air rogers complete business plan - hammad

8/6/2019 Air Rogers Complete Business Plan - Hammad

1/21

Bahria University IslamabadDept. of Management Sciences

2010

MBA III (Z)

Group Members

Hammad Hassan

Aadil Ejaz

Abdul Manan

Muneeb Ahmad

Faiza Sana

Fareeha Afzaal

Dr. Umbreen Hamid

Dated

24th of December

Air Rogers

Business Plan


2/21

Entrepreneurship MBA III (Z)

2 Air Rogers Business Plan

Table of Contents

Description of Industry

Description of Business

Demand Forecast

Theoretical Perspective on Entrepreneurship

Air Rogers Mission & Vision

Technology Plan

Marketing Plan

Financial Plan

Personnel Plan

Production Plan

Organizational Plan

Operational Plan

Implementation


3/21



DESCRIPTION OF THE AIRLINE INDUSTRY

The Pakistan aviation industry started up when Orient Airways merged with Pakistan

International Airlines Corporation (PIAC) to become the national flag carrier of

Pakistan called Pakistan International Airlines (PIA). PIA remained the only operator

for many years after its creation, but soon private airlines arrived at the scene to

compete with the national flag carrier as conditions of the country established.

Pakistans Airline Industry is mainly confined but not limited to three main

destinations i.e. Lahore, Karachi, and Islamabad. Therefore most of the air traffic

exists between these three destinations. Currently there are only 3 airline operators in

Pakistan i.e. PIA, Air Blue and Shaheen. Air Blue and Shaheen are operating on

specific routes where as PIA holds most of the market share and operates on all the

routes in the country. Air routes between Lahore-Karachi, Lahore-Islamabad and

Karachi-Islamabad can be considered as the busiest routes in terms of air traffic.


4/21



DESCRIPTION OF THE AIRLINE BUSINESS

An airline provides air transport services for passengers or freight, generally these

companies have a recognized operating certificate or license. Airlines vary from those

with a single aircraft carrying mail or cargo, through full-service international airlines

operating hundreds of aircraft. Airline services can be categorized as being

intercontinental, intra continental, domestic, or international and may be operated as

scheduled services or charters.

PURPOSE

Air Rogers is a new consumer airline in its forming stages. The head office of the Air

Rogers will be in Islamabad Stock Exchange Building with Karachi set as the main

hub for all the operations of the company. It is being organized to take advantage of a

specific gap that exists in the domestic travel market. The gap exists in the form of

less number of flights being operated between the busiest routes i.e. Lahore-Karachi

and Karachi-Islamabad.

Air Rogerss mission is to provide safe, efficient and low cost consumer air travel

service. It is expected that the air travel customers preference is for low fares without

compromising on issues of safety or on-time performance. Therefore the newest and

best maintained aircrafts available will be operated to serve the purpose. The airline

will also strive to operate its flight on time and will provide friendly and courteous no

frill service. Currently all the three airlines operating at the domestic level are

providing frill services. As Air Rogers will be introducing this service (no frill

service) for the first time, the response of the passengers needs to be closely


5/21



monitored. But it is assumed that, since no frill service will result in reduced air fare,

the response of the passengers will be over whelming as customers do tend to settle

for lower levels of in-flight service in order to reduce the cost of travel. Eliminating

meal service in flight will also increase airplane utilization due to no need for catering

service while in port. Along with reduced air fare and on time flight operations

coupled with friendly courteous service, Air Rogers is expected to capture a

significant share of market on the above mentioned routes.

FUTURE PROSPECTS

After being successful in the above said, the airline operations can further be

expanded to other routes as well and possibly be introduced on international routes as

well.

DEMAND FORECAST

Our research and projections indicate that air travel to and from any city within

Pakistan is sufficient to provide a new carrier with excellent revenues in its first full

year of operations, utilizing four aircrafts and selected short-haul routes. The first

year of formative operations will burn cash until revenue can commence. This is due

to the organizational and regulatory obligations of a new air carrier. Investment

activity is needed to handle the expenses of this phase of the business. However, the

airline will start earning great amount of profits and it will continue on the same lines

until a new entrant emerges and the competition increases. But we believe that our

low cost and timely services will never let us down in any circumstances.


6/21



THEORETICAL PERSPECTIVE ON ENTREPRENEURSHIP

Entrepreneur ship is the act of being an entrepreneur, which can be defined as "one

who undertakes innovations, finance and business acumen in an effort to transform

innovations into economic goods". This may result in new organizat ions or may be

part of revitalizing mature organizations in response to a perceived opportunity. The

most obvious form of entrepreneurship is that of starting new businesses (also referred

as Startup Company). However, in recent years, the term has been extended to include

social and political forms of entrepreneurial activity.

VIEWS OF SCHUMPETER ON ENTREPRENEURSHIP

In the 20th century, the understanding of entrepreneurship owes much to the work of

economist Joseph Schumpeter. According to Schumpeters point of view, an

entrepreneur is a person who is willing and able to convert a new idea

or invention into a successful innovation. Entrepreneurship employs what Schumpeter

called "the gale of creative destruction" to replace in whole or in part inferior

innovations across markets and industries, simultaneously creating new products

including new business models. In this way, creative destruction is largely responsible

for the dynamism of industries and long-run economic growth.


7/21



ECONOMICAL VIEW ON PROFIT & LOSS IN ENTREPRENEURSHIP

Historically, philosophers of science did not hold entrepreneurs in high esteem.

Making profit was perceived as robbery ever since Aristotle had introduced the

persistent idea of economic activity as a Zero-sum game (one mans gain is another

mans loss).

Today, most people will readily admit the importance of the entrepreneurs role in

society. Entrepreneurs are held responsible for economic development, by introducing

and implementing innovative ideas. Entrepreneurs can be given credit for a

considerable contribution to the economy.

PROFIT & LOSS

Profit and loss disciplines and teaches the entrepreneur the appropriate use of

society's resources. Von Mises writes in Profit and Loss that the role o f profit and

subsequently loss is to reward the entrepreneur for their efforts in creating products

and services that the consumer values.

Profit results in a creation of value of existing inputs of production. Society

communicates to the entrepreneur that it agrees with the entrepreneur's use of existing

resources. Losses, conversely, punish the entrepreneur for using existing resources in

a wasteful manner.


8/21



AIR ROGERS

Mission

Air Rogers has a mission to provide safe, efficient, low-cost consumer air travel

service. Our service will give emphasis to safety as its priority. We will operate the

best maintained aircrafts. We will strive to operate our flights on time.

Vision

We aim at providing Airline services beyond the economical barriers to our nation.

Tagline

Being there is everything.

Marketing Slogan

Fly Like Never Before.


9/21



TECHNOLOGY PLAN

The aircrafts will have the required equipment and certification necessary to conduct

instrument training and actual instrument flight. The aircrafts will be continuously

upgraded. Following aircrafts will be used in our initial years of flight operation:

Type of Plane No. of

Planes

Seating Capacity

(Maximum)

Seating Capacity

(Class 1 Typical)

Seating Capacity

(Class 2 Typical)

Boeing737 500

Classic

4 132 122 108

IT Infrastructure

A sound IT infrastructure is the backbone of a new airline venture in todays era.

Building an error proof IT infrastructure is critical in a way that its a very hectic to

build it initially and requires time and energy to keep everything running and

working, not just the initial time and money is involved but also later on maintenance

would be more important and all transactions and records of the customers will be

stored with these services.

Wireless communication and GPS enabled hand held computers and PDAs will be

provided to the ground and flight crew so that they can coordinate with the

management or ground handling staff working on the run way quick communication

with the pilot and other staff would also reduce errors and miscommunication.


10/21



Online Reservations and Sales

Mechanism for Online reservations (e-reservations) and sales (e-sales) will be

introduced via our website (www.airrogers.com) that will provide quick and easy

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

range of customers across the nation. This eliminates payment of agency commissions

and keeps costs low so that the savings can be passed on to the customer.

Electronic Ticketing

E-ticket ing will be introduced which will enable passengers to obtain their ticket s

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

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

Again this will result in more savings for both the airline and the customer.

Electronic Check-In

The facility of e-check-in will virtually eliminate waiting in line to check-in for e-

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

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

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

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

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

antiquated system that only adds to the traveler's inconvenience and frustration. This

results in another win-win situation for both airline and passenger.


11/21



Electronic Baggage Tracking

Reusable Electronic Baggage Tag Powered by RFID

We will be using Vanguard ID Systems' View Tag that contains two passive RFID

chips and an electronic paper display to help airlines and airports track the location of

luggage, and send updates to passengers' cell phones when bags are loaded on planes.

This is the first time this facility will be introduced in Pakistan. E-baggage tracking

will enable the airline to track any piece of baggage from check-in to final pick-up

and claim. There may still be contingencies (such as late check-in, lack of space,

security restrictions, late connections, and so forth) that cause baggage not to be

placed on a given aircraft, but at least both the airline and the customer can be assured

that they both know exactly where the given item of baggage is at any moment, and

when it might be expected to arrive at the destination. This could well be an exclusive

feature of the proposed new airline since no other airline appears to be utilizing it at

present.

Electronic Quality Control

E-QC is another innovation that will enable technology to create a far better flying

experience for the customer, give airline management and staff greater control over

airline operations and performance, and save time, effort, money, and staff resources

in the process. What is envisaged is a central electronic matrix that controls and

monitors scheduling of aircraft, equipment, personnel, supplies, and support materiel,

and responds to problems, excesses, and deficiencies.

It also will track all elements of a given passenger's or customer's transactions and

interactions with the airline, from initial flight inquiry through reservations, ticketing,


12/21



check-in, flight, connections, and final baggage pick-up, claim, and check-out, as well

as any standing preferences, follow-up comments, inquiries, or problems. It also will

monitor things like weather conditions, flight delays or projected delays, gate jam-

ups, and other contingencies, and will automatically notify appropriate airline

personnel as well as passengers and customers of any advisories, warnings, or

changes.

Electronic Financial Control

Use of e-finance tolls such as SAP Finance will enable complete electronic financial

control and monitoring of the airline's finances.

Additional Technological Features

Additional technological features will be incorporated on-board the aircraft to provide

flight crews with the latest navigational and communication technologies to assure the

highest level of passenger safety and also airline reliability and punctuality.

MARKETING PLAN

The most critical factor for Air Rogers or any new airline to overcome is the issue of

brand awareness and name recognition. Customers prefer to fly with airlines they

know about. There is little doubt that initially Air Rogers will need to spend heavily

and frequently to advertise and promote its product. Consumers will switch for lower

costs, but not at the expense of a safety risk. Air Rogerss marketing team will put a

special emphasis on this theme. Air Rogerss market presence will be achieved by

relying on the strategy of identifying and serving a specialized niche market well.


13/21



Tagline

Being there is everything

Advertisement

Since Air Rogers is start up company therefore it will spend heavily on advertisements

initially during the first six months. The most effective media is expected to be the

outdoor billboards. Other media used will be TV, local radio, newspapers, and

magazines. In addition to these marketing programs, the company will also market via

Internet.

Direct Selling

Since Air Rogers, in its initial phase, will be providing services between Lahore,

Karachi, Islamabad and Peshawar, therefore in order to attract the business travelers

of these cities the company will make direct sales contacts with the travel departments

of corporations and businesses based in these cities.


14/21



Pricing Strategy

Due to its low cost operating structure Air Rogers will be able to offer service at

lesser airfares than the competitive airfares to our selected destinations from any of

our airports. Projected fares are as follows:

ROUTE ADVANCE

(Rs.)

T.W.B

(Rs.)

D.O.T.

(Rs.)

Isb - Khi 6500 7000 8000

Khi - Isb 6500 7000 8000

Lhr - Khi 5500 6000 6600

Khi - Lhr 5500 6000 6600

Isb - Lhr 4000 4400 4800

Lhr - Isb 4000 4400 4800

Khi - Psw 7500 8000 9000

Psw - Khi 7500 8000 9000

The above table shows the published average fare for all routes of Air Rogers. The

first column is for 14 days advance purchase of ticket. These fares are non-cancelable

and non-refundable. The second column is for fares purchased within two weeks of

the date of travel. The third column is the current day of travel.


15/21



FINANCIAL PLAN

If a decision is made to purchase the aircraft for the new airline rather than dry

leasing them, then a considerably larger cash outlay will be required, even with export

financing guarantees from the respective Body. Therefore aircrafts will be obtained on

a "dry lease" basis.

Air Rogers plan on having a fleet of four self-owned Boeing 737 aircraft that will be

operating on all domestic routes. Each aircraft has the seating capacity of about 132

passengers and has extra leg space to keep the passengers comfortable throughout

their journey.

Boeing 737 is one of the aviation industry's most popular twin engine narrow-body

short to medium haul jet aircraft. Besides many economical and commercial benefits,

it has the distinction of being the most ordered and produced commercial airplane of

all time and Boeing continues to manufacture its variants, till date. Breakdown of our

air plane cost is as follows.

Quantity Type of Airplane Total Cost in Million Dollars

Four Boeing 737 300 Classic 120

It is expected that up to 6 airplanes will be acquired over the next two years.


16/21



PERSONNEL PLAN

The following table illustrates personnel needs and growth plans for both key

executives and category needs by group.

Designations Salaries

(Rs.)

CEO

Vice President 500,000

Advisor Engineering 300,000

Advisor Marketing 300,000

V.P. Operations 400,000

V.P. Maintenance 400,000

V.P. Finance 450,000

V.P Marketing 400,000

V.P Administration 350,000

DirectorFlights 250,000

Director Maintenance 200,000

Director Assurance 200,000

Chief Pilot 500,000

Flight Crews 30,000

Reservations 30,000


17/21



Maintenance 40,000

Chief Cabin Crew 100,000

Chief Load Master 80,000

Finance/Accounting 25,000

Other 15,000

PRODUCTION PLAN

Air Rogers will make contracts with certain production units or firms and outsource

the task of manufacturing uniforms for employees and staff. Laundry services will be

obtained from some of the renowned players in the field. In the very same way all the

office equipment including office furniture, stationary and all other equipment needed

to complete the setup will be acquired in the same fashion. Trained professionals will

be hired to design the website and software management system for Air Rogers.

Outsourcing of other services is as follows:

Maintenance

All regular "A" and "B" maintenance will be performed by Air Rogers personnel at our own

leased facilities at each airport served. We will also have tools and parts inventory at each site.

Air Rogerss management feels that it is both necessary and prudent in today's regulatory

environment to perform this regular and routine maintenance "in house". Periodic "C" and "D"

overhauls and major maintenance will be outsourced to PIA.


18/21



Ground Handling

Airplane parking services, baggage loading and unloading, and baggage and freight handling

services will be outsourced at all airports other than the Karachi hub where these services will be

performed by Air Rogers personnel.

ORGANIZATIONAL PLAN

The company will be organized into five major operational areas:

1. Flight Operations.2. Maintenance.3. Financial.4. Marketing.5. Administration.


19/21



The organizational hierarchy for Air Rogers will be as follows:

President/CEO Air Rogers

Secretary to CEO

Adviser Engineering

Adviser Marketing

V.P Flight

Operations

V.P Finance V.P Marketing V.P

Administration

V.P General

Maintenance

Flight

Director

Personnel/HR Sales /

Reservations

Station

ManagerDirector of

Maintenance

Director of

Assurance

Chief Pilot

Chief Cabin

Chief Load

Master

Mechanics

Personnel/

HR

Inspector

Personne

HR

Executive Vice President


20/21



OPERATIONAL PLAN

Weekly Flight Schedule

FLT # FROM TO DEP: ARR: Mon Tue Wed Thu Fri Sat Sun

AR

100

ISB KHI 0720 0920 X X X X X X X

AR

101

KHI ISB 1010 1210 X X X X X X X

AR

110

ISB KHI 1700 1900 X X X X X X X

AR111

KHI ISB 1940 2140 X X X X X X X

AR

200

LHR KHI 0800 0945 X X X X X X X

AR

201

KHI LHR 1015 1200 X X X X X X X

AR

210

LHR KHI 1800 1945 X X X X X X X

AR

211

KHI LHR 2030 2215 X X X X X X X

AR

300

ISB LHR 0800 0830 X X X X X X X

AR

301

LHR ISB 0900 0930 X X X X X X X

AR

400

KHI PSW 1240 1440 X X X X X X X

AR

401

PSW KHI 1510 1710 X X X X X X X


21/21



IMPLEMENTATION

We have completed all the formalities that are required to make an airline operational. All

resources have been gathered, financial, technological, marketing and operational planning has

been done as mentioned in our plan.

Air Rogers - Cost advantages achieved through simplicity and youth!

air rogers complete business plan - hammad

Documents