Wharton on Coursera Entrepreneurship Capstone Project

Preliminary Pitch Deck

By FRANCISCO A OLIVAS

August 14 2016

Central American Airways More Value for Less Money

(Low-cost Air Carrier)

Caveat business plan hypothesis for accrediting the Wharton on Coursera Entrepreneurship Capstone course August 2016 No business proprietary rights infringement intended

Description of the Problem (Pain Point) Central America (Guatemala Belize Honduras El Salvador Nicaragua Costa Rica Panama) is a

region in development After experiencing catastrophic economic and social effects to its population in

the last quarter of the 20th century because of civil wars and lack of economic opportunity Central

Americans have experienced relative political stability and visible relative economic development in the

21st century ie increasing and visible middle class and and sustained population growth Furthermore

Central America is poised to achieve full economic integration which will increase economic growth

High Intra-Central American plane ticket prices Because the intra-Central American air carrier

market is dominated by a duopoly in the hands of two flight carriers COPA (Panama) and Avianca

(Colombia) plane ticket prices for traveling within Central America are sky-high eg the cheapest one-

way plane ticket for traveling between the city of San Jose Costa Rica to Guatemala City Guatemala

(distance of 541 miles) costs USA $248 whereas the price of a one-way plane ticket between the city of

Berlin Germany and the city of Paris France (distance of 546 miles) with a low-cost air carrier costs

USA $123 (as of August 10 2016)

Huge opportunities in Central America for low-cost air carriers Because the concept of low-cost

airlines (cheaper fares few frills one-class cabins and Internet-only ticket sales) has not penetrated into

Central America the region is a promising growth market for low-cost air carrieers

3

Central American Airways More Value for Less Money

(Low-cost Air Carrier)

Caveat business plan hypothesis for accrediting the Wharton on Coursera Entrepreneurship Capstone course August 2016 No business proprietary rights infringement intended

Description of the Problem (Pain Point) Central America (Guatemala Belize Honduras El Salvador Nicaragua Costa Rica Panama) is a

region in development After experiencing catastrophic economic and social effects to its population in

the last quarter of the 20th century because of civil wars and lack of economic opportunity Central

Americans have experienced relative political stability and visible relative economic development in the

21st century ie increasing and visible middle class and and sustained population growth Furthermore

Central America is poised to achieve full economic integration which will increase economic growth

High Intra-Central American plane ticket prices Because the intra-Central American air carrier

market is dominated by a duopoly in the hands of two flight carriers COPA (Panama) and Avianca

(Colombia) plane ticket prices for traveling within Central America are sky-high eg the cheapest one-

way plane ticket for traveling between the city of San Jose Costa Rica to Guatemala City Guatemala

(distance of 541 miles) costs USA $248 whereas the price of a one-way plane ticket between the city of

Berlin Germany and the city of Paris France (distance of 546 miles) with a low-cost air carrier costs

USA $123 (as of August 10 2016)

Huge opportunities in Central America for low-cost air carriers Because the concept of low-cost

airlines (cheaper fares few frills one-class cabins and Internet-only ticket sales) has not penetrated into

Central America the region is a promising growth market for low-cost air carrieers

3

Description of the Problem (Pain Point) Central America (Guatemala Belize Honduras El Salvador Nicaragua Costa Rica Panama) is a

region in development After experiencing catastrophic economic and social effects to its population in

the last quarter of the 20th century because of civil wars and lack of economic opportunity Central

Americans have experienced relative political stability and visible relative economic development in the

21st century ie increasing and visible middle class and and sustained population growth Furthermore

Central America is poised to achieve full economic integration which will increase economic growth

High Intra-Central American plane ticket prices Because the intra-Central American air carrier

market is dominated by a duopoly in the hands of two flight carriers COPA (Panama) and Avianca

(Colombia) plane ticket prices for traveling within Central America are sky-high eg the cheapest one-

way plane ticket for traveling between the city of San Jose Costa Rica to Guatemala City Guatemala

(distance of 541 miles) costs USA $248 whereas the price of a one-way plane ticket between the city of

Berlin Germany and the city of Paris France (distance of 546 miles) with a low-cost air carrier costs

USA $123 (as of August 10 2016)

Huge opportunities in Central America for low-cost air carriers Because the concept of low-cost

airlines (cheaper fares few frills one-class cabins and Internet-only ticket sales) has not penetrated into

Central America the region is a promising growth market for low-cost air carrieers

3

The Airplane Passenger Market of Central America

4

Total Market Size Focal Market Segment

Total Population

427 millions

Total Number of

Passengers using

Capitalrsquos

International

Airports

Annually

asymp 20 millions

Key Customer Needs

bull Affordable passenger

plane ticket prices

bull Point to point flight

service

bull Round-trip services

bull Service to all Central

American capitals and

and region major

tourist destinations

bull Safety and comfort

Middle-income

share of the

population 2001 -

2011 from 19 to

21

Reachable

Market Share

asymp 40

The Solution Concept

5

Value Proposition

For air travelers who want cheap flight

tickets for flying within Central America

without sacrificing punctuality safety and

reliability Central American Airways is a low-

cost airline that services the main business

and tourist destinations in Central America

and delivers an enjoyable flying experience at

unmatched prices and punctuality

Unlike existing airlines servicing the region

we offer truly low-cost flight tickets for

arrival at destination with punctuality and

with a friendly and personal attention our

objective is to offer you a safely punctual

and affordable flight experience

Minimum Value Product (MVP)

bull Single passenger class

bull A single type of airplane for reducing training

and service costs

bull Minimum set of optional equipment on the

aircraft

bull Pilot conveniences are excluded

bull No in-flight entertainment systems

bull Fast turnaround times allowing maximum use of

aircraft

bull Simple and transparent fare scheme

bull Price sensitive traffic leisure passengers

bull Flying early in the morning or late in the evening

bull Point-to-point transit instead of transfers at hubs

bull Passengers paying extras charges for extras

bull No meals in flights but snacks sandwiches

bull Emphasis on direct sale of tickets especially over

the Internet

Competitive Analysis

6

Central American Aviation

Industry Environment

Opportunities

bull Central American economic

integration

bull Untapped demand for LCC

bull Low oil prices

bull Growing demand ∆ 500

annually USA economic

recovery from Great

Recession

Challenges

bull High local airport taxes

bull Lack of secondary airport

network in Central America

bull Lack of a unified Central

America aviation market

Competitors

Full Sevice Airlines

Duopoly high

ticket prices

daily routes

service all of

Central

America

Alternative 2014 started

operations

regional services

to major cities

no round-trip

services for all

destinations

Central American Airways

Low fares eg San Jose

Costa Rica ndash Guatemala

City Guatemala round-trip

for USA $130

Service all Central America

capital cities and major

tourist destinations

Daily services

No-frills

Cordial and informal but

respectful attention

High safety standards

Modern aircraft fleet

Customer Acquisition Process - Estimated Customer Acquisition Cost

7

15

25

15

45

Customer Acquisition Methods

Off-line word-of-mouth

Magazineadvertising

Online word-of-mouth

Online search

Estimated Customer Acquisition Cost

(Using the example of round-trip flight from

Costa Rica To Guatemala)

bull Margin (m) = 141$130 asymp $20

bull Retention period rate (r) = 90

bull Discount rate (d) = 10

bull Time period (t) = 0 (Period 0)

Customer Acquisition Cost equiv Customer Lifetime

Value Period 0 (CLV)

1198621198711198810 = 119898 119903119905

(1 + 119889)0 = $20

090

(1 + 01)0 = $120784120782

Unit Economics

8

Central American Airways Average Fare

(Price to Customers)

USA $95

Cost Structure Operating Expenses Estimate

(Including Aircraft Rental (3))

0

10

20

30

40

50

60

70

80

90

100

10

13

22

5

15

18

2

15

Labor Flight Crew

Ticket Sales

Airport Landing

DepreciationAmortization

Mantainance amp Overhaul

Fuel amp Oil

Route Charges

Others

Sales Forecast - What is the Forecast Demand under Uncertainty

9

ACCORD MODEL

To avoid biases in our sales (demand) forecast we use the ACCORD Model

1 Relative advantage over status-quo complete round-trip packages for all of destination points more flights per week

friendlier service better punctuality cheapest price guarantee

2 Behavioral change required No target market expectations compatibility low-cost carrier has already been introduced

to Central America but is undeveloped

3 Easiness for understanding Very simple target market is receptive to concept

4 Can customers observe benefits Yes in a comparative way with what is being currently offered in Central America

price service punctuality destinations convenience of service hours

5 What is the risk of failure of using the service No social stigma associated with the use of low-cost air carrier there is

no financial risk of using the product offered by Central American Airways

6 Can the product be consumed in a relative cost or small units The product is low-cost and can be used in single trials

rarr Since the answers are positive we can expect that demand (sales) are going to expand swiftly

Sales Estimation Using Demand Decomposition (Passengers Annually)

Central America

Population 427

millions

X Who Fly

10 X

Who Want Low-

Cost Carrier 7

=

Potential

Sales

asymp 300000

Branding and Naming

10

centralamericancom dot-com availability via GoDaddycom

POSITIVE

(As of August 13 2016)

Brand Name

Central American Airways More Value for Less Money

Critical Assumptions 1

11

1 Customer Value

a) Do you know what customer needs you are solving Cheap flights needs How I am one of the

customers in need and there are a lot of customers like me in Central America

b) Are there particular segments you are addressing Middle class relative young students leisure

travelers frequent-fliers non-corporate highly mobile people foreign tourists

c) How are you different than other products or services Cheapest fares servicing all regionrsquos capital

cities more weekly flies

d) How can you keep your advantage Keeping fares and costs down and high service standards

e) How will competitors react Taking advantage of their duopolistic advantages and trying to imitate

our service

f) How are you pricing the product or service Strategy of Four Cs of Pricing flying-out early in the day

and flying-back later in the day use conjoint analysis to determine best price

g) Who are you going to work with to succeed Seek local business groups to share investment costs seek

international investors

2 Technology and Operations

a) What tasks exactly need to be done to make this work Get initial investors to pay for the detailed

plans to make this happen get local governments approval lobby to promote secondary airports (more

private enterprise) get start-up financing hire local managers with industry

Critical Assumptions - 2

12

and region knowledge (local business groups) get consulting from The World Bank

b) What drives your costs Fuel airport labor

c) Do you have the talent already No If not how will you get it Through contacting local private

business associations local headhunters businesses partnership with specialized organizations in

Europe and the North America

d) How will you develop and maintain your underlying technologies Specialized consulting firms IATA

(International Air Transport Association)

3 Sales and Marketing

a) What types of sales channels are you using to go to market Direct ticket sales via the Internet call

centers and local partnership with other businesses (hotels guest houses)

b) How are you getting new customers Aggressive direct marketing campaign and marketing through

strategic alliances with local hotels

c) How are you going to measure success High revenue low costs high customer satisfaction

4 Financial and Profit

a) How much money do you need to build this Initial investment of $100 million USD

b) How will you get that money Local and international investors (international investors ndash partnership

with an international low-cost carrier in the USA andor Europe)

The Team

13

CEO TBD Characteristics

bull Aggressive management

style

bull Aviation industry and

Region knower

bull Ivy League MBA ndash

Specialization

Entrepreneurship

bull Age Mature

FRANCISCO A OLIVAS

(Novice Entrepreneur)

Chief Capital Raiser TBD

Characteristics

bull Knower of seed capital

markets in Latin America

bull Sound finance expertise

bull Contact to regionrsquos start-

up investors

bull eg Region Venture

Capitalist

14

The Budget (Milestones) - Illustrative Only Milestones

Milestone Start Date End Date Budget Manager Department

Establish a firm financial plan 0912016 0912016 TBD ABC Team

Identify an anchor investor 09152016 09152016 TBD ABC Team

Commence leasing negotiations 1012016 1012016 TBD ABC Team

Set up new company 1052016 1052016 TBD ABC Team

Begin negotiating for offices 1052016 1052016 TBD ABC Team

Select core mngmnt team 10102016 10102016 TBD ABC Team

Commence co operations 10152016 10152016 TBD ABC Team

Make initial aircraft lease pymnt 10302016 10302016 TBD ABC Team

Begin hiring key personnel 1112016 1112016 TBD ABC Team

Begin crew training 1212016 1212016 TBD ABC Team

Take delivery of aircraft 12152016 12152016 TBD ABC Team

Begin inaugural flights 152017 152017 TBD ABC Team

Operation turns profitable 112018 112018 TBD ABC Team

Take delivery of fourth aircraft 4152018 4152018 TBD ABC Team

Totals TBD

15

Financing Plan (sources and amounts required) [Illustrative Only] Most of the planned start-up costs are apportioned to the following six areas in approximately declining

value

1 Dry leasing or purchasing three (followed by two more by the end of the first year of operations) mid-

to-large-size regional jet aircraft most likely the 99-seat British Aerospace Avro RJ100 (or the older

predecessor to the RJ100 the BAe 146 which also offers a quick-convert passenger-cargo version) or

the 85 - 99-seat Avro RJ85 or the next-generation follow-on versions of those two Avro jets the

RJX100 or RJX85

2 Provision of a sufficient cash reserve to assure timely payment of the leasing or finance payments and

operating costs of the aircraft through at least the first six months of operations

3 Marketing advertising and public relations costs including costs of setting up a website capable of

offering flight and fare information and making online sales and reservations and related Internet

marketing as well as conventional print and broadcast advertising and public relations activities

4 Costs associated with recruiting training and certifying flight and ground operational crews

5 A reserve to cover overall operating costs aside from aircraft operating costs over at least the first six

months of operations

6 Administrative and legal costs incurred in setting up the business and the airline operations

16

Financing Plan (sources and amounts required) - 2 Table Start-up Requirements

Start-up Expenses

Legal and consulting $200000

Route and market study $100000

Office supplies stationery etc $10000

Brochures and marketing materials $30000

Design consultants $60000

Corporate insurance $20000

Office rent $50000

Software and systems development $100000

Expensed equipment and off furniture $150000

Expensed vehicles (8) $100000

Public relations and advertising $80000

Crew staff training and manuals $60000

Other $30000

Total Start-up Expenses $990000

Start-up Assets

Cash Required $10400000

Start-up Inventory $150000

Other Current Assets $50000

Long-term Assets $200000

Total Assets $10800000

Total Requirements $11790000

17

Financing Plan (sources and amounts required) - 3 Table Start-up Funding

Start-up Expenses to Fund $990000

Start-up Assets to Fund $10800000

Total Funding Required $11790000

Assets

Non-cash Assets from Start-up $400000

Cash Requirements from Start-up $10400000

Additional Cash Raised $0

Cash Balance on Starting Date $10400000

Total Assets $10800000

Liabilities and Capital

Liabilities

Current Borrowing $600000

Long-term Liabilities $0

Accounts Payable (Outstanding Bills) $390000

Other Current Liabilities (interest-free) $0

Total Liabilities $990000

Capital

Planned Investment

Private investment $10800000

Other $0

Additional Investment Requirement $0

Total Planned Investment $10800000

Loss at Start-up (Start-up Expenses) ($990000)

Total Capital $9810000

Total Capital and Liabilities $10800000

Total Funding $11790000

18

Financing Plan (sources and amounts required) - 4 Chart Start-up

19

Proforma Financial Statements for the Next 3 Years Illustrative Only ndash Click On Embedded Links

I ProForma Income Statement

II ProForma Cash Flow Statement

III ProForma Balance Sheet

Competitive Analysis

6

Central American Aviation

Industry Environment

Opportunities

bull Central American economic

integration

bull Untapped demand for LCC

bull Low oil prices

bull Growing demand ∆ 500

annually USA economic

recovery from Great

Recession

Challenges

bull High local airport taxes

bull Lack of secondary airport

network in Central America

bull Lack of a unified Central

America aviation market

Competitors

Full Sevice Airlines

Duopoly high

ticket prices

daily routes

service all of

Central

America

Alternative 2014 started

operations

regional services

to major cities

no round-trip

services for all

destinations

Central American Airways

Low fares eg San Jose

Costa Rica ndash Guatemala

City Guatemala round-trip

for USA $130

Service all Central America

capital cities and major

tourist destinations

Daily services

No-frills

Cordial and informal but

respectful attention

High safety standards

Modern aircraft fleet

Customer Acquisition Process - Estimated Customer Acquisition Cost

7

15

25

15

45

Customer Acquisition Methods

Off-line word-of-mouth

Magazineadvertising

Online word-of-mouth

Online search

Estimated Customer Acquisition Cost

(Using the example of round-trip flight from

Costa Rica To Guatemala)

bull Margin (m) = 141$130 asymp $20

bull Retention period rate (r) = 90

bull Discount rate (d) = 10

bull Time period (t) = 0 (Period 0)

Customer Acquisition Cost equiv Customer Lifetime

Value Period 0 (CLV)

1198621198711198810 = 119898 119903119905

(1 + 119889)0 = $20

090

(1 + 01)0 = $120784120782

Unit Economics

8

Central American Airways Average Fare

(Price to Customers)

USA $95

Cost Structure Operating Expenses Estimate

(Including Aircraft Rental (3))

0

10

20

30

40

50

60

70

80

90

100

10

13

22

5

15

18

2

15

Labor Flight Crew

Ticket Sales

Airport Landing

DepreciationAmortization

Mantainance amp Overhaul

Fuel amp Oil

Route Charges

Others

Sales Forecast - What is the Forecast Demand under Uncertainty

9

ACCORD MODEL

To avoid biases in our sales (demand) forecast we use the ACCORD Model

1 Relative advantage over status-quo complete round-trip packages for all of destination points more flights per week

friendlier service better punctuality cheapest price guarantee

2 Behavioral change required No target market expectations compatibility low-cost carrier has already been introduced

to Central America but is undeveloped

3 Easiness for understanding Very simple target market is receptive to concept

4 Can customers observe benefits Yes in a comparative way with what is being currently offered in Central America

price service punctuality destinations convenience of service hours

5 What is the risk of failure of using the service No social stigma associated with the use of low-cost air carrier there is

no financial risk of using the product offered by Central American Airways

6 Can the product be consumed in a relative cost or small units The product is low-cost and can be used in single trials

rarr Since the answers are positive we can expect that demand (sales) are going to expand swiftly

Sales Estimation Using Demand Decomposition (Passengers Annually)

Central America

Population 427

millions

X Who Fly

10 X

Who Want Low-

Cost Carrier 7

=

Potential

Sales

asymp 300000

Branding and Naming

10

centralamericancom dot-com availability via GoDaddycom

POSITIVE

(As of August 13 2016)

Brand Name

Central American Airways More Value for Less Money

Critical Assumptions 1

11

1 Customer Value

a) Do you know what customer needs you are solving Cheap flights needs How I am one of the

customers in need and there are a lot of customers like me in Central America

b) Are there particular segments you are addressing Middle class relative young students leisure

travelers frequent-fliers non-corporate highly mobile people foreign tourists

c) How are you different than other products or services Cheapest fares servicing all regionrsquos capital

cities more weekly flies

d) How can you keep your advantage Keeping fares and costs down and high service standards

e) How will competitors react Taking advantage of their duopolistic advantages and trying to imitate

our service

f) How are you pricing the product or service Strategy of Four Cs of Pricing flying-out early in the day

and flying-back later in the day use conjoint analysis to determine best price

g) Who are you going to work with to succeed Seek local business groups to share investment costs seek

international investors

2 Technology and Operations

a) What tasks exactly need to be done to make this work Get initial investors to pay for the detailed

plans to make this happen get local governments approval lobby to promote secondary airports (more

private enterprise) get start-up financing hire local managers with industry

Critical Assumptions - 2

12

and region knowledge (local business groups) get consulting from The World Bank

b) What drives your costs Fuel airport labor

c) Do you have the talent already No If not how will you get it Through contacting local private

business associations local headhunters businesses partnership with specialized organizations in

Europe and the North America

d) How will you develop and maintain your underlying technologies Specialized consulting firms IATA

(International Air Transport Association)

3 Sales and Marketing

a) What types of sales channels are you using to go to market Direct ticket sales via the Internet call

centers and local partnership with other businesses (hotels guest houses)

b) How are you getting new customers Aggressive direct marketing campaign and marketing through

strategic alliances with local hotels

c) How are you going to measure success High revenue low costs high customer satisfaction

4 Financial and Profit

a) How much money do you need to build this Initial investment of $100 million USD

b) How will you get that money Local and international investors (international investors ndash partnership

with an international low-cost carrier in the USA andor Europe)

The Team

13

CEO TBD Characteristics

bull Aggressive management

style

bull Aviation industry and

Region knower

bull Ivy League MBA ndash

Specialization

Entrepreneurship

bull Age Mature

FRANCISCO A OLIVAS

(Novice Entrepreneur)

Chief Capital Raiser TBD

Characteristics

bull Knower of seed capital

markets in Latin America

bull Sound finance expertise

bull Contact to regionrsquos start-

up investors

bull eg Region Venture

Capitalist

14

The Budget (Milestones) - Illustrative Only Milestones

Milestone Start Date End Date Budget Manager Department

Establish a firm financial plan 0912016 0912016 TBD ABC Team

Identify an anchor investor 09152016 09152016 TBD ABC Team

Commence leasing negotiations 1012016 1012016 TBD ABC Team

Set up new company 1052016 1052016 TBD ABC Team

Begin negotiating for offices 1052016 1052016 TBD ABC Team

Select core mngmnt team 10102016 10102016 TBD ABC Team

Commence co operations 10152016 10152016 TBD ABC Team

Make initial aircraft lease pymnt 10302016 10302016 TBD ABC Team

Begin hiring key personnel 1112016 1112016 TBD ABC Team

Begin crew training 1212016 1212016 TBD ABC Team

Take delivery of aircraft 12152016 12152016 TBD ABC Team

Begin inaugural flights 152017 152017 TBD ABC Team

Operation turns profitable 112018 112018 TBD ABC Team

Take delivery of fourth aircraft 4152018 4152018 TBD ABC Team

Totals TBD

15

Financing Plan (sources and amounts required) [Illustrative Only] Most of the planned start-up costs are apportioned to the following six areas in approximately declining

value

1 Dry leasing or purchasing three (followed by two more by the end of the first year of operations) mid-

to-large-size regional jet aircraft most likely the 99-seat British Aerospace Avro RJ100 (or the older

predecessor to the RJ100 the BAe 146 which also offers a quick-convert passenger-cargo version) or

the 85 - 99-seat Avro RJ85 or the next-generation follow-on versions of those two Avro jets the

RJX100 or RJX85

2 Provision of a sufficient cash reserve to assure timely payment of the leasing or finance payments and

operating costs of the aircraft through at least the first six months of operations

3 Marketing advertising and public relations costs including costs of setting up a website capable of

offering flight and fare information and making online sales and reservations and related Internet

marketing as well as conventional print and broadcast advertising and public relations activities

4 Costs associated with recruiting training and certifying flight and ground operational crews

5 A reserve to cover overall operating costs aside from aircraft operating costs over at least the first six

months of operations

6 Administrative and legal costs incurred in setting up the business and the airline operations

16

Financing Plan (sources and amounts required) - 2 Table Start-up Requirements

Start-up Expenses

Legal and consulting $200000

Route and market study $100000

Office supplies stationery etc $10000

Brochures and marketing materials $30000

Design consultants $60000

Corporate insurance $20000

Office rent $50000

Software and systems development $100000

Expensed equipment and off furniture $150000

Expensed vehicles (8) $100000

Public relations and advertising $80000

Crew staff training and manuals $60000

Other $30000

Total Start-up Expenses $990000

Start-up Assets

Cash Required $10400000

Start-up Inventory $150000

Other Current Assets $50000

Long-term Assets $200000

Total Assets $10800000

Total Requirements $11790000

17

Financing Plan (sources and amounts required) - 3 Table Start-up Funding

Start-up Expenses to Fund $990000

Start-up Assets to Fund $10800000

Total Funding Required $11790000

Assets

Non-cash Assets from Start-up $400000

Cash Requirements from Start-up $10400000

Additional Cash Raised $0

Cash Balance on Starting Date $10400000

Total Assets $10800000

Liabilities and Capital

Liabilities

Current Borrowing $600000

Long-term Liabilities $0

Accounts Payable (Outstanding Bills) $390000

Other Current Liabilities (interest-free) $0

Total Liabilities $990000

Capital

Planned Investment

Private investment $10800000

Other $0

Additional Investment Requirement $0

Total Planned Investment $10800000

Loss at Start-up (Start-up Expenses) ($990000)

Total Capital $9810000

Total Capital and Liabilities $10800000

Total Funding $11790000

18

Financing Plan (sources and amounts required) - 4 Chart Start-up

19

Proforma Financial Statements for the Next 3 Years Illustrative Only ndash Click On Embedded Links

I ProForma Income Statement

II ProForma Cash Flow Statement

III ProForma Balance Sheet

Customer Acquisition Process - Estimated Customer Acquisition Cost

7

15

25

15

45

Customer Acquisition Methods

Off-line word-of-mouth

Magazineadvertising

Online word-of-mouth

Online search

Estimated Customer Acquisition Cost

(Using the example of round-trip flight from

Costa Rica To Guatemala)

bull Margin (m) = 141$130 asymp $20

bull Retention period rate (r) = 90

bull Discount rate (d) = 10

bull Time period (t) = 0 (Period 0)

Customer Acquisition Cost equiv Customer Lifetime

Value Period 0 (CLV)

1198621198711198810 = 119898 119903119905

(1 + 119889)0 = $20

090

(1 + 01)0 = $120784120782

Unit Economics

8

Central American Airways Average Fare

(Price to Customers)

USA $95

Cost Structure Operating Expenses Estimate

(Including Aircraft Rental (3))

0

10

20

30

40

50

60

70

80

90

100

10

13

22

5

15

18

2

15

Labor Flight Crew

Ticket Sales

Airport Landing

DepreciationAmortization

Mantainance amp Overhaul

Fuel amp Oil

Route Charges

Others

Sales Forecast - What is the Forecast Demand under Uncertainty

9

ACCORD MODEL

To avoid biases in our sales (demand) forecast we use the ACCORD Model

1 Relative advantage over status-quo complete round-trip packages for all of destination points more flights per week

friendlier service better punctuality cheapest price guarantee

2 Behavioral change required No target market expectations compatibility low-cost carrier has already been introduced

to Central America but is undeveloped

3 Easiness for understanding Very simple target market is receptive to concept

4 Can customers observe benefits Yes in a comparative way with what is being currently offered in Central America

price service punctuality destinations convenience of service hours

5 What is the risk of failure of using the service No social stigma associated with the use of low-cost air carrier there is

no financial risk of using the product offered by Central American Airways

6 Can the product be consumed in a relative cost or small units The product is low-cost and can be used in single trials

rarr Since the answers are positive we can expect that demand (sales) are going to expand swiftly

Sales Estimation Using Demand Decomposition (Passengers Annually)

Central America

Population 427

millions

X Who Fly

10 X

Who Want Low-

Cost Carrier 7

=

Potential

Sales

asymp 300000

Branding and Naming

10

centralamericancom dot-com availability via GoDaddycom

POSITIVE

(As of August 13 2016)

Brand Name

Central American Airways More Value for Less Money

Critical Assumptions 1

11

1 Customer Value

a) Do you know what customer needs you are solving Cheap flights needs How I am one of the

customers in need and there are a lot of customers like me in Central America

b) Are there particular segments you are addressing Middle class relative young students leisure

travelers frequent-fliers non-corporate highly mobile people foreign tourists

c) How are you different than other products or services Cheapest fares servicing all regionrsquos capital

cities more weekly flies

d) How can you keep your advantage Keeping fares and costs down and high service standards

e) How will competitors react Taking advantage of their duopolistic advantages and trying to imitate

our service

f) How are you pricing the product or service Strategy of Four Cs of Pricing flying-out early in the day

and flying-back later in the day use conjoint analysis to determine best price

g) Who are you going to work with to succeed Seek local business groups to share investment costs seek

international investors

2 Technology and Operations

a) What tasks exactly need to be done to make this work Get initial investors to pay for the detailed

plans to make this happen get local governments approval lobby to promote secondary airports (more

private enterprise) get start-up financing hire local managers with industry

Critical Assumptions - 2

12

and region knowledge (local business groups) get consulting from The World Bank

b) What drives your costs Fuel airport labor

c) Do you have the talent already No If not how will you get it Through contacting local private

business associations local headhunters businesses partnership with specialized organizations in

Europe and the North America

d) How will you develop and maintain your underlying technologies Specialized consulting firms IATA

(International Air Transport Association)

3 Sales and Marketing

a) What types of sales channels are you using to go to market Direct ticket sales via the Internet call

centers and local partnership with other businesses (hotels guest houses)

b) How are you getting new customers Aggressive direct marketing campaign and marketing through

strategic alliances with local hotels

c) How are you going to measure success High revenue low costs high customer satisfaction

4 Financial and Profit

a) How much money do you need to build this Initial investment of $100 million USD

b) How will you get that money Local and international investors (international investors ndash partnership

with an international low-cost carrier in the USA andor Europe)

The Team

13

CEO TBD Characteristics

bull Aggressive management

style

bull Aviation industry and

Region knower

bull Ivy League MBA ndash

Specialization

Entrepreneurship

bull Age Mature

FRANCISCO A OLIVAS

(Novice Entrepreneur)

Chief Capital Raiser TBD

Characteristics

bull Knower of seed capital

markets in Latin America

bull Sound finance expertise

bull Contact to regionrsquos start-

up investors

bull eg Region Venture

Capitalist

14

The Budget (Milestones) - Illustrative Only Milestones

Milestone Start Date End Date Budget Manager Department

Establish a firm financial plan 0912016 0912016 TBD ABC Team

Identify an anchor investor 09152016 09152016 TBD ABC Team

Commence leasing negotiations 1012016 1012016 TBD ABC Team

Set up new company 1052016 1052016 TBD ABC Team

Begin negotiating for offices 1052016 1052016 TBD ABC Team

Select core mngmnt team 10102016 10102016 TBD ABC Team

Commence co operations 10152016 10152016 TBD ABC Team

Make initial aircraft lease pymnt 10302016 10302016 TBD ABC Team

Begin hiring key personnel 1112016 1112016 TBD ABC Team

Begin crew training 1212016 1212016 TBD ABC Team

Take delivery of aircraft 12152016 12152016 TBD ABC Team

Begin inaugural flights 152017 152017 TBD ABC Team

Operation turns profitable 112018 112018 TBD ABC Team

Take delivery of fourth aircraft 4152018 4152018 TBD ABC Team

Totals TBD

15

Financing Plan (sources and amounts required) [Illustrative Only] Most of the planned start-up costs are apportioned to the following six areas in approximately declining

value

1 Dry leasing or purchasing three (followed by two more by the end of the first year of operations) mid-

to-large-size regional jet aircraft most likely the 99-seat British Aerospace Avro RJ100 (or the older

predecessor to the RJ100 the BAe 146 which also offers a quick-convert passenger-cargo version) or

the 85 - 99-seat Avro RJ85 or the next-generation follow-on versions of those two Avro jets the

RJX100 or RJX85

2 Provision of a sufficient cash reserve to assure timely payment of the leasing or finance payments and

operating costs of the aircraft through at least the first six months of operations

3 Marketing advertising and public relations costs including costs of setting up a website capable of

offering flight and fare information and making online sales and reservations and related Internet

marketing as well as conventional print and broadcast advertising and public relations activities

4 Costs associated with recruiting training and certifying flight and ground operational crews

5 A reserve to cover overall operating costs aside from aircraft operating costs over at least the first six

months of operations

6 Administrative and legal costs incurred in setting up the business and the airline operations

16

Financing Plan (sources and amounts required) - 2 Table Start-up Requirements

Start-up Expenses

Legal and consulting $200000

Route and market study $100000

Office supplies stationery etc $10000

Brochures and marketing materials $30000

Design consultants $60000

Corporate insurance $20000

Office rent $50000

Software and systems development $100000

Expensed equipment and off furniture $150000

Expensed vehicles (8) $100000

Public relations and advertising $80000

Crew staff training and manuals $60000

Other $30000

Total Start-up Expenses $990000

Start-up Assets

Cash Required $10400000

Start-up Inventory $150000

Other Current Assets $50000

Long-term Assets $200000

Total Assets $10800000

Total Requirements $11790000

17

Financing Plan (sources and amounts required) - 3 Table Start-up Funding

Start-up Expenses to Fund $990000

Start-up Assets to Fund $10800000

Total Funding Required $11790000

Assets

Non-cash Assets from Start-up $400000

Cash Requirements from Start-up $10400000

Additional Cash Raised $0

Cash Balance on Starting Date $10400000

Total Assets $10800000

Liabilities and Capital

Liabilities

Current Borrowing $600000

Long-term Liabilities $0

Accounts Payable (Outstanding Bills) $390000

Other Current Liabilities (interest-free) $0

Total Liabilities $990000

Capital

Planned Investment

Private investment $10800000

Other $0

Additional Investment Requirement $0

Total Planned Investment $10800000

Loss at Start-up (Start-up Expenses) ($990000)

Total Capital $9810000

Total Capital and Liabilities $10800000

Total Funding $11790000

18

Financing Plan (sources and amounts required) - 4 Chart Start-up

19

Proforma Financial Statements for the Next 3 Years Illustrative Only ndash Click On Embedded Links

I ProForma Income Statement

II ProForma Cash Flow Statement

III ProForma Balance Sheet

Unit Economics

8

Central American Airways Average Fare

(Price to Customers)

USA $95

Cost Structure Operating Expenses Estimate

(Including Aircraft Rental (3))

0

10

20

30

40

50

60

70

80

90

100

10

13

22

5

15

18

2

15

Labor Flight Crew

Ticket Sales

Airport Landing

DepreciationAmortization

Mantainance amp Overhaul

Fuel amp Oil

Route Charges

Others

Sales Forecast - What is the Forecast Demand under Uncertainty

9

ACCORD MODEL

To avoid biases in our sales (demand) forecast we use the ACCORD Model

1 Relative advantage over status-quo complete round-trip packages for all of destination points more flights per week

friendlier service better punctuality cheapest price guarantee

2 Behavioral change required No target market expectations compatibility low-cost carrier has already been introduced

to Central America but is undeveloped

3 Easiness for understanding Very simple target market is receptive to concept

4 Can customers observe benefits Yes in a comparative way with what is being currently offered in Central America

price service punctuality destinations convenience of service hours

5 What is the risk of failure of using the service No social stigma associated with the use of low-cost air carrier there is

no financial risk of using the product offered by Central American Airways

6 Can the product be consumed in a relative cost or small units The product is low-cost and can be used in single trials

rarr Since the answers are positive we can expect that demand (sales) are going to expand swiftly

Sales Estimation Using Demand Decomposition (Passengers Annually)

Central America

Population 427

millions

X Who Fly

10 X

Who Want Low-

Cost Carrier 7

=

Potential

Sales

asymp 300000

Branding and Naming

10

centralamericancom dot-com availability via GoDaddycom

POSITIVE

(As of August 13 2016)

Brand Name

Central American Airways More Value for Less Money

Critical Assumptions 1

11

1 Customer Value

a) Do you know what customer needs you are solving Cheap flights needs How I am one of the

customers in need and there are a lot of customers like me in Central America

b) Are there particular segments you are addressing Middle class relative young students leisure

travelers frequent-fliers non-corporate highly mobile people foreign tourists

c) How are you different than other products or services Cheapest fares servicing all regionrsquos capital

cities more weekly flies

d) How can you keep your advantage Keeping fares and costs down and high service standards

e) How will competitors react Taking advantage of their duopolistic advantages and trying to imitate

our service

f) How are you pricing the product or service Strategy of Four Cs of Pricing flying-out early in the day

and flying-back later in the day use conjoint analysis to determine best price

g) Who are you going to work with to succeed Seek local business groups to share investment costs seek

international investors

2 Technology and Operations

a) What tasks exactly need to be done to make this work Get initial investors to pay for the detailed

plans to make this happen get local governments approval lobby to promote secondary airports (more

private enterprise) get start-up financing hire local managers with industry

Critical Assumptions - 2

12

and region knowledge (local business groups) get consulting from The World Bank

b) What drives your costs Fuel airport labor

c) Do you have the talent already No If not how will you get it Through contacting local private

business associations local headhunters businesses partnership with specialized organizations in

Europe and the North America

d) How will you develop and maintain your underlying technologies Specialized consulting firms IATA

(International Air Transport Association)

3 Sales and Marketing

a) What types of sales channels are you using to go to market Direct ticket sales via the Internet call

centers and local partnership with other businesses (hotels guest houses)

b) How are you getting new customers Aggressive direct marketing campaign and marketing through

strategic alliances with local hotels

c) How are you going to measure success High revenue low costs high customer satisfaction

4 Financial and Profit

a) How much money do you need to build this Initial investment of $100 million USD

b) How will you get that money Local and international investors (international investors ndash partnership

with an international low-cost carrier in the USA andor Europe)

The Team

13

CEO TBD Characteristics

bull Aggressive management

style

bull Aviation industry and

Region knower

bull Ivy League MBA ndash

Specialization

Entrepreneurship

bull Age Mature

FRANCISCO A OLIVAS

(Novice Entrepreneur)

Chief Capital Raiser TBD

Characteristics

bull Knower of seed capital

markets in Latin America

bull Sound finance expertise

bull Contact to regionrsquos start-

up investors

bull eg Region Venture

Capitalist

14

The Budget (Milestones) - Illustrative Only Milestones

Milestone Start Date End Date Budget Manager Department

Establish a firm financial plan 0912016 0912016 TBD ABC Team

Identify an anchor investor 09152016 09152016 TBD ABC Team

Commence leasing negotiations 1012016 1012016 TBD ABC Team

Set up new company 1052016 1052016 TBD ABC Team

Begin negotiating for offices 1052016 1052016 TBD ABC Team

Select core mngmnt team 10102016 10102016 TBD ABC Team

Commence co operations 10152016 10152016 TBD ABC Team

Make initial aircraft lease pymnt 10302016 10302016 TBD ABC Team

Begin hiring key personnel 1112016 1112016 TBD ABC Team

Begin crew training 1212016 1212016 TBD ABC Team

Take delivery of aircraft 12152016 12152016 TBD ABC Team

Begin inaugural flights 152017 152017 TBD ABC Team

Operation turns profitable 112018 112018 TBD ABC Team

Take delivery of fourth aircraft 4152018 4152018 TBD ABC Team

Totals TBD

15

Financing Plan (sources and amounts required) [Illustrative Only] Most of the planned start-up costs are apportioned to the following six areas in approximately declining

value

1 Dry leasing or purchasing three (followed by two more by the end of the first year of operations) mid-

to-large-size regional jet aircraft most likely the 99-seat British Aerospace Avro RJ100 (or the older

predecessor to the RJ100 the BAe 146 which also offers a quick-convert passenger-cargo version) or

the 85 - 99-seat Avro RJ85 or the next-generation follow-on versions of those two Avro jets the

RJX100 or RJX85

2 Provision of a sufficient cash reserve to assure timely payment of the leasing or finance payments and

operating costs of the aircraft through at least the first six months of operations

3 Marketing advertising and public relations costs including costs of setting up a website capable of

offering flight and fare information and making online sales and reservations and related Internet

marketing as well as conventional print and broadcast advertising and public relations activities

4 Costs associated with recruiting training and certifying flight and ground operational crews

5 A reserve to cover overall operating costs aside from aircraft operating costs over at least the first six

months of operations

6 Administrative and legal costs incurred in setting up the business and the airline operations

16

Financing Plan (sources and amounts required) - 2 Table Start-up Requirements

Start-up Expenses

Legal and consulting $200000

Route and market study $100000

Office supplies stationery etc $10000

Brochures and marketing materials $30000

Design consultants $60000

Corporate insurance $20000

Office rent $50000

Software and systems development $100000

Expensed equipment and off furniture $150000

Expensed vehicles (8) $100000

Public relations and advertising $80000

Crew staff training and manuals $60000

Other $30000

Total Start-up Expenses $990000

Start-up Assets

Cash Required $10400000

Start-up Inventory $150000

Other Current Assets $50000

Long-term Assets $200000

Total Assets $10800000

Total Requirements $11790000

17

Financing Plan (sources and amounts required) - 3 Table Start-up Funding

Start-up Expenses to Fund $990000

Start-up Assets to Fund $10800000

Total Funding Required $11790000

Assets

Non-cash Assets from Start-up $400000

Cash Requirements from Start-up $10400000

Additional Cash Raised $0

Cash Balance on Starting Date $10400000

Total Assets $10800000

Liabilities and Capital

Liabilities

Current Borrowing $600000

Long-term Liabilities $0

Accounts Payable (Outstanding Bills) $390000

Other Current Liabilities (interest-free) $0

Total Liabilities $990000

Capital

Planned Investment

Private investment $10800000

Other $0

Additional Investment Requirement $0

Total Planned Investment $10800000

Loss at Start-up (Start-up Expenses) ($990000)

Total Capital $9810000

Total Capital and Liabilities $10800000

Total Funding $11790000

18

Financing Plan (sources and amounts required) - 4 Chart Start-up

19

Proforma Financial Statements for the Next 3 Years Illustrative Only ndash Click On Embedded Links

I ProForma Income Statement

II ProForma Cash Flow Statement

III ProForma Balance Sheet

Sales Forecast - What is the Forecast Demand under Uncertainty

9

ACCORD MODEL

To avoid biases in our sales (demand) forecast we use the ACCORD Model

1 Relative advantage over status-quo complete round-trip packages for all of destination points more flights per week

friendlier service better punctuality cheapest price guarantee

2 Behavioral change required No target market expectations compatibility low-cost carrier has already been introduced

to Central America but is undeveloped

3 Easiness for understanding Very simple target market is receptive to concept

4 Can customers observe benefits Yes in a comparative way with what is being currently offered in Central America

price service punctuality destinations convenience of service hours

5 What is the risk of failure of using the service No social stigma associated with the use of low-cost air carrier there is

no financial risk of using the product offered by Central American Airways

6 Can the product be consumed in a relative cost or small units The product is low-cost and can be used in single trials

rarr Since the answers are positive we can expect that demand (sales) are going to expand swiftly

Sales Estimation Using Demand Decomposition (Passengers Annually)

Central America

Population 427

millions

X Who Fly

10 X

Who Want Low-

Cost Carrier 7

=

Potential

Sales

asymp 300000

Branding and Naming

10

centralamericancom dot-com availability via GoDaddycom

POSITIVE

(As of August 13 2016)

Brand Name

Central American Airways More Value for Less Money

Critical Assumptions 1

11

1 Customer Value

a) Do you know what customer needs you are solving Cheap flights needs How I am one of the

customers in need and there are a lot of customers like me in Central America

b) Are there particular segments you are addressing Middle class relative young students leisure

travelers frequent-fliers non-corporate highly mobile people foreign tourists

c) How are you different than other products or services Cheapest fares servicing all regionrsquos capital

cities more weekly flies

d) How can you keep your advantage Keeping fares and costs down and high service standards

e) How will competitors react Taking advantage of their duopolistic advantages and trying to imitate

our service

f) How are you pricing the product or service Strategy of Four Cs of Pricing flying-out early in the day

and flying-back later in the day use conjoint analysis to determine best price

g) Who are you going to work with to succeed Seek local business groups to share investment costs seek

international investors

2 Technology and Operations

a) What tasks exactly need to be done to make this work Get initial investors to pay for the detailed

plans to make this happen get local governments approval lobby to promote secondary airports (more

private enterprise) get start-up financing hire local managers with industry

Critical Assumptions - 2

12

and region knowledge (local business groups) get consulting from The World Bank

b) What drives your costs Fuel airport labor

c) Do you have the talent already No If not how will you get it Through contacting local private

business associations local headhunters businesses partnership with specialized organizations in

Europe and the North America

d) How will you develop and maintain your underlying technologies Specialized consulting firms IATA

(International Air Transport Association)

3 Sales and Marketing

a) What types of sales channels are you using to go to market Direct ticket sales via the Internet call

centers and local partnership with other businesses (hotels guest houses)

b) How are you getting new customers Aggressive direct marketing campaign and marketing through

strategic alliances with local hotels

c) How are you going to measure success High revenue low costs high customer satisfaction

4 Financial and Profit

a) How much money do you need to build this Initial investment of $100 million USD

b) How will you get that money Local and international investors (international investors ndash partnership

with an international low-cost carrier in the USA andor Europe)

The Team

13

CEO TBD Characteristics

bull Aggressive management

style

bull Aviation industry and

Region knower

bull Ivy League MBA ndash

Specialization

Entrepreneurship

bull Age Mature

FRANCISCO A OLIVAS

(Novice Entrepreneur)

Chief Capital Raiser TBD

Characteristics

bull Knower of seed capital

markets in Latin America

bull Sound finance expertise

bull Contact to regionrsquos start-

up investors

bull eg Region Venture

Capitalist

14

The Budget (Milestones) - Illustrative Only Milestones

Milestone Start Date End Date Budget Manager Department

Establish a firm financial plan 0912016 0912016 TBD ABC Team

Identify an anchor investor 09152016 09152016 TBD ABC Team

Commence leasing negotiations 1012016 1012016 TBD ABC Team

Set up new company 1052016 1052016 TBD ABC Team

Begin negotiating for offices 1052016 1052016 TBD ABC Team

Select core mngmnt team 10102016 10102016 TBD ABC Team

Commence co operations 10152016 10152016 TBD ABC Team

Make initial aircraft lease pymnt 10302016 10302016 TBD ABC Team

Begin hiring key personnel 1112016 1112016 TBD ABC Team

Begin crew training 1212016 1212016 TBD ABC Team

Take delivery of aircraft 12152016 12152016 TBD ABC Team

Begin inaugural flights 152017 152017 TBD ABC Team

Operation turns profitable 112018 112018 TBD ABC Team

Take delivery of fourth aircraft 4152018 4152018 TBD ABC Team

Totals TBD

15

Financing Plan (sources and amounts required) [Illustrative Only] Most of the planned start-up costs are apportioned to the following six areas in approximately declining

value

1 Dry leasing or purchasing three (followed by two more by the end of the first year of operations) mid-

to-large-size regional jet aircraft most likely the 99-seat British Aerospace Avro RJ100 (or the older

predecessor to the RJ100 the BAe 146 which also offers a quick-convert passenger-cargo version) or

the 85 - 99-seat Avro RJ85 or the next-generation follow-on versions of those two Avro jets the

RJX100 or RJX85

2 Provision of a sufficient cash reserve to assure timely payment of the leasing or finance payments and

operating costs of the aircraft through at least the first six months of operations

3 Marketing advertising and public relations costs including costs of setting up a website capable of

offering flight and fare information and making online sales and reservations and related Internet

marketing as well as conventional print and broadcast advertising and public relations activities

4 Costs associated with recruiting training and certifying flight and ground operational crews

5 A reserve to cover overall operating costs aside from aircraft operating costs over at least the first six

months of operations

6 Administrative and legal costs incurred in setting up the business and the airline operations

16

Financing Plan (sources and amounts required) - 2 Table Start-up Requirements

Start-up Expenses

Legal and consulting $200000

Route and market study $100000

Office supplies stationery etc $10000

Brochures and marketing materials $30000

Design consultants $60000

Corporate insurance $20000

Office rent $50000

Software and systems development $100000

Expensed equipment and off furniture $150000

Expensed vehicles (8) $100000

Public relations and advertising $80000

Crew staff training and manuals $60000

Other $30000

Total Start-up Expenses $990000

Start-up Assets

Cash Required $10400000

Start-up Inventory $150000

Other Current Assets $50000

Long-term Assets $200000

Total Assets $10800000

Total Requirements $11790000

17

Financing Plan (sources and amounts required) - 3 Table Start-up Funding

Start-up Expenses to Fund $990000

Start-up Assets to Fund $10800000

Total Funding Required $11790000

Assets

Non-cash Assets from Start-up $400000

Cash Requirements from Start-up $10400000

Additional Cash Raised $0

Cash Balance on Starting Date $10400000

Total Assets $10800000

Liabilities and Capital

Liabilities

Current Borrowing $600000

Long-term Liabilities $0

Accounts Payable (Outstanding Bills) $390000

Other Current Liabilities (interest-free) $0

Total Liabilities $990000

Capital

Planned Investment

Private investment $10800000

Other $0

Additional Investment Requirement $0

Total Planned Investment $10800000

Loss at Start-up (Start-up Expenses) ($990000)

Total Capital $9810000

Total Capital and Liabilities $10800000

Total Funding $11790000

18

Financing Plan (sources and amounts required) - 4 Chart Start-up

19

Proforma Financial Statements for the Next 3 Years Illustrative Only ndash Click On Embedded Links

I ProForma Income Statement

II ProForma Cash Flow Statement

III ProForma Balance Sheet

Branding and Naming

10

centralamericancom dot-com availability via GoDaddycom

POSITIVE

(As of August 13 2016)

Brand Name

Central American Airways More Value for Less Money

Critical Assumptions 1

11

1 Customer Value

a) Do you know what customer needs you are solving Cheap flights needs How I am one of the

customers in need and there are a lot of customers like me in Central America

b) Are there particular segments you are addressing Middle class relative young students leisure

travelers frequent-fliers non-corporate highly mobile people foreign tourists

c) How are you different than other products or services Cheapest fares servicing all regionrsquos capital

cities more weekly flies

d) How can you keep your advantage Keeping fares and costs down and high service standards

e) How will competitors react Taking advantage of their duopolistic advantages and trying to imitate

our service

f) How are you pricing the product or service Strategy of Four Cs of Pricing flying-out early in the day

and flying-back later in the day use conjoint analysis to determine best price

g) Who are you going to work with to succeed Seek local business groups to share investment costs seek

international investors

2 Technology and Operations

a) What tasks exactly need to be done to make this work Get initial investors to pay for the detailed

plans to make this happen get local governments approval lobby to promote secondary airports (more

private enterprise) get start-up financing hire local managers with industry

Critical Assumptions - 2

12

and region knowledge (local business groups) get consulting from The World Bank

b) What drives your costs Fuel airport labor

c) Do you have the talent already No If not how will you get it Through contacting local private

business associations local headhunters businesses partnership with specialized organizations in

Europe and the North America

d) How will you develop and maintain your underlying technologies Specialized consulting firms IATA

(International Air Transport Association)

3 Sales and Marketing

a) What types of sales channels are you using to go to market Direct ticket sales via the Internet call

centers and local partnership with other businesses (hotels guest houses)

b) How are you getting new customers Aggressive direct marketing campaign and marketing through

strategic alliances with local hotels

c) How are you going to measure success High revenue low costs high customer satisfaction

4 Financial and Profit

a) How much money do you need to build this Initial investment of $100 million USD

b) How will you get that money Local and international investors (international investors ndash partnership

with an international low-cost carrier in the USA andor Europe)

The Team

13

CEO TBD Characteristics

bull Aggressive management

style

bull Aviation industry and

Region knower

bull Ivy League MBA ndash

Specialization

Entrepreneurship

bull Age Mature

FRANCISCO A OLIVAS

(Novice Entrepreneur)

Chief Capital Raiser TBD

Characteristics

bull Knower of seed capital

markets in Latin America

bull Sound finance expertise

bull Contact to regionrsquos start-

up investors

bull eg Region Venture

Capitalist

14

The Budget (Milestones) - Illustrative Only Milestones

Milestone Start Date End Date Budget Manager Department

Establish a firm financial plan 0912016 0912016 TBD ABC Team

Identify an anchor investor 09152016 09152016 TBD ABC Team

Commence leasing negotiations 1012016 1012016 TBD ABC Team

Set up new company 1052016 1052016 TBD ABC Team

Begin negotiating for offices 1052016 1052016 TBD ABC Team

Select core mngmnt team 10102016 10102016 TBD ABC Team

Commence co operations 10152016 10152016 TBD ABC Team

Make initial aircraft lease pymnt 10302016 10302016 TBD ABC Team

Begin hiring key personnel 1112016 1112016 TBD ABC Team

Begin crew training 1212016 1212016 TBD ABC Team

Take delivery of aircraft 12152016 12152016 TBD ABC Team

Begin inaugural flights 152017 152017 TBD ABC Team

Operation turns profitable 112018 112018 TBD ABC Team

Take delivery of fourth aircraft 4152018 4152018 TBD ABC Team

Totals TBD

15

Financing Plan (sources and amounts required) [Illustrative Only] Most of the planned start-up costs are apportioned to the following six areas in approximately declining

value

1 Dry leasing or purchasing three (followed by two more by the end of the first year of operations) mid-

to-large-size regional jet aircraft most likely the 99-seat British Aerospace Avro RJ100 (or the older

predecessor to the RJ100 the BAe 146 which also offers a quick-convert passenger-cargo version) or

the 85 - 99-seat Avro RJ85 or the next-generation follow-on versions of those two Avro jets the

RJX100 or RJX85

2 Provision of a sufficient cash reserve to assure timely payment of the leasing or finance payments and

operating costs of the aircraft through at least the first six months of operations

3 Marketing advertising and public relations costs including costs of setting up a website capable of

offering flight and fare information and making online sales and reservations and related Internet

marketing as well as conventional print and broadcast advertising and public relations activities

4 Costs associated with recruiting training and certifying flight and ground operational crews

5 A reserve to cover overall operating costs aside from aircraft operating costs over at least the first six

months of operations

6 Administrative and legal costs incurred in setting up the business and the airline operations

16

Financing Plan (sources and amounts required) - 2 Table Start-up Requirements

Start-up Expenses

Legal and consulting $200000

Route and market study $100000

Office supplies stationery etc $10000

Brochures and marketing materials $30000

Design consultants $60000

Corporate insurance $20000

Office rent $50000

Software and systems development $100000

Expensed equipment and off furniture $150000

Expensed vehicles (8) $100000

Public relations and advertising $80000

Crew staff training and manuals $60000

Other $30000

Total Start-up Expenses $990000

Start-up Assets

Cash Required $10400000

Start-up Inventory $150000

Other Current Assets $50000

Long-term Assets $200000

Total Assets $10800000

Total Requirements $11790000

17

Financing Plan (sources and amounts required) - 3 Table Start-up Funding

Start-up Expenses to Fund $990000

Start-up Assets to Fund $10800000

Total Funding Required $11790000

Assets

Non-cash Assets from Start-up $400000

Cash Requirements from Start-up $10400000

Additional Cash Raised $0

Cash Balance on Starting Date $10400000

Total Assets $10800000

Liabilities and Capital

Liabilities

Current Borrowing $600000

Long-term Liabilities $0

Accounts Payable (Outstanding Bills) $390000

Other Current Liabilities (interest-free) $0

Total Liabilities $990000

Capital

Planned Investment

Private investment $10800000

Other $0

Additional Investment Requirement $0

Total Planned Investment $10800000

Loss at Start-up (Start-up Expenses) ($990000)

Total Capital $9810000

Total Capital and Liabilities $10800000

Total Funding $11790000

18

Financing Plan (sources and amounts required) - 4 Chart Start-up

19

Proforma Financial Statements for the Next 3 Years Illustrative Only ndash Click On Embedded Links

I ProForma Income Statement

II ProForma Cash Flow Statement

III ProForma Balance Sheet

Critical Assumptions 1

11

1 Customer Value

a) Do you know what customer needs you are solving Cheap flights needs How I am one of the

customers in need and there are a lot of customers like me in Central America

b) Are there particular segments you are addressing Middle class relative young students leisure

travelers frequent-fliers non-corporate highly mobile people foreign tourists

c) How are you different than other products or services Cheapest fares servicing all regionrsquos capital

cities more weekly flies

d) How can you keep your advantage Keeping fares and costs down and high service standards

e) How will competitors react Taking advantage of their duopolistic advantages and trying to imitate

our service

f) How are you pricing the product or service Strategy of Four Cs of Pricing flying-out early in the day

and flying-back later in the day use conjoint analysis to determine best price

g) Who are you going to work with to succeed Seek local business groups to share investment costs seek

international investors

2 Technology and Operations

a) What tasks exactly need to be done to make this work Get initial investors to pay for the detailed

plans to make this happen get local governments approval lobby to promote secondary airports (more

private enterprise) get start-up financing hire local managers with industry

Critical Assumptions - 2

12

and region knowledge (local business groups) get consulting from The World Bank

b) What drives your costs Fuel airport labor

c) Do you have the talent already No If not how will you get it Through contacting local private

business associations local headhunters businesses partnership with specialized organizations in

Europe and the North America

d) How will you develop and maintain your underlying technologies Specialized consulting firms IATA

(International Air Transport Association)

3 Sales and Marketing

a) What types of sales channels are you using to go to market Direct ticket sales via the Internet call

centers and local partnership with other businesses (hotels guest houses)

b) How are you getting new customers Aggressive direct marketing campaign and marketing through

strategic alliances with local hotels

c) How are you going to measure success High revenue low costs high customer satisfaction

4 Financial and Profit

a) How much money do you need to build this Initial investment of $100 million USD

b) How will you get that money Local and international investors (international investors ndash partnership

with an international low-cost carrier in the USA andor Europe)

The Team

13

CEO TBD Characteristics

bull Aggressive management

style

bull Aviation industry and

Region knower

bull Ivy League MBA ndash

Specialization

Entrepreneurship

bull Age Mature

FRANCISCO A OLIVAS

(Novice Entrepreneur)

Chief Capital Raiser TBD

Characteristics

bull Knower of seed capital

markets in Latin America

bull Sound finance expertise

bull Contact to regionrsquos start-

up investors

bull eg Region Venture

Capitalist

14

The Budget (Milestones) - Illustrative Only Milestones

Milestone Start Date End Date Budget Manager Department

Establish a firm financial plan 0912016 0912016 TBD ABC Team

Identify an anchor investor 09152016 09152016 TBD ABC Team

Commence leasing negotiations 1012016 1012016 TBD ABC Team

Set up new company 1052016 1052016 TBD ABC Team

Begin negotiating for offices 1052016 1052016 TBD ABC Team

Select core mngmnt team 10102016 10102016 TBD ABC Team

Commence co operations 10152016 10152016 TBD ABC Team

Make initial aircraft lease pymnt 10302016 10302016 TBD ABC Team

Begin hiring key personnel 1112016 1112016 TBD ABC Team

Begin crew training 1212016 1212016 TBD ABC Team

Take delivery of aircraft 12152016 12152016 TBD ABC Team

Begin inaugural flights 152017 152017 TBD ABC Team

Operation turns profitable 112018 112018 TBD ABC Team

Take delivery of fourth aircraft 4152018 4152018 TBD ABC Team

Totals TBD

15

Financing Plan (sources and amounts required) [Illustrative Only] Most of the planned start-up costs are apportioned to the following six areas in approximately declining

value

1 Dry leasing or purchasing three (followed by two more by the end of the first year of operations) mid-

to-large-size regional jet aircraft most likely the 99-seat British Aerospace Avro RJ100 (or the older

predecessor to the RJ100 the BAe 146 which also offers a quick-convert passenger-cargo version) or

the 85 - 99-seat Avro RJ85 or the next-generation follow-on versions of those two Avro jets the

RJX100 or RJX85

2 Provision of a sufficient cash reserve to assure timely payment of the leasing or finance payments and

operating costs of the aircraft through at least the first six months of operations

3 Marketing advertising and public relations costs including costs of setting up a website capable of

offering flight and fare information and making online sales and reservations and related Internet

marketing as well as conventional print and broadcast advertising and public relations activities

4 Costs associated with recruiting training and certifying flight and ground operational crews

5 A reserve to cover overall operating costs aside from aircraft operating costs over at least the first six

months of operations

6 Administrative and legal costs incurred in setting up the business and the airline operations

16

Financing Plan (sources and amounts required) - 2 Table Start-up Requirements

Start-up Expenses

Legal and consulting $200000

Route and market study $100000

Office supplies stationery etc $10000

Brochures and marketing materials $30000

Design consultants $60000

Corporate insurance $20000

Office rent $50000

Software and systems development $100000

Expensed equipment and off furniture $150000

Expensed vehicles (8) $100000

Public relations and advertising $80000

Crew staff training and manuals $60000

Other $30000

Total Start-up Expenses $990000

Start-up Assets

Cash Required $10400000

Start-up Inventory $150000

Other Current Assets $50000

Long-term Assets $200000

Total Assets $10800000

Total Requirements $11790000

17

Financing Plan (sources and amounts required) - 3 Table Start-up Funding

Start-up Expenses to Fund $990000

Start-up Assets to Fund $10800000

Total Funding Required $11790000

Assets

Non-cash Assets from Start-up $400000

Cash Requirements from Start-up $10400000

Additional Cash Raised $0

Cash Balance on Starting Date $10400000

Total Assets $10800000

Liabilities and Capital

Liabilities

Current Borrowing $600000

Long-term Liabilities $0

Accounts Payable (Outstanding Bills) $390000

Other Current Liabilities (interest-free) $0

Total Liabilities $990000

Capital

Planned Investment

Private investment $10800000

Other $0

Additional Investment Requirement $0

Total Planned Investment $10800000

Loss at Start-up (Start-up Expenses) ($990000)

Total Capital $9810000

Total Capital and Liabilities $10800000

Total Funding $11790000

18

Financing Plan (sources and amounts required) - 4 Chart Start-up

19

Proforma Financial Statements for the Next 3 Years Illustrative Only ndash Click On Embedded Links

I ProForma Income Statement

II ProForma Cash Flow Statement

III ProForma Balance Sheet

Critical Assumptions - 2

12

and region knowledge (local business groups) get consulting from The World Bank

b) What drives your costs Fuel airport labor

c) Do you have the talent already No If not how will you get it Through contacting local private

business associations local headhunters businesses partnership with specialized organizations in

Europe and the North America

d) How will you develop and maintain your underlying technologies Specialized consulting firms IATA

(International Air Transport Association)

3 Sales and Marketing

a) What types of sales channels are you using to go to market Direct ticket sales via the Internet call

centers and local partnership with other businesses (hotels guest houses)

b) How are you getting new customers Aggressive direct marketing campaign and marketing through

strategic alliances with local hotels

c) How are you going to measure success High revenue low costs high customer satisfaction

4 Financial and Profit

a) How much money do you need to build this Initial investment of $100 million USD

b) How will you get that money Local and international investors (international investors ndash partnership

with an international low-cost carrier in the USA andor Europe)

The Team

13

CEO TBD Characteristics

bull Aggressive management

style

bull Aviation industry and

Region knower

bull Ivy League MBA ndash

Specialization

Entrepreneurship

bull Age Mature

FRANCISCO A OLIVAS

(Novice Entrepreneur)

Chief Capital Raiser TBD

Characteristics

bull Knower of seed capital

markets in Latin America

bull Sound finance expertise

bull Contact to regionrsquos start-

up investors

bull eg Region Venture

Capitalist

14

The Budget (Milestones) - Illustrative Only Milestones

Milestone Start Date End Date Budget Manager Department

Establish a firm financial plan 0912016 0912016 TBD ABC Team

Identify an anchor investor 09152016 09152016 TBD ABC Team

Commence leasing negotiations 1012016 1012016 TBD ABC Team

Set up new company 1052016 1052016 TBD ABC Team

Begin negotiating for offices 1052016 1052016 TBD ABC Team

Select core mngmnt team 10102016 10102016 TBD ABC Team

Commence co operations 10152016 10152016 TBD ABC Team

Make initial aircraft lease pymnt 10302016 10302016 TBD ABC Team

Begin hiring key personnel 1112016 1112016 TBD ABC Team

Begin crew training 1212016 1212016 TBD ABC Team

Take delivery of aircraft 12152016 12152016 TBD ABC Team

Begin inaugural flights 152017 152017 TBD ABC Team

Operation turns profitable 112018 112018 TBD ABC Team

Take delivery of fourth aircraft 4152018 4152018 TBD ABC Team

Totals TBD

15

Financing Plan (sources and amounts required) [Illustrative Only] Most of the planned start-up costs are apportioned to the following six areas in approximately declining

value

1 Dry leasing or purchasing three (followed by two more by the end of the first year of operations) mid-

to-large-size regional jet aircraft most likely the 99-seat British Aerospace Avro RJ100 (or the older

predecessor to the RJ100 the BAe 146 which also offers a quick-convert passenger-cargo version) or

the 85 - 99-seat Avro RJ85 or the next-generation follow-on versions of those two Avro jets the

RJX100 or RJX85

2 Provision of a sufficient cash reserve to assure timely payment of the leasing or finance payments and

operating costs of the aircraft through at least the first six months of operations

3 Marketing advertising and public relations costs including costs of setting up a website capable of

offering flight and fare information and making online sales and reservations and related Internet

marketing as well as conventional print and broadcast advertising and public relations activities

4 Costs associated with recruiting training and certifying flight and ground operational crews

5 A reserve to cover overall operating costs aside from aircraft operating costs over at least the first six

months of operations

6 Administrative and legal costs incurred in setting up the business and the airline operations

16

Financing Plan (sources and amounts required) - 2 Table Start-up Requirements

Start-up Expenses

Legal and consulting $200000

Route and market study $100000

Office supplies stationery etc $10000

Brochures and marketing materials $30000

Design consultants $60000

Corporate insurance $20000

Office rent $50000

Software and systems development $100000

Expensed equipment and off furniture $150000

Expensed vehicles (8) $100000

Public relations and advertising $80000

Crew staff training and manuals $60000

Other $30000

Total Start-up Expenses $990000

Start-up Assets

Cash Required $10400000

Start-up Inventory $150000

Other Current Assets $50000

Long-term Assets $200000

Total Assets $10800000

Total Requirements $11790000

17

Financing Plan (sources and amounts required) - 3 Table Start-up Funding

Start-up Expenses to Fund $990000

Start-up Assets to Fund $10800000

Total Funding Required $11790000

Assets

Non-cash Assets from Start-up $400000

Cash Requirements from Start-up $10400000

Additional Cash Raised $0

Cash Balance on Starting Date $10400000

Total Assets $10800000

Liabilities and Capital

Liabilities

Current Borrowing $600000

Long-term Liabilities $0

Accounts Payable (Outstanding Bills) $390000

Other Current Liabilities (interest-free) $0

Total Liabilities $990000

Capital

Planned Investment

Private investment $10800000

Other $0

Additional Investment Requirement $0

Total Planned Investment $10800000

Loss at Start-up (Start-up Expenses) ($990000)

Total Capital $9810000

Total Capital and Liabilities $10800000

Total Funding $11790000

18

Financing Plan (sources and amounts required) - 4 Chart Start-up

19

Proforma Financial Statements for the Next 3 Years Illustrative Only ndash Click On Embedded Links

I ProForma Income Statement

II ProForma Cash Flow Statement

III ProForma Balance Sheet

The Team

13

CEO TBD Characteristics

bull Aggressive management

style

bull Aviation industry and

Region knower

bull Ivy League MBA ndash

Specialization

Entrepreneurship

bull Age Mature

FRANCISCO A OLIVAS

(Novice Entrepreneur)

Chief Capital Raiser TBD

Characteristics

bull Knower of seed capital

markets in Latin America

bull Sound finance expertise

bull Contact to regionrsquos start-

up investors

bull eg Region Venture

Capitalist

14

The Budget (Milestones) - Illustrative Only Milestones

Milestone Start Date End Date Budget Manager Department

Establish a firm financial plan 0912016 0912016 TBD ABC Team

Identify an anchor investor 09152016 09152016 TBD ABC Team

Commence leasing negotiations 1012016 1012016 TBD ABC Team

Set up new company 1052016 1052016 TBD ABC Team

Begin negotiating for offices 1052016 1052016 TBD ABC Team

Select core mngmnt team 10102016 10102016 TBD ABC Team

Commence co operations 10152016 10152016 TBD ABC Team

Make initial aircraft lease pymnt 10302016 10302016 TBD ABC Team

Begin hiring key personnel 1112016 1112016 TBD ABC Team

Begin crew training 1212016 1212016 TBD ABC Team

Take delivery of aircraft 12152016 12152016 TBD ABC Team

Begin inaugural flights 152017 152017 TBD ABC Team

Operation turns profitable 112018 112018 TBD ABC Team

Take delivery of fourth aircraft 4152018 4152018 TBD ABC Team

Totals TBD

15

Financing Plan (sources and amounts required) [Illustrative Only] Most of the planned start-up costs are apportioned to the following six areas in approximately declining

value

1 Dry leasing or purchasing three (followed by two more by the end of the first year of operations) mid-

to-large-size regional jet aircraft most likely the 99-seat British Aerospace Avro RJ100 (or the older

predecessor to the RJ100 the BAe 146 which also offers a quick-convert passenger-cargo version) or

the 85 - 99-seat Avro RJ85 or the next-generation follow-on versions of those two Avro jets the

RJX100 or RJX85

2 Provision of a sufficient cash reserve to assure timely payment of the leasing or finance payments and

operating costs of the aircraft through at least the first six months of operations

3 Marketing advertising and public relations costs including costs of setting up a website capable of

offering flight and fare information and making online sales and reservations and related Internet

marketing as well as conventional print and broadcast advertising and public relations activities

4 Costs associated with recruiting training and certifying flight and ground operational crews

5 A reserve to cover overall operating costs aside from aircraft operating costs over at least the first six

months of operations

6 Administrative and legal costs incurred in setting up the business and the airline operations

16

Financing Plan (sources and amounts required) - 2 Table Start-up Requirements

Start-up Expenses

Legal and consulting $200000

Route and market study $100000

Office supplies stationery etc $10000

Brochures and marketing materials $30000

Design consultants $60000

Corporate insurance $20000

Office rent $50000

Software and systems development $100000

Expensed equipment and off furniture $150000

Expensed vehicles (8) $100000

Public relations and advertising $80000

Crew staff training and manuals $60000

Other $30000

Total Start-up Expenses $990000

Start-up Assets

Cash Required $10400000

Start-up Inventory $150000

Other Current Assets $50000

Long-term Assets $200000

Total Assets $10800000

Total Requirements $11790000

17

Financing Plan (sources and amounts required) - 3 Table Start-up Funding

Start-up Expenses to Fund $990000

Start-up Assets to Fund $10800000

Total Funding Required $11790000

Assets

Non-cash Assets from Start-up $400000

Cash Requirements from Start-up $10400000

Additional Cash Raised $0

Cash Balance on Starting Date $10400000

Total Assets $10800000

Liabilities and Capital

Liabilities

Current Borrowing $600000

Long-term Liabilities $0

Accounts Payable (Outstanding Bills) $390000

Other Current Liabilities (interest-free) $0

Total Liabilities $990000

Capital

Planned Investment

Private investment $10800000

Other $0

Additional Investment Requirement $0

Total Planned Investment $10800000

Loss at Start-up (Start-up Expenses) ($990000)

Total Capital $9810000

Total Capital and Liabilities $10800000

Total Funding $11790000

18

Financing Plan (sources and amounts required) - 4 Chart Start-up

19

Proforma Financial Statements for the Next 3 Years Illustrative Only ndash Click On Embedded Links

I ProForma Income Statement

II ProForma Cash Flow Statement

III ProForma Balance Sheet

14

The Budget (Milestones) - Illustrative Only Milestones

Milestone Start Date End Date Budget Manager Department

Establish a firm financial plan 0912016 0912016 TBD ABC Team

Identify an anchor investor 09152016 09152016 TBD ABC Team

Commence leasing negotiations 1012016 1012016 TBD ABC Team

Set up new company 1052016 1052016 TBD ABC Team

Begin negotiating for offices 1052016 1052016 TBD ABC Team

Select core mngmnt team 10102016 10102016 TBD ABC Team

Commence co operations 10152016 10152016 TBD ABC Team

Make initial aircraft lease pymnt 10302016 10302016 TBD ABC Team

Begin hiring key personnel 1112016 1112016 TBD ABC Team

Begin crew training 1212016 1212016 TBD ABC Team

Take delivery of aircraft 12152016 12152016 TBD ABC Team

Begin inaugural flights 152017 152017 TBD ABC Team

Operation turns profitable 112018 112018 TBD ABC Team

Take delivery of fourth aircraft 4152018 4152018 TBD ABC Team

Totals TBD

15

Financing Plan (sources and amounts required) [Illustrative Only] Most of the planned start-up costs are apportioned to the following six areas in approximately declining

value

1 Dry leasing or purchasing three (followed by two more by the end of the first year of operations) mid-

to-large-size regional jet aircraft most likely the 99-seat British Aerospace Avro RJ100 (or the older

predecessor to the RJ100 the BAe 146 which also offers a quick-convert passenger-cargo version) or

the 85 - 99-seat Avro RJ85 or the next-generation follow-on versions of those two Avro jets the

RJX100 or RJX85

2 Provision of a sufficient cash reserve to assure timely payment of the leasing or finance payments and

operating costs of the aircraft through at least the first six months of operations

3 Marketing advertising and public relations costs including costs of setting up a website capable of

offering flight and fare information and making online sales and reservations and related Internet

marketing as well as conventional print and broadcast advertising and public relations activities

4 Costs associated with recruiting training and certifying flight and ground operational crews

5 A reserve to cover overall operating costs aside from aircraft operating costs over at least the first six

months of operations

6 Administrative and legal costs incurred in setting up the business and the airline operations

16

Financing Plan (sources and amounts required) - 2 Table Start-up Requirements

Start-up Expenses

Legal and consulting $200000

Route and market study $100000

Office supplies stationery etc $10000

Brochures and marketing materials $30000

Design consultants $60000

Corporate insurance $20000

Office rent $50000

Software and systems development $100000

Expensed equipment and off furniture $150000

Expensed vehicles (8) $100000

Public relations and advertising $80000

Crew staff training and manuals $60000

Other $30000

Total Start-up Expenses $990000

Start-up Assets

Cash Required $10400000

Start-up Inventory $150000

Other Current Assets $50000

Long-term Assets $200000

Total Assets $10800000

Total Requirements $11790000

17

Financing Plan (sources and amounts required) - 3 Table Start-up Funding

Start-up Expenses to Fund $990000

Start-up Assets to Fund $10800000

Total Funding Required $11790000

Assets

Non-cash Assets from Start-up $400000

Cash Requirements from Start-up $10400000

Additional Cash Raised $0

Cash Balance on Starting Date $10400000

Total Assets $10800000

Liabilities and Capital

Liabilities

Current Borrowing $600000

Long-term Liabilities $0

Accounts Payable (Outstanding Bills) $390000

Other Current Liabilities (interest-free) $0

Total Liabilities $990000

Capital

Planned Investment

Private investment $10800000

Other $0

Additional Investment Requirement $0

Total Planned Investment $10800000

Loss at Start-up (Start-up Expenses) ($990000)

Total Capital $9810000

Total Capital and Liabilities $10800000

Total Funding $11790000

18

Financing Plan (sources and amounts required) - 4 Chart Start-up

19

Proforma Financial Statements for the Next 3 Years Illustrative Only ndash Click On Embedded Links

I ProForma Income Statement

II ProForma Cash Flow Statement

III ProForma Balance Sheet

15

Financing Plan (sources and amounts required) [Illustrative Only] Most of the planned start-up costs are apportioned to the following six areas in approximately declining

value

1 Dry leasing or purchasing three (followed by two more by the end of the first year of operations) mid-

to-large-size regional jet aircraft most likely the 99-seat British Aerospace Avro RJ100 (or the older

predecessor to the RJ100 the BAe 146 which also offers a quick-convert passenger-cargo version) or

the 85 - 99-seat Avro RJ85 or the next-generation follow-on versions of those two Avro jets the

RJX100 or RJX85

2 Provision of a sufficient cash reserve to assure timely payment of the leasing or finance payments and

operating costs of the aircraft through at least the first six months of operations

3 Marketing advertising and public relations costs including costs of setting up a website capable of

offering flight and fare information and making online sales and reservations and related Internet

marketing as well as conventional print and broadcast advertising and public relations activities

4 Costs associated with recruiting training and certifying flight and ground operational crews

5 A reserve to cover overall operating costs aside from aircraft operating costs over at least the first six

months of operations

6 Administrative and legal costs incurred in setting up the business and the airline operations

16

Financing Plan (sources and amounts required) - 2 Table Start-up Requirements

Start-up Expenses

Legal and consulting $200000

Route and market study $100000

Office supplies stationery etc $10000

Brochures and marketing materials $30000

Design consultants $60000

Corporate insurance $20000

Office rent $50000

Software and systems development $100000

Expensed equipment and off furniture $150000

Expensed vehicles (8) $100000

Public relations and advertising $80000

Crew staff training and manuals $60000

Other $30000

Total Start-up Expenses $990000

Start-up Assets

Cash Required $10400000

Start-up Inventory $150000

Other Current Assets $50000

Long-term Assets $200000

Total Assets $10800000

Total Requirements $11790000

17

Financing Plan (sources and amounts required) - 3 Table Start-up Funding

Start-up Expenses to Fund $990000

Start-up Assets to Fund $10800000

Total Funding Required $11790000

Assets

Non-cash Assets from Start-up $400000

Cash Requirements from Start-up $10400000

Additional Cash Raised $0

Cash Balance on Starting Date $10400000

Total Assets $10800000

Liabilities and Capital

Liabilities

Current Borrowing $600000

Long-term Liabilities $0

Accounts Payable (Outstanding Bills) $390000

Other Current Liabilities (interest-free) $0

Total Liabilities $990000

Capital

Planned Investment

Private investment $10800000

Other $0

Additional Investment Requirement $0

Total Planned Investment $10800000

Loss at Start-up (Start-up Expenses) ($990000)

Total Capital $9810000

Total Capital and Liabilities $10800000

Total Funding $11790000

18

Financing Plan (sources and amounts required) - 4 Chart Start-up

19

Proforma Financial Statements for the Next 3 Years Illustrative Only ndash Click On Embedded Links

I ProForma Income Statement

II ProForma Cash Flow Statement

III ProForma Balance Sheet

16

Financing Plan (sources and amounts required) - 2 Table Start-up Requirements

Start-up Expenses

Legal and consulting $200000

Route and market study $100000

Office supplies stationery etc $10000

Brochures and marketing materials $30000

Design consultants $60000

Corporate insurance $20000

Office rent $50000

Software and systems development $100000

Expensed equipment and off furniture $150000

Expensed vehicles (8) $100000

Public relations and advertising $80000

Crew staff training and manuals $60000

Other $30000

Total Start-up Expenses $990000

Start-up Assets

Cash Required $10400000

Start-up Inventory $150000

Other Current Assets $50000

Long-term Assets $200000

Total Assets $10800000

Total Requirements $11790000

17

Financing Plan (sources and amounts required) - 3 Table Start-up Funding

Start-up Expenses to Fund $990000

Start-up Assets to Fund $10800000

Total Funding Required $11790000

Assets

Non-cash Assets from Start-up $400000

Cash Requirements from Start-up $10400000

Additional Cash Raised $0

Cash Balance on Starting Date $10400000

Total Assets $10800000

Liabilities and Capital

Liabilities

Current Borrowing $600000

Long-term Liabilities $0

Accounts Payable (Outstanding Bills) $390000

Other Current Liabilities (interest-free) $0

Total Liabilities $990000

Capital

Planned Investment

Private investment $10800000

Other $0

Additional Investment Requirement $0

Total Planned Investment $10800000

Loss at Start-up (Start-up Expenses) ($990000)

Total Capital $9810000

Total Capital and Liabilities $10800000

Total Funding $11790000

18

Financing Plan (sources and amounts required) - 4 Chart Start-up

19

Proforma Financial Statements for the Next 3 Years Illustrative Only ndash Click On Embedded Links

I ProForma Income Statement

II ProForma Cash Flow Statement

III ProForma Balance Sheet

17

Financing Plan (sources and amounts required) - 3 Table Start-up Funding

Start-up Expenses to Fund $990000

Start-up Assets to Fund $10800000

Total Funding Required $11790000

Assets

Non-cash Assets from Start-up $400000

Cash Requirements from Start-up $10400000

Additional Cash Raised $0

Cash Balance on Starting Date $10400000

Total Assets $10800000

Liabilities and Capital

Liabilities

Current Borrowing $600000

Long-term Liabilities $0

Accounts Payable (Outstanding Bills) $390000

Other Current Liabilities (interest-free) $0

Total Liabilities $990000

Capital

Planned Investment

Private investment $10800000

Other $0

Additional Investment Requirement $0

Total Planned Investment $10800000

Loss at Start-up (Start-up Expenses) ($990000)

Total Capital $9810000

Total Capital and Liabilities $10800000

Total Funding $11790000

18

Financing Plan (sources and amounts required) - 4 Chart Start-up

19

Proforma Financial Statements for the Next 3 Years Illustrative Only ndash Click On Embedded Links

I ProForma Income Statement

II ProForma Cash Flow Statement

III ProForma Balance Sheet

18

Financing Plan (sources and amounts required) - 4 Chart Start-up

19

Proforma Financial Statements for the Next 3 Years Illustrative Only ndash Click On Embedded Links

I ProForma Income Statement

II ProForma Cash Flow Statement

III ProForma Balance Sheet

19

Proforma Financial Statements for the Next 3 Years Illustrative Only ndash Click On Embedded Links

I ProForma Income Statement

II ProForma Cash Flow Statement

III ProForma Balance Sheet

20

References embedded in slides (No copyrights infringement intended)

21

22

21

22

22