Airline Business Plan Air Leo

Table of Contents
1.0 Executive Summary 1

Chart: Highlights .......................................................................................................................... 3
1.1 Objectives.................................................................................................................................... 3
1.2 Mission .......................................................................................................................................... 4
1.3 Keys to Success ........................................................................................................................ 5
2.0 Company Summary ..................................................................................................................... 6
2.1 Company Ownership ............................................................................................................... 9
2.2 Start-up Summary ................................................................................................................. 10
Table: Start-up............................................................................................................................ 10
Table: Start-up Funding .......................................................................................................... 11
Chart: Start-up ........................................................................................................................... 12
2.3 Company Locations and Facilities .................................................................................... 12
3.0 Services .......................................................................................................................................... 14
3.1 Service Description ................................................................................................................ 14
3.2 Competitive Comparison ..................................................................................................... 14
3.3 Fulfillment.................................................................................................................................. 18
3.4 Technology ................................................................................................................................ 21
4.0 Market Analysis Summary ...................................................................................................... 23
4.1 Market Segmentation ........................................................................................................... 23
Chart: Market Analysis (Pie) .................................................................................................. 24
Table: Market Analysis ............................................................................................................. 24
4.2 Service Business Analysis ................................................................................................... 25
4.2.1 Main Competitors ........................................................................................................... 25
5.0 Strategy and Implementation Summary .......................................................................... 26
5.1 Marketing Strategy ................................................................................................................ 27
5.1.1 Pricing Strategy............................................................................................................... 27
5.1.2 Promotion Strategy ....................................................................................................... 29
5.2 Sales Strategy ......................................................................................................................... 30
5.2.1 Sales Forecast.................................................................................................................. 31
Chart: Sales Monthly ............................................................................................................ 31
Chart: Sales by Year ............................................................................................................. 31
Table: Sales Forecast ........................................................................................................... 32
5.3 Milestones.................................................................................................................................. 32
Table: Milestones ....................................................................................................................... 32
6.0 Management Summary ............................................................................................................ 33
6.1 Organizational Structure ..................................................................................................... 33
6.2 Management Team ................................................................................................................ 34
6.3 Management Team Gaps..................................................................................................... 34
6.4 Personnel Plan ......................................................................................................................... 34
Table: Personnel ......................................................................................................................... 37
7.0 Financial Plan ............................................................................................................................... 38
7.1 Important Assumptions ....................................................................................................... 39
Table: General Assumptions .................................................................................................. 43
7.2 Key Financial Indicators ....................................................................................................... 43
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Table of Contents
Chart: Benchmarks.................................................................................................................... 43
7.3 Break-even Analysis .............................................................................................................. 44
Chart: Break-even Analysis ................................................................................................... 44
Table: Break-even Analysis.................................................................................................... 44
7.4 Projected Profit and Loss ..................................................................................................... 45
Chart: Profit Monthly ................................................................................................................ 46
Chart: Profit Yearly .................................................................................................................... 46
Chart: Gross Margin Monthly................................................................................................. 47
Chart: Gross Margin Yearly .................................................................................................... 47
Table: Profit and Loss ............................................................................................................... 48
7.5 Projected Cash Flow .............................................................................................................. 49
Chart: Cash .................................................................................................................................. 49
Table: Cash Flow ........................................................................................................................ 50
7.6 Projected Balance Sheet ...................................................................................................... 51
Table: Balance Sheet ................................................................................................................ 51
7.7 Business Ratios ....................................................................................................................... 52
Table: Ratios ................................................................................................................................ 53
Table: Sales Forecast ......................................................................................................................... 1
Table: Personnel ................................................................................................................................... 2
Table: Personnel ................................................................................................................................... 2
Table: General Assumptions ............................................................................................................ 4
Table: General Assumptions ............................................................................................................ 4
Table: Profit and Loss ......................................................................................................................... 5
Table: Profit and Loss ......................................................................................................................... 5
Table: Cash Flow .................................................................................................................................. 7
Table: Cash Flow .................................................................................................................................. 7
Table: Balance Sheet .......................................................................................................................... 8
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Air Leo -- A New Regional Airline
1.0 Executive Summary
Market factors favor inauguration of a new airline to meet the demand for additional, higher-
quality passenger and cargo service linking Western Europe with the rapidly expanding markets
of Southeastern Europe and Turkey, and linking Southeastern European destinations, via
Western European hubs, to trans-Atlantic and global destinations.
This new airline will base its business and marketing strategies on achieving high, and
profitable, load factors through absorption of unmet demand in three key air-traffic categories:
unserved and under-served routes on which high unmet demand currently exists or can be
readily developed; serving key niche markets where demand is either unmet or poorly served;
and meeting peak traffic demands on certain key regional, seasonal, and variable routes where
very high load factors can be predicted despite existing but lower-quality competition, or where
competition cannot meet the demand.
In addition, the proposed new airline will be designed around, and operated utilizing, the most
up-to-date electronic, informational, and aviation technologies to ensure low operating and
marketing costs, maximum efficiency in deployment of its resources, and a high level of
customer service and convenience. And it is this final element - dedicating the airline, its staff,
and its organization to providing a high level of customer service and convenience, and
efficiently meeting the needs, wants, comfort, and safety of the passenger - that will assure the
proposed airline's rapid acceptance in the marketplace and its long-term growth and success.
Particularly in the post-09/11/01 environment, experience in Europe has shown that those
carriers which can maintain a "mean-and-lean" operation while still meeting the needs and
desires of the traveling public, with the right fares, will not only survive, but can prosper.
The six key characteristics leading to the success and profitability of this new carrier will be:
• Provision of high-quality service on routes and in markets that currently are either
unserved, poorly served, or under-subscribed by existing carriers, thereby setting both a
new trend and a new pace in air service to and within the Southeastern European region.
• Employment of cost-effective, up-to-date regional aircraft that will be sized right for the
market and the route, leading to higher load factors, reduced costs, improved efficiency and
flexibility, greater passenger comfort and satisfaction, and higher net profits. Outfitting
these aircraft with the latest aviation technologies and navigational equipment will help
ensure the highest level of reliability, punctuality, safety, and customer satisfaction.
• Utilization of the latest electronic and informational technologies in sales and marketing;
reservations, ticketing and check-in; scheduling and resource planning; cargo tracking; and
operational oversight. Such techniques as internet marketing, reservations, and sales;
electronic ticketing and check-in; online quality control, resource planning, operational
oversight, cargo and baggage tracking, and customer service, all will reduce staffing
requirements while offering ease-of-use and greatly enhanced access by, and convenience
to, the customer.
• Recognition that not everyone is geared for the electronic world, leading the proposed
airline to provide a high level of non-electronic service as well, particularly to the many
newer, less-experienced travelers - but future loyal customers - found in the region.
• Ensuring a friendly, cooperative, enjoyable, yet highly professional face to the customer.
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• Development and implementation of cooperations, associations, and partnerships with other

larger, more established, and highly regarded airlines both within and beyond the region to
provide an extensive range of connections, through fares, frequent-flyer mileage sharing,
and other passenger and client advantages through interline arrangements, code shares,
common hubbing, and so forth.
In short, the goal of this new airline is to be known to the passenger and the cargo customer by
its proposed motto: "We've got a job to do, and we do it every day - for you!"
Primary financial results anticipated during the first year of operations include:
• Average passenger load factors in the 60-80 percent range, depending on route and season,
reached within the first year of flight operations, and increasing thereafter to the 75-90
percent range.
• Revenues approaching [XYZ] million USD within the first six months of flight operations,
exceeding [XYZ] million USD by the end of the first year, [XYZ] million USD in the second
year of operations, and nearly [XYZ] million USD in the third.
• A gross operating margin of close to [XYZ] percent achieved within the first year of
operations, reaching close to double that by the third year, and with steady growth enabling
rational expansion of the airline thereafter. Even in the first year of operations, a pre-tax
profit of [XYZ] million USD is anticipated. This is applying a very conservative business
model, and is achieved on an initial investment of less than [XYZ] million USD, yielding a
return on equity of [XYZ] percent. The accompanying chart illustrates the growth and profit
potential present.
A key element contributing to the success of this new carrier will be its organizational and
management team. Leading this team is Balkan Consortium Holdings USA, Inc. (BalkConsort),
a U.S. corporation that is regionally based in Southeast Europe and which knows the region and
its business needs. BalkConsort, together with its partner companies and associations
throughout the countries of Southeast Europe and beyond, identifies business and profit
opportunities and develops projects and strategic partnerships to implement and benefit from
them.
As explained in the Company Summary that follows later in this business plan, BalkConsort
USA's interest and ownership in the proposed airline will transfer first to a new off-shore
holding company, BC Holdings International Ltd, and then to a daughter company registered in
a member state of the European Union ("BalkConsort EU"), both of which will be established
prior to the airline's start-up. Due to current European Union requirements that E.U. nationals
hold the majority interest in an E.U.-flagged carrier, and the importance of an E.U. air
operators certificate (AOC) to the new airline's overall business plan, a majority ownership
stake in the new airline, either directly or through "BC Holdings EU," must be by E.U. nationals.
Joining the BalkConsort USA/BC Holdings International team are aviation, finance, and
marketing experts with long and successful track records, including extensive experience
organizing and managing other start-up airlines of both a regional and global scope. This
organizational and management team, which is described in greater detail in the section of the
business plan dealing with the Management Team, will help reduce the risk and ensure the
success of the proposed new carrier.
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Chart: Highlights
1.1 Objectives
The proposed airline will have as its primary objectives the following elements:
1. To establish and operate a new regional airline aiming specifically at linking Western Europe
with the rapidly expanding markets of Southeastern Europe and Turkey, and linking
Southeastern European destinations, via Western European hubs, to trans-Atlantic and global
destinations.
2. To provide service and absorb unmet demand in three key traffic categories: unserved and
under-served routes on which high demand currently exists or can be developed; serving key
niche markets where demand is either unmet or poorly served; and meeting peak traffic
demands on certain key regional, seasonal, and variable routes where very high load factors
can be predicted despite existing, but lower-quality, competition.
3. To implement an organizational and marketing strategy that will, beginning in the first year
of flight operations, achieve average passenger load factors in the 65-85 percent range,
depending on route and season, and increasing thereafter to the 75-90 percent range, thereby
maximizing revenues and return on investment while minimizing risk.
4. To achieve revenues in excess of [XYZ] million USD per quarter within the first six months of
flight operations, and exceeding [XYZ] million USD per quarter, by the end of the first year.
5. To achieve net operating profits in the [XYZ] percent range within the first 12 months of
flight operations, an annualized return-on-investment of approximately [XYZ] percent by the
end of the second year of operations, and steady growth enabling rational expansion of the
airline thereafter.
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6. To achieve the projected results starting with three mid-to-large-size regional aircraft,
growing to five by the end of the first year of operations, similar to the 99-passenger British
Aerospace Avro RJ100 or 85 - 99-seat Avro RJ85 regional jet aircraft, obtained on either a dry-
lease or purchase basis; supplementing those aircraft with larger, longer-range passenger
aircraft and cargo liners on a charter or wet-lease basis to serve peak-demand and intermittent
routes and periods, as well as cargo demands, as called for by the business plan; and
incrementally expanding the fleet size and scope on a dry-lease or purchase basis to at least
double its initial capacity by the beginning of the third year of operations to accommodate
projected passenger and cargo growth in the business plan's out-years.
7. To gear operations, and present a professional, serious, growth-oriented image from the
outset, that will set the stage for reasoned, planned expansion, mirroring growth rates
projected for the first year of operations, and that will enable the airline to extend its regional
scope and, in future years, to transition from its initial regional status into a larger continental
and intercontinental carrier.
8. As an element critical to achieving the airline's other key objectives, to identify and develop
key interline alliances, cooperations, associations, and partnerships with other larger, more
established, and highly regarded airlines both within and beyond the target region that will
enable the proposed airline to provide an extensive range of connections, through fares,
frequent-flyer mileage sharing, and other passenger and client advantages through interline
arrangements, code shares, common hubbing, and so forth.
1.2 Mission
The proposed new airline's mission, simply stated, is to fill a niche in the growing air-travel and
cargo markets linking Western Europe, and points beyond, to Southeastern Europe and Turkey;
to achieve high, and profitable, load factors by identifying and serving key routes and city pairs
currently unserved, under-served, or poorly served, and where significant unmet demand
exists; and to set a new standard for air service and professionalism both within the target
market region and beyond.
By utilizing the latest aviation, electronic, and informational technologies, and by designing
effective and efficient systems and building in quality control from the outset, we aim to ensure
the highest level of service, operations, and safety, all based around the needs, wants, comfort,
and convenience of the passenger and the cargo client. This combination of technology, service
orientation, and quality oversight will help keep costs at a minimum and maximize profits to the
airline and its investors. It also will help build the strong customer satisfaction and excellent
reputation that will enable the airline to build solid, and crucially important, interline
arrangements necessary to expand its scope and customer attraction in the early stages, and
which will lead to continued long-term growth both within the target market area and, looking
toward the future, beyond.
In short, this airline wants to be known by its proposed guiding motto: "We've got a job to do,
and we do it every day - for you!"
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1.3 Keys to Success
In descending order of importance, the five critical keys to success for the proposed new
regional airline are:
• Employing an experienced, highly professional management team that combines

vision; realism; financial ability; solid knowledge of the aviation business; familiarity with,
and belief in, the utilization and benefits of the latest aviation, electronic, and informational
technologies; on-the-ground knowledge of the region and markets to be served; realization
of the crucial importance of an organization's personnel to its success; and a total familiarity
with, and commitment to, the overall mission and goals of the proposed new airline.
• Intelligent, progressive, and aggressive marketing that identifies the airline as a

different kind of player, one that is sharper and smarter, and with a higher level of
professionalism and operational standard than is the norm in the target region.
Concentration on safety, with highly trained, dedicated, and professional personnel, caring
for the passenger and the passenger's needs and wants, the advantages offered by
advanced technology, and straightforward, understandable, highly competitive tariffs and
fare pricing, all will form key pillars of the marketing strategy.
• Identification, through careful market research, of unserved or under-served

routes and city pairs in the target market area with sufficient passenger demand to
enable high load factors and profitable operations utilizing the category of aircraft
envisaged.
• Use of an all-jet fleet of newer, modern, Western-built regional aircraft that offer a
high level of comfort, safety, and fuel and operational efficiency and flexibility, which meet
all normal aviation standards, and which offer sufficient, but not excessive, passenger and
cargo capacity on the envisaged routes.
• Use of advanced electronic and information technology to reduce staffing and other
operational costs; expand the potential market base; readily capture sales opportunities;
simplify and speed passenger, baggage, and cargo handling; and enhance customer
convenience and satisfaction.
Additional important, though less critical, keys to assuring the airline's success include the
following:
• Identifying, negotiating, and entering into, in the pre-operational stage and early
on, beneficial associations, cooperations, and partnerships with larger, more
established, highly regarded carriers both within and beyond the target market region
to offer interline arrangements, through fares, frequent-flyer mileage sharing, and
convenient hubbing and long-distance onward connections to passengers. Successful
execution of this element of the business plan is crucial to the overall success and growth of
the airline, and must be kept in mind in the organizational plan and structuring of the
airline.
• Establishing a high level of operational oversight and quality control that will ensure
that the airline always lives up to its marketing commitments and fulfills the promise of a
high level of service, customer satisfaction, convenience, and safety, at a reasonable, highly
competitive fare.
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• Avoiding the temptation to go head-to-head with established carriers on routes that

already are well-served, unless solid evidence exists of additional, significant pent-up
demand, or widespread customer dissatisfaction with existing services.
• Maintaining flexibility that enables the airline to always respond and adapt to changing
market conditions and opportunities, without being erratic, and employing equipment,
scheduling, and staffing on a basis that is sufficient to get the job done properly, efficiently,
and at a high rate of return, without "overkill" or fielding costly excess capacity or,
conversely, unduly cancelling scheduled flight operations.
• Identifying, developing, and quickly and cost-effectively exploiting opportunities

for new markets, new market concepts, and expanded sales potential.
• Supplementing regularly scheduled passenger service with both regularly scheduled

and also special cargo services when and where sufficient demand exists, and also with
seasonal, peak-period, and other intermittent passenger services on certain key regional,
seasonal, and variable routes where very high load factors can be predicted despite existing
but lower-quality competition, or where competition cannot meet the demand. Larger,
longer-range, or specialized aircraft may be employed on a charter or wet-lease basis to
provide these supplemental, but potentially highly profitable, passenger and cargo services.
• Looking to combine the core aviation business with ancillary marketing concepts
and activities and ground-based operations that support, supplement, and complement
the aviation elements of the business, including such activities as package-, group-, and
charter-travel program offerings; value-added sales and customer services, both land- and
Internet-based; construction and operation of enhanced passenger-, baggage-, and cargo-
handling facilities and services; and other logical business pursuits both within and outside
the immediate aviation business.
• Avoiding growth for growth's sake, and instead looking for solid niche-enlargement
opportunities that will allow incremental, but always profitable, expansion.
2.0 Company Summary
The plan for the envisaged new regional airline is an outgrowth of the market research and
regional experience of Balkan Consortium Holdings USA, Inc. (BalkConsort), garnered over a
nearly three-year period, beginning in mid-1999.
BalkConsort, which is proposing to found the new airline, is a U.S. corporation registered in the
State of Delaware and headquartered in Chicago, Illinois, with a Southeastern European
regional headquarters located in Panorama, just outside Thessaloniki, Greece. BalkConsort,
together with its partner companies and associations throughout the countries of Southeast
Europe and beyond, identifies key business and profit opportunities and develops projects and
strategic partnerships to implement and benefit from them.
Early on following its establishment in the region in mid-1999, BalkConsort identified a growth
opportunity in the aviation and travel sector in Southeast Europe. This opportunity is
occasioned by growing economic, political, and social stability, and consequent significant
business expansion, within and between most of the countries of the region; vastly expanded
outside contact and support with and for the region, occasioned by the aftermath of the Bosnia
and Kosovo conflicts; extensive UN, NATO, and other international-organization operations in
the region; and such multilateral initiatives as the Stability Pact for Southeast Europe, the
Southeast Europe Cooperative Initiative, and the Southern Balkan Initiative.
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Additionally, the company has determined that maximum potential from this growth
opportunity can be obtained not only by linking certain key destinations within the Southeast
European region, but by linking the region with carefully selected destinations in Western
Europe and beyond. It further has identified significant unmet demand, and significant short-,
medium-, and long-term growth potential, represented by Turkey and the rapid growth of the
Turkish economy and its domestic and international air-travel market, particularly in light of
Turkey's growing economic and political integration with the European Community and Europe
as a whole.
Ancillary Travel Services

In response to the growing travel-market potential of the region, represented in particular by
the large expatriate community living and working in parts of the region, including Bosnia-
Herzegovina, Kosovo, the Former Yugoslav Republic of Macedonia, and Albania, BalkConsort
established Hassle-Free Holidays, a package-travel wholesaler and retailer, in mid-2000.
Both Hassle-Free Holidays and its partner organizations are expected to feed customers and
traffic to the regional airline and utilize the airline's services when possible, and will act as
additional low-cost outlets for marketing the airline through their planned electronic-commerce
websites. Locally established retail travel agencies can serve as a base for the airline's sales
and operations in the key niche market of Kosovo, and Hassle-Free Holidays already has
established other close links with retail agencies in Skopje, Thessaloniki, and Athens, and is
working on developing similar relationships with agencies in Istanbul, Ankara, Tirana, and
elsewhere both within and outside the Southeast European region.
Other related company activities of BalkConsort

BalkConsort currently maintains strategic partnerships or associations with companies in the
following functional and geographic areas, all of which can serve to support, augment, or
supplement the proposed new airline's core aviation business:
• Construction, construction management, and construction technology (U.S., Greece,

Turkey, Albania).
• Environmental engineering, including water and waste water treatment and solid-waste
management (U.S., Italy).
• High-level security, demining, and explosive-ordnance removal (U.K.).
• Aviation services and airport development (Albania).
• Travel services and package travel development and marketing (Greece, FYRO Macedonia,
Kosovo, global).
• Free-trade zone development (U.S.).
The company owns 50 percent of a private U.S.-Albania joint venture limited-liability company,
Rruget e Mira sh.p.k., founded in early 2001 and based in Tirana, Albania. The joint-venture
company is set up to undertake primarily public road and street construction and reconstruction
projects, as well as general construction and development projects, in Albania.
It also is considering tendering, either on its own or more likely in conjunction with a major
international engineering and construction firm, for the build-operate-transfer (BOT) concession
the Government of Albania will let for the planned new passenger terminal for Rinas (Tirana)
International Airport.
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In addition, BalkConsort also holds exclusive license rights to two advanced U.S.-developed
construction technologies in the 10 countries of Southeast Europe, including Albania, Bosnia-
Herzegovina, Bulgaria, Croatia, Greece, Macedonia, Slovenia, Romania, Turkey, and Yugoslavia
(including Kosovo).
These technologies, combined with other building technologies, products, and methodologies
the company and associated companies represent, can offer significant advantages to the new
airline should it pursue, either on its own or in conjunction with BalkConsort, development and
construction of new passenger-, baggage-, and cargo-handling facilities and other related
installations.
Legal relationship and company status of the new airline

BalkConsort intends to spin-off the proposed new airline operating company into a separate
legal entity under the continued partial ownership and general oversight of BalkConsort, acting
as a holding company. Investments in the new airline may be made either through BalkConsort,
as a share of its total capital holdings, through an E.U.-based daughter company described later
in this section that will be BalkConsort's proxy for its interests in the new airline company, or
directly into the new airline operating company.
To obtain maximum flexibility in terms of certification and flight and landing rights, it is
important that the primary carrier operate under an air operator's certificate (AOC) granted by
an European Union country. Since current E.U. requirements stipulate that European Union
nationals (companies and individuals) hold the majority ownership interest in any E.U.-flagged
carrier, it is critical that overall ownership in the new airline be structured in such a way that
the majority interest is held by E.U. nationals.
According to its overall organizational plan, BalkConsort anticipates reorganizing itself into an
off-shore holding company (BC Holdings International Ltd), most likely registered in Anguilla,
and transferring the current share ownership of Balkan Consortium Holdings USA, Inc. to the
new off-shore holding company. BalkConsort USA will then become a daughter marketing
company of BC Holdings International, with a majority of its shares owned by U.S. stockholders
(necessary for it to fulfill its role as a U.S. marketing company capable of winning U.S.
government contracts reserved for U.S.-owned companies), and a minority share owned by BC
Holdings International as a holding company.
The corporate organizational plan then calls for the establishment of a daughter marketing
company in the E.U., similar to BalkConsort USA, to be held partly by BC Holdings International
as minority shareholder and with a majority of ownership held by E.U. nationals. This daughter
company (BalkConsort EU) may own all or part of the new airline operating company, provided
that majority ownership in the airline meets E.U. requirements for an E.U.-flag carrier.
BalkConsort (in its new identity as BC Holdings International and as "BalkConsort EU")
anticipates maintaining or appointing positions on the new airline operating company's board of
directors proportional to its direct or indirect ownership interest in the airline, with other board
positions held or named by other investors in the airline proportional to their ownership
interests. Additionally, some board positions will be held by non-equity members, nominated by
BalkConsort and the other investors and strategically selected by the board, whose presence
and guidance can serve to advance the new airline's operations, business interests, financial
positioning, and expansion.
It is anticipated that the new airline operating company will be established as a limited-liability
company in one or more E.U. countries, the country or countries to be determined based on tax
Page 8
requirements and relative tax and business operating advantages, and other substantive
considerations. For instance, registering and basing the company in Luxembourg may offer
significant tax, as well as logistic, advantages to the new airline.
Meanwhile, it may be necessary to register a subsidiary company in another country, such as

Switzerland for example, to obtain necessary landing rights or slots in that country.
Furthermore, if - as is being considered and is detailed elsewhere in this business plan - the
airline acquires British-built aircraft, it may be advantageous from the perspective of obtaining
British export financing to base the company outside the U.K.
Additional AOCs may be obtained by subsidiary carrier companies established outside the E.U.
for substantive reasons such as outlined above.
The final company structure, including ownership arrangements, national company registrations
and AOCs, and basing, will be determined based on consultation and negotiation between
BalkConsort and prospective investors, and with the expert guidance of its project team of tax,
business, and aviation advisors and consultants, and others as may be needed.
2.1 Company Ownership
It is anticipated that a portion of the ownership in the new airline operating company will be
held by BC Holdings International Ltd, most likely through an E.U.-registered daughter
company, along with one or more strategic private investors. Investment in the new airline
operating company may be made directly in the airline operating company or through
investment in BC Holdings International or its E.U. daughter company as the holding company
for the airline, with shares apportioned according to the equity investment involved. However,
as previously stated, the majority ownership stake in the new airline must be held by E.U.
nationals for the airline to qualify for an E.U. AOC, considered an essential element of the
overall organizational plan. BalkConsort is prepared to discuss and negotiate specific ownership
arrangements in detail with prospective investors. Equity requirements are discussed in the
Start-up Summary that follows.
For planning purposes, any subsidiary airline companies established by the parent airline
operating company, as described in the previous section, shall be considered to be wholly
owned subsidiaries of the parent airline operating company, although individual sub-ownership
arrangements may be made in individual cases of such subsidiary companies, particularly in
cases where local ownership interests might be required by prevailing law in the countries in
question.
Balkan Consortium Holdings USA, Inc., the current entity formulating this proposal, is a
privately held Delaware (U.S.A.) corporation. As noted in the previous section, a new off-shore
holding company, BC Holdings International, Ltd., will be set up, with stock ownership in
BalkConsort USA transferring to the new entity. It is anticipated that subsequently BC Holdings
Ltd. will set up an E.U. daughter company which would then hold a share of the new airline,
based on its relative stake in the airline.
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2.2 Start-up Summary
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.
Assumptions governing start-up costs are shown in the following table and chart.
Table: Start-up
Start-up
Requirements
Start-up Expenses
Legal and consulting $200,000
Route and market study $100,000
Office supplies, stationery etc. $10,000
Brochures and marketing materials $30,000
Design consultants $60,000
Corporate insurance $20,000
Office rent $50,000
Software and systems development $100,000
Expensed equipment and off. furniture $150,000
Expensed vehicles (8) $100,000
Public relations and advertising $80,000
Crew, staff training and manuals $60,000
Other $30,000
Total Start-up Expenses $990,000
Start-up Assets
Cash Required $10,400,000
Start-up Inventory $150,000
Other Current Assets $50,000
Long-term Assets $200,000
Total Assets $10,800,000
Total Requirements $11,790,000
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Table: Start-up Funding
Start-up Funding
Start-up Expenses to Fund $990,000
Start-up Assets to Fund $10,800,000
Total Funding Required $11,790,000
Assets
Non-cash Assets from Start-up $400,000
Cash Requirements from Start-up $10,400,000
Additional Cash Raised $0
Cash Balance on Starting Date $10,400,000
Total Assets $10,800,000
Liabilities and Capital
Liabilities
Current Borrowing $600,000
Long-term Liabilities $0
Accounts Payable (Outstanding Bills) $390,000
Other Current Liabilities (interest-free) $0
Total Liabilities $990,000
Capital
Planned Investment
Private investment $10,800,000
Other $0
Additional Investment Requirement $0
Total Planned Investment $10,800,000
Loss at Start-up (Start-up Expenses) ($990,000)

Total Capital $9,810,000
Total Capital and Liabilities $10,800,000
Total Funding $11,790,000
Page 11
Chart: Start-up
2.3 Company Locations and Facilities
Financial, traffic, and other studies currently are underway to determine the optimal prime
basing location for the proposed new airline. Among the locations under study are the following
eight:
1. Luxembourg, Luxembourg;
2. Berlin, Germany;
3. London City Airport, London, United Kingdom;
4. Stanstead Airport, London, United Kingdom;
5. EuroAirport, Basel/Mulhouse, Switzerland/France;
6. Amsterdam, The Netherlands;
7. Cologne/Bonn, Germany;
8. Munich, Germany.
In selecting a location to base the new airline, the following 11 major considerations are being
evaluated, in roughly descending order of relative weight:
1. The tax and business regime in place in the selected locale. A low profit tax rate and a
regulatory and political climate supportive of business, and particularly foreign investment,
are key considerations.
2. The availability of relatively low-cost facilities suitable for basing both the business and
aircraft-support operations, as well as the aircraft, is another key consideration.
3. The availability of sufficient landing and parking slots and gate facilities to permit the
desired level of service at the base airport.
Page 12
4. The ability to interconnect with one or more major carriers for onward interline
arrangements both within Europe as well as to trans-Atlantic and global destinations.
5. A location that, given the maximum range of the selected aircraft, will enable non-stop
flights to the most important destinations within the new airline's service area in
Southeastern Europe and Turkey and, at most, one-stop service to more distant or
secondary destinations.
6. The existence of relatively high-traffic volume between the base location and one or more
key interchange points to provide sufficiently high load factors between the base location
and onward destinations and points of origin.
7. The existence of a reasonably high level of cargo traffic, including opportunities for interline
trans-shipment of both inbound and outbound cargo.
8. The support of a larger airline with which the proposed new airline can establish a
particularly close working relationship.
9. The support of local airport and aviation authorities to facilitate establishment, certification,
and ongoing operation of the airline and its aircraft.
10. A location outside of the U.K. to facilitate British trade finance on acquisition of the new
aircraft, should decisions be made to acquire British-built Avro aircraft as previously noted,
as well as to purchase, rather than lease, the aircraft.
11. A range of other factors, including the availability and cost of local skilled workers, the
growth potential of the market selected, year-round climatic and weather conditions as they
may affect flight operations, the "cache" of the locale for marketing purposes, the cost and
convenience or difficulty involved in command and control of the airline involving key
personnel, some of whom may be based at various other locations, and so forth.
It is anticipated that most routine maintenance will be performed at the base location, with
some more minor maintenance and repairs relegated to other locations in the route network. In
both cases, most of this routine maintenance and repair work will be contracted out to
established and experienced service providers, reducing the need for the new airline to
maintain its own extensive maintenance and repair teams and facilities.
The airline will, however, perform its own normal line maintenance at home base and will utilize
locally available services away from home. Aircraft also may be based at key airline hub
locations away from the home business base as well.
With acquisition of British-built aircraft, major overhauls and heavy maintenance may be
performed at British Aerospace's Woodford facility in the U.K. on a selective basis. In addition,
it is anticipated that separate fixed-cost maintenance agreements will be entered into for both
the airframes and the engines, or these elements will be included in any dry-leasing
arrangements entered into.
Estimates for total labor and spare parts costs have been calculated as a fixed per-hour cost
and included in the portion of this business plan dealing with anticipated operating costs.
Sufficient apron and hangar space for staging, parking, and storing, as needed on a short-term
basis, up to the entire initial five-aircraft fleet will be required at the base location and any
other hub locations selected.
Page 13
As the fleet expands over time, additional parking and storage space will be needed either at
the main base location or at regional hubs in the airline route network. Additionally, sufficient
office space, preferably in one central location at or near the base airport, will be required to
house the airline's main administrative offices and its central reservations system.
While the airline may consider establishing its own sales offices in key market locations, in
general sales will be handled through a combination of Internet marketing utilizing the airline's
own website as well as other Internet travel websites, designated general sales agents in given
locales, and regular travel agencies everywhere.
3.0 Services
As demonstrated throughout this business plan, it is clear that a strong growth potential exists
for the future, and the airline will gear itself toward sensible, well-based growth and solid
financial and business planning.
The proposed new airline has the potential to become a strong, well-established, and - as the
numbers indicate - extremely profitable carrier, starting from now.
3.1 Service Description
In reviewing the planned services to be offered by the proposed new airline, this plan will divide
services into two main categories: passenger services and cargo services. Within each category,
the service strategy, as well as general services to be offered, are presented and reviewed.
3.2 Competitive Comparison
In comparing the proposed new airline to its competitors, there are at least two levels of
comparison that must be considered; the usually lower-standard airlines, both scheduled and
charter, flying out of the Southeastern European region, and the higher-standard, more highly
regarded airlines operating out of Western Europe.
Beating the former source of competition is both a reasonable and an essential goal. But
comparing favorably, and even standing notably above, the latter also is an important objective
since these airlines will represent direct competition to the new airline on many of its projected
key routes, despite efforts to avoid such competition to the extent feasible.
Fortunately, several of the key distinguishing characteristics planned for the new carrier not
only will enable it to fare extremely well in both levels of competitive comparison, but will
actually be achievable at a savings in cost and resources. In other words, by being smart, the
new airline can be significantly better than its competition while at the same time accruing
lower overall costs, a remarkably good combination.
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In comparing the proposed new carrier to both its Southeastern European and its Western
European competition, it is important to look at those factors that determine how most
travelers choose an airline. They include the following (and the order of importance is different
for each traveler and each situation, but the most important factors are listed):
• Safety, actual and perceived;

• Cost, and range of fares offered;
• Destinations served;
• Availability of seats;
• Availability of fares;
• Convenience of flight schedules, times of arrivals and departures;
• Frequency of flights;
• Connections, including reliability and convenience of connections;
• Nature of flights: non-stop, direct, number of stops, aircraft changes;
• Availability of different classes of service;
• Onboard comfort, service, meals, and amenities;
• Type of aircraft, including jet or non-jet, size, and speed;
• Age and condition of aircraft;
• Ease and efficiency of reservations and ticketing;
• Reliability and on-time departures and arrivals;
• Ground service;
• Reliability and quality of baggage handling;
• Friendly, competent service in reservations, check-in, and in the air;
• Overall reputation of airline;
• Nationality of carrier;
• Factors of personal preference.
While no airline probably can excel in every one of these areas, the closer an airline comes to
"excellent," or at least "good," ratings in each of these key areas, the better it will fare in its
competitive standing.
Both in the overall design of the airline and its basic operational features, as well as in its
management, quality control, and day-to-day operations, the proposed airline is expected to
stand out positively in almost every regard.
Competition with Southeastern European carriers

While not all Southeastern European carriers fit the stereotype presented here, and several are
in the process of privatization and ostensible upgrading, most do operate at a lower level of
service than is customary in Western Europe.
It is not uncommon for carriers in the region to operate older Soviet-built equipment (perceived
to be less comfortable, less safe, and less reliable than its Western competition - perceptions
that often are accurate).
For instance, such competing airlines as Avioimpex of the Former Yugoslav Republic of
Macedonia, Albanian Airlines (Albania's Kuwaiti-owned private carrier), ADA Air (a smaller
private carrier in Albania with which BalkConsort has been partnered for certain purposes),
Hemus Air and Bulgarian Airlines, both of Bulgaria, Tarom, Romania's state carrier, and even
Malev, the Hungarian airline, still operate Soviet-era aircraft in their fleets. In some cases,
these aircraft are turbo-prop powered, and not pure jet.
Page 15
While often it is relatively inexpensive to lease such aircraft, their operating costs tend to be
significantly higher than newer, more fuel-efficient Western-built aircraft, and their safety,
reliability, and noise factors are often poor, in some cases limiting their ability to operate in
some markets.
Service levels are poor in general, among both scheduled and charter carriers, which represent
a significant part of the market, particularly in service to Kosovo and Turkey, the two niche
markets identified for the new carrier.
By utilizing modern, safe, reliable, and cost-effective Western-built regional jet aircraft, the
proposed new airline will offer a far more attractive alternative to the traveler both from within
and outside Southeast Europe, and will be able to operate with far lower fuel and maintenance
costs than the competition.
The comfort, reliability, speed, and safety of the new airline's aircraft all will enable it to be the
airline of preference for virtually all business, government, and organizational travelers from
both within and outside the target region when traveling to or within the region, and it also will
be preferred by most leisure and personal travelers, including those from with the target
region, as well.
Greater reliability and punctuality of the aircraft, augmented by state-of-the-art navigational

devices that permit operation under a wider range of weather and visibility conditions, will
enable the airline to compete most favorably on those bases also, and will ensure the least
likelihood of flight cancellations, postponements, and missed or late connections.
On the basis of fares, the new airline will offer highly competitive fares which, in many cases,
should be below those offered by its Southeastern European competition. Higher load factors,
combined with greater efficiency both in operational costs as well as in reservations, ticketing,
and check-in, will enable the new airline to be highly competitive from both a cost and a quality
perspective, and will also enable it to retain a higher percentage of its revenues.
In short, the local competition, except in a few cases (such as Aegean/Cronus Airlines, and to a
lesser extent Olympic Airways, from Greece; Adria from Slovenia; in some cases Malev, from
Hungary; and the Turkish carriers) will not represent very strong competition to the new airline,
and particularly in attracting the primary market groups at which the new carrier will be aimed.
Finally, the new carrier will be seeking out, as part of its business and marketing strategies,
routes and city pairs that offer unserved or under-served demand. That strategy also will help
reduce the threat from competition, and will enable the carrier to further establish itself as the
carrier of choice in Southeast Europe.
Competition with Western European carriers

The competitive picture is somewhat different when Western European carriers represent the
competition. Many of the new airline's competitive advantages relative to Southeastern
European carriers are erased or at least minimized.
In most cases, the new airline will be competing with other carriers operating aircraft of a
similar nature. Safety, comfort, convenience, and reliability, as well as in many cases cost, all
are on a similar footing. To stand out from the crowd, the airline must do things either
differently or better, or both, than its competitors, and it is here that both the design and the
management of the new airline must be at their sharpest.
Page 16
The competition in this region will include such well-established carriers as Swiss International,
Austrian, Tyrolean, Lufthansa, KLM, British Airways, Air France, Alitalia, Sabena, and others of
that nature. More recent, lower-cost, and "hipper" start-ups such as EasyJet, Go Fly, Bluebird,
Virgin Express, and others like them will represent even more challenging competition in some
cases.
But unlike any of its competitors, which may employ one or two or several elements of the
proposed new airline's marketing strategies, informational and electronic technologies, and
management techniques, none of them - none - employ the full range of those elements that
the proposed new airline will employ.
Consequently, the proposed new airline will be the real equivalent of a whole new generation of
airline (regional or beyond), and will represent the kind of revolution in the aviation world that
Pan Am, Icelandic, Laker Air, PEOPLExpress, Virgin Air Atlantic, EasyJet, and Air Blue
represented in their day (and in some cases, their "day" is still today).
In that regard, the new airline might well be known as "TechnoAir" given its extensive
deployment of state-of-the-art marketing, reservations, ticketing, check-in, baggage- and
cargo-tracking, and operational and safety technologies.
The advantages of these technologies include a net cost saving to the airline, greater
convenience and ease for the passenger, and an image and reputation that will cause the new
airline to stand out from the pack. Combined with a staff and management that will be carefully
recruited, selected, trained, and motivated to be the best of the best, and to be the most
customer-oriented in the business, the new airline also will soon become known by its motto:
"I've got a job to do, and I do it every day - for you!"
In other key areas - routes, schedules, and fares - the new airline also will be carefully
designed to either compete highly effectively or, alternatively, to go where the competition is
limited or non-existent.
Requirements for interline arrangements

In order for the new airline to be able to obtain the interline arrangements such as code-shares,
interline fare agreements, frequent-flyer mileage sharing, and so forth, that will be so
important to its competitive posture and overall success, it must:
• Fly Western-built aircraft, preferably pure jet.

• Meet the standards to have a two-letter airline code.
• Meet the highest standards for safety, reliability, and service.
• Be accessible through normal reservations and ticketing systems.
Meeting these requirements, and negotiating the desired agreements, will be priorities from the
outset in setting up the new airline. Additionally, partnering and interline arrangements will be
carefully identified and sought that will offer the new airline strategic partnerships that will help
give it the "cover" of larger, more established carriers, and also the status and service and
growth potentials it will need to grow beyond its initial stage and to become a true presence in
the aviation world.
Page 17
3.3 Fulfillment
The primary issue regarding sourcing is the question of the type and source of aircraft to be
employed in the new airline's fleet.
Aircraft selection
Several potential fleet aircraft and manufacturing sources are being considered and evaluated,
including the following:
• Airbus Industrie ATR72, A-300, A-310, A-320

• Boeing 717, 737-500, 737-700
• Bombardier Canadair Regional Jet CRJ
• British Aerospace BAe 146-300, BAe 146-200QC*, Avro RJ85, RJ100, RJX85, RJX100
• Embraer ERJ-145
• Fokker 100
• Saab 2000
• Also, in an all-freighter configuration, the BAe 146-200QT** and BAe 146-300QT**
* QC = "Quiet Convertible" version allowing quick-conversion from passenger to full-freighter

configuration; only five of these - the complete production run - currently are in service
worldwide.
** QT = "Quiet Trader" all freight version, of which in service there are 13 in the 200 version
and 10 in the 300 version.
With the exception of the turboprops ATR72 and the Saab 2000, all aircraft under consideration
are pure jets.
Given the strong "jet preference" among the flying public (for instance, Continental Express in
the U.S. estimated that its load factors increased 33 - 50 percent when it switched from
turboprops to jet aircraft, and similar results have been documented elsewhere, including in
Europe), the overall greater speed and reliability, reasonably close operating costs (especially
given the additional flights that can be operated daily), and the longer range offered by jets,
the preferred aircraft type is a pure jet. It remains only to decide which is the "right" pure jet
for the fleet.
A number of key factors have mitigated toward the BAe Avro RJ family of regional jets rising
toward the top of the list as the probable aircraft of choice for the new airline. Among those
factors are the following:
1. Relatively low per-seat acquisition cost.
2. Relatively low per-passenger-mile costs, given their added capacity over smaller regional
jets, and high reliability factors in the newer versions (for instance, Aegean/Cronus Airlines
of Greece, which operates six RJ100s on a very active daily schedule, has averaged above
99.6 percent departure reliability with its RJ fleet).
3. Complete pilot and maintenance intercompatibility between the various members of the
family (RJ70, RJ85, RJ100, and now the new RJX family as well), giving added flexibility in
flight and maintenance operations and reducing training and simulator costs.
Page 18
4. Four-engine configuration which gives it an added safety factor (while also increasing
operating costs, however).
5. Spacious, comfortable cabin interiors that offer the only seat, aisle, and overhead bin
dimensions available in a regional jet that are equivalent to those on standard-size jets.
6. The option of flexible cabin and seating configurations that allow for varying the number of
seats provided for various classes depending on demand, the number of seats abreast,
types of seat coverings, the number of seats provided on a given flight, and so forth.
7. Availability of the aircraft from various sources on both lease and purchase bases.
8. The possible option of obtaining advantageous British export financing.
9. Ability to service the aircraft in many locations on the projected service network and the
availability of major overhaul capabilities at the manufacturer's own facilities in the U.K.
10. Widespread passenger and industry acceptance of the Avro regional jets both within and
outside Europe.
Seating capacity is an important consideration both from the point-of-view of capacity, load
factors, and per-passenger-mile costs, but also from the point-of-view of "scope clauses" in
pilot union contracts.
In Europe, any airliner with 100 or more seats falls under the far more highly compensated
"mainline" airliner contracts in place in the industry. Planes with 99 and fewer seats are
considered "regional airliners" for contract and union purposes, carrying more economical
compensation packages.
On the lower end of the spectrum, market conditions make it very difficult to run profitable
operations in Europe with a 70-seat regional jet, which is considered suitable only for certain
niche markets. Consequently, the core of the regional-jet segment in Europe falls in the range
of 85-100 seats and, in fact, this segments comprises nearly half the airliners in use in Europe
today. Either the RJ85/RJX85 or RJ100/RJX100 series (or older BAe 146) fall squarely into this
size segment.
Either the RJ85/RJX85 or RJ100/RJX100 (the fuselage and cabin configurations are the same
for both series, with the major change being in the more advanced and more powerful
Honeywell AS977 engineers on the RJX series) is able to offer seating up to 99 seats (the 100
can offer a maximum of 112 seats configured with optional six-abreast seating), although the
85 series requires six-abreast seating to reach the upper capacity limit.
There are trade-offs with both series to consider: The 100 series offers greater capacity without
the need to go to six-abreast seating and lower per-passenger-mile costs at higher capacities,
but it also offers somewhat less range and requires a longer takeoff roll than the 85 series.
On the other hand, it also has more cargo capacity. The 100 series also obviously costs more to
acquire than the 85 series, but with planned high load factors this capital cost should be more
than offset by greater revenue potential. Key operating parameters for both the current and
new series of Avro jets (85 and 100) are given here:
Page 19
Aircraft type RJ85 RJ100 RJX85 RJX100

Seating 85-100 99/100-112 85-100 99/100-112
Cargo Capacity (m3/ft3) 18.25/645 22.98/812 18.25/645 22.98/812
Range (km/nm) 2796/1510 2554/1379 3296/1780 3019/1630
Maximum Speed (kt) MO.73/300 kt MO.73/305 kt MO.73/300 kt MO.73/305 kt
Runway for 740 km (m/ft) 1157/3796 1314/4311 1105/3625 1275/4183
While any of the available configurations would be adequate to accommodate the range of most
of the routes envisaged, the greater range of the RJX series gives added scope, and also
enables service into airports with shorter runways and with "hot and high" takeoff conditions,
such as may be encountered in Turkey and some other locations in the route network.
Given that the RJX series is now in production with the first ones expected to enter service later
this year, the RJX series is an option to consider.
While acquiring older-generation BAe 146s also is being evaluated, a number of factors related
to reliability, higher operating and maintenance costs, and the likely need for additional
refurbishment, mitigate toward acquiring newer, or new, Avro RJs for the new airline's fleet,
except possibly for air freighter use.
Additionally, per month leasing costs can be two-to-three times higher, as a percentage of
aircraft value, on older aircraft compared with newer aircraft, making their monthly leasing
expense potentially higher than for new or newer aircraft.
One approach worth considering is to commence operations with one generation of aircraft with
an option to return those aircraft to the lessor or manufacturer without penalty in an "upward
trade" to acquire the newer generation aircraft when they become available.
Such options are commonly supported by manufacturers in their effort to market newer
generation aircraft, and would enable the new airline to avoid any delays that might ensue from
backups in the RJX build pipeline.
Given the new airline's stress on technology and the comfort of the passenger, combined with
the very real considerations of lower operating and maintenance costs and greater flexibility,
consideration of the latest generation of aircraft should be evaluated carefully, along with
limiting seating to five abreast, including in Value Class as described elsewhere in this plan.
However, factors such as initial acquisition cost, refurbishing costs, operating and maintenance
expenses, reliability, operating parameters, customer preference, and financing packages
available for purchase or lease all must be considered.
For purposes of the costing factors utilized in this business plan, acquisition and operating costs
for dry-leasing new Avro RJ100 aircraft with a high-level of technical features and passenger
amenities have been employed, with a cost comparison also made for purchasing the same
aircraft. Adjustments would need to be made for other aircraft types or ages and acquisition
methods.
Page 20
Aircraft acquisition
Another issue still being evaluated and which will be decided is the question of how to acquire
the aircraft. For a variety of reasons, including the ease with which the leases can be cancelled
by the lessor and the lack of "ownership" of the aircraft, wet leasing has been ruled out except
for short-term acquisition of aircraft that would be employed in meeting peak demand-type
services as outlined elsewhere in this business plan.
The two remaining options both need to be examined from cost, flexibility, and finance points of
view: Dry leasing the aircraft (generally on a five-year lease), or outright purchase. Both
provide long-term control over the aircraft, and while both options tend to restrict changes in
the fleet that might be preferred after the initial years of operation, market conditions and high
demand for aircraft indicate that it would be relatively easy to be released from the leases, or
to sell or lease the aircraft to new owners or operators, or to return them to their sources.
A number of leasing sources are available for the BAe Avro aircraft being considered, and some
used aircraft also are available from time-to-time on the market from various sources. In
addition, new aircraft can be acquired directly from the manufacturer on a variety of different
plans and options, as well as used aircraft on occasion.
Cost factors employed assume dry leasing of new Avro RJ100 aircraft in 99-seat configurations,
with a comparison for purchasing. It is anticipated that finance guarantees up to 85 percent of
the acquisition cost of the aircraft could be obtained from the Export Credit Guarantee
Department of the United Kingdom (ECGD) for purchasing British-built aircraft exported from
the UK.
3.4 Technology
Flight may be based on aerodynamics, but the proposed airline will be based on technology,
and lots of it. Efficiency and convenience through use of the most up-to-date informational and
electronic technologies, in addition to modern aviation and navigational technologies, are
guiding principals of the proposed new airline. Technology will also be a cornerstone of the new
airline's marketing strategy.
Among the technological features the new airline will offer are:
• Internet marketing and online reservations (e-reservations) and sales (e-sales)

that will provide quick and easy access to airline schedules, flight availability, reservations,
and ticketing to a wide range of customers worldwide. This eliminates payment of agency
commissions and keeps costs low - savings that can be passed on to the customer.
• Electronic ticketing (e-ticketing) which will enable passengers to obtain their tickets
online and avoid the need to obtain paper tickets from airline offices, travel agencies, or at
the airport. It also frees the airline from having to stock, track, and issue tickets and
maintain paper trails of them. Again, more savings for both the airline and the customer.
Page 21
• Electronic check-in (e-check-in) that will virtually eliminate waiting in line to check-in for
e-ticketed passengers, enabling them to confirm their identities, obtain their boarding
passes, and check-in their baggage (and even purchase tickets upon check-in) utilizing a
user-friendly kiosk that eliminates those last-minute frustrating waits to get to the counter.
And it also greatly reduces the airline's needs to staff check-in desks, control long lines,
employ local contract ground staff, and expend money and resources on an antiquated
system that only adds to the traveler's inconvenience and frustration. Another win-win
situation for both airline and passenger.
• Electronic baggage tracking (e-baggage tracking) which will enable the airline to track
any piece of baggage from check-in to final pick-up and claim. If courier services can track
parcels as they move around the world, and enable customers to track their parcels using
tracking numbers and online tracking systems, then why can't the same system be used to
assure that no passenger will ever again have to wonder where his or her baggage might
be? 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 cargo tracking (e-cargo tracking) is the same basic idea as e-baggage
tracking, and will use the same basic system, only for tracking cargo and parcels.
• 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, 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 both appropriate airline personnel as well as passengers and
customers of any advisories, warnings, or changes.
• Electronic financial control (e-finance) will enable complete electronic financial control
and monitoring of the airline's finances, clear advantages.
• 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. Included in
this technology, in the case of the Avro aircraft, is all-digital ARINC 700 avionics with
advanced Cat IIIb low weather-minimal landing capability to permit landings under the
poorest permissible approach and visibility conditions.
Page 22
4.0 Market Analysis Summary
Economic growth and the requirements of redevelopment, not to mention the impending entry
of several countries in the region to the European Union, are creating increased demand for air
services between Western Europe and the countries of Southeast Europe and Turkey.
The market combines a variety of elements all of which demand a higher quality of air service
than often currently available:
1. Business travelers requiring convenience, reliability, speed, and schedules built around
business needs.
2. Government and international organization travelers, requiring the same elements.
3. Personal and leisure travelers from the Southeast Europe/Turkey region who have the
money to travel by air and who increasingly demand a higher level of service and
convenience, but at an economical cost.
4. The "Diaspora," Personal and leisure travelers originally from the Southeast Europe/Turkey
region, but now living and working in sizable numbers in the countries of Western Europe,
with the same demands.
5. Western European personal and leisure travelers, primarily traveling on the airline's routes
between Western European points.
6. Seasonal (primarily summer, with some limited niche markets in the winter period) holiday
travelers, primarily destined for Greece, Turkey, and the islands of the Mediterranean. Cost,
reliability, convenience, and destination are their concerns.
The proposed new airline will appeal to all these distinct groups by offering better quality
service (and in some cases, offering service where none now exists), at a higher level of safety,
comfort, and convenience, and at reasonable fares, than currently available. The new airline
also will focus on the niche markets identified in the Service Description section of this plan,
enabling it to better serve and to become identified as the carrier of choice for those markets.
4.1 Market Segmentation
A complete market analysis and segmentation will require a specific passenger and destination
survey, the cost of which is included in the Start-up Costs for the airline.
Preliminary analysis (based on a variety of methods, including observation, interviews with

travel- and airline-industry professionals, economic segmentation, future projections based on
marketing plans, and experience with the region and market) for planning purposes, however,
indicates the following approximate market segmentation overall (considerable variations, of
course, would be anticipated depending on route, season, and other factors):
• Business - 15%
• Government and International Organizations - 10%
• Regional Resident Personal and Leisure Travelers - 20%
• Diaspora Personal and Leisure Travelers - 10%
• Western European Personal and Leisure Travelers - 5%
• Seasonal Holiday Travelers - 10%*
Page 23
* The seasonal/holiday travel segment of the market to some degree distorts the overall
market percentages, but might initially be anticipated for two reasons: first, it compensates for
the drop in business and government travel that can be expected during the peak summer
holiday travel season; second, a significant portion of this traffic is likely to be carried on flights
employing specially chartered or wet-leased supplemental aircraft.
The accompanying Market Analysis table and chart below show total potential markets based on
estimated population in each segment, as well as potential growth rates in air travel in the new
airline's target market region within those segments, but do not reflect the anticipated
passenger demand from those markets. Overall make-up of the airline's anticipated passenger
loads by market segment are presented above.
Chart: Market Analysis (Pie)
Table: Market Analysis
Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Reg Res Pers & Leis 20% 130,000,000 156,000,000 187,200,000 224,640,000 269,568,000 20.00%
Business 15% 5,000,000 5,750,000 6,612,500 7,604,375 8,745,031 15.00%
Government & IO 10% 1,500,000 1,650,000 1,815,000 1,996,500 2,196,150 10.00%
Diaspora Pers & Leis 10% 10,000,000 11,000,000 12,100,000 13,310,000 14,641,000 10.00%
Holiday Trav (seasonal) 10% 20,000,000 22,000,000 24,200,000 26,620,000 29,282,000 10.00%
W Europe Pers & Leis 5% 260,000,000 273,000,000 286,650,000 300,982,500 316,031,625 5.00%
Other 20% 5,000,000 6,000,000 7,200,000 8,640,000 10,368,000 20.00%
Total 10.82% 431,500,000 475,400,000 525,777,500 583,793,375 650,831,806 10.82%
Page 24
4.2 Service Business Analysis
The overall airline industry operating between Western Europe and Southeastern Europe and
Turkey consists of four primary segments:
1. Established mainline European carriers (primarily Swiss International, Austrian, Lufthansa,

Alitalia, Malev, Turkish) utilizing their Southeast European routes as spokes connecting to
main hubs in Western Europe (or Budapest and Istanbul in the case of Malev and Turkish,
respectively) and serving to feed traffic to their prime intra-European and trans-Atlantic
routes (or domestic Turkish routes in the case of Turkish).
2. Smaller, but generally well-established regional airlines primarily from Western Europe or
the upper level of Eastern European states (primarily Swiss International, Tyrolean, and
Adria) that perform essentially the same function as the mainline carriers or, in the case of
carriers like Adria, link destinations in Southeast Europe to their own national capitals.
3. Home-based Southeastern European carriers (such as ADA Air, Albanian Airlines,

Avioimpex, Balkan Air, Hemus Air, JAT, and Tarom Airways) that often operate older,
Soviet-built aircraft or turboprops, offer a generally lower level of service (though not
always lower fares), and are often less highly regarded, including by travelers from
Southeastern Europe. These airlines connect points within Southeast Europe, or they may
connect Southeastern European destinations to major destinations in Western Europe.
4. There also is a fourth segment worth noting, and that is the fairly significant charter market
that exists within certain niche or seasonal markets. This market includes charter flights
between Pristina and destinations in Switzerland and Germany, as well as primarily summer
charters from Southeast Europe to New York and other destinations in North America. These
charters are often operated by individual travel agencies or airlines, and often are
categorized by a low level of service and utilization of older, often Soviet-built, aircraft.
There also are the vacation charters that operate from Western Europe to Greece, Turkey,
Cyprus, and the other holiday spots of Southeastern Europe and the Mediterranean.
It is anticipated that the proposed new airline would most closely fit into the second grouping
above, but would compete effectively with all four main segments through a combination of a
high level of safety and service, carefully selected routes, niche-market service, convenient
schedules, reasonable and competitive fares, and modern, safe, comfortable aircraft. It also will
offer service on under-served and unserved routes where little or no competition currently
exists.
4.2.1 Main Competitors
The new airline's main competitors will vary depending on market and route served, and the
category of passenger. For the most part, competition can be expected as follows:
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Business and For SE European For Western European Personal and For seasonal Holiday
Government/IO segments Regional and Diaspora Leisure Travelers, as well as Business Travelers to
to and from Southeastern Personal and Leisure and Government/IO Travelers between Southeastern Europe
Europe Travelers Western European destinations and Turkey
Adria ADA Adria Alitalia
Alitalia Adria Air France/Air Inter Austrian
Austrian/Tyrolean Albanian Alitalia Balkan/Hemus
Croatian Alitalia Austrian/Tyrolean Britannia
Lufthansa Avioimpex British Airways/CityFlyer Express British Airways
Malev Balkan/Hemus Croatian British Midlands
Swiss International Croatian Deutsche Air BA Cyprus
Turkish JAT KLM/KLM Cityhopper/KLM UK Hapag Lloyd
- Tarom Lufthansa Lufthansa
- Turkish Luxair Maersk
- - Malev Malev
- - Sabena Olympic
- - Swiss International SAS
- - Turkish Swiss International
- - - Turkish
The larger, more established carriers often suffer from a lack of flexibility, and a focus on
feeding their main intra-European and trans-Atlantic routes. The smaller regional carriers often
are focused almost exclusively on their own core regional service. The Southeastern European
airlines often suffer from poor service and poor reputations. And the larger, more established
charter operators are focused on the holiday charter and package market.
Again, the extent of competition (and what is listed here is not comprehensive) dictates the
importance of the new airline's three-prong strategy to seek out unserved and under-served
routes and city pairs, key niche markets where it can effectively compete or create its own
market, and meeting peak travel demands on key regional, seasonal, and intermittent routes.
It also points out the importance of standing out from the crowd through offering a higher level
of service and convenience, and utilizing technology and a service-oriented staff to achieve
recognition and passenger preference right from the outset.
5.0 Strategy and Implementation Summary
The airline's strategy has already been adequately explained elsewhere in this plan: target
unserved and under-served markets, seek out niches and unmet demand, and offer a higher
level of service and a higher standard than the competition. The airline will utilize technology to
reduce costs and offer better service and greater convenience to the passenger.
In this section we'll examine how the new airline will go about cutting out its niche through its
marketing strategy.
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5.1 Marketing Strategy
The proposed new airline intends to cut out new territory as it goes about marketing itself.
While it will clearly serve the target markets of Southeastern Europe and Turkey, it will just as
clearly be a different kind of player on the field, and will seek to be known not only as a
Western airline, but at the cutting edge of the aviation business in Europe.
The airline's emphasis on the latest information and electronic technology, and its stress on
comfort, convenience, safety and customer service, will be cornerstones on which the
marketing strategy will be built.
The airline will utilize a combination of methods to achieve the recognition that it both desires
and needs. A fairly large advertising budget is planned to buy the space and time to get its
name and message in front of the largest possible group of potential customers that it can.
Given the crowded field of European regional airlines, it is better to come on like a lion than a
lamb, or you may be lost in the herd.
The airline will also utilize public relations to good advantage to extend and supplement its
advertising budget.
There are a number of "hooks," aside simply from its newness, that the airline can utilize to get
the media's attention. The airline is opening up new markets, and it also is transcending the
technological barrier with the latest technology in the business in Europe, or anywhere. It has
big ambitions, but knows that it needs to serve the customer first to realize them. And it wants
to know and serve its markets better than anyone else.
Everything about this airline, from its name to its colors, from the look of its planes to its
airport kiosks, from its smart but informal crew uniforms to its advertisements and literature
should set it apart. And it costs little more to do things freshly and smartly than the more
ordinary way of doing things. An organization is new only once in its life, so the airline should
grab that opportunity and get all the attention it can at the outset. And it needs to have both an
adequate budget, as well as an outwardly directed management, to achieve that end.
The new airline will become known as one where all the staff practice the motto, "We have a
job to do, and we do it every day - for you!""
5.1.1 Pricing Strategy
Like everything else about it, the new airline's pricing strategy will also set it apart from the
pack and will form a key aspect of its overall marketing strategy.
It is almost a stock joke, the unwieldy and impenetrable forest of airline tariffs and fares and
promotions (often available for something like three seats on a flight - and that is meant to win
customers) common in the industry today. Few things have garnered the notoriety and degree
of customer suspicion and dislike that airline pricing has, and yet there are few moves afoot to
improve the situation.
We intend to change that, and will not only make our business more predictable and "user-
friendly" to the passenger, but also will help fill our planes and make our financial direction
more predictable and clear to our management and our bankers as well.
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The game plan is simple enough, offer customers good service to places they want (or need) to
go to, and at a fair and predictable price. Competition on the basis of price alone has spelled
disaster for more than one carrier (start-up and veteran alike), and once down that slippery
slope it is hard to turn back. And while price is clearly an important factor driving the
marketplace, it is by no means the only one. It will not be our aim to be the lowest-priced
competitor in the market (though we may be on occasion). Nor will we seek to be the highest
priced, either. Fairness, clarity, and a rational fare basis, combined with better service and
greater convenience than offered elsewhere, will be our guiding principles.
Essentially, we will work from only two sets of fares (existing for market segmentation
purposes) for our service:
• Weekday fares, in both Value and Premium (aimed primarily at business travelers who are
willing to pay a higher price to be able to go and come back during the week).
• Stay-over weekend fares, in both Value and Premium (aimed more at the personal or
leisure traveler for whom price is more important than traveling mid-week).
The only variations on those fares (not new fare bases) will be these:
• Set, publicized discounts for early reservations and purchasing tickets in advance.
• Set, publicized discounts for reserving and ticketing online, electronically.
• Seasonal and certain peak-period adjustments to the basic fares, or adjustments due to
spikes in fuel prices and the like.
• Infant and child discounts based on the original fare (up to free in the case of infants).
• And possibly a stand-by fare (call it the "Gambler Fare") for people who are willing to take
what's available at the last minute (helps us fill seats, helps them get on a nearly full flight,
and it does not have to be radically discounted from the normal fare - probably no more
than 5 percent discount - since the normal fare will be just that, a normal fare, and not
some outrageously priced gouger).
Given our stress on electronic reservations and ticketing, most tickets will be paid for in
advance of the departure date, which means the new airline - again, as part of its marketing
strategy and offering a higher level of concern for the traveler - should avoid the common and
much detested practice of overbooking. This also is where stand-bys can help fill any voids that
may occur.
In addition, fares for the most part should be based on some rational system that is calculated
on distance and actual costs, and not simply what the market will bear. One must wonder how
much legitimate business is lost to the industry simply because many passengers cannot and
will not pay the near-equivalent of a round-the-world fare only to go between two neighboring
countries in Europe.
Page 28
Here is an example of how this user-friendly fare system will work for the London-Berlin route:
• Value Fare is $XXX for weekday round-trip travel.
• Value Fare is $XXX - 20 percent for Saturday stay over round-trip travel.
• Value Fare one-way is one-half the round-trip cost of $XXX + 10 percent.
• Premium Fare is Value Fare plus 30 percent (for any category. So you can stay over
Saturday and travel Premium for only 10 percent more than the regular weekday Value fare
- this will help fill Premium seats and get people used to the idea of traveling Premium
during the rest of the week, too).
• Reserve and pay for your ticket on the airline's website, and receive a 5 percent discount on
whatever the fare is (a lot cheaper than paying a 9 or 10 percent commission plus
reservation-system handling charges, and it gets the customer to be e-ticketed, other
advantages for the airline as well as the customer. And it beats operations like EasyJet that
only offer a flat 2.50-British pound sterling discount, regardless of the fare).
• Reserve and buy your ticket up to 30 days in advance, and take another 15 percent
discount. Or reserve and buy your ticket up to 14 days in advance, and take a 10 percent
discount. Up to seven days in advance, and a 5 percent discount. So essentially, the
maximum discount is 40 percent (20 percent for Saturday stay over, 15 percent 30-day-
advance purchase, and 5 percent online reservations and ticketing. Predictable for the
traveller, predictable for the airline). Fly Premium weekends and reserve 30+ days in
advance online, and you fly at 10 percent less than weekday Value fare - another marketing
hook. And since the basic fare will be a "fair" one, the airline will not be staging loss-leaders
even with the steepest discount. But no one is likely to complain about the fare, either.
• Go non-stop, or make connections if you need to - no penalty if you don't disembark at the
interconnect and if the fare to the interconnect point is equal to or less than the fare to the
passenger's stated destination, as it would be in most cases. Otherwise the higher fare is
charged to eliminate the argument (it's all in the computer's database).
• And that's it. Unless there is an adjustment for seasonality or other special conditions. No
impenetrable forest of fares. Few promotions needed (though they might be used from
time-to-time). No reading the small print on the back of the ticket or trying to make out the
"fare basis" (except maybe for those through tickets connecting to or from another carrier).
How can the customer not love it? The only real danger is that it could set a new trend for
the industry.
5.1.2 Promotion Strategy
The overall concept and design of the airline sets the stage for its promotion. Marketing and
promotion will stress the unique qualities of the airline and the points that set it apart. Strong
public relations combined with well-placed, well-designed, distinctive advertising appealing
directly to people who are the airline's prospective customers will help get the word out.
Special effort must be made to develop and operate a highly functional, fast, rock-solid, and
user-friendly website for online information, reservations, and e-ticketing. Internet marketing,
combined with conventional non-Web marketing, will steer people to the website. The more
customers use the website, the easier and more pleasant the experience will be for them, and
the more economical and efficient, and predictable, will be the process for the airline.
Page 29
Special attention will be made at the outset to reach the trend-setters and opinion-leaders in
our various target markets, even going so far as to arrange personal meetings between airline
executives and marketing directors and those opinion leaders, particularly either in Southeast
Europe and Turkey or who deal or otherwise have a close connection to the target region.
While in general, special promotional fares and the like will be limited, the airline may consider
launching with a special promotion simply to get known and to "get off the ground" with planes
that are not mostly empty, as is often the case with new airlines. Overall, management and the
sales and marketing department will coordinate closely and will employ outside consultants as
need be to assure the most positive possible launch.
5.2 Sales Strategy
The airline's sales strategy will flow from its overall concept and marketing approach. Mass
marketing, but with a personal touch utilizing airline employees as spokesmen and women to
explain that "I have a job to do, and I do it everyday - for you!", will aim to steer as many
people as possible either to the airline's website, or to its telephone-based customer-service
representatives. While clients are free to utilize their own travel agents, and the airline may
also want to be accessible through general travel sites such as Travelocity, the more customers
that can be encouraged to use the airline's own reservations and ticketing services, the less
revenue will have to be shared in the form of expensive commissions.
E-reservations and e-ticketing, combined with e-check-in, make the most sense for any
customers who have online access, and also for the airline itself. But nonetheless, the airline
must not lose sight of the fact that many people do not have access to the Internet, or do not
care to use it to arrange their travel, or perhaps just prefer a more personal touch, and so
other means of access must always be readily available.
The regional and specialized sales and marketing managers, as explained in the section on
Personnel, will concentrate their effort on targeting specific clients that have the potential to
offer corporate or group travel (including contract arrangements), or who are potential air-
cargo customers. The airline will not have the resources to field a large sales team, and so
these regional managers must target their efforts, and the airline must effectively utilize its
mass marketing methods as well as the Internet to attract individual travelers who, once they
experience the new airline, hopefully will feel a close affinity toward it and will become loyal and
happy customers.
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5.2.1 Sales Forecast
The following chart and table show the projected sales figures for Air Leo.
Chart: Sales Monthly
Chart: Sales by Year
Page 31
Table: Sales Forecast
Sales Forecast
Year 1 Year 2 Year 3
Sales
Scheduled Passenger Revenues $37,653,000 $88,642,656 $139,694,250
Scheduled Cargo Revenues $2,282,000 $4,132,800 $5,473,300
Special Flights Passenger Revenues $1,483,200 $2,013,600 $3,502,000
Special Flights Cargo Revenues $34,560 $43,200 $72,000
Package trips $79,000 $270,000 $405,000
Other $0 $0 $0
Total Sales $41,531,760 $95,102,256 $149,146,550
Direct Cost of Sales Year 1 Year 2 Year 3

Scheduled Passenger Revenues $1,995,120 $4,309,920 $5,989,354
Scheduled Cargo Revenues $0 $0 $0
Special Flights Passenger Revenues $85,680 $104,340 $167,300
Special Flights Cargo Revenues $0 $0 $0
Package trips $31,600 $108,000 $162,000
Other $0 $0 $0
Subtotal Direct Cost of Sales $2,112,400 $4,522,260 $6,318,654
5.3 Milestones
The accompanying chart gives some notional milestones for setting up the new airline,
beginning recruitment, training, and operations, and also reaching profitability on a month-to-
month basis. The timetable is ambitious, and it is meant to be. The time for action is now, and
once a decision is made to go forward there will be no time, or resources, to waste. Of course,
once a final plan, team, organization, and financing is in place, a more refined timetable will be
established and specific duties delegated to responsible team members.
Table: Milestones
Milestones
Milestone Start Date End Date Budget Manager Department

Establish a firm financial plan 5/1/2002 5/1/2002 $0 ABC Team
Identify an anchor investor 5/15/2002 5/15/2002 $0 ABC Team
Commence leasing negotiations 6/1/2002 6/1/2002 $0 ABC Team
Set up new company 6/5/2002 6/5/2002 $0 ABC Team
Begin negotiating for offices 6/5/2002 6/5/2002 $0 ABC Team
Select core mngmnt team 6/10/2002 6/10/2002 $0 ABC Team
Commence co. operations 6/15/2002 6/15/2002 $0 ABC Team
Make initial aircraft lease pymnt 6/30/2002 6/30/2002 $0 ABC Team
Begin hiring key personnel 7/1/2002 7/1/2002 $0 ABC Team
Begin crew training 8/1/2002 8/1/2002 $0 ABC Team
Take delivery of aircraft 8/15/2002 8/15/2002 $0 ABC Team
Begin inaugural flights 9/5/2002 9/5/2002 $0 ABC Team
Operation turns profitable 1/1/2003 1/1/2003 $0 ABC Team
Take delivery of fourth aircraft 4/15/2003 4/15/2003 $0 ABC Team
Totals $0
Page 32
6.0 Management Summary
BalkConsort is putting together what it expects will be a solid management team combining
extensive aviation industry experience with significant experience in finance, accountancy, and
management. An initial project team is in place. As more advanced planning continues on the
airline and investment is in place, the full core management team will be finalized and its
members brought on-board.
More than in most businesses, management is critically important to an airline, and especially
an airline envisaged as this one is. To reiterate a point made early in this plan, the right
management team is seen as the first and foremost key to the success of the overall venture.
We endeavor to have such a team.
6.1 Organizational Structure
Reflecting the overall nature of the organization envisaged, there is very little hierarchy in the
organizational plan for the airline. In an operation where safety and accountability are so much
at issue, obviously someone has to be in charge, and there also have to be clear lines of
authority (and expertise) in the operational aspects of the airline. But beyond that, the
organization is designed around flexibility, a high level of personal accountability and
responsibility, and common cross-training and sharing of responsibilities as need arises and
circumstances permit.
The levels of organization (reflected in the personnel and salary chart in the Personnel section
of this plan) are as follows:
• President and chief executive officer (who reports to the Board of Directors of the airline
company).
• Vice president and general manager.
• Functional vice presidents for the core areas of commercial activities, finance, and
operations.
• Directors covering sales and marketing, communications, human resources, flight safety,
flight operations, ground operations, maintenance, and information systems.
• Managers in sales and marketing, as well as in station management functions.
• Professional, engineering, ground handling, service, and other support personnel.
On the flight side, which reports to the director of flight operations and also responds to the
director of flight safety, there are only three levels of personnel:
• Captain;
• First officer;
• Flight attendant.
Salary scales and levels of authority have been simplified and based on a rational scale allowing
for similar levels, though of different natures, of functional work to be compensated at the
same pay levels. The overall objective is to foster an atmosphere of cooperation and shared
responsibility to the overall mission, which is to provide the customer and client with the best
possible, safest, and most satisfying experience with the airline. Cross-training and cross-
functioning are important parts of the organization plan, as explained in more detail elsewhere
in this document.
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6.2 Management Team
A complete management team, covering the elements of administration, aviation, and finance,
is being assembled. This team brings together a wide range of skills and backgrounds covering
the key areas needed to form, launch, and operate the airline, and from a range of national
origins.
6.3 Management Team Gaps
It is premature to speak of management team gaps until a core management team is named.
The individuals who will play leading roles with the new airline will need to possess the widest
possible range of the requisite skills. The current project team believes investors in the airline
will want to play a key role in helping formulate core management. Once primary investment is
established, that step can be undertaken, and it is anticipated that the core team will be
finalized quickly.
The new airline will need people with skill, experience, energy, and vision to head up and serve
in such areas as information management, flight safety, aviation operations, aviation
maintenance, ground operations, sales and marketing, communications, and human resources
management. Also good pilots, co-pilots, cabin crew members, and ground staff, and
administrative staff.
BalkConsort anticipates putting together the best possible airline management team in the
business, one that also shares the common vision of what this new airline truly can be and
what it can become.
6.4 Personnel Plan
Along with aircraft acquisition and operating costs, personnel costs represent one of the two
largest cost factors faced by the new airline. Additionally, the airline's personnel will largely
determine the success of the venture. Therefore, it is crucially important to develop and
implement an effective personnel operations and compensation plan.
The Personnel Plan for the new airline reflects the stress on the use of technology to reduce
staffing and costs, and the concomitant stress on customer service. Consequently, staffing is
heavier (with individual function directors) in such areas as information technology and
oversight of such functions as human resources, flight safety, flight maintenance, and ground
operations than might otherwise be the case with a smaller regional airline. On the other hand,
functions such as sales and marketing, bookkeeping and finance, and personnel management
are reduced, with the assumption being that the effective use of advanced, cost-efficient
informational technologies in these areas will make up for the reduced staffing, resulting in
significant cost savings while providing superior results at less effort.
It is assumed, based on the experience of other regional airlines in Europe, that something on
the order of 60-70 percent of all reservations and bookings will be made electronically, and
such passengers will be ticketed and checked-in electronically using special electronic check-in
kiosks such as those employed successfully by the U.S. carrier Continental Airlines, leading to
major cost savings in areas such as sales, reservations, and ground check-in staffing, as well as
in commissions paid out to outside travel agencies.
Staffing in the sales and marketing area is aimed at targeted customer contact to generate
corporate and group business, rather than individual sales, and to develop special marketing
Page 34
programs designed to generate significant increases in both passenger and cargo business.
Responsibilities will be divided along both regional and functional lines, with three regional sales
and marketing managers (notionally responsible for Western Europe North, Western Europe
South, and Southeast Europe & Turkey) and two targeted, global sales and marketing
managers (one responsible for special sales aimed specifically at the peak traffic/special
flights/holiday travel/charters market, the other for air cargo sales), reporting to one director of
sales and marketing. Additional personnel will answer customer inquiries and take reservations
on the telephone at central headquarters, with phone calls forwarded to them from throughout
the airline market area, and also will respond to e-mail/website-forwarded inquiries.
All key functional positions throughout the airline, including in the sales and marketing area,
are backed up by professional support personnel, most of whom will be cross-trained in
different areas, so there will always be coverage of all key functional areas as well as back-up
support when work demand requires it.
In the ground-service area, the airline will utilize its own personnel to the extent practical in
order to assure a more consistently positive experience for the passenger. All major
destinations will be staffed by airline personnel, while at some smaller and more remote
destinations, or where local practice or requirement dictates it, ground handling and service
may be contracted out to local service providers.
Even in such cases, efforts will be made to utilize spare flight crew personnel to assist with
oversight of ground services and respond to customer needs, again stressing the airline's focus
on cross-training. Finally, as revenues and passenger demand increases, the Personnel Plan can
be expanded to provide additional ground service personnel at key locations and to expand the
number of locations where the airline provides its own ground-service staffing.
Again through the use of e-ticketing, e-check-in, and e-baggage tracking, ground-service
staffing requirement will be very light compared with a more traditional organization.
Particularly given the fairly light flight scheduling at most locations and the convenient size of
the projected aircraft, check-ins should be quick and easy, with little waiting in line or fighting
with crowds - major marketing advantages as well.
Given the airline's motto, "We have a job to do, and we do it every day - for you!", cross-
training and cross-functioning will be core elements of the new airline's personnel-management
approach. Everyone will be inculcated with the spirit that she or he is personally responsible for
the passenger and the client having a positive experience when in contact with the new airline.
Everyone, from the president on down, will be familiar with (and participate in) virtually every
aspect of the work and customer-service process (a method employed successfully by the
former PEOPLExpress and other "people-oriented" carriers and other successful service
businesses). While no one will expect (nor want) a receptionist to fly the airplane, nor a sales
manager to perform engine repairs, nor for that matter a pilot or flight attendant to tend to the
bookkeeping, common customer-service functions like check-in, gate monitoring, baggage
handling, and answering customer inquiries can and should be performed from time to time by
any and all available personnel. This process also requires, however, that personnel receive
actual training and experience in these various areas, so they do not become more of a
hindrance than a help.
Even the airline's uniforms will project an image of ordinary people doing extraordinary work to
please and make the passenger feel comfortable. There will be a stress on informality, utilizing
"non-uniform" uniforms to again stress the airline's work ethic and customer-service
orientation, making both employee and client feel more at home. This approach also is in
Page 35
keeping with today's trend toward greater informality and equality in the work place, and away
from the stilted authoritarian way of the past.
Finally, the proposed hierarchy and salary structure is designed to be both economical as well
as sufficiently attractive and competitive to enable the airline to recruit good, qualified
personnel. At the same time, in keeping with the overall ambience of the airline, it also stresses
relative equality and fairness in its structure. A good benefits package, consistent with, and
perhaps better than, available elsewhere in the industry or related industries, and the more
abstract benefits of being part of a well-respected, well-functioning, professional, winning team,
also will be elements attracting good employees to the new airline and keeping them on the
team.
There are only about 10 pay grades provided for in the salary plan for the entire airline,
including executive-level salaries, with jobs that may be markedly different in terms of function,
but similar in terms of experience required, difficulty, and importance, sharing the same pay
grade.
Most subordinate grades within given functions are based on a set percentage of higher-level
salaries within the same general function. In addition, the plan for pay increases is
straightforward and fosters clarity and understanding, rather than anxiety and unhealthy
competition, among employees.
Everyone, across the board, from top to bottom in the organization, who performs satisfactorily
will receive a 10 percent pay increase at the end of the first year of service (deemed to be the
most difficult), and a 5 percent pay increase at the end of each subsequent year of service
(with adjustments made only on the basis of specific across-the-board or localized issues like
inflation, currency devaluations, and so forth).
Unsatisfactory performance merits only one of two remedies: Dismissal, or placement on a

limited probationary regime to determine if problems can be remedied and the employee
brought up to standard within a given time limit. Otherwise, there is no room, and no cause, for
protracted anxiety on the part of the satisfactory employee concerning such issues as pay
raises and related issues. The only other issue is the possibility of promotion to a higher
position within the organization, and the airline will endeavor to promote its best from within
whenever possible.
One other issue worth considering, though it is not included in the current plan, is the
possibility of offering a bonus to all employees, as a specific percentage of their pay, when the
airline shows a particularly profitable year to encourage additional "pride of ownership" and
esprit de corps.
A summary Personnel Plan for the first three years of operations follows in the table below, and
a detailed monthly plan for the initial year is provided in the appendix.
Page 36
Table: Personnel
Personnel Plan
Production Personnel
Captains (3 per aircraft) $585,000 $1,018,500 $1,448,175
First Officers (3 per aircraft) $468,000 $814,800 $1,158,540
Flight Attendants (9 per aircraft) $526,500 $916,650 $1,303,360
Other $59,062 $557,794 $856,370
Other $0 $0 $0
Subtotal $1,638,562 $3,307,744 $4,766,445
Sales and Marketing Personnel

Director of Sales & Marketing $60,000 $66,000 $69,300
Regional Sales & Marketing Mgrs (3) $132,000 $157,200 $165,720
Special Sales & Marketing Manager $40,000 $52,400 $55,240
Air Cargo Sales & Marketing Manager $40,000 $52,400 $55,240
Sales & Marketing Assistants (6) $97,500 $117,600 $124,515
Cust. Service/Reservations Assts (12) $108,000 $141,000 $149,700
Other $0 $0 $0
Subtotal $477,500 $586,600 $619,715
General and Administrative Personnel

President & CEO $180,000 $198,000 $207,900
Vice President & General Manager $144,000 $158,400 $166,320
Vice President Commercial $126,000 $115,500 $121,275
Vice President Finance $126,000 $115,500 $121,275
Vice President Operations $126,000 $115,500 $121,275
Other $0 $0 $0
Subtotal $702,000 $702,900 $738,045
Other Personnel
Director of Communications $54,000 $59,400 $62,370
Director of Human Resources $54,000 $59,400 $62,370
Director of Flight Safety $54,000 $59,400 $62,370
Director of Flight Maintenance $54,000 $59,400 $62,370
Director of Ground Operations $54,000 $59,400 $62,370
Director of Information Systems $54,000 $59,400 $62,370
Station Managers (1 per major station) $140,000 $374,000 $404,200
Ground Service Pers (3 per maj station) $315,000 $837,925 $909,450
Maintenance Engineers (8) $200,000 $260,000 $275,200
Bookkeeping & Finance Personnel (3) $64,000 $78,400 $81,920
Information Systems Personnel (5) $120,000 $132,000 $138,600
Professional Support Personnel (3) $68,000 $78,800 $82,960
Secretarial/Admin Asst Personnel (3) $51,000 $59,100 $62,220
Customer Relations Personnel (2) $40,000 $52,000 $55,040
Other $0 $0 $0
Subtotal $1,322,000 $2,228,625 $2,383,810
Total People 84 90 94
Total Payroll $4,140,062 $6,825,869 $8,508,015
Page 37
7.0 Financial Plan
This section of the plan offers the core elements for evaluating the financial viability of the
proposed new airline. Both in text and in charts and tables, all the key elements are presented
to offer a frank appraisal of the venture and the opportunity it presents.
Of particular importance is the following section which presents the key "Important
Assumptions" on the core cost and revenue aspects of the airline. These assumptions are based
on cost factors involving the proposed Avro RJ100 aircraft, and assume dry leasing of new
aircraft (a comparison is also given for a purchase option, although that option, as will be
apparent from the numbers, demands a much larger up-front cash outlay, and does not
necessarily lead to economies of operation, particularly in the short run).
Among the assumptions made were that the airline will begin operating with just three 99-
passenger regional jets, with very low load factors, beneath 25 percent of capacity, and at fare
levels that in all likelihood are lower than reasonably expected on the planned route network.
These assumptions were taken to ensure a conservative approach to the financial planning, and
to demonstrate that even with these constraints the proposed airline can be profitable as early
as the first year of operations.
It also was assumed that the aircraft will receive maximum utilization, up to six, seven, or more
segments per day. A "wave" or "W" route pattern, and reciprocating or circular routes, was
assumed, rather than simply a spoke-and-hub route pattern, to enable service to more
destinations and to maximize use of the aircraft. A major feature of the route planning has
been to enable business travelers to go and come back from destinations generally in the same
day, and certainly in the same week. Crew requirements and hour restrictions also were
considered in the planning.
Again, it should be stressed that even with the considerable constraints employed in the
calculations, the airline can be expected to carry upwards of 300,000 passengers in its first
year, and possibly up to a half a million passengers, and to reach profitability within the first
year of operations, with significant growth in both revenues and cash generated thereafter.
The Important Assumptions section also includes information on the third prong of the
proposed marketing strategy, which is to employ wet-leased or chartered aircraft to serve high-
demand regional, seasonal, and peak-traffic markets as a supplement to the regular scheduled
service of the airline. A conservative approach also was taken with this segment, and again it
was shown to be a profitable area to pursue, although relatively modest particularly at the
outset in terms of overall revenues.
It is strongly suggested that the Important Assumptions section be reviewed carefully prior to
more in-depth examination of the financials since it explains the premises on which the
financials are based. It also should be noted that the aircraft costing section is based on a
segment approach, with aircraft acquisition, operating and crew costs, and some direct sales
costs, as well as revenues, apportioned on a "segment" basis. Note that some elements that go
into the segment costing are based on hourly costs, extrapolated to the segment length, and
others are strictly on a "per segment" basis. The number of aircraft employed are stated at the
top, on a "full-time equivalent" (FTE) basis, allowing for variance in fleet size during the year as
new aircraft are brought into the fleet.
Page 38
7.1 Important Assumptions
In addition to the general financial and business assumptions presented in the following table,
the key parameters presented on the next page also were included as Operating Assumptions in
formulating the financial portions of this business plan.
Every effort was made to be realistic in these Assumptions, and if anything they were
formulated conservatively, particularly in calculating initial load factors and revenue yields
which, in practice, should be considerably higher than offered here. Additionally, passenger and
cargo fares were considered to be flat over the entire period covered by this plan to
compensate for the possibility that additional competition could force fares to remain relatively
constant over the period. However, the objective of this exercise was to show that the proposed
operation will be profitable even with much lower revenues than would normally be expected,
and the numbers do in fact confirm a profitable outcome.
Additionally, expected net revenues from offering peak-demand special flights also are
calculated. They are set apart separately from the scheduled-service revenues to show that
both types of service - and particularly the more important scheduled service - are viable and
the airline will be profitable even without these additional revenues.
The assumptions utilized here are based on dry leasing new Avro RJ100s at a high level of
outfitting and with necessary spares included. A separate set of figures is provided following the
Operating Assumptions section which gives a cost comparison should the decision be made to
purchase the aircraft new, utilizing ECGD export financing for 85 percent of the purchase price
of the aircraft.
Page 39
Operating Assumptions FY 2003 FY 2004 FY 2005

Aircraft in service (FTE) 2.83 5.33 7.33
Aircraft in service at end of FY 5 7 9
Cost per aircraft if purchased $26,000,000 $26,000,000 $26,000,000
Annual leasing cost per aircraft $3,120,000 $3,120,000 $3,120,000
Insurance rate % of aircraft cost 1.5% 1.5% 1.5%
Annual insurance cost per aircraft $390,000 $390,000 $390,000
Captain's Annual Salary $60,000 $66,000 $69,300
First Officer's Salary % of Captain 80% 80% 80%
Flight Attendant's Salary % of Capt 30% 30% 30%
Salary Burden as percent of Salary 20% 20% 20%
Crew members per flight Flght-2/Cab-3 Flght-2/Cab-3 Flght-2/Cab-3
Crew contingents per aircraft 3 3 3
Total crew per aircraft (min.) Flght-6/Cab-9 Flght-6/Cab-9 Flght-6/Cab-9
Flight Hours/Month for Crew 80 80 80
Average Total Salary Cost/Hour $202.50 $222.75 $233.89
Total aircraft maint. cost/hour $800 $800 $800
Fuel burn kg/hour 2,100 2,100 2,100
Fuel cost per kg $.35 $.35 $.35
Handling cost/segment (ave.) $360 $400 $440
ATC cost/segment (ave.) $120 $130 $140
Land/depart charge per seg. (ave.) $150 $180 $210
Parking fee/aircraft/night $150 $170 $190
In-flight items/pax -- Value $6 $7 $8
In-flight items/pax -- Premium $8 $9 $10
Percent/revenues commissionable 40% 35% 30%
Commission payable 9% 9% 9%
Ave. reservations cost/pax/seg $2 $2 $2
Average segment (hours) 1.25 1.30 1.35
Annual segments 6,520 11,808 15,638
Ave. total capacity/segment (pax) 99 99 99
Ave. Annual Load Factor (%) 50% 65% 75%
Ave. split Value/Premier 79/20 79/20 79/20
Average fare per Value pax/seg. $110 $110 $110
Average fare per Premier pax/seg. $143 $143 $143
Cargo per segment (kgs) 700 700 700
Ave. cargo tariff per segment/kg. $.50 $.50 $.50
Ave. cargo tariff per segment $350 $350 $350
Average pax revenues/segment $5,775 $7,507 $8,933
Average cargo revenues/seg. $350 $350 $350
Total ave. revenues/segment $6,125 $7,857 $9,283
Total ave. costs/segment $4,972 $5,449 $5,741
Total ave. net yield/segment $1,153 $2,408 $3,542
Total revenues/year $39,935,000 $92,775,456 $145,167,550
Total operating costs/year $32,417,440 $64,341,792 $89,777,758
Total net oper. revenues/year $7,517,560 $28,433,664 $55,389,792
Page 40
Peak-demand special flights on key regional/seasonal/intermittent routes

The figures provided in this section represent a "best estimate" calculation of the costs and
revenues expected to be derived from special peak-demand flights on key regional, seasonal,
and intermittent routes. These figures, which also were approached conservatively, though
realistically, supplement the figures derived from the assumptions concerning regular scheduled
service.
The following assumptions were applied for these special flights:
FY 2003 FY 2004 FY 2005

Flight Segments 48 60 100
Average length of segment (hrs) 4.0 4.0 4.0
Ave. wet-leasing cost of aircraft/hr. $4,000 $4,000 $4,000
Ave. cost per flight segment $16,000 $16,000 $16,000
Handling cost/segment (ave.) $360 $400 $440
ATC cost/segment (ave.) $120 $130 $140
Land/depart charge per seg. (ave.) $150 $180 $210
Parking fee/aircraft/night $150 $170 $190
In-flight items/pax -- Value $12 $14 $16
In-flight items/pax -- Premium $16 $18 $20
Percent/revenues commissionable 50% 45% 40%
Commission payable 10% 10% 10%
Ave. reservations cost/pax/seg $2 $2 $2
Ave. total capacity/segment (pax) 160 160 160
Ave. annual load factor (%) 75% 80% 85%
Ave. split Value/Premier 90/10 90/10 90/10
Average fare per Value pax/seg $250 $250 $250
Average fare per Premier pax/seg $325 $325 $325
Cargo per segment (kgs) 600 600 600
Ave. cargo tariff per segment/kg. $1.20 $1.20 $1.20
Ave. cargo tariff per segment $720 $720 $720
Average pax revenues/segment $30,900 $33,560 $35,020
Average cargo revenues/segm. $720 $720 $720
Total ave. revenues/segment $31,620 $34,280 $35,740
Total ave. costs/segment $20,053 $20,462 $20,883
Total ave. net yield/segment $11,567 $13,818 $14,857
Total revenues/year $1,517,760 $2,056,800 $3,574,000
Total costs/year $962,544 $1,227,720 $2,088,300
Total net revenues/year $555,216 $829,080 $1,485,700
Page 41
Aircraft cost on a purchase basis

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 ECGD. For instance, here is a notional cost projection based on five new Avro RJ100s,
well fitted with passenger amenities as well as the most up-to-date communication and
navigation gear:
Cost per aircraft $26,000,000

Total cost, five aircraft $130,000,000
Financing to be provided by Export Credit Guarantee Department of
85%
the UK
Interest rate 7.5%
1.5% on value of the
Insurance
aircraft
Cash outlay required for down payment 15%, or $19,500,000
Amount to be financed $110,500,000
Insurance, per year $1,950,000
Depreciation chargeable against revenues per year for 10 years $13,000,000
Annual payments on five aircraft based on 120 payments (10 yrs) Approx. $12,000,000
Total cost of aircraft w/ payments and interest $163,500,000
Residual value after 10 years Approx. $65,000,000
Total real cost of five aircraft assuming sale at end of 10 years Approx. $98,500,000
Based on these figures, comparative per-segment costs in the following years are shown:
FY 2003 FY 2004 FY 2005

Aircraft in service (FTE) 5 5 5
Segments per year per aircraft 2,303 2,215 2,133
Total segments 11,519 11,076 10,665
Total cost for down payment $19,500,00 $0 $0
Total cost for insurance per year $1,950,000 $1,950,000 $1,950,000
Total cost for payments/year $12,000,000 $12,000,000 $12,000,000
Total raw cost per year $33,450,000 $13,950,000 $13,950,000
Total raw cost per segment $2,904 $1,259 $1,308
Cost per segment w/ depreciation $4,032 $2,433 $2,527
Cost/seg/yr w/ depr & recov value $3,416 $1,846 $1,917
Comparative cost for five aircraft dry leased w/
$17,550,000 $17,550,000 $17,550,000
insurance/year
Cost per segment as above for dry-leased aircraft $1,524 $1,585 $1,646
Page 42
This comparison obviously does not examine the possible tax consequences and other factors in
considering the comparative cost of dry leasing versus purchasing, but it does demonstrate that
lower short-range acquisition costs result in an immediate lower segment cost for the aircraft as
well as lower up-front cash requirements.
Table: General Assumptions
General Assumptions
Plan Month 1 2 3
Current Interest Rate 9.00% 9.00% 9.00%
Long-term Interest Rate 7.50% 7.50% 7.50%
Tax Rate 34.58% 35.00% 34.58%
Other 0 0 0
7.2 Key Financial Indicators
The accompanying chart, which is based on the actual financial projections for the proposed
airline, clearly shows a pattern of solid growth over the first three years of the operation (and
which would continue into the future), which the financials consider in depth. There is a good
balance between revenues and costs, yielding healthy gross margins, and in a predictable,
steady pattern of growth. Financial turn-over also is in good balance and, as other tables and
charts show, with careful planning of expenditures cash flow is maintained in good balance
throughout the life of the plan.
Chart: Benchmarks
Page 43
7.3 Break-even Analysis
As the accompanying chart demonstrates, the break-even point comes at a relatively modest
monthly passenger load, under 22,000 passengers per month, which represents an average
passenger load factor of only about 40 percent with a fleet of three RJ100s operating about six
segments each per day. It is anticipated that this load will be reached fairly early in the new
airline's life and, in practice, much higher loads - into the 65 - 75 percent range during the first
year of operations - can be anticipated based on the overall business and marketing plans for
the airline.
Chart: Break-even Analysis
Table: Break-even Analysis
Break-even Analysis
Monthly Revenue Break-even $507,571
Assumptions:
Average Percent Variable Cost 5%
Estimated Monthly Fixed Cost $481,754
Page 44
7.4 Projected Profit and Loss
As the accompanying Profit and Loss chart clearly demonstrates, the proposed airline has the
potential to achieve profitability, on a month-by-month basis, by as early as the third month of
operations, and to end the first year comfortably in the black - an indication of the strength of
the market and the marketing plan for the venture, given the conservative nature with which
the numbers were calculated.
All cost items are covered in this Profit and Loss chart and, while the organization and salary
and cost items presented are not lavish, they both cover the needed functions adequately and
also allow some margin for movement. Given the business plan's stress on utilizing technology
to control staffing and related support and marketing costs - big problems for many airlines -
the plan presented here should enable this airline to accomplish far more with less, and
simultaneously to present less of a "command-and-control" problem to the management team.
All flight and cabin crew salaries are included in the line designated "Operational" in the top
section of the chart, with all non-salary aircraft operational costs included in the same section.
All revenues, which derive almost entirely from airline operations (both scheduled and special
flights) are also provided in the top area, along with a deduction for the direct cost of sales,
such as reservations fees and commissions (an area that hopefully can be reduced even further
through e-reservations and e-ticketing, though it probably cannot be eliminated altogether.
Clearly the affect of these charges on the bottom line can be seen in this chart, even figuring
that 60 percent and more of airline clients will utilize electronic means for ticketing). The rest of
the chart is broken down by functional area, outside of direct flight operations (which also
include aircraft acquisition costs).
Finally, it is worth noting that a net operating profit of more than [XYZ] million USD (on an
equity investment of under [XYZ] million USD) is projected for the first year, with a net profit of
more than [XYZ] percent. Profits in the second and third years show substantial growth, with a
combined net profit in excess of [XYZ] million USD projected for the third and fourth years,
even given the limited size of the fleet (up to nine mid-sized jets by the end of the third year of
operations) projected for the airline.
Page 45
Chart: Profit Monthly
Chart: Profit Yearly
Page 46
Chart: Gross Margin Monthly
Chart: Gross Margin Yearly
Page 47
Table: Profit and Loss
Pro Forma Profit and Loss

Sales $41,531,760 $95,102,256 $149,146,550
Direct Cost of Sales $2,112,400 $4,522,260 $6,318,654
Production Payroll $1,638,562 $3,307,744 $4,766,445
Non-Salary Aircraft Operational Costs $29,642,941 $57,732,304 $80,052,471
Total Cost of Sales $33,393,903 $65,562,308 $91,137,570
Gross Margin $8,137,857 $29,539,948 $58,008,980

Gross Margin % 19.59% 31.06% 38.89%
Operating Expenses
Sales and Marketing Expenses

Sales and Marketing Payroll $477,500 $586,600 $619,715
Advertising/Promotion $1,500,000 $2,000,000 $3,000,000
Travel $32,000 $54,750 $82,125
Public Relations Consultants/Activities $16,000 $25,000 $35,000
LD toll-free reservations telephone serv $66,000 $72,000 $80,000
Other $24,000 $26,400 $29,040
Total Sales and Marketing Expenses $2,115,500 $2,764,750 $3,845,880
Sales and Marketing % 5.09% 2.91% 2.58%
General and Administrative Expenses

General and Administrative Payroll $702,000 $702,900 $738,045
Sales and Marketing and Other Expenses $0 $0 $0
Depreciation $120,000 $120,000 $120,000
Leased Equipment $24,000 $30,000 $36,000
Telephone $32,600 $48,900 $73,350
Utilities $15,300 $18,000 $22,000
Insurance (Non-Aviation) $10,000 $30,000 $35,000
Headquarters Office Rent $220,000 $220,000 $242,000
Field Office Rental $98,000 $180,000 $198,000
Vehicle Operating Expenses $8,640 $8,640 $9,500
Computer Hardware/Software Devlpmnt $56,000 $80,000 $120,000
Cockpit/Cabin Crew Training/Simulator $185,000 $150,000 $165,000
Crew/Staff Uniforms & Grooming $44,000 $88,000 $95,000
Payroll Taxes $828,012 $1,365,174 $1,701,603
Other General and Administrative Expenses $0 $0 $0
Total General and Administrative Expenses $2,343,552 $3,041,614 $3,555,498
General and Administrative % 5.64% 3.20% 2.38%
Other Expenses:
Other Payroll $1,322,000 $2,228,625 $2,383,810
Consultants $0 $0 $0
Contract/Consultants $0 $0 $0
Total Other Expenses $1,322,000 $2,228,625 $2,383,810
Other % 3.18% 2.34% 1.60%
Total Operating Expenses $5,781,052 $8,034,989 $9,785,188
Profit Before Interest and Taxes $2,356,805 $21,504,959 $48,223,792

EBITDA $2,476,805 $21,624,959 $48,343,792
Interest Expense $45,536 $27,837 $9,369
Taxes Incurred $917,055 $7,516,993 $16,674,155
Net Profit $1,394,214 $13,960,129 $31,540,268

Net Profit/Sales 3.36% 14.68% 21.15%
Page 48
7.5 Projected Cash Flow
Cash flow is probably the factor that makes or breaks more businesses than any other, and it is
even more critical to consider in a venture as capital-intensive as is an airline.
As the accompanying chart and table readily show, with careful planning and control of
resources and expenses, cash flow crises should not pose a threat to the new airline. Even
allowing for a [XYZ] million USD up front deposit on aircraft leases (which would be charged
against operational expenses as the airline begins flying) and other significant up-front costs,
as shown in the accompanying illustrations, at no time does cash on-hand become a major
issue during the first year, and even less so in the follow-on years.
While an investment of about [XYZ] million USD is modest by regional airline standards, the
financial and business planning done here should indicate that the venture is quite feasible in
the market. Nevertheless, it would offer an extra cushion of safety to arrange for availability of
additional credit facilities or cash reserves, or equity investment, to be called up only as needed
in the short-run should cash demands out strap expectations, immediate revenues, and on-
hand cash on a temporary basis.
It should be noted that a 30-day accounts payable repayment schedule is included in the
planning for the financials. However, a majority of the airline's revenues will come from online
sales, with payment by credit cards and generally rapid settlement, and also from ticket sales
from travel agencies that are required to make payments usually in half the accounts payable
schedule used in the assumptions for this plan. Given the large fluxes of cash, even these
payment methods allow for significant amounts of funds to be receivable at any given time but,
again, the financial calculations indicate that this should pose no significant problem to the
airline's financial management or cash liquidity.
Chart: Cash
Page 49
Table: Cash Flow
Pro Forma Cash Flow

Cash Received
Cash from Operations

Cash Sales $26,995,644 $61,816,466 $96,945,258
Cash from Receivables $9,626,176 $26,952,615 $45,812,104
Subtotal Cash from Operations $36,621,820 $88,769,081 $142,757,362
Additional Cash Received

Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $36,621,820 $88,769,081 $142,757,362
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations

Cash Spending $4,140,062 $6,825,869 $8,508,015
Bill Payments $30,946,389 $74,284,142 $106,090,971
Subtotal Spent on Operations $35,086,451 $81,110,011 $114,598,986
Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $188,100 $205,200 $205,200
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $35,274,551 $81,315,211 $114,804,186
Net Cash Flow $1,347,269 $7,453,870 $27,953,176

Cash Balance $11,747,269 $19,201,139 $47,154,316
Page 50
7.6 Projected Balance Sheet
As the accompanying Balance Sheet indicates, the proposed venture will maintain a healthy
position, even with limited hard assets other than cash and leased aircraft, and the company's
net worth is projected to grow beginning from the end of the first year from about [XYZ] million
USD to [XYZ] million USD by the end of the second year, and to more than [XYZ] million
USD by the end of the third year, with continued growth at about the same remarkable rate
beyond that.
Table: Balance Sheet
Pro Forma Balance Sheet

Assets
Current Assets
Cash $11,747,269 $19,201,139 $47,154,316
Accounts Receivable $4,909,940 $11,243,115 $17,632,303
Inventory $364,453 $1,073,380 $978,841
Other Current Assets $50,000 $50,000 $50,000
Total Current Assets $17,071,662 $31,567,634 $65,815,459
Long-term Assets
Long-term Assets $200,000 $200,000 $200,000
Accumulated Depreciation $120,000 $240,000 $360,000
Total Long-term Assets $80,000 ($40,000) ($160,000)
Total Assets $17,151,662 $31,527,634 $65,655,459
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $5,535,548 $6,156,590 $8,949,347
Current Borrowing $411,900 $206,700 $1,500
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $5,947,448 $6,363,290 $8,950,847
Long-term Liabilities $0 $0 $0
Total Liabilities $5,947,448 $6,363,290 $8,950,847
Paid-in Capital $10,800,000 $10,800,000 $10,800,000

Retained Earnings ($990,000) $404,214 $14,364,343
Earnings $1,394,214 $13,960,129 $31,540,268
Total Capital $11,204,214 $25,164,343 $56,704,612
Total Liabilities and Capital $17,151,662 $31,527,634 $65,655,459
Net Worth $11,204,214 $25,164,343 $56,704,612
Page 51
7.7 Business Ratios
The accompanying table offers key business ratios, based on the financial plan for the proposed
airline. It is worth noting that even in the first year of operations, and with conservative
planning, a profit, albeit relatively modest, is feasible - something unusual in the airline
business. Even in the first year, the investor can expect a return on equity about [XYZ] percent,
and then significant cash growth going into the second and third years, with ROE figures
upwards of [XYZ] percent on a cumulative basis.
Care must be taken to control costs, to plan routes, schedules, and capacities carefully, and to
take on high-cost items with caution and with an eye to timing. But the basic elements for a
solid business are evident in this plan's financials. Prudent, experienced management will
regard these caveats carefully and, in so doing, will see the airline through its initial challenging
launch into a period where growth will be both solid and sustained. A long-term (five-year)
financial plan is included among the appendix.
Page 52
Table: Ratios
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth n.a. 128.99% 56.83% 2.91%
Percent of Total Assets

Accounts Receivable 28.63% 35.66% 26.86% 21.79%
Inventory 2.12% 3.40% 1.49% 4.16%
Other Current Assets 0.29% 0.16% 0.08% 36.78%
Total Current Assets 99.53% 100.13% 100.24% 62.73%
Long-term Assets 0.47% -0.13% -0.24% 37.27%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 34.68% 20.18% 13.63% 32.64%

Long-term Liabilities 0.00% 0.00% 0.00% 18.38%
Total Liabilities 34.68% 20.18% 13.63% 51.02%
Net Worth 65.32% 79.82% 86.37% 48.98%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 19.59% 31.06% 38.89% 55.97%
Selling, General & Administrative Expenses 15.98% 16.38% 17.88% 39.09%
Advertising Expenses 3.61% 2.10% 2.01% 0.59%
Profit Before Interest and Taxes 5.67% 22.61% 32.33% 1.06%
Main Ratios
Current 2.87 4.96 7.35 1.57
Quick 2.81 4.79 7.24 1.01
Total Debt to Total Assets 34.68% 20.18% 13.63% 58.53%
Pre-tax Return on Net Worth 20.63% 85.35% 85.03% 1.65%
Pre-tax Return on Assets 13.48% 68.12% 73.44% 3.99%
Additional Ratios Year 1 Year 2 Year 3

Net Profit Margin 3.36% 14.68% 21.15% n.a
Return on Equity 12.44% 55.48% 55.62% n.a
Activity Ratios
Accounts Receivable Turnover 2.96 2.96 2.96 n.a
Collection Days 55 89 101 n.a
Inventory Turnover 9.02 6.29 6.16 n.a
Accounts Payable Turnover 6.52 12.17 12.17 n.a
Payment Days 27 28 25 n.a
Total Asset Turnover 2.42 3.02 2.27 n.a
Debt Ratios
Debt to Net Worth 0.53 0.25 0.16 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $11,124,214 $25,204,343 $56,864,612 n.a
Interest Coverage 51.76 772.53 5,147.17 n.a
Additional Ratios
Assets to Sales 0.41 0.33 0.44 n.a
Current Debt/Total Assets 35% 20% 14% n.a
Acid Test 1.98 3.03 5.27 n.a
Sales/Net Worth 3.71 3.78 2.63 n.a
Dividend Payout 0.00 0.00 0.00 n.a
Page 53
Appendix
Table: Sales Forecast
Sales Forecast
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales
Scheduled Passenger Revenues 0% $0 $0 $0 $866,250 $1,299,375 $2,601,625 $5,155,920 $3,866,940 $5,255,920 $5,881,619 $6,180,451 $6,544,900
Scheduled Cargo Revenues 0% $0 $0 $0 $65,625 $98,437 $118,124 $188,997 $207,897 $293,966 $440,949 $390,600 $477,405
Special Flights Passenger Revenues 0% $0 $0 $0 $0 $0 $0 $247,200 $123,600 $185,400 $309,000 $309,000 $309,000
Special Flights Cargo Revenues 0% $0 $0 $0 $0 $0 $0 $5,760 $2,880 $4,320 $7,200 $7,200 $7,200
Package trips 0% $0 $0 $0 $0 $0 $0 $9,975 $10,973 $12,070 $13,277 $14,605 $18,100
Other 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Sales $0 $0 $0 $931,875 $1,397,812 $2,719,749 $5,607,852 $4,212,290 $5,751,676 $6,652,045 $6,901,856 $7,356,605
Direct Cost of Sales Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Scheduled Passenger Revenues $0 $0 $0 $53,900 $84,567 $142,345 $325,467 $221,980 $272,367 $289,810 $298,453 $306,231
Scheduled Cargo Revenues $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Special Flights Passenger Revenues $0 $0 $0 $0 $0 $0 $14,280 $7,140 $10,710 $17,850 $17,850 $17,850
Special Flights Cargo Revenues $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Package trips $0 $0 $0 $0 $0 $0 $3,990 $4,389 $4,828 $5,311 $5,842 $7,240
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Direct Cost of Sales $0 $0 $0 $53,900 $84,567 $142,345 $343,737 $233,509 $287,905 $312,971 $322,145 $331,321
Page 1
Appendix
Table: Personnel
Personnel Plan
Production Personnel
Captains (3 per aircraft) $0 $0 $45,000 $45,000 $45,000 $60,000 $60,000 $60,000 $60,000 $60,000 $75,000 $75,000
First Officers (3 per aircraft) $0 $0 $36,000 $36,000 $36,000 $48,000 $48,000 $48,000 $48,000 $48,000 $60,000 $60,000
Flight Attendants (9 per aircraft) $0 $0 $40,500 $40,500 $40,500 $54,000 $54,000 $54,000 $54,000 $54,000 $67,500 $67,500
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $19,687 $39,375
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal $0 $0 $121,500 $121,500 $121,500 $162,000 $162,000 $162,000 $162,000 $162,000 $222,187 $241,875
Sales and Marketing Personnel

Director of Sales & Marketing $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000
Regional Sales & Marketing Mgrs (3) $4,000 $8,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000
Special Sales & Marketing Manager $0 $0 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000
Air Cargo Sales & Marketing Manager $0 $0 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000
Sales & Marketing Assistants (6) $3,000 $4,500 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000
Cust. Service/Reservations Assts (12) $0 $0 $6,000 $9,000 $9,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal $12,000 $17,500 $40,000 $43,000 $43,000 $46,000 $46,000 $46,000 $46,000 $46,000 $46,000 $46,000
General and Administrative Personnel

President & CEO $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000
Vice President & General Manager $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000
Vice President Commercial $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500
Vice President Finance $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500
Vice President Operations $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500 $10,500
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal $58,500 $58,500 $58,500 $58,500 $58,500 $58,500 $58,500 $58,500 $58,500 $58,500 $58,500 $58,500
Other Personnel
Director of Communications $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500
Director of Human Resources $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500
Director of Flight Safety $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500
Page 2
Appendix
Director of Flight Maintenance $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500
Director of Ground Operations $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500
Director of Information Systems $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500
Station Managers (1 per major station) $0 $0 $10,000 $10,000 $10,000 $14,000 $14,000 $14,000 $14,000 $14,000 $20,000 $20,000
Ground Service Pers (3 per maj station) $0 $0 $22,500 $22,500 $22,500 $31,500 $31,500 $31,500 $31,500 $31,500 $45,000 $45,000
Maintenance Engineers (8) $0 $0 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000
Bookkeeping & Finance Personnel (3) $2,000 $2,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000
Information Systems Personnel (5) $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
Professional Support Personnel (3) $4,000 $4,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000
Secretarial/Admin Asst Personnel (3) $3,000 $3,000 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500
Customer Relations Personnel (2) $0 $0 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal $46,000 $46,000 $110,000 $110,000 $110,000 $123,000 $123,000 $123,000 $123,000 $123,000 $142,500 $142,500
Total People 84 84 84 84 84 84 84 84 84 84 84 84
Total Payroll $116,500 $122,000 $330,000 $333,000 $333,000 $389,500 $389,500 $389,500 $389,500 $389,500 $469,187 $488,875
Page 3
Appendix
Table: General Assumptions
General Assumptions
Plan Month 1 2 3 4 5 6 7 8 9 10 11 12
Current Interest Rate 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00%
Long-term Interest Rate 7.50% 7.50% 7.50% 7.50% 7.50% 7.50% 7.50% 7.50% 7.50% 7.50% 7.50% 7.50%
Tax Rate 30.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00%
Other 0 0 0 0 0 0 0 0 0 0 0 0
Page 4
Appendix
Table: Profit and Loss
Pro Forma Profit and Loss
Sales $0 $0 $0 $931,875 $1,397,812 $2,719,749 $5,607,852 $4,212,290 $5,751,676 $6,652,045 $6,901,856 $7,356,605
Direct Cost of Sales $0 $0 $0 $53,900 $84,567 $142,345 $343,737 $233,509 $287,905 $312,971 $322,145 $331,321
Production Payroll $0 $0 $121,500 $121,500 $121,500 $162,000 $162,000 $162,000 $162,000 $162,000 $222,187 $241,875
Non-Salary Aircraft Operational Costs $2,000,000 $0 $0 $2,308,350 $2,010,020 $2,179,945 $4,109,523 $3,093,544 $3,021,288 $3,465,698 $3,041,040 $4,413,533
Total Cost of Sales $2,000,000 $0 $121,500 $2,483,750 $2,216,087 $2,484,290 $4,615,260 $3,489,053 $3,471,193 $3,940,669 $3,585,372 $4,986,729
Gross Margin ($2,000,000) $0 ($121,500) ($1,551,875) ($818,275) $235,459 $992,592 $723,237 $2,280,483 $2,711,376 $3,316,484 $2,369,876
Gross Margin % 0.00% 0.00% 0.00% -166.53% -58.54% 8.66% 17.70% 17.17% 39.65% 40.76% 48.05% 32.21%
Operating Expenses
Sales and Marketing Expenses

Sales and Marketing Payroll $12,000 $17,500 $40,000 $43,000 $43,000 $46,000 $46,000 $46,000 $46,000 $46,000 $46,000 $46,000
Advertising/Promotion $0 $0 $175,000 $225,000 $100,000 $150,000 $150,000 $100,000 $100,000 $150,000 $150,000 $200,000
Travel $500 $1,500 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Public Relations Consultants/Activities $0 $0 $3,000 $3,000 $2,000 $2,000 $2,000 $2,000 $500 $500 $500 $500
LD toll-free reservations telephone
$0 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000
serv
Other $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Total Sales and Marketing Expenses $14,500 $27,000 $229,000 $282,000 $156,000 $209,000 $209,000 $159,000 $157,500 $207,500 $207,500 $257,500
Sales and Marketing % 0.00% 0.00% 0.00% 30.26% 11.16% 7.68% 3.73% 3.77% 2.74% 3.12% 3.01% 3.50%
General and Administrative Expenses

General and Administrative Payroll $58,500 $58,500 $58,500 $58,500 $58,500 $58,500 $58,500 $58,500 $58,500 $58,500 $58,500 $58,500
Sales and Marketing and Other
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Expenses
Depreciation $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
Leased Equipment $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Telephone $1,500 $2,000 $2,300 $2,500 $3,000 $3,000 $3,300 $3,000 $3,000 $3,000 $3,000 $3,000
Utilities $1,200 $1,500 $1,500 $1,200 $1,000 $1,200 $1,500 $1,500 $1,500 $1,200 $1,200 $800
Insurance (Non-Aviation) $0 $0 $0 $0 $0 $0 $10,000 $0 $0 $0 $0 $0
Headquarters Office Rent $0 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000
Field Office Rental $0 $0 $15,000 $5,000 $5,000 $14,000 $8,000 $8,000 $8,000 $8,000 $17,000 $10,000
Page 5
Appendix
Vehicle Operating Expenses $720 $720 $720 $720 $720 $720 $720 $720 $720 $720 $720 $720
Computer Hardware/Software
$0 $0 $0 $0 $0 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000
Devlpmnt
Cockpit/Cabin Crew Training/Simulator $0 $0 $100,000 $0 $0 $35,000 $0 $0 $0 $0 $50,000 $0
Crew/Staff Uniforms & Grooming $0 $24,000 $0 $0 $8,000 $0 $0 $0 $0 $12,000 $0 $0
Payroll Taxes 20% $23,300 $24,400 $66,000 $66,600 $66,600 $77,900 $77,900 $77,900 $77,900 $77,900 $93,837 $97,775
Other General and Administrative
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Expenses
Total General and Administrative
$97,220 $143,120 $276,020 $166,520 $174,820 $230,320 $199,920 $189,620 $189,620 $201,320 $264,257 $210,795
Expenses
General and Administrative % 0.00% 0.00% 0.00% 17.87% 12.51% 8.47% 3.57% 4.50% 3.30% 3.03% 3.83% 2.87%
Other Expenses:
Other Payroll $46,000 $46,000 $110,000 $110,000 $110,000 $123,000 $123,000 $123,000 $123,000 $123,000 $142,500 $142,500
Consultants $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Contract/Consultants $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Other Expenses $46,000 $46,000 $110,000 $110,000 $110,000 $123,000 $123,000 $123,000 $123,000 $123,000 $142,500 $142,500
Other % 0.00% 0.00% 0.00% 11.80% 7.87% 4.52% 2.19% 2.92% 2.14% 1.85% 2.06% 1.94%
Total Operating Expenses $157,720 $216,120 $615,020 $558,520 $440,820 $562,320 $531,920 $471,620 $470,120 $531,820 $614,257 $610,795
Profit Before Interest and Taxes ($2,157,720) ($216,120) ($736,520) ($2,110,395) ($1,259,095) ($326,861) $460,672 $251,617 $1,810,363 $2,179,556 $2,702,227 $1,759,081
EBITDA ($2,147,720) ($206,120) ($726,520) ($2,100,395) ($1,249,095) ($316,861) $470,672 $261,617 $1,820,363 $2,189,556 $2,712,227 $1,769,081
Interest Expense $4,500 $4,372 $4,244 $4,115 $3,987 $3,859 $3,731 $3,602 $3,474 $3,346 $3,218 $3,089
Taxes Incurred ($648,666) ($77,172) ($259,267) ($740,079) ($442,079) ($115,752) $159,930 $86,805 $632,411 $761,674 $944,653 $614,597
Net Profit ($1,513,554) ($143,320) ($481,496) ($1,374,432) ($821,003) ($214,968) $297,012 $161,210 $1,174,478 $1,414,537 $1,754,356 $1,141,395
Net Profit/Sales 0.00% 0.00% 0.00% -147.49% -58.73% -7.90% 5.30% 3.83% 20.42% 21.26% 25.42% 15.52%
Page 6
Appendix
Table: Cash Flow
Pro Forma Cash Flow

Cash Received
Cash from Operations

Cash Sales $0 $0 $0 $605,719 $908,578 $1,767,837 $3,645,104 $2,737,989 $3,738,589 $4,323,829 $4,486,206 $4,781,793
Cash from Receivables $0 $0 $0 $0 $10,872 $331,592 $504,657 $985,607 $1,946,467 $1,492,261 $2,023,591 $2,331,130
Subtotal Cash from Operations $0 $0 $0 $605,719 $919,450 $2,099,429 $4,149,761 $3,723,595 $5,685,056 $5,816,090 $6,509,797 $7,112,923
Additional Cash Received

Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Received $0 $0 $0 $605,719 $919,450 $2,099,429 $4,149,761 $3,723,595 $5,685,056 $5,816,090 $6,509,797 $7,112,923
Expenditures Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Expenditures from Operations

Cash Spending $116,500 $122,000 $330,000 $333,000 $333,000 $389,500 $389,500 $389,500 $389,500 $389,500 $469,187 $488,875
Bill Payments $436,235 $1,341,196 $15,659 $200,427 $1,908,184 $1,896,940 $2,683,243 $5,079,453 $3,553,903 $4,258,469 $4,859,342 $4,713,339
Subtotal Spent on Operations $552,735 $1,463,196 $345,659 $533,427 $2,241,184 $2,286,440 $3,072,743 $5,468,953 $3,943,403 $4,647,969 $5,328,529 $5,202,214
Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $17,100 $17,100 $17,100 $17,100 $17,100 $17,100 $17,100 $17,100 $17,100 $17,100 $17,100
Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Spent $552,735 $1,480,296 $362,759 $550,527 $2,258,284 $2,303,540 $3,089,843 $5,486,053 $3,960,503 $4,665,069 $5,345,629 $5,219,314
Net Cash Flow ($552,735) ($1,480,296) ($362,759) $55,192 ($1,338,835) ($204,111) $1,059,918 ($1,762,458) $1,724,553 $1,151,022 $1,164,169 $1,893,610
Cash Balance $9,847,265 $8,366,969 $8,004,210 $8,059,402 $6,720,567 $6,516,456 $7,576,374 $5,813,916 $7,538,469 $8,689,491 $9,853,659 $11,747,269
Page 7
Appendix
Table: Balance Sheet
Pro Forma Balance Sheet
Assets Starting Balances
Current Assets
Cash $10,400,000 $9,847,265 $8,366,969 $8,004,210 $8,059,402 $6,720,567 $6,516,456 $7,576,374 $5,813,916 $7,538,469 $8,689,491 $9,853,659 $11,747,269
Accounts Receivable $0 $0 $0 $0 $326,156 $804,519 $1,424,839 $2,882,930 $3,371,625 $3,438,245 $4,274,199 $4,666,258 $4,909,940
Inventory $150,000 $150,000 $150,000 $150,000 $96,100 $93,024 $156,580 $378,111 $256,860 $316,696 $344,268 $354,360 $364,453
Other Current Assets $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000
Total Current Assets $10,600,000 $10,047,265 $8,566,969 $8,204,210 $8,531,658 $7,668,109 $8,147,874 $10,887,415 $9,492,401 $11,343,409 $13,357,958 $14,924,277 $17,071,662
Long-term Assets
Long-term Assets $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000
Accumulated Depreciation $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000 $110,000 $120,000
Total Long-term Assets $200,000 $190,000 $180,000 $170,000 $160,000 $150,000 $140,000 $130,000 $120,000 $110,000 $100,000 $90,000 $80,000
Total Assets $10,800,000 $10,237,265 $8,746,969 $8,374,210 $8,691,658 $7,818,109 $8,287,874 $11,017,415 $9,612,401 $11,453,409 $13,457,958 $15,014,277 $17,151,662
Liabilities and Capital Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Current Liabilities
Accounts Payable $390,000 $1,340,819 $10,942 $136,780 $1,845,760 $1,810,314 $2,512,147 $4,961,776 $3,412,652 $4,096,283 $4,703,395 $4,522,458 $5,535,548
Current Borrowing $600,000 $600,000 $582,900 $565,800 $548,700 $531,600 $514,500 $497,400 $480,300 $463,200 $446,100 $429,000 $411,900
Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Current Liabilities $990,000 $1,940,819 $593,842 $702,580 $2,394,460 $2,341,914 $3,026,647 $5,459,176 $3,892,952 $4,559,483 $5,149,495 $4,951,458 $5,947,448
Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Liabilities $990,000 $1,940,819 $593,842 $702,580 $2,394,460 $2,341,914 $3,026,647 $5,459,176 $3,892,952 $4,559,483 $5,149,495 $4,951,458 $5,947,448
Paid-in Capital $10,800,000 $10,800,000 $10,800,000 $10,800,000 $10,800,000 $10,800,000 $10,800,000 $10,800,000 $10,800,000 $10,800,000 $10,800,000 $10,800,000 $10,800,000
Retained Earnings ($990,000) ($990,000) ($990,000) ($990,000) ($990,000) ($990,000) ($990,000) ($990,000) ($990,000) ($990,000) ($990,000) ($990,000) ($990,000)
Earnings $0 ($1,513,554) ($1,656,874) ($2,138,370) ($3,512,802) ($4,333,805) ($4,548,773) ($4,251,761) ($4,090,551) ($2,916,073) ($1,501,537) $252,819 $1,394,214
Total Capital $9,810,000 $8,296,446 $8,153,126 $7,671,630 $6,297,198 $5,476,195 $5,261,227 $5,558,239 $5,719,449 $6,893,927 $8,308,463 $10,062,819 $11,204,214
Total Liabilities and Capital $10,800,000 $10,237,265 $8,746,969 $8,374,210 $8,691,658 $7,818,109 $8,287,874 $11,017,415 $9,612,401 $11,453,409 $13,457,958 $15,014,277 $17,151,662
Net Worth $9,810,000 $8,296,446 $8,153,126 $7,671,630 $6,297,198 $5,476,195 $5,261,227 $5,558,239 $5,719,449 $6,893,927 $8,308,463 $10,062,819 $11,204,214
Page 8
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Airline Business Plan Air Leo

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Table of Contents

1.0 Executive Summary 1

1.0 Executive Summary

• Development and implementation of cooperations, associations, and partnerships with other

1.3 Keys to Success

• Employing an experienced, highly professional management team that combines

• Intelligent, progressive, and aggressive marketing that identifies the airline as a

• Identification, through careful market research, of unserved or under-served

• Avoiding the temptation to go head-to-head with established carriers on routes that

• Identifying, developing, and quickly and cost-effectively exploiting opportunities

• Supplementing regularly scheduled passenger service with both regularly scheduled

2.0 Company Summary

Ancillary Travel Services

Other related company activities of BalkConsort

• Construction, construction management, and construction technology (U.S., Greece,

• High-level security, demining, and explosive-ordnance removal (U.K.).

• Aviation services and airport development (Albania).

• Free-trade zone development (U.S.).

Legal relationship and company status of the new airline

Meanwhile, it may be necessary to register a subsidiary company in another country, such as

2.1 Company Ownership

2.2 Start-up Summary

Total Requirements $11,790,000

Table: Start-up Funding

Liabilities and Capital

Loss at Start-up (Start-up Expenses) ($990,000)

Total Capital and Liabilities $10,800,000

Total Funding $11,790,000

2.3 Company Locations and Facilities

3.1 Service Description

3.2 Competitive Comparison

• Safety, actual and perceived;

Competition with Southeastern European carriers

Greater reliability and punctuality of the aircraft, augmented by state-of-the-art navigational

Competition with Western European carriers

Requirements for interline arrangements

• Fly Western-built aircraft, preferably pure jet.

• Airbus Industrie ATR72, A-300, A-310, A-320

* QC = "Quiet Convertible" version allowing quick-conversion from passenger to full-freighter

1. Relatively low per-seat acquisition cost.

8. The possible option of obtaining advantageous British export financing.

Aircraft type RJ85 RJ100 RJX85 RJX100

• Internet marketing and online reservations (e-reservations) and sales (e-sales)

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

4.0 Market Analysis Summary

2. Government and international organization travelers, requiring the same elements.

4.1 Market Segmentation

Preliminary analysis (based on a variety of methods, including observation, interviews with

Chart: Market Analysis (Pie)

Table: Market Analysis

4.2 Service Business Analysis

1. Established mainline European carriers (primarily Swiss International, Austrian, Lufthansa,

3. Home-based Southeastern European carriers (such as ADA Air, Albanian Airlines,

4.2.1 Main Competitors

5.0 Strategy and Implementation Summary

5.1 Marketing Strategy

5.1.1 Pricing Strategy

• Value Fare is $XXX for weekday round-trip travel.

• Value Fare one-way is one-half the round-trip cost of $XXX + 10 percent.

5.1.2 Promotion Strategy

5.2 Sales Strategy

5.2.1 Sales Forecast

Chart: Sales Monthly

Chart: Sales by Year