scale

• Forced comparison

Benefits and perks

For employee career

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• A 5 days work a week

• Performance bonus

• Long service awards

• Examination leave

• Career progression opportunity for employee health and wellness

For employee’s health and wellness

• Hospitalization and surgical expense

• Personal accident and term life insurance coverage

• Food and drinks subsidies

For employee’s inner wanderlust

• Yearly free flight coupons

• Up to 90% discounts on concession travel

For employee’s family

• Paternity leave

• Compassionate leave

• Hospitalization expense for employee’s spouse and children.

Structure

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There are six elements that managers need to address when they design their organization’s

structure:

• Work specialization

• Departmentalization

• Chain of command

• Span of control

• Centralization

• Decentralization

Staff requirement

Staffs of ABABIL AIRWAYS

• Pilot

• Co pilot

• Ground engineer

• Flight engineer

• Air hostess

EXHIBIT 8: DELEGATION OF AUTHORITY

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AUTHORITY OF PRINCIPALS:

Name Specialization Graduated From DesignationNafees Imtiaz Finance &

AccountingNorth South University

CFO

Abdullah Al Zubair Finance & Marketing North South University

CEO

Al Inzamam Akhtar Finance & Accounting

North South University

CFO

Salman Daud HRM North South University

C HR O

Mohammad Towaha Sakin

Marketing North South University

CMO

Roles and Responsibilities:

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CFO will take care of the financial side, the managers under him will manage the financial

data and information and any kind of barriers in work will be monitored by the CFO.

 CMO will delegate works to the marketing managers and they will be conducting the

marketing campaigns. Marketing assistant are there to flow the commands by the upper level

regularly, all the outdoor works will be followed by them.

 The COO will take care of all the operations going and the operational manager maintain the

designers and artists work who will be involved in creating new designs and conduct the paint

service. All services will be observed by this COO’s department. 

CEO is the top most level, and he is going to look over all the aspects of the business. The

CFO, CMO, COO will directly report to the CEO and they all will work as a team like board of

directors.

FINANCIAL PLANProjected Income Statement

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Forecasted Balance Sheet and Cash Flow Statement (Percentage of Sales Method):

Forecasted Balance Sheet: 2012 2013 2014 2015 2016 2017

Current Assets:Cash ৳ 10,000,000 ৳ 10,281,889 ৳ 10,565,703 ৳ 10,851,130 ৳ 11,124,819 ৳ 11,386,335Other Current Assets ৳ 12,000,000 ৳ 12,405,920 ৳ 12,819,106 ৳ 13,239,266 ৳ 13,646,678 ৳ 14,040,199

Total Current Assets ৳ 22,000,000 ৳ 22,687,808 ৳ 23,384,809 ৳ 24,090,396 ৳ 24,771,497 ৳ 25,426,534

Long-term AssetsLicensing ৳ 11,100,000 ৳ 11,447,315 ৳ 11,799,115 ৳ 12,155,072 ৳ 12,498,489 ৳ 12,828,576Office Interiors ৳ 3,000,000 ৳ 3,025,370 ৳ 3,049,942 ৳ 3,073,726 ৳ 3,095,686 ৳ 3,115,936Office Leasing ৳ 1,000,000 ৳ 1,002,819 ৳ 1,005,519 ৳ 1,008,104 ৳ 1,010,466 ৳ 1,012,624

Plane leasing ৳ 100,000,000 ৳ 128,188,865 ৳ 172,304,132 ৳ 248,212,626 ৳ 391,416,265 ৳ 715,152,539

Total Long-term Assests ৳ 115,100,000 ৳ 143,664,369 ৳ 188,158,707 ৳ 264,449,528 ৳ 408,020,906 ৳ 732,109,675Total Assets ৳ 137,100,000 ৳ 166,352,178 ৳ 211,543,516 ৳ 288,539,925 ৳ 432,792,403 ৳ 757,536,210

Current LiabilitiesShort-term borrowing ৳ 15,000,000 ৳ 15,634,249 ৳ 16,290,459 ৳ 16,968,983 ৳ 17,638,279 ৳ 18,295,673

Total Liabilities ৳ 15,000,000 ৳ 15,634,249 ৳ 16,290,459 ৳ 16,968,983 ৳ 17,638,279 ৳ 18,295,673

Paid-in Capital ৳ 125,593,750 ৳ 125,593,750 ৳ 125,593,750 ৳ 125,593,750 ৳ 125,593,750 ৳ 125,593,750Retained Earnings -৳ 3,493,750 -৳ 4,308,437.50 -৳ 2,310,109 ৳ 5,595,552 ৳ 19,999,279 ৳ 41,550,878

Total Capital ৳ 122,100,000 ৳ 121,285,312.50 ৳ 123,283,641 ৳ 131,189,302 ৳ 145,593,029 ৳ 167,144,628Total Capital and Liabilities ৳ 137,100,000 ৳ 136,919,561.97 ৳ 139,574,100 ৳ 148,158,285 ৳ 163,231,308 ৳ 185,440,301Additional Funds Needed ৳ 29,432,615.62 ৳ 71,969,417 ৳ 140,381,640 ৳ 269,561,095 ৳ 572,095,908

Forecasted Cashflow Statement: 2012 2013 2014 2015 2016 2017

Cash flow from Opearating Activities:Net Income -৳ 3,493,750 -৳ 814,688 ৳ 1,998,328 ৳ 7,905,661 ৳ 14,403,727 ৳ 21,551,600

Cash provided by changes in Current Assets and Liabilities:Increase in Other Current Assets ৳ 0 -৳ 405,920 -৳ 413,187 -৳ 420,160 -৳ 407,412 -৳ 393,521Increase in Short term Borrowing ৳ 0 ৳ 634,249 ৳ 656,209 ৳ 678,525 ৳ 669,296 ৳ 657,394

Net Cash provided by Operating Activities ৳ 0 ৳ 228,330 ৳ 243,023 ৳ 258,365 ৳ 261,883 ৳ 263,874

Cash provided by changes in Financing Activities:Capital Expenditure ৳ 0 -৳ 28,564,369 -৳ 44,494,338 -৳ 76,290,821 -৳ 144,252,478 -৳ 324,088,769

Net Cash provided by Financing Activities ৳ 0 -৳ 28,564,369 -৳ 44,494,338 -৳ 76,290,821 -৳ 143,845,652 -৳ 324,088,769

Increase/Decrease in cash -৳ 3,493,750 -৳ 28,922,398 -৳ 42,252,987 -৳ 68,126,795 -৳ 129,180,042 -৳ 302,273,295

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Percentages Used in Forecasting:

Percentages: 2013 2014 2015 2016 2017

Current Assets:Cash 2.82% 2.76% 2.70% 2.52% 2.35%Other Current Assets 3.38% 3.33% 3.28% 3.08% 2.88%

Long-term AssetsLicensing 3.13% 3.07% 3.02% 2.83% 2.64%Office Interiors 0.85% 0.81% 0.78% 0.71% 0.65%Office Leasing 0.28% 0.27% 0.26% 0.23% 0.21%

Plane Leasing 28.19% 34.41% 44.05% 57.69% 82.71%

Current LiabilitiesShort-term borrowing 4.23% 4.20% 4.17% 3.94% 3.73%

Paid-in Capital 0.00% 0.00% 0.00% 0.00% 0.00%Retained Earnings 0.00% 0.00% 0.00% 0.00% 0.00%

Assumptions:

Sales are expected to rise by 5% for the first two years, and 10% from year 3 and onwards. Some short-term borrowing might be needed, in case of purchase of certain equipment or advance purchase of fuel,

in case fuel prices rise.

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CONCLUSION

Ababil Airway’s will be providing a whole new strategy that is not yet present in Bangladesh’s

Airline Industry, which is a no frills, lowest fare airline service that will capture our target

market.

We hope to hold this competitive advantage in the near future, by standing by our Mission

statement, and carrying out the objectives we have outlined in the Plan.

Our biggest strength is the size of our operations, which are small-scale. This gives us a better

advantage in terms of Management and achieving low cost in every possible aspect of our

operations. This gives us a further competitive advantage than our competitors, who not only

provide Domestic air travel, but also International. This causes them to lose focus on their

domestic goals, and gives us the chance to grab this opportunity to become the market leader in

the Domestic air travel market in Bangladesh.

Furthermore, as our financial plan shows, we have consistently achieved a positive net profit

margin as well as rate of return, excluding the first two years of operations, which shows that

Ababil Airways has the potential to be a highly profitable venture.

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Appendix:Variable Cost per Flight

Variab Particulars Cost

Fuel 50000Co-pilot 10000Air-Hostess Wage (2) 10000

Pilot Wage 20000

Maintenance 5000Airport Charges 10000Sales Commision 5000

Total ৳ 110000 x 2150 flights = ৳ 236,500,000

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Sales Calculation Price Total

30 passengers/flight up/down 2500 75,00020 passengers/ flight up/down 3000 60,00030 passengers/flight up/down 1000 30,000total 165,000Flights Per Week 3 routes

Revenue per Flight

Sunday 3 3 450 165,000 ৳ 74,250,000Monday 2 1 100 165,000 ৳ 16,500,000Tuesday 2 3 300 165,000 ৳ 49,500,000Wednesday 2 1 100 165,000 ৳ 16,500,000Thursday 3 3 450 165,000 ৳ 74,250,000Friday 3 2 300 165,000 ৳ 49,500,000Saturday 3 3 450 165,000 ৳ 74,250,000

TOTAL 2150 ৳ 354,750,000

Total Flights per year Yearly Revenue Day Number

of Shifts Zones

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