AERO 2307 Group Assignment-Black Swan

BUSINESS REPORT
AERO 2307
AIRLINE
OPERATIONS
MANAGEMENT

Contents
Executive Summary...........................................................................................................................1
1.0 Company structure............................................................................................................2
1.1 Brief description............................................................................................................2
1.2 Mission statement .........................................................................................................2
1.3 Our beliefs.....................................................................................................................2
1.4 Management team.........................................................................................................2
2.0 Market analysis .................................................................................................................3
2.1 Current market ..............................................................................................................3
2.2 Full service carrier ........................................................................................................7
2.3 Market and distribution plan (5P) .................................................................................9
2.4 Load factor..................................................................................................................15
3.0 Aircraft structure.............................................................................................................17
3.1 Type of aircraft to choose............................................................................................17
3.2 Comparing between leasing and purchasing...............................................................18
3.3 Seat map......................................................................................................................21
4.0 Airline .............................................................................................................................23
4.1 Flight route analysis....................................................................................................25
4.2 Ticket price..................................................................................................................28
5.0 Cost .................................................................................................................................35
5.1 Operation costs............................................................................................................35
5.2 Port..............................................................................................................................37
5.3 Fuel Strategy ...............................................................................................................38
5.4 Training.......................................................................................................................40
5.5 Selling cost..................................................................................................................41
5.6 Overheads....................................................................................................................41
5.7 Other cost....................................................................................................................42
6.0 Revenue...........................................................................................................................43
6.1 Ticket...........................................................................................................................43
6.2 Cargo Structure ...........................................................................................................43
6.3 Others..........................................................................................................................44
7.0 Activities.........................................................................................................................46
7.1 The loyalty program....................................................................................................46
7.2 Fuel hedging................................................................................................................48
8.0 Financials ........................................................................................................................51
8.1 Payback period analysis..............................................................................................55
9.0 Future plan ......................................................................................................................55
10.0 Our company market competitiveness (SWOT) .............................................................57
Appendix I Aircraft Specifications (A330).....................................................................................58
Appendix II Current market of each route ......................................................................................59
Appendix III Comparison between leasing and buying aircraft......................................................62
Appendix IV Port Cost....................................................................................................................64
Appendix V Aircraft Specifications (A320)....................................................................................66

Appendix VI Compare between A320 and B737............................................................................67
Appendix VII SWOT Analysis .......................................................................................................68
Bibliography ....................................................................................................................................72

Black Swan: The Airline of Your Choice
1AERO 2307 | ASSIGNMENT
Cai yuntong | Guan Kai | Imran Budhani | Naif Awad Almatrafi | Robin Rajiah
Executive Summary
The Black Swan Airline in Perth, West Australia, is a newly launched airline planning
to operate six highly profitable routes including the fast-growing routes
PER-MEL-PER and PER-SYD-PER.
As a full service airline, our mission is to deliver an outstanding travel experience that
focuses on meeting all kinds of customers’ travel needs, including the business
travelers, VFR (visiting friend and relatives) travelers as well as the leisure travels and
so on. The existing and potential demands on these routes are key deciding factors for
Black Swan’s selection of these top ten listed routes in Australia domestic market.
Upon the comprehensive analysis of current business model and the passenger traffic
and load factors, the Black Swan Company decide to use three new A330-200 aircraft
on its routes. The choice of a young and small fleet will benefit us as it will be energy
efficient, more punctuality and make customer happier. Our well-designed cabin
layout introduced the unique premium economy class on our routes which will bring
flexibility to our customers as well as our price strategy. Depending on our
technological and financial calculations, the Black Swan company decides to dump
lease our three A330-200s. (Virgin australia, 2013) To minimize impacts from a
variety of socio-economic factors, we proposed numerous initiatives which are our
fuel policy, our price strategy and our market and loyalty program.
Ultimately it is our people who make the real difference in setting us apart from the
competition, the well-designed training and remuneration plans will ensure our
high-standard service at an attractive price. (Singapore Airline, 2013)
Subject to regulatory approvals, the AOC should be acquired after one calendar year.
The Black Swan Airline estimate a start-up investment of AUD $44,685,000 for
obtaining the AOC, leasing the aircrafts, paying the salaries, acquiring properties and
equipment’s and other costs. Our shareholders will get paid back in five years.

1.0 Company structure
1.1 Brief description
The Black Swan Airline in Perth, West Australia, is a newly launched
airline planning to operate six highly profitable routes including the
fast-growing routes PER-MEL-PER and PER-SYD-PER. Our objective is
to be the number one domestic airline in Australia in ten years.
1.2 Mission statement
Based on Perth, our Company will commit ourselves to deliver an
outstanding travel experience that focuses on meeting all kinds of
customers’ travel needs.
1.3 Our beliefs
Ultimately it is our people who make the real difference in setting us apart
from the competition. Do our best to control the cost, for the things that we
can’t control, do our best to forecast and take actions.
1.4 Management team
Figure 1: Black swan Airline management structure
C E O
Chief
Operation
Officer
Maintenance
Manager
Chief Pilot
Chief
Financial
Officer
H R Manager
Chief
Commercial
Officer
Marketing
Manager
Customer
Services
Manger

2.0 Market analysis
2.1 Current market
2.1.1 The base of Black Swan Airline
Perth is the capital of Western Australia with current population of
more than 2 million (Anon., 2013). With the extreme growth of mining
industry the routes to Perth have been extremely profitable (see Figure
2). For current other companies’ flight route, seeing Appendix II
Current market of each route.
Figure 2: Annual RPT
YE Dec 2012 YE Dec 2013 Growth
Total passengers
carried
56.54 million 57.55 million 1.8%
Revenue passenger
kilometers
66.39 billion 67.74 billion 2.0%
Available seats 74.82 million 77.44 million 3.5%
Available seat
kilometers
85.66 billion 88.55 billion 3.4%
Load factor 77.5% 76.5% -1%
Aircraft trips 633.9(000s) 644.6(000s) 1.7%
Source: Australian Government BITRE, Australian Domestic Aviation Activity 2008-2013

2.1.2 Australia GDP analysis
The airline industry is highly influenced by the GDP. According to the
World Bank (Trading economy, 2014), the Gross Domestic Product
(GDP) in Australia was worth 1520.60 billion US dollars in 2012. The
following chart illustrate that the GDP in Australia grow slowly but
steadily in the recent years. We can estimate that the Australia GDP
will remain this growth trend in the following years.
Figure 3: Australia GDP
Source: trading economy, <http://www.tradingeconomics.com/australia/gdp>
2.1.3 The Australia Interest Rate
Our company’s capital and financial decision is highly influenced by
the economic environment, especially the interest rate. According to
the Reserve Bank of Australia, the benchmark interest rate in Australia
was last recorded at 2.50 percent. (Trading Economy, 2000-2014)
Interest rates decisions are taken by the Reserve Bank of Australia's
Board. The official interest rate is the cash rate. From the following
chart, we can see that the interest rates in Australia from 2000 to 2014
changed vastly, and right now it reaches a relative bottom. And after
comparing the GDP with the interest rate in these years, we can get a
rough conclusion that, in general, the interest rate changes according to
the GDP change rate. That is, when the GDP growth rate is higher than
the further years, the interest rate increase, on the other hand, when the

GDP increase slower than before or even decrease, the interest rate
decrease. So the interest rate’s forecast is intertwined with the GDP
forecasting. Since the GDP of Australia in the future remains unknown,
so we need further details to forecast the interest rate.
Figure 4: Australia interest rate
2.1.4 Foreign exchange rate
The AUD to USD exchange rate will influence our cost as well as our
investment policy. The following chart shows the AUD exchange rate
to USD in the last five years. (www.xe.com, 2004-2014). And another
chart shows the Australian foreign exchange reserves for the last 10
years. After analyzing the two charts, we can get an impression that
when the exchange rate increase, the foreign exchange reserve tends to
shrink and vice versa. In the future, our company will need a monitor
strategy on government foreign exchange reserve, so as to forecast the
AUD exchange rate in order to minimize our risk.

Figure 5: AUD exchange rate
Source: www.xe.com, <http://www.xe.com/currencycharts/?from=USD&to=AUD&view=10Y>
Figure 6: AUD exchange reserves

2.1.5 Fuel price
Figure 7: Fuel price
Source: Indexmundi,
<http://www.indexmundi.com/commodities/?commodity=jet-fuel&months=120&currency=aud>
Fuel cost is vital to any airline. Fuel cost is the largest single cost for
airlines nowadays. So a healthy strategy about fuel should consider the
future price of fuel. And after analysis the historical data (indexmundi,
2004-2014) for fuel price in the last 10 years, we can see the fuel price
is volatile in these years, however, it is to some extent similar to the
change of foreign exchange rate. Our company has got a fuel strategy
as well as fuel hedging policy to minimize the risk.
2.2 Full service carrier
Direct competition between full service airlines and no-frills carriers is
intensifying across the world (O'Connell &Williams, 2005). These carriers
have pursued simplicity, efficiency, productivity and high utilization of
assets to offer low fares. Figure 8 provides a summary of the main
differentiating characteristics between incumbent network carriers and
no-frills scheduled airlines (O'Connell &Williams, 2005).

The Figure 8 clearly depicts the major differences between low cost carriers
and full cost carriers. Black Swan Airlines will be a hybrid of the two.
We plan to operate as a full cost carrier while at the same time adopting
some low cost strategies. That is, first we will be using a single type aircraft
(A330-200) discerning the PER-MEL-PER and PER- SYD-Per routes. We
are making use of 3 aircrafts (under a wet lease agreement) – which will
result in very high aircraft utilization. Our target is to reduce/ lower our
turnaround time to 35 minutes. Third, we are focusing our marketing and
distribution plan to be more targeted online and only 30% of our tickets
would be through travel agents. Advertising will be targeted to both
businesses: business passengers travelling on incumbent airlines tend to
come from larger companies that employ over 100 people. These
companies would generally have larger travel budgets and would adopt
corporate travel policies (O'Connell &Williams, 2005). On the other hand,
our goal is to target group passengers that are normally price sensitive.
Figure 8: Product features of low cost and full service carriers
Product features Low cost carrier Full service carrier
Brand One brand: low fare Brand extensions: fare+ service
Fares Simplified: fare structure Complex fare: structure+ yield mgt
Distribution Online and direct booking online, direct, travel agent
Check-in Ticketless Ticketless, IATA ticket contract
Airports Secondary (mostly) Primary
Connections Point-to-point Interlining, code share, global alliances
Class segmentation One class (high density) class (dilution of seating capacity)
Inflight Pay for amenities Complementary extras
Aircraft utilisation Very high Medium to high: union contracts
Turnaround time 25min turnarounds Low turnaround: congestion/labour
Product One product: low fare Multiple integrated products
Ancillary revenue Advertising, on-board sales Focus on the primary product
Aircraft Single type: commonality Multiple types: scheduling complexities
Seating Small pitch, no assignment Generous pitch, offers seat assignment
Customer service Generally under performs Full service, offers reliability
Operational activities Focus on core (flying) Extensions: e.g., maintenance, cargo

2.3 Market and distribution plan (5P)
2.3.1 Product
Black Swan Airlines will operate as a full service carrier. It is apparent
that passengers travelling on full cost carriers place strong emphasis on
reliability, quality, flight schedules, connections, frequent flyer
programs and comfort, while travelers taking low cost carriers focus
almost exclusively on fare. (O'Connell J. 2005).
In the long run, our aim is to have a combination of low fares (at
no-frills airline levels) and some of the full service products. Thereby,
passengers enjoying both airline models with our company. (O'Connell
J. 2005)

2.3.2 Price
Passengers using full service airlines are concerned about price but will
tolerate a higher fare to gain an advantage through the additional airline
products offered by full service carriers. (O'Connell J. 2005). The
basis for price structure is illustrated in the Figure 9.
Figure 9: Provide price structure
High Fares Low fares
Passenger
Type
Business Travel Leisure Travel
Cabin First Class/ Business class Economy Class
Restrictions NIL Multiple
Time of
Travel
Week day,
Early Morning
late afternoon,
long weekends (labour day e.g.)
Saturday night
Early Sunday
morning
Midday on week day
Season School holidays,
Lunar New Year
Christmas
Australian Open season
Grand Prix - In March
Melbourne Cup
National/ International Events:
AFL Grande Final and other
sporting events.
Wet Season
Winter
Route Non- Stop Multiple-Stop
The Figure 9 will be the basis upon which we price out tickets. This
will depend upon the segment we are targeting. For example, as a
general rule business travelers need to pay higher prices since the latter
enjoys more services and benefits compare to low cost fare travelers.
Our pricing strategy on routes PER-MEL-PER and PER-SYD-PER can
be illustrated in the Figure 10.

Figure 10: Ticket price
Route
Fare Class
Business Premium
Economy
Economy Low-Fare
Economy
PER-MEL
$1799, D:
$1149
$899 $449 $230(Bundle),$175
$1799, D:
$1149
$799 $425 $230(Bundle),$175
$1799, D:
$1149
$799 $425 $230(Bundle),$175
MEL-
PER
$1799, D:
$1149
$899 $449 $230(Bundle),$175
$1799, D:
$1149
$799 $425 $230(Bundle),$175
As indicated in the above table, Business Class travelers- travelling
form Perth to Melbourne will be charged $1799, on the other hand, low
fare economy passengers will be charged as low as $175. We predict
our load factors for this specific route to be 66.5 %. These prices do
not account for any ancillary revenues from other products and services
we can provide.
In addition ticket prices for peak seasons during the year will be higher
for all class of travelers. For instance, tickets prices during the AFL
Grand Final week, Melbourne Cup, Australian Open are very like to
peak respectively across all segments.
Furthermore, time sensitive passengers who are insensitive to price are
much more willing and likely to pay for higher price tickets. On the
other hand, Time sensitive passengers but who are price
sensitive-These travelers must make the trip but are willing to be
flexible to secure a discounted fare. They are willing to rearrange trips
to get a discounted fare and are willing to make stops or connections

and fly at less convenient times. In the latter example, ticket prices
need preferably be discounted (Belobaba 1998a, p. 356).
2.3.3 Place
The distribution strategy for our full cost carrier operations will vary
from the low cost carrier concept. Black Swan Airline plan to invest
in its own (in-house) online ticketing system that is relatively easy and
efficient. This will allow us the minimize commission paid to third
party websites and travel agents.
We would, therefore, be able to management, monitor and update ticket
prices rather quickly on the website and make adjustments to bring in
more revenue from ticket sale and other ancillary revenues.
Black Swan Airline is going to sell primarily direct via internet, 3rd
party websites such as Webjet and Flight Centre, Lastminutes.com.au
and so on.
Black Swan Airlines will be develop internet applications (Apps) on
smart phone supporting Mac and Android operating systems that
customers could make booking, check-in, get electronic boarding pass,
and check flight status through mobile.
For corporate sales, a corporate booking tool will be supported by the
third party software.
2.3.4 Promotion
Promotional fares, sometimes referred to as discount or deep discount
fares, are various low fares, usually with one or more restrictions on
their availability, which offer passengers significant savings on the
normal economy fares(Dempsey & Gesell 1997) Firstly, Black Swan

Airlines will select the following appropriate advertising channels
with respect to target customer taste, interests and focuses:
The roll out of our National brand campaign will be key to achieve our
future growth aspirations and convincing travelers to fly with us.
These will be done through the mass media network/channels. In the
first phase, of our promotional activities we plan to use traditional
channels, such as, free-to-air TV and cable channels (for example,
Foxtel), radio, newspapers etc. In this day and age we believe our
promotional strategies should match current trends through the use of
the internet. These are as follows:
 Social media: Social networks such as Facebook and Twitter with
their huge audiences allow us to offer real-time customer service
via social channels and advertising opportunities as well as
offering discounted (last minute) ticket prices during off peak
season.
 Onboard events: the current trend is to entertain guest with
onboard events. For example, mile high bingo where passengers
can win discounts or free tickets of other promotional items.
 Surprised gift: to surprise passengers with free gifts to celebrate
Christmas, Easter or Valentine’s Day. We plan to create alliances
with companies that can offer their products at cheaper prices and
that we can afford to offer Business class travelers free of costs.
In the long run, we hope to encourage them to travel with Black
Swan Airlines.
2.3.5 People
Employees of a business, from front line service personnel to
management, can be the key to success (Goonetilleke 2004). Black
Swan Airlines human resource strategy would be closely based to that
of Southwest Airlines. Southwest airlines’ extraordinary performance is

due to its organizational structure and culture that are bases for
outstanding leadership, friendly culture, unique operating strategies and
high performance relationships (Gittell, 2003).
Our Strategy for employees at Black swan Airlines are as follows
(Amongst others):
 Human resource department has a critical role in recruiting, hiring,
training, and promoting individuals who fit with the strategy of
Southwest Airlines (Hall, 2007). Our strategy would be to employ
staff that share or identify with our culture. This will be done by
recruiting the right employee for the right job and for the right
remuneration (both monetary and non-monetary).
 Our aim is to provide opportunities for learning and personal
growth to each employee. As such we plan to hire experience staff
as well as young recruit and train them based on our philosophy
and culture.
 Employees are to be provided the same concern, respect, and
caring attitude within the organization that the employees are
expected to share with the customer (Hall, 2007).
 Total compensation must include pay, as well as non-monetary
compensation and recognition (Williams, 1999). As mentioned
above we will be looking into offering shares to our employees, for
example, for their contribution.
 We aim to hire and retain talented employees our staff retention
program need to include a succession plan.
The keystone of HR responsibility is talent retention, keeping great
performers from going somewhere else. Many organizations are
looking to fill the vacuum of star performers (Chambers, 1998).

2.4 Load factor
Figure 11: Airport Passenger Statistic (000s)
airline
year
item 2008 2009 2010 2011 2012 2013 average
MEL-PER
passenger carried 1,772.2 1,724.9 1,736.4 1,855.9 2,130.7 2,209.5
P change % 10.3 -2.7 0.7 6.9 14.8 3.7 5.6
available seat 2,199.0 2,055.9 2,093.5 2,249.3 2,739.2 2,871.0
A change % 10.6 -6.5 1.8 7.4 21.8 4.8 6.7
SYD-PER
P change % 5.5 1.8 10.8 6.7 4.6 -0.6 4.8
available seat 1,691.1 1,796.8 2,022.9 2,203.0 2,283.6 2,193.4
A change % 5.0 6.2 12.6 8.9 3.7 -3.9 5.4
MEL-SYD
P change % 3.1 1.2 11.6 -2.2 4.3 2.4 3.4
available seat 8,768.7 8,688.9 9,594.3 9,339.9 10,170.6 10,056.0
A change % 5.2 -0.9 10.5 -2.7 8.9 -1.7 3.2
MEL-BNE
P change % -0.4 0.7 11.6 2.3 3.2 0.3 3.0
available seat 3,442.1 3,260.1 3,703.4 3,821.9 4,017.5 4,101.6
A change % 7.4 -5.3 13.6 3.2 5.1 2.1 4.4
SYD-BNE
P change % 5.6 -0.2 2.4 0.2 -0.4 0.8 1.4
available seat 5,581.8 5,221.3 5,397.4 5,391.6 5,502.1 5,594.0
A change % 8.0 -6.5 3.4 -0.1 2.0 1.7 1.4
SYD-OOL
P change % 1.2 -0.8 12.2 -6.7 8.8 4.9 3.3
available seat 2,635.3 2,546.0 2,871.1 2,644.3 3,008.8 3,181.4
A change % 1.2 -3.4 13.2 -7.9 13.8 5.7 3.8
Source: Australian Government BITRE, Australian Domestic Aviation Activity 2008-2013,
< https://www.bitre.gov.au/publications/ongoing/domestic_airline_activity-monthly_publications.aspx>

From the data of Figure 11 the average passenger and available seats’ grow
percentage could be calculated. Therefore, the expect passengers and available seats
for the next six years could also be calculated through Formula 1 and Formula 2.
𝑒𝑥𝑝𝑒𝑐𝑡 𝑝𝑎𝑠𝑠𝑒𝑛𝑔𝑒𝑟𝑠 =
𝑙𝑎𝑠𝑡 𝑦𝑒𝑎𝑟 𝑝𝑎𝑠𝑠𝑒𝑛𝑔𝑒𝑟𝑠
𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑔𝑟𝑜𝑤 𝑝𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒
Formula 1
𝑒𝑥𝑝𝑒𝑐𝑡 𝑠𝑒𝑎𝑡𝑠 =
𝑙𝑎𝑠𝑡 𝑦𝑒𝑎𝑟 𝑠𝑒𝑎𝑡𝑠
𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑔𝑟𝑜𝑤 𝑝𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒
Formula 2
Therefore, the expect load factor for the next six years could be calculated through
Formula 3. In addition, Figure 12 could be made through the calculation.
𝑒𝑥𝑝𝑒𝑐𝑡 𝑙𝑜𝑎𝑑 𝑓𝑎𝑐𝑡𝑜𝑟 =
𝑒𝑥𝑝𝑒𝑐𝑡 𝑝𝑎𝑠𝑠𝑒𝑛𝑔𝑒𝑟𝑠
𝑒𝑥𝑝𝑒𝑐𝑡 𝑠𝑒𝑎𝑡𝑠+𝑜𝑢𝑟 𝑛𝑒𝑤 𝑓𝑙𝑔𝑖ℎ𝑡 𝑠𝑒𝑎𝑡𝑠
× 100 Formula 3
Figure 12: Expect travel passengers for each route
airline
year
item 2015 2016 2017 2018 2019
MEL-PER
expect passenger 2,464.9 2,603.3 2,749.6 2,904.0 3,067.1
expect available seat 3,265.5 3,482.7 3,714.3 3,961.3 4,224.7
expect load factor 66.4 66.2 66.0 65.8 65.6
SYD-PER
MEL-SYD
MEL-BNE
SYD-BNE
SYD-OOL

3.0 Aircraft structure
3.1 Type of aircraft to choose
3.1.1 Aircraft model
Our aircraft choice is Airbus 330-200 (Appendix I Aircraft
Specifications (A330)) as it is one of the modern aircraft types and this
will also help us to be in competition with other aircraft carriers
operating in these routes. The main criteria behind the selection of
A330-200 is less fuel consumption compared to B777 and also high
fuel capacity which allows us for operation in remote areas where fuel
cost is expensive.
Figure 13: compare with A330 and B777
Aircraft specifications A330-200 B777
Purchase price 216.1 millions 261.5 millions
Range 13400km 9537km
MTOW 230 229
Seating capacity 380
246(2 class)
440
305(3 class)
Maximum speed 880 km/hour 905km/hour
Fuel capacity 36743.69
gallons
31000 gallons
Fuel consumption 6669.9 liters/h 7302.1 liters/h
Winner loser
Source: AIRBUS AND BOEING WEB PAGES

3.1.2 Engine
The A330 series is powered by three engine types CF6-8OE1 SERIES,
PW4100 SERIES AND Trent 700 series. The RR powered A330-200s
form the largest sub-fleet of all A330s. Our engine selection is
RR-powered Trent 772B-60s, which has the least fuel burn rate
compared to other two engines.
Figure 14: The engine of A330
SOURCE: AIRBUS WEB PAGE
3.2 Comparing between leasing and purchasing
From the Figure 15 (the calculation details please refer to Appendix III
Comparison between leasing and buying aircraft), it could be seen that the
NPV for leasing which is -34,793,733 is lower than buying’s NPV
-43,222,168. Therefore, the Black Swan Airline decided to lease aircraft at
the first time.

Figure 15: The cost for purchasing and leasing
Date Rental or cost
Gov. Credits
(@30%)
Sale of aircraft
Total net
benefits
Discount
factor
NPV
Purchase
30/06/2015 -102,542,000 -102,542,000 1 -102,542,000
30/06/2016 7,331,753 7,331,753 0.920935818 6,752,074
30/06/2017 7,331,753 7,331,753 0.848122781 6,218,227
30/06/2018 7,331,753 7,331,753 0.781066647 5,726,588
30/06/2019 7,331,753 7,331,753 0.719312252 5,273,820
30/06/2020 7,331,753 7,331,753 0.662440417 4,856,850
30/06/2021 49,982,000.00 49,982,000 0.610065108 30,492,274
30/06/2022 0.561830809 0
NPV= -43,222,168
Date Rental or cost
Gov. Credits
(@30%)
Sale of aircraft
Total net
benefits
Discount
factor
NPV
Lease
30/06/2015 0
30/06/2016 -10,584,960 -10584959.8 0.920935818 -9,748,069
30/06/2017 -10,584,960 3,175,488 -7409471.857 0.848122781 -6,284,142
30/06/2018 -10,584,960 3,175,488 -7409471.857 0.781066647 -5,787,291
30/06/2019 -10,584,960 3,175,488 -7409471.857 0.719312252 -5,329,724
30/06/2020 -10,584,960 3,175,488 -7409471.857 0.662440417 -4,908,334
30/06/2021 -10,584,960 3,175,488 -7409471.857 0.610065108 -4,520,260
30/06/2022 3,175,488 3175487.939 0.561830809 1,784,087
NPV= -34,793,733
Source: Morrell, 2012
3.2.1 Wet leasing and Dry leasing
 Wet leasing
A wet lease is a leasing arrangement whereby one airline (lesser)
provides an aircraft, complete crew, maintenance, and insurance
(ACMI) to an airline [or other type of business acting as a broker
of air travel] (the lessee), which pays by hours operated. The lessee
provides fuel and covers airport fees, and any other duties, taxes,
etc. The flight uses the flight number of the lessee. A wet lease

generally lasts one month to two years; anything less would be
considered an ad-hoc charter. A wet lease is typically utilized
during peak traffic seasons or annual heavy maintenance checks,
or to initiate new routes.
They can also be considered as a form of charter whereby the
lesser provides minimum operating services, including ACMI, and
the lessee provides the balance of services along with flight
numbers. In all other forms of charter, the lesser provides the flight
numbers. Variations of a wet lease include a code share
arrangement and a block seat agreement. (air charter network,
2014)
When an air carrier provides less than an entire aircraft crew, the
wet lease occasionally is also sometimes referred to as a damp
lease, especially in the UK. A wet lease without crew is
occasionally referred to as a “moist lease”.
 Dry leasing
A dry lease is a leasing arrangement whereby an aircraft financing
entity, such as the lesser, provides an aircraft without insurance,
crew, ground staff, supporting equipment, maintenance, etc. Dry
lease is typically used by leasing companies and banks, requiring
the lessee to put the aircraft on its own Air Operators Certificate
(AOC) and provide aircraft registration. A typical dry lease starts
from two years onwards and bears certain conditions with respect
to depreciation, maintenance, insurances, etc., depending also on
the geographical location, political circumstances, etc.
A dry lease arrangement can also be used by a major airline and a
regional operator, in which the regional operator provides flight

crews, maintenance and other operational aspects of the aircraft,
which then may be operated under the major airline’s name or
some similar name. This saves the major airline the expense of
training personnel to fly and maintain the aircraft, along with other
considerations. In the United Kingdom, a dry lease is when an
aircraft is operated under the AOC of the lessee. (air charter
network, 2014)
 Our decision
Because Black Swan Airline is a full-service airline, therefore
service quality and employee’s loyalty are more important to us.
For a long term consideration, we need to hire our own crews. On
the other hand, as a start-up company, we don't have enough
equipment as well as resources to perform all the maintenance
tasks. As a result, we will choose the dump lease for all our three
A330-200s.
3.3 Seat map
Because Black Swan Airline’s main flight service is fly between Perth –
Sydney and Perth –Melbourne and the there are some overnight shifts
during the flight circle, having a comfortable seat on the aircraft would be
an important needed for the businessmen who do not care much about the
price. At the same time, there are also a large number of normal people who
cannot afford the business class ticket need to travel by air. Therefore,
Black Swan Airline’s aircrafts are designed as Figure 16 shows to meet the
needed of different group of passengers.
Figure 16: Black Swan Airline’s A330 Seat map

Black Swan Airline’s A330 has 24 business seats (Figure 17) which are
provided for the businessmen who do not care much about the price and
what to have a comfortable environment during the flight. The seats in the
business class can be set as a bed, so that the passengers could sleep during
the overnight flight. There are also 48 Premium seats which have more
space than economy seats on our A330. These seats are provided for the
people who what to have a comfortable seat but cannot afford the business
class. In addition, our A330 also have 58 low fare seats at the end of the
aircraft for the people who what to have the cheapest travel and do not care
about the environment. Furthermore, our aircraft also have two change
rooms which could help the businessmen to change the cloth after overnight
flight.
Figure 17: Black Swan Airline’s A330 business class seats

4.0 Airline
Figure 18: passengers carried for 2012 and 2013
Figure 19: Great Triangle
Source: Google Map, < https://maps.google.com/>
Black Swan Airline is a Perth based airline company and its main service is
offering the flight between Perth and Sydney as well as Perth and Melbourne.
Thus, all of the daily flight circles for every aircraft will start at Perth which

makes the aircraft exchange easily. In addition, from the Figure 18, it can be seen
that the number of passengers carried between Melbourne and Sydney is nearly
double comparing with the second highest column. Thus, flight between
Melbourne and Sydney would be another operating airline other than the two
main airlines. Therefore, a “great triangle” could be draw among Melbourne,
Sydney and Perth. (Figure 19) In addition, the Figure 18 shows that the numbers
of passengers travel to Brisbane and Gold Coast is also quite high. That is
because many passengers travel to Brisbane and Gold Coast at the weekend for
holiday. Because there will not have many businessmen do business at the
weekend, a weekend airline between Melbourne, Sydney and Brisbane could be
set instead of the flight between Sydney and Melbourne. There are three aircrafts
are needed to make this “great triangle” airline cycle virtuously develop.

4.1 Flight route analysis
Figure 20: Airport load
Source: Perth Airport, Perth Airport Slot Availability, <
http://www.perthairport.com.au/Libraries/General_Docs/Perth_Airport_Slot_Availability_Chart_as_of_7_Mar_20
14-FINAL.sflb.ashx> & Airservices, Sydney Airport Operational Statistics, <
ttp://www.airservicesaustralia.com/publications/reports-and-statistics/sydney-airport-operational-statistics/>
The Figure 20 shows the suggested avoid hours for each airport. A flight
statistic could be made as shown in Figure 21. On weekdays shift, all of the
three aircrafts’ overnight and morning shifts are set for the businessmen to
attend meetings in another city on time. In addition, the evening shifts
(off-work hours) are set for the businessmen fly back to their home city
after a whole day’s business meeting. On the other hand, for the flight 2,
after the overnight flight, it will fly two circles between Melbourne to
Sydney, which are the two biggest finance city in Australia, to give
businessman in Melbourne and Sydney more travel choices. Finally, flight
2 will fly back to Perth at 17:00 to allow the businessman of Perth who
have already finished their meeting in the early afternoon to get home
earlier. For flight 3, it will depart at Perth in the late morning and fly to

Melbourne at first. After that, flight 3 will departure from Melbourne at
18:00 to help the businessman of Sydney go back home at night after a
whole day’s work. Finally, flight 3’s evening shift could help the
businessmen of Perth who finish the work late and cannot catch the flight 2
go back to Perth at night. On the other hand, the flight 3 is also a spare
aircraft. The flight 3 has over 12 hours rest time, so if one of flight 1 and 2
need to be repaired or need A check, the third aircraft can take the place of
flight 1 or 2 and leave the problem aircraft enough time to do the
maintenance.
For the weekend shift, the flight 3 will do its normal job in case of any
emergency problem of flight 1 and 2. For the flight 1 and 2, the overnight
shift will be kept because people may travel to Melbourne at Friday night
after work for their holiday. After the flights arrive at Melbourne and
Sydney, they will wait for flying to Brisbane until the late morning, so that
people do not need to get up quite early after a five days’ hard work.
Continually, the flight 1 will fly back to Melbourne in the late afternoon to
take the holiday people back to Melbourne and then fly back to Perth. For
the flight 2, it will fly two circles before it go back to Perth because Sydney
is much closer to Brisbane than Melbourne. However during the second
circle, the flight 2 will fly to Gold Coast instead of Brisbane. This change
has two reasons. Firstly, most people who travel to Brisbane will go to the
Gold Coast beach, so they can fly to Brisbane and drive to Gold Coast, and
then, they can fly back to Sydney without going back to Brisbane. Secondly,
fly to Gold Coast costs less time than Brisbane, thus the aircraft could go
back to Perth a bit early and has more time to rest before next daily circle.

Figure 21: Flight statistics
weekdays weekend
Flight 1 Flight 1
summer shift winter shift summer shift winter shift
departure arrival departure arrival departure arrival departure arrival
23:30 6:05 0:30 6:05 23:30 6:05 0:30 6:05
PER MEL PER MEL PER MEL PER MEL
6:55 8:00 6:55 9:00 9:30 10:40 9:30 11:40
MEL PER MEL PER MEL BNE MEL BNE
11:30 18:05 12:30 18:05 15:00 18:20 16:00 18:20
PER MEL PER MEL BNE MEL BNE MEL
19:00 20:05 19:00 21:05 19:10 20:15 19:10 21:15
MEL PER MEL PER MEL PER MEL PER
Flight 2 Flight 2
22:50 6:05 23:50 6:05 23:00 6:15 0:00 6:15
PER SYD PER SYD PER SYD PER SYD
6:50 8:15 6:50 8:15 9:00 9:30 9:00 10:30
SYD MEL SYD MEL SYD BNE SYD BNE
9:15 10:40 9:15 10:40 10:15 12:50 11:15 12:50
MEL SYD MEL SYD BNE SYD BNE SYD
12:40 14:05 12:40 14:05 13:40 14:00 13:40 14:00
SYD MEL SYD MEL SYD OOL SYD OOL
14:50 16:15 14:50 16:15 14:50 17:20 14:50 17:20
MEL SYD MEL SYD OOL SYD OOL SYD
17:00 19:00 17:00 20:00 18:05 20:05 18:05 21:05
SYD PER SYD PER SYD PER SYD PER
Flight 3 Flight 3
10:25 17:00 11:25 17:00 10:25 17:00 11:25 17:00
PER MEL PER MEL PER MEL PER MEL
18:00 19:25 18:00 19:25 18:00 19:25 18:00 19:25
MEL SYD MEL SYD MEL SYD MEL SYD
20:10 22:10 20:10 23:10 20:10 22:10 20:10 23:10
SYD PER SYD PER SYD PER SYD PER

4.2 Ticket price
Our price structure consists of two parts which are tickets fare plus fuel
surcharge. This separate charge makes our company pay fewer fee for the
booking service.
4.2.1 Ticket fare (Figure 22)
4.2.1.1 Business class
The business class fare has two types of price, namely “discount
price and full fare price”. They are essentially the same in details.
The only difference is that we will offer the discount price to a
limit. There is a threshold for passenger buying the business class
ticket on discount price. If the number is higher than the
threshold, the price will be offered at the ‘full fare” price. The
passenger can change and cancel the flight if he or she need. No
restriction applied.
4.2.1.2 Premium economy
The premium fare is also our high yield price. Aiming at some of
the VFR passenger, occasionally travelling passengers, the
premium class will offer almost the same service as business
class passenger, only with less baggage and purchasing
requirement for lounge entry. If an economy class passenger who
is our membership reached a certain level of membership, he or
she can get a free upgrade to premium when there is available on
premium class before departure. The passenger can change and
cancel the flight if he or she need. However, ‘No show’ passenger
cannot cancel the ticket after the plane take off.
4.2.1.3 Economy
The economy class ticket has only one price level. Change or
cancel will charge certain amount of money. No ‘priority’
check-in and boarding allowed. In addition, ‘No show’

passenger cannot cancel the ticket after the plane take off.
4.2.1.4 Low-fare economy
As the most complex ticket in our ticket structure, the low-fare
economy ticket contains two levels: with bundle or without
bundle. The bundle means added services, in our case, which are
Checked Baggage, Flight Changes option, Cancellations option
and Advanced Seat Selection. And there is some restriction about
the bundle low-fare ticket, No shows not allow for Cancellation
and Peak and off-peak price might change. The without bundle
low-fare ticket contains no Checked Baggage, not allowing
Flight Changes and Cancellations, need to purchase food or
beverage, and no priority for check-in, boarding, cannot select
seats in advance. The without bundle low-fare ticket gets more
restrictions such as Minimum stays could apply and Advance
purchase requirements.

Figure 22: Recommend Price for Black Swan Airline
Route
Flight
number
Time Date
Fare Class
Business
Premium
Economy
Economy Low-Fare Economy
PER-MEL
BS101 23:30 - 6:05(+1) Daily $1799, D: $1149 $899 $449 $230(Bundle),$175
BS103 11:30 - 18:05 Weekday $1799, D: $1149 $799 $425 $230(Bundle),$175
BS105 10:25 - 17:00 Daily $1799, D: $1149 $799 $425 $230(Bundle),$175
MEL- PER
BS104
19:00 – 20:05
Weekdays
Daily $1799, D: $1149 $799 $425 $230(Bundle),$175
19:10 - 20:15
Weekends
PER-SYD BS201
22:50 - 6:05
Weekdays
Daily $1849, D: $1199 $899 $449 $230(Bundle),$175
23:00 - 6:15
Weekends
SYD-PER
BS202
17:00 - 19:00
Weekdays
Daily $1849, D: $1199 $899 $449 $230(Bundle),$175
18:05 - 20:05
Weekends
BS204 20:10 - 22:10 Daily $1849, D: $1199 $899 $449 $230(Bundle),$175
SYD-MEL
MEL- SYD
BS306 18:00 - 19:25 Daily $719, D: $519 $449 $255 $95(Bundle),$80
MEL - BNE BS401 9:30 - 10:40 Sat, Sun $925, D: $700 $500 $285 $125(Bundle),$100
BNE - MEL BS402 15:00 - 18:20 Sat, Sun $925, D: $700 $500 $285 $125(Bundle),$100
SYD - BNE BS501 9:00 - 9:30 Sat, Sun $749, D: $600 $449 $255 $185(Bundle),$130
BNE - SYD BS502 10:15 - 12:50 Sat, Sun $749, D: $600 $449 $255 $185(Bundle),$130
SYD - OOL BS601 13:40 - 14:00 Sat, Sun $649, D: $599 $449 $235 $169(Bundle),$119
OOL - SYD BS602 14:50 - 17:20 Sat, Sun $649, D: $599 $449 $235 $169(Bundle),$119

4.2.2 Fuel surcharge
Fuel surcharge depends on the flight distance of each route. See the
‘Recommend Fuel surcharge as in March 2014’ form below for the
detail of every price. (Figure 23)
Figure 23: Recommend Fuel surcharge as in March 2014
Route Class Fuel surcharge
PER – MEL &
PER - SYD
Economy 75
Premium economy 90
Business 110
SYD - MEL
Economy 35
Premium economy 40
Business 50
MEL - BNE
Economy 50
Premium economy 60
Business 75
SYD – GOLD
COAST & SYD
-BNE
Economy 35
Premium economy 40
Business 50

Figure 24: Pricing Strategy
Class Subclasses Service Category Details Restrictions
Business
Business
Checked Baggage 2 pieces included (32kg)
Nil
Flight Changes No fees. Up to 24 hours after the flight
Cancellations No fees. Up to 24 hours after the flight
In-flight Entertainment Included
Food and Beverage Included
Extra Leg Room Extra space and comfort
Advanced Seat Selection Included
Priority Check in Included
Priority Boarding Included
Lounge Entry Included
Discount Business No essential difference with Full Fare Business Nil
Premium
Economy
Nil
No shows not allow for
Cancellation
Flight Changes No fees. 24 hours before the flight
Cancellations No fees. 24 hours before the flight
Extra Leg Room Premium Economy
Priority Check in Included
Priority Boarding Included
Lounge Entry Membership available for purchase

Economy Nil
Cancellation
Flight Changes $50, 24 hours before the flight
Cancellations $200, 24 hours before the flight
Extra Leg Room $200 to upgrade, $100 for Members
Priority Check in None
Priority Boarding None
Low-Fare
Economy
Bundle
Checked Baggage 1 pieces included (23kg) No shows not allow for
Cancellation
Peak and off-peak price
might change;
Flight Changes $50, 24 hours before the flight
Cancellations $80, 24 hours before the flight
Low fare
Checked Baggage None Baggage, available for purchase
Cancellation; Peak and
off-peak price might
change; Minimum stays
could apply; Advance
purchase requirements;
Flight Changes Not allow
Cancellations Not allow
Food and Beverage $40 to Purchase, $20 for Members
Extra Leg Room $300 to upgrade, $200 for Members
Advanced Seat Selection None
Priority Check in None
Priority Boarding None

4.2.3 Price Strategies in the future
The future price of our tickets will be constantly changing according to
several aspects:
 Prices of competitors, given that the price of our competitors lower
and our flights’ booking of that same period have reached a certain
level, we have to lower our fares according to our competitors.
 We will monitoring the traffic on our six routes in one year, and
record the peaks and valleys of our traffic demands, we will
change our price to adapting to the fluctuation of the demands.
 We will monitor the fuel cost of our operation as well as forecast
the future fuel price, in order to change the fuel surcharge to better
adapting to the fuel prices.
 We will analysis the preference of passengers on the six routes,
using in-flight survey as well as online mail visit to determine the
proportion of inelastic demand as well as elastic demand and to
modify our future operation strategy to better maximum our
profits.
 We will keep monitoring and forecasting the GDP and currency
rates in Australia, as they will impose a heavily influence on traffic
demands, we would be able to change our frequency ahead of
time.
 If other related expenses for instance the airport surcharges change,
the price should be changed.

5.0 Cost
5.1 Operation costs
5.1.1 Line Maintenance
According to STRAIR, Many new entrant airlines, especially where
they have low frequencies to particular cities, sub-contract out their
maintenance (STRAIR, 2007). Our company’s aircraft are under a wet
leasing agreement; our airline is going to perform the line maintenance.
where the lessor perform all associated heavy maintenance Line
maintenance will be contracted and out sourced to a third party.
Considering factors such as cost of maintenance and location, Black
Swan Airlines is going to contract AMSA PTY Ltd, which is based in
Brisbane and has branches in PER, MEL, and SYD to perform line
maintenance and the necessary shop visits.
5.1.2 Heavy Maintenance
Under the wet-leasing agreement, the leaser is responsible for
conducting all the associated heavy maintenance or called C and D
checks as part of ACMI lease agreement. Our airline will perform an
audit on the MRO to check if they are safely and accurately conducting
the heavy maintenance.
A330-200 Line Maintenance C- check D- check
What
Line maintenance as being
any maintenance that is
carried out before flight to
ensure that the aircraft is fit
for the intended flight.(CASA,
2014)(1)
18-20 months /
6000 FH/ 3000
FC
72 months
Who
AMSA PTY Ltd Leaser Leaser
Where
PER-(MEL-SYD-BNE) Brisbane Brisbane

5.1.3 AOC
An Air Operator's Certificate (AOC) is an authorization granted by
CASA under the section 27 of the Civil Aviation Act to conduct
commercial activities prescribed by regulation 206 of the Civil
Aviation Regulations 1988 (CAR). (Civil Aviation Safety Authority,
n.d.) AOC process consists of 4 major stages: enquiry, application,
assessment and certification. The Figure 25 illustrates the framework of
how our airline obtains the AOC.
Figure 25: AOC Process
Source: CASA, 2012
The AOC has to be obtained before we commence operations. CASA
High Capacity RPT Air Operator's Certificate takes 1 year on average
with an aircraft required in the final 3 months for airworthiness
approval/ certification. CASA charges an hourly rate of $190 for
services provided by its officers. The whole process is estimated cost
around AUD $0.8 million to AUD$1 million.
An alternative action that we might consider would be to purchase an

existing AOC from another airline. The use of an existing AOC will
reduce drastically the waiting time before operations begin. We might
have to look into buying an existing AOC in the event we plan to
operation international flights.
5.2 Port
Figure 26: Port Cost
Item PER MEL SYD BNE OOL Total
Passenger movement fees 7,983,572 6,515,550 5,578,830 293,429 257,084 20,628,465
Landing fee 2,533,850 0 1,237,115 380,100 399,000 4,550,065
Air navigation charge 2,452,550 2,039,260 1,745,240 93,660 40,320 3,918,480
Catering charge 16,107,625
Security screening 1,414,561 2,703,953 1,301,727 73,584 5,493,825
（Detail calculation see Appendix IV Port Cost）
5.2.1 Others
𝑒𝑛𝑟𝑜𝑢𝑡𝑒 𝑐ℎ𝑎𝑟𝑔𝑒 = 𝑝𝑟𝑖𝑐𝑒 × (
𝑑𝑖𝑠𝑡𝑎𝑛𝑐𝑒
100
) × √𝑀𝑇𝑂𝑊 Formula 4
En-route charges at Melbourne (Melbourne to Perth) =$1672.5
En-route charges at Perth (Sydney to Perth) =$2022
En-route charges at Sydney (Sydney to Melbourne) =$447.85.
Therefore, with the flight frequency for one year, the total en-route
charges could be calculated = $5,902,589.

Figure 27: Total cost of operating
route
flight
time (in
minutes)
operating
cost
other cost
(landing)
total
operating
cost
MEL-PER 250 $28,750.0 $1,869.2 $30,619.2
PER-MEL 213 $24,495.0 $0.0 $24,495.0
PER-SYD 255 $29,325.0 $852.0 $30,177.0
SYD-PER 300 $34,500.0 $1,869.2 $36,369.2
MEL-SYD 87 $10,005.0 $937.2 $10,942.2
SYD-MEL 94 $10,810.0 $0.0 $10,810.0
MEL-BNE 130 $14,950.0 $1,810.1 $16,760.1
BNE-MEL 140 $16,100.0 $0.0 $16,100.0
SYD-BNE 90 $10,350.0 $1,810.1 $12,160.1
BNE-SYD 95 $10,925.0 $928.7 $11,853.7
SYD-OOL 80 $9,200.0 $3,795.0 $12,995.0
OOL-SYD 90 $10,350.0 $933.0 $11,283.0
5.3 Fuel Strategy
Fuel currently accounts for some 30 percent of the average airline cost
structure. Jet fuel prices are expected to be higher at $124.6 per barrel in
2014 which is a $1.7 per barrel increase from previously forecast, and about
the same as 2013 (Young 2014).
Based on the International Air Travel Association's data the global average
price paid for aviation jet fuel by airlines operating in the Asia/Oceania
region, as of 28th February 2014, was $122 per barrel against $125.2/b as
of the 21st of that same month.
In reference to the above information our fuel strategies for the next 6 to 12
months will be based on Platts forecast of $124.6 per barrel. We predict our
fuel use for the next 12 months (that is in 2015) to be AUD $149,672,556.

An analysis of Jet A1 fuel supply market to Sydney airport, for instance, is
dominated by a limited number of suppliers. The four major providers to
Sydney, Melbourne, Perth and Brisbane is dominated by Shell, Caltex, BP
and ExxonMobil Australia (BARA 2011). Market shares between existing
oil companies and providers represents a concentrated market, with Caltex
providing 55%, Shell 28%, while others (BP and Qantas) supplying about
17%. (IATA, n.d.).
Our main procurement strategy for jet fuel is to purchase fuel at the three
main airports based on the lowest current prices. For example, as of
February 15th 2014 Shell charges AUD$1703.20 per 1000 liters of fuel in
Brisbane, Perth, Sydney and Melbourne Airport. This represent fuel costs of
AUD $1.7 per liter. With the use of fleet cards to pay for JET A1 fuel we
can enjoy fuel discounts with prompt payment.
Furthermore, with prior negotiation with Shell, for example, we can agree
on a fix fuel price for the fourth coming month and make use of our fleet
card to refuel our aircrafts at any airport and at the same rate. Such a
strategy is beneficial since the need to plan for refueling at any specific
airport to enjoy lower prices does not arise. On the other hand, it allows us
to purchase fuel at any airport and paying the same price.
This can prove very advantageous since the after mentioned airports make
use of the Joint User Hydrant Installation (JUHI) (Sydney 2011). A number
of other advantages is associated with the use of fleet cards, such as,
Effective accurate and clear reporting, centralized billing, reduced
administration costs and the possibility of online- management reporting.
Our ultimate objective, in the medium to long term, is to set a benchmark
which matches that of Qantas, that is, to optimize fuel consumption and

improve our operating efficiency (Anon., n.d.)
5.4 Training
5.4.1 Flight Crew Training
Black Swan Airlines is aiming to provide training for its pilots, flight
attendant, and customer services personal. Initially, the company will
hire an experienced flight crew. At the same time, the company will
provide flight training to a number of selected fresh graduates at
AirGoldCost flight training school which has an excellent program
with a duration of 46 weeks. The cost will be around $64.816 per
student and that include all flight license showing in Figure 28.
Figure 28: Flight training cost
5.4.2 Flight Attendant Training
Flight attendants are the face of Black Swan Airlines since they are
representing the airline and delivering its services to passengers. We
have carefully considered Aviation Australia School as a third party
flight attendant training provider in Brisbane. The program is consider
the best in in Australia. It is a full time program with 6.5 weeks
consisting of theoretical and practical training. The training will cover

all aviation safety and security aspects as well as customer services.
The school is equipped with cabin simulator. Black Swan Airline have
continues training plan for flight attendant as sessions delivered
in-house by senior management.
5.5 Selling cost
 Marketing & Advertising: 1-2% of ticket fare (Pelt, 2014), we chose
the 2% of ticket fare for the first five years, since our company is a
start-up company. And in the first year, our marketing and advertising
cost would be higher. We plan to invest 20 million on that.
 Commissions - Agents & Interline: 4% of ticket fare (Pelt, 2014)
 Commissions - Credit Cards: 2% of credit card sales are
commissions for bank. We just approximately use 2% of 80% tickets
sale revenue as credit card commissions.
 Reservation Charges: Booking and change 50 cents per person
 E-commerce Charges: Online check-in 75cents per person; 10k to
buy a kiosk; kiosk 75 cents per person
 Call Centre: 250,000 per year, we will hire local.
 Other: Setting new website 50K-75K; 10K per year to operate
5.6 Overheads
In total, the Salaries & Wages Superannuation Payroll Tax takes about 21%
of total expense (Pelt, 2014). The other overheads cost takes 10% of total
expense. (IATA, 2014) However, the start-up year we will spend more on
the consulting, IT and vehicles, which is 6 million, 3million and 4 million
respectively.

5.7 Other cost
5.7.1 Salaries
5.7.2 Start-up cost
Figure 29: Start-up cost
Loyalty Program Costs: 5,600,000
AOC Costs: 1,000,000
Marketing & Advertising: 10,000,000
E-commerce Charges: (Buying a kiosk) 10,000
Setting new website: 75,000
Consulting Fees: 5,000,000
Motor Vehicles Expenses: 4,000,000
IT & Computers: 3,000,000
Aircraft Decoration & Painting. 1,000,000
Buying a Hanger in Perth. 5,000,000
Headquarters Office 9,000,000
Others 1,000,000
Total 44,685,000

5.7.3 Debt
Our company will have a capital structure of 20% debt to 80% equity.
So the 20 percent of total expense is debt. And according to Mr. Pelt,
we use 10% of interest rate.
6.0 Revenue
6.1 Ticket
According to the seat structure (Figure 16, p.21), the expect load factor
(Figure 12, p.15), the ticket price (Figure 22, p.28) and the fuel surcharge
(Figure 23, p.31), the totally revenue for every route could be calculated
through Formula 5.
revenue = (𝑝𝑟𝑖𝑐𝑒 + 𝑓𝑢𝑒𝑙 𝑠𝑢𝑟𝑐ℎ𝑎𝑟𝑔𝑒) × 𝑠𝑒𝑎𝑡 × 𝑒𝑥𝑝𝑒𝑐𝑡 𝑙𝑜𝑎𝑑 𝑓𝑎𝑐𝑡𝑜𝑟 Formula 5
Where,
Price: the ticket price of one class of every route
Fuel surcharge: the price if homologous class
Seats: the number of seats of homologous class
Expect load factor: the load factor for every year
Therefore, the ticket revenue of all route for one year could be calculated
according the flight statistics of Figure 21 (p.25) (normally take one year
including 260 weekdays and 105 weekends).
6.2 Cargo Structure
The cargo carried by our airlines is divided into three parts which are
general cargo, specific or priority cargo and perishable cargo.
6.2.1 General cargo
This includes any general commodities and the price is based on the
weight. As the weight of shipment increases the cost of shipment
decreases. There will also be a minimum charge depending on the
flight routes. This will take about 2-3 business days with charge

depending on mass and volumetric weight (around $4-$5) per kg.
(quantas, 2014)
6.2.2 Priority cargo
This is introduced to serve shippers who need the advantage of
reserved space on specific flight. As this requires special handling the
rates for this type will be higher than general cargo. The price of these
will be around $10 per kg. (quantas, 2014)
6.2.3 Perishable cargo
Shipping commodities by air is most desirable form of distribution
when the commodity is perishable or required on short notice. For
example, fruits and vegetables, cut flowers etc. For these kinds of
shipments we would like to be advantageous as we know the demand is
unexceptional. The price of these goods will be about $5 per kg.
(quantas, 2014)
6.2.4 Special Services
We will also provide some special services like pickup and delivery
service, arm guards for shipment of highly valuable goods, distribution
service, assembly service, and speed package service. The price range
for these goods will be around $15-$20 per kg. (quantas, 2014)
6.3 Others
6.3.1 Excess baggage
We estimate 0.5% of total tickets revenue would be the excess
baggage.
6.3.2 Loyalty
In the first year, we estimate 0.3% of total tickets revenue would be the
loyalty revenue, and the two to five year would be 0.3%, 0.5%, 0.5%,
0.5% respectively.

6.3.3 Ancillary revenue
Figure 30: In-flight chargeable service
Source: http://www.qantas.com.au/infodetail/about/investors/jetstar-in-asia.pdf
About 20 per cent of the Jetstar's total income came from ancillary
charges which equivalent to about $23-$24 a ticket. The ancillary
revenues earned by Jetstar for the last financial year (2013) amounted
to AUD $31.6 million. Ancillary revenues for airlines are from-sale of
food and beverages, assigned seats or seat upgrades, checking baggage
and excess baggage, fees from credit card purchases, priority check-in,
onboard entertainment systems and wireless internet connections.
Ancillary revenues also include the commissions earned by airlines on
the sale of hotel accommodation, car rental and travel insurance.
Black Swan Airlines ancillary revenues would be derived as Figure 30
shows. Passengers in business class and premium economy will enjoy-
complementary 30kg allowance when purchasing tickets and frequent
flyer points on each route. Meal as well as on board entertainment is

complementary. However, should business travelers require iPads- this
will be at a charge of AUD$15.
Low fare economy passengers will have to pay extra (on top of ticket
prices) for any other service or items they require. Our Strategy will be
based on Jetstars current ancillary revenue model. That is, after
selecting their flight, potential flyers then choose which products and
services they want and pay accordingly. The airline calls it
"customizing" the fare to suit individual needs.
7.0 Activities
7.1 The loyalty program
The number of Status credits will be reviewed daily, based on a member’s
activity since the anniversary of the member joined the program. If a
member have earned the required Status credits to qualify for the next
membership level, plus he/she has travelled a minimum of four Black Swan
flights during that membership year, the member will automatically move
up to the next level and can start enjoying the extra privileges.
Any member will retain his/her new status for at least 12 months. At the
end of that membership year, member’s Status credits will be reset to zero.
Only if the member continues to earn the required number of Status credits
each year and take at least four Black Swan flights in that membership year,
his/her membership status and privileges will remain at the acquired level.
The required status credits for each membership level are shown as Figure
31.

Figure 31: membership structure
Bronze Silver Gold Platinum
Qualify Retain Qualify Retain Qualify Retain Qualify Retain
300 250 700 600 1,400 1,200 3,600 3000
Figure 32: Status credits earned per one-way flight
SwanFlyer
distance (km)
Low-Fare
Economy
Economy Premium
Economy
Business
0- 666 10 15 20 40
667 - 1,631 15 20 30 60
1,633-3,562 20 25 40 80
3,564- 5,494 25 30 50 100
5,495- 7,425 30 35 60 120
7,426 - 9,034 35 40 70 140
Figure 33: Privileges during travel
Privilege Bronze Silver Gold Platinum
Discount food
onboard
Yes Yes Yes Yes
Priority Check-in Yes Yes Yes Yes
Preferred seating Yes Yes Yes Yes
On departure
upgrade seat class
Yes Yes Yes
Extra checked
baggage allowance
Yes Yes
Priority baggage Yes Yes
Free Lounge usage Yes Yes
Access Premium
Security Lanes
Yes
Free Lounge Entry Yes
7.1.1 Other benefits of SwanFlyer
 Retail partners’ membership alliance: our credits can be used as for
membership for Coles and iTunes and BigW and so on.
 We will launch co-branded Credit Card for our members, giving
members another opportunity to earn points on their everyday
spending.

 As our business expand, we will join the airline alliance, which
will bring more travel benefits to our SwanFlyer member, as you
can get access to our partner airline’s lounge and using their travel
miles to change for SwanFlyer Credits.
7.1.2 The cost and revenue for loyalty program
 We need to set up lounges for SwanFlyer members at PER, MEL,
SYD and we plan to share Lounges with other airline in BNE and
OOL.
 We need to set up a Premium Security Lanes for SwanFlyer
members at the five airports.
 The membership card cost and co-branded Credit card cost.
 Other costs.
Figure 34: Estimate cost of loyalty program
Cost Item Start-up cost Annual cost
Lounges 10 million 8 million
Premium Security lane - 0.5 million
Card cost 0.1 million 0.1 million
Other cost 0.5 million 0.5 million
Total cost 10.6 million 9.1 million
7.2 Fuel hedging
Unfortunately, fuel-hedging programs are increasingly expensive and
provide only limited protection when jet-fuel prices are outpacing crude-oil
prices (Heimlish, n.d.). Our goal in the first year is to minimize our fuel
costs in order to remain competitive or at least to survive. An analysis of jet
fuel price movements from the graph below depicts the relative volatility in
the year 2008, for example, resulted in major financial lost of hundreds
million dollars by airline companies (Morisson., 2010).

Our plan is to hedge 30%- 40%- based on our fuel forecast above which,
therefore, represent an average of AUD$32 million. Hedging at the rate of
AUD$1.7 per liter over 12 months- under the assumption that international
market conditions, geopolitical and environmental events and
currency/exchange rates are relatively stable. We plan to create a reserve in
the event that fuel prices do increase at a rate higher than AUD $1.7 per
liter. That is, if the price for jet fuel increase the different between what we
are currently paying compared to the market at that particular time period
will be set aside, as a reserve, should the price then happens to fall and we
are paying higher than market prices. We estimate that such a policy will
even out any gain or losses.
Figure 35: Jet price and crude oil price
Source: Indexmundi,
<http://www.indexmundi.com/commodities/?commodity=jet-fuel&months=120&currency=aud>

7.2.1 None- monetary fuel strategies
A none monetary strategy for minimizing fuel costs is purchase fuel in
the morning or late at night especially when weather temperature is
cooler since fuel is more dense in cooler temperature and expand in
higher temperature.
We can look into association with another airline and negotiate to buy
Aviation fuel in bulk, therefore, obtain better bargaining power and
greater economies of scale which might in turn reduce the price of fuel.
Another suggestion would be offer preferential rates to the fuel
company in order to induce its staff to use our airline. We can
therefore, secure business travelers to use out airline and secure regular
income.
Alternatively, in the long term, we recommend back ward vertical
integration strategies and buy significant share in oil companies.

8.0 Financials
YE1 % YE2 % YE3 % YE4 % YE5 %
REVENUE
Passenger Revenue 418,350,103 85% 428,434,649 85% 438,667,999 85% 449,032,982 85% 459,553,933 85%
Fuel Levy 59,017,066 12% 60,409,137 12% 61,833,925 12% 63,282,452 12% 64,774,748 12%
Adjustment to Passenger Revenue 0 0% 42,843 0% 43,867 0% 44,903 0% 45,955 0%
Freight 12,550,503 3% 12,864,266 3% 13,185,872 3% 13,515,519 3% 13,853,407 3%
Excess Baggage 2,091,751 0% 2,142,173 0% 2,193,340 0% 2,245,165 0% 2,297,770 0%
Loyalty Revenue 1,255,050 0% 1,286,427 0% 1,316,287 0% 1,348,017 0% 1,380,512 0%
Revenue 493,264,473 100% 505,179,493 100% 517,241,291 100% 529,469,039 100% 541,906,325 100%
PORT COSTS
Pax. Movement Fees (Head Tax) 20,628,465 4% 21,144,177 4% 21,672,781 4% 22,214,601 4% 22,769,966 4%
Landing Fees 4,550,065 1% 4,663,817 1% 4,780,412 1% 4,899,922 1% 5,022,420 1%
Air Navigation Charges 6,371,030 1% 6,530,306 1% 6,693,563 1% 6,860,902 1% 7,032,425 1%
Contract Ground Handling 730,000 0% 748,250 0% 766,956 0% 786,130 0% 805,783 0%
Line Maintenance 8,000,000 2% 8,200,000 2% 8,405,000 2% 8,615,125 2% 8,830,503 2%
Catering 16,107,625 3% 16,510,316 3% 16,923,074 3% 17,346,150 3% 17,779,804 3%
Passenger Expenses 1,880,130 0% 1,927,133 0% 1,975,312 0% 2,024,694 0% 2,075,312 0%
Security Screening 5,493,825 1% 5,631,171 1% 5,771,950 1% 5,916,249 1% 6,064,155 1%
Loyalty Program Costs 19,700,000 4% 9,840,000 2% 10,086,000 2% 10,338,150 2% 10,596,604 2%
Hotac. 2,260,800 0% 2,317,320 0% 2,375,253 0% 2,434,634 0% 2,495,500 0%
Other 6,603,801 1% 6,768,896 1% 6,938,118 1% 7,111,571 1% 7,289,361 1%
Port Costs 92,325,741 19% 84,281,385 18% 86,388,419 18% 88,548,130 18% 90,761,833 18%

YE1 % YE2 % YE3 % YE4 % YE5 %
FLIGHT COSTS
Engineering 8,000,000 2% 8,200,000 2% 8,405,000 2% 8,615,125 2% 8,830,503 2%
Maintenance Reserves - aircraft 1,800,000 0% 1,845,000 0% 1,891,125 0% 1,938,403 0% 1,986,863 0%
ECMP - 0% - 0% - 0% - 0% - 0%
Aircraft Finance &/or Lease Charges 31,754,880 6% 32,548,752 7% 33,362,471 7% 34,196,533 7% 35,051,446 7%
Aircraft & Liability Insurance 3,290,000 1% 3,372,250 1% 3,456,556 1% 3,542,970 1% 3,631,544 1%
Aircraft Depreciation & Amortization - 0% - 0% - 0% - 0% - 0%
AOC Costs 1,000,000 0% 0% - 0% - 0% - 0%
Parking & Ferry Charges 8,500,000 2% 8,712,500 2% 8,930,313 2% 9,153,570 2% 9,382,410 2%
Fuel 149,672,556 30% 153,414,370 32% 157,249,729 32% 161,180,972 32% 165,210,497 32%
Other 1,500,000 0% 1,537,500 0% 1,575,938 0% 1,615,336 0% 1,655,719 0%
Flight Costs 205,517,436 42% 209,630,372 44% 214,871,131 44% 220,242,909 44% 225,748,982 44%
SELLING COSTS
Marketing & Advertising 20,000,000 4% 8,568,693 2% 8,782,910 2% 9,002,483 2% 9,227,545 2%
Commissions - Agents & Interline 16,734,004 3% 17,152,354 4% 17,581,163 4% 18,020,692 4% 18,471,209 4%
Commissions - Credit Cards 6,693,602 1% 6,860,942 1% 7,032,466 1% 7,208,277 1% 7,388,484 1%
Reservation Charges 553,814 0% 567,659 0% 581,851 0% 596,397 0% 611,307 0%
E-commerce Charges 840,720 0% 861,738 0% 883,281 0% 905,363 0% 927,998 0%
Call Centre 250,000 0% 256,250 0% 262,656 0% 269,223 0% 275,953 0%
Other 85,000 0% 10,250 0% 10,506 0% 10,769 0% 11,038 0%
Selling Costs 45,157,140 9% 34,277,886 7% 35,134,833 7% 36,013,204 7% 36,913,534 7%

YE1 % YE2 % YE3 % YE4 % YE5 %
OVERHEADS
Salaries & Wages 59,755,033 12% 61,248,909 13% 62,780,132 13% 64,349,635 13% 65,958,376 13%
Superannuation 22,982,705 5% 23,557,273 5% 24,146,204 5% 24,749,860 5% 25,368,606 5%
Payroll Tax 13,789,623 3% 14,134,364 3% 14,487,723 3% 14,849,916 3% 15,221,164 3%
Consulting Fees 6,000,000 1% 2,479,713 1% 2,541,706 1% 2,605,248 1% 2,670,379 1%
Manpower Related 2,419,232 0% 2,479,713 1% 2,541,706 1% 2,605,248 1% 2,670,379 1%
Loss of License Insurance 40,488 0% 41,500 0% 42,538 0% 43,601 0% 44,691 0%
Aircrew Training 2,419,232 0% 2,479,713 1% 2,541,706 1% 2,605,248 1% 2,670,379 1%
Accounting, Bank & Audit Fees 2,419,232 0% 2,479,713 1% 2,541,706 1% 2,605,248 1% 2,670,379 1%
Rent 3,628,848 1% 3,719,569 1% 3,812,558 1% 3,907,872 1% 4,005,569 1%
Depreciation 2,209,616 0% 1,239,856 0% 1,270,853 0% 1,302,624 0% 1,335,190 0%
Fringe Benefits Tax 2,419,232 0% 2,479,713 1% 2,541,706 1% 2,605,248 1% 2,670,379 1%
General Expenses 1,209,616 0% 1,239,856 0% 1,270,853 0% 1,302,624 0% 1,335,190 0%
General Insurance 3,628,848 1% 3,719,569 1% 3,812,558 1% 3,907,872 1% 4,005,569 1%
Legal Fees 2,419,232 0% 2,479,713 1% 2,541,706 1% 2,605,248 1% 2,670,379 1%
Motor Vehicles Expenses 4,000,000 1% 2,479,713 1% 2,541,706 1% 2,605,248 1% 2,670,379 1%
Security 1,209,616 0% 1,239,856 0% 1,270,853 0% 1,302,624 0% 1,335,190 0%
Travel & accommodation 3,628,848 1% 3,719,569 1% 3,812,558 1% 3,907,872 1% 4,005,569 1%
Administration Expenses 3,628,848 1% 3,719,569 1% 3,812,558 1% 3,907,872 1% 4,005,569 1%
IT&Comms. 3,000,000 1% 2,479,713 1% 2,541,706 1% 2,605,248 1% 2,670,379 1%
Consulting & Professional Fees 3,628,848 1% 3,719,569 1% 3,812,558 1% 3,907,872 1% 4,005,569 1%
Realized FX Variance 1,209,616 0% 1,239,856 0% 1,270,853 0% 1,302,624 0% 1,335,190 0%
Cost Saving Initiatives 1,209,616 0% 1,239,856 0% 1,270,853 0% 1,302,624 0% 1,335,190 0%
Other 2,419,232 0% 2,479,713 1% 2,541,706 1% 2,605,248 1% 2,670,379 1%
Overheads 149,275,561 30% 146,096,588 31% 149,749,003 31% 153,492,728 31% 157,330,046 31%

YE1 % YE2 % YE3 % YE4 % YE5 %
Total Operating Expense 492,275,878 100% 474,286,231 100% 486,143,387 100% 498,296,971 100% 510,754,396 100%
EBIT 988,595 30,893,263 31,097,904 31,172,068 31,151,930
Interest 9,370,671 9,370,671 9,370,671 9,370,671 9,370,671
Earnings before Tax -8,382,076 21,522,592 21,727,233 21,801,397 21,781,259
Tax - 6,456,777 6,518,170 6,540,419 6,534,378
Earnings after Tax -8,382,076 15,065,814 15,209,063 15,260,978 15,246,881
OPERATING STATISTICS
Departures 4,745 4,745 4,745 4,745 4,745
Total Hours 13,997.5 13,997.5 13,997.5 13,997.5 13,997.5
RPKs (M) 1,884,422,173 1,881,607,826 1,878,793,479 1,875,292,697 1,872,478,351
ASKs (M) 2,671,566,100 2,671,566,100 2,671,566,100 2,671,566,100 2,671,566,100
Passengers (K) 963,166 962,290 961,414 960,625 959,749
USD Exchange Rate (USD/AUD) 1.09 1.11 1.2 1.1 1.09
PERFORMANCE INDICATORS
Yield (cents/ RPK) 26.18 26.85 27.53 28.23 28.94
Costs (cents)/ ASK 18.4 17.8 18.2 18.7 19.1
Load Factor 70.5% 70.4% 70.3% 70.2% 70.1%
Average Net Fare ($) 434.3 445.2 456.3 467.4 478.8
(Depend on current interest rate: 2.5%) (Trading Economy, 2000-2014)

8.1 Payback period analysis
Depending on the whole finance table, it is easy to be calculated the
payback period of the Black Swan Airline as shown in Figure 36. Therefore,
our initial investors can get paid back by Year Five, based on the analysis.
Figure 36: payback period
Year Zero Year One Year Two Year Three Year Four Year Five
Earnings after Tax - -8,382,076 15,065,814 15,209,063 15,260,978 15,246,881
Start-up cost 44,685,000 53,067,076 38,001,262 22,792,199 7,531.221 -7,715,660
9.0 Future plan
Figure 37: Passengers travel between Perth to Newman
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
3,000.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Thousands
Perth-Newman airline statistics
Passenger carried Available seats

Figure 38: Expect passengers travel between Perth to Newman
Because the West Australia is developing quickly and Black Swan Airline is Perth
based, our future flight route will mainly due to WA internal-state flight.
According our calculation, the number of passengers travel between Perth and
Newman has a sharply increase during the past 5 years and will continue grow for
next 5 years (see Figure 37). The load factor between Perth and Newman is lower
than other hot airlines but it has a great increase for next years which cannot be
seen for other hot airlines (see Figure 38). Therefore, in the future, our company
will start new route internal the WA, such as Perth to Newman after the pay-back
time. In addition, because the internal-state airlines are short-time flight and the
number of passengers is lower than hot airlines, our company will operate smaller
aircraft than A330. (Appendix V Aircraft Specifications (A320) & Appendix VI
Compare between A320 and B737)
58.0
59.0
60.0
61.0
62.0
63.0
64.0
65.0
66.0
2014 2015 2016 2017 2018 2019
Expect load factor of Perth-Newman airline
% Load factors

10.0 Our company market competitiveness (SWOT)
For a detail analysis of SWOT please refer to Appendix VII SWOT Analysis.
Figure 39: SWOT analysis

Appendix I Aircraft Specifications (A330)
Dimensions
Performance
Range 13 400 km
Mmo M0.86
Max ramp
weight
230.9 (242.9) tonnes
Max
take-off
weight
230.0 (242.0) tonnes
Max
landing
weight
180 (182) tonnes
Max zero
fuel weight
168.0 (170) tonnes
Max fuel 139 090 liters
Overall length 58.82 m
Cabin length 45.00 m
Fuselage width 5.64 m
Max cabin width 5.28 m
Wing span (geometric) 60.30 m
Height 17.39 m
Track 10.69 m
Wheelbase 22.20 m

Appendix II Current market of each route

Appendix III Comparison between leasing and buying aircraft
1.0 Criterion
 Calculate the NPV of the lease alternative
 Calculate the NPV of the buy alternative
 Choose the alternative with the lowest NPV cost
2.0 A330-200 Aircraft cost
 Market value: AUD$102,542,000 (USD$93,000,000) (Flightglobal.com,
2013)
 Listing price: AUD $241,060,000 (USD $216,100,000) (AIRBUS, 2013)
 Acquisition date: 30th June 2015
 Remaining asset life: 15 years (2013 made aircraft)
 We will sell the aircraft on the end of the 6th year at an estimate price of
49.982million AUD (45million USD, (Flightglobal.com, 2013)).
 Lease terms: AUD$882,079.983 per month (10,584,960 per year)
(Flightglobal.com, 2013)
 Airline bank borrowing rate: 10% (Pelt, 2014)
 Airline financial year end: 30th June
3.0 Calculation
3.1 WACC
The after tax WACC could be calculated through Formula 6. In Formula 6,
D and E are the market values of the firm’s debt and equity, V =D + E is the
total market value of the firm, 𝑟𝐷 and 𝑟𝐸 are the costs of debt and equity,
and 𝑇𝑐 is the marginal corporate tax rate.
𝑊𝐴𝐶𝐶 =
𝑟 𝐷×(1−𝑇𝑐)𝐷+𝑟 𝐸×𝐸
𝑉
Formula 6
We assuming the debt ratio of our company is 20%, the 𝑟𝐷 equals to that
of the 10-year Australia treasury bonds which is 4.18% at 12/03/14
(Bloomberg, 2014), and 𝑟𝐸 is 10%, so WACC = 8.5852%. Therefore,
according to the WACC, we can get the discounting factor.
3.2 Tax-paying lease
The According to Peter’s book (Morrell, 2012), an evaluation for the
government subsidiary must take into account the delay between the
payment of interest or rental, and the cash benefit of tax credits. The
following formula derives an acceptable approximation for the after-tax
discount rate from the pre—tax rate:
Tax-paying time for leasing could be calculated through Formula 7.

Therefore, it is easy to get that the tax should be paid after 18 months,
which is 1.5 years. Thus, 𝑅2 which could be calculated through formula 7
is 7.15%. Therefore, the costs for leasing and purchasing could be
calculated as shown in Figure 15 (p.18).
𝑅2 = 𝑅1 −
𝑅1×𝑇
(1+𝑅1×𝑇) 𝑛
Formula 7
Where: 𝑅1= Lessee’s pre-tax borrowing rate (10%)
𝑅2= Lessee’s after-tax rate
T = Rate of corporation tax (30%)
n = Delay of tax payment in years

Appendix IV Port Cost
1.0 Passenger movement fees
The charges for head tax in Melbourne = $10, Sydney = $9, Perth = $15.419,
Brisbane = $3.28, Gold coast = $5.59.
In the case of black swan airlines, number of passengers travelling per year in
Melbourne airport =651555, Perth airport = 517775, Sydney airport =619870,
Brisbane airport = 89460, Gold coast airport = 45990.
Therefore, the passenger movement fee could be calculated through Formula 8.
𝑚𝑜𝑣𝑒𝑚𝑒𝑛𝑡 𝑓𝑒𝑒 = 𝑝𝑎𝑠𝑠𝑒𝑛𝑔𝑒𝑟 × 𝑐ℎ𝑎𝑟𝑔𝑒 𝑓𝑒𝑒 Formula 8
Passenger movement fees at Melbourne = 6,515,550
Passenger movement fees at Sydney = 5,578,830
Passenger movement fees at Perth =7,983,572
Passenger movement fees at Brisbane = 293,429
Passenger movement fees at gold coast = 257,084.
Total passenger movement fees =$ 20,628,465.
2.0 Landing fee
There is no charge for landing at Melbourne, whereas for Sydney it is $4.26 per
passenger, for Perth = $8.127×MTOW (230) = 1869.21, For Brisbane =
$7.87×MTOW (230) = $1810.1, For Gold Coast airport = $16.50×MTOW (230)
= 3800.
In the case of Black Swan airlines, total landings at Sydney = 1355, Perth = 1355,
Brisbane = 210 and Gold Coast = 105.
Landing fees at Sydney = 1,237,115
Landing fees at Perth = 2,533,850
Landing fees at Brisbane = 380,100
Landing fees at Gold Coast = 399,000
Total landing fees = $4,550,065
3.0 Air navigation charge
Terminal charges and Navigation charge are calculated as Formula 9 and Formula
10 shown.
𝑇𝑒𝑟𝑚𝑖𝑛𝑎𝑙 𝑐ℎ𝑎𝑟𝑔𝑒 = 𝑝𝑟𝑖𝑐𝑒 × 𝑀𝑇𝑂𝑊 Formula 9
(MTOW of A330-200 is 230 tonnes).

Terminal charges at Melbourne = $1262.7
Terminal charges at Sydney = $1288
Terminal charges at Perth = $1810.1.
𝑛𝑎𝑣𝑖𝑔𝑎𝑡𝑖𝑜𝑛 𝑐ℎ𝑎𝑟𝑔𝑒 = 4.04 × (
𝑑𝑖𝑠𝑡𝑎𝑛𝑐𝑒
100
) × √𝑀𝑇𝑂𝑊 Formula 10
Total take off s from Melbourne = 1615, Sydney = 1355, Perth = 1355, Brisbane
= 210, Gold Coast = 105.
Navigation charge at Melbourne = 2,039,260
Navigation charge at Sydney = 1.745,240
Navigation charge at Perth = 2,452,550
Navigation charge at Brisbane = 93,660
Navigation charge at gold coast = 40,320
Total Navigation charge = 6.371.030.
4.0 Catering charge
The base charges for catering are taken as, business class = $25, Premium
economy = $20, Economy = $15 and low fare =$15.
Total number of passengers on board per year is 963,375.
Number of business class travelers = 82850 x 25 = 2,071,250
Number of premium economy travelers = 1657000 x 20 = 3,314,000
Number of economy class travelers = 512515 x 15 = 7,687,725
Number of low fare travelers = 202310 x 15 = 3,034,650
Total charge for catering = $16,107,625
5.0 Security screening
The charge for security screening at Melbourne = $4.15, Sydney = $2.10, Perth =
$2.732, Gold coast = $1.6.
Charge for security screening at Melbourne = number of passengers x price =
651555 x 4.15 = 2,703,953.
Charge for security screening at Perth = 517775 x 2.732 = 1,414,561.
Charge for security screening at Sydney = 619870 x 2.10 = 1,301,727.
Charge for security screening at Gold coast = 45990 x 1.6 = 73.584.
Total charge for security screening = 5,493,825.

Appendix V Aircraft Specifications (A320)
Dimensions
Performance
Range 6 100 km with Shark lets
Mmo M 0.82
Max ramp
weight
73.9 (78.4) tonnes
Max take-off
weight
73.5 (78.0) tonnes
Max landing
weight
64.5 (66.0) tonnes
Max zero
fuel weight
61.0 (62.5) tonnes
Max fuel
capacity
up to 24 210 (27
200) liters
Overall
length
37.57 m
Cabin
length
27.51 m
Fuselage
width
3.95 m
Max cabin
width
3.70 m
Wing span
(geometric)
35.80 m with Shark lets
Height 11.76 m
Track 7.59 m
Wheelbase 12.64 m

Appendix VI Compare between A320 and B737
Aircraft specifications A320-200 B737-800
Purchase price 93.9 million 90.5 million
Range 6100 km 5500km
MTOW 73.5(78) 79
Seating capacity 180 189
Maximum speed 903 km/hour 970km/hour
Fuel capacity 7900 gallons 4780 gallons
Fuel consumption 3353.9 Liters/hour 3013.2 liters/hour
Engine
Engine type- V2527-A5 Maximum Speed: 527 mph
Engine Weight: 2,359kg take off distance: 5,015 ft.
Compression ratio: 32.8:1
By pass ratio: 4.8:1
Thrust: 117.88 KN
The V2527 has gained share of Airbus A320 in recent years. IAE has also launched a
modification enhancement package for the V.2500 termed V.2500 select, which helps
in 1% reduction in fuel burn and 20-30% reduction in maintenance costs.
In most cases V.2500 is more fuel efficient than other variants of CFM56-5A/5B
series in order of 0.5-5%.

Appendix VII SWOT Analysis
1.0 Strengths
 Newly body aircrafts
Our new aircrafts are more fuel efficiency which could help our company
save much money on fuel. In addition, the mechanical failures of the new
aircrafts are rare. Therefore, our maintenance cost will be much lower and
our flight will have less cancelation because of the fault of aircrafts.
 Single type fleets
More cost efficiency, can substitute.
 Based on a quickly develop city
Perth is a fast growing market, WA potential, geographic distance between
WA’s cities is suitable for flight. (US airways, 2014) Therefore, the flights
internal WA will grow quickly which leads to our company a bright
development in the future.
 Our Network
Our company has six mature routes, which are PER-MEL, PER-SYD,
MEL-SYD, MEL-BNE, SYD-BNE and SYD-OOL. The market is stable, so
that our company could easily get profit. In addition, including both business
and holiday routes can meet a large variety of demands of both business and
leisure travel.
 Our unique cabin layout
Aiming at the high yield passengers, our unique three-class-cabin layout
which gives different passengers more choice to choose will attract more
consumers than our rivals. In addition, our business class’s seats are more
comfortable when comparing with Qantas domestics flight (Figure 16, p.21)
because our seat can totally lay as a bed, so that passengers could sleep well
during the overnight flight. It will attract more businessmen travel by our
aircraft.
 Low debt ratio financial
Low debt ratio makes our company have more revenue that could be used for
developing instead keep it to pay back the debt. On the other hand, a small
ratio of debt gives our company more money to use for start-up the company
and makes our company pay less tax at the end of the year.
 Competitive Advantage
We already have well-designed market strategy, good fuel policy, very
aggressive price strategy aim to deliver a high-standard service as well as
attractive

price. They are our main pillar in competition with other airlines, as
differentiation will benefit us.
 Well-skilled Employees
Our Company has a good plan for hiring and training our staff. We will hire
and train some of our own pilots and crews and try our best to make them be
loyal to us. We are planning to hire management employees of a large variety
of backgrounds, such as business, engineering and management. They are the
most valuable assets of our company, which will benefit to all of us.
2.0 Weaknesses
 Too dependent on the business class traffic
Since our profit mainly comes through the daily business class passengers,
and the business travel demand is highly depend on the economic status.
When the economic situation doesn't go well, our revenue will decline. (Wiki,
2014) (Pelt, 2014).
 Loyalty to the rivals
Our rivals already operating on these routes for years, many business class
passengers are already their members. It will cost more to attract passengers
from the competitors. (Southwest airlines, 2014).
 The net assets or equity
Since we don’t have enough assets, we might face problems such as
attracting more investments.
 Our limited frequencies
Because we are planning to operate on the six routes, it has diluted our
frequency on a single route, so we might loss some revenue because we don't
have enough frequencies.
3.0 Opportunities
 Recovery of global economy and Australian economy
Government’s initiatives to stimulate the economy, The Australian economy
is forecast to grow by 2½ percent in 2013-14 and 3 percent in 2014-15,
according to the au government. (Australian Government, 2014)
 The IATA
The IATA is forecasting an industry profits in the global airline industry
especially in Asia and Pacific area. (IATA, 2014)
 WA demand’s rapid growth
The traffic demand in West Australia boomed rapidly in last few years. As a
company based at Perth, further expansion of our business will become easy
and also

benefit our existing routes. (BITRE, 2014)
 Homogenous service
The highly homogenous service of Qantas and Virgin create a chance to
allow a third airline enter the market. There will never be a perfect service,
the customer who are familiar to their services want to try something new. In
addition, as we are new, we should have a chance to attract their customer as
we differentiate our service.
 Government subsidies
The WA government gives new start-up companies subsidies which helps our
company start easily with more cash flow.
 Quick development of IT and digital technology
The new reservation system which is quite convenient for consumers to use
will boost the ticket sales. In addition, new in-flight entertainment system,
on-board WIFI and media will attract more passengers travel by our aircraft
and will bring more revenue to our company, such as leasing iPad, charged
movies and games.
 Win-win partnerships
As a new entrant, our potential partner with a financially stable company
could be another opportunity that would improve Black Swan’s condition.
4.0 Threats
 The Australia’s sluggish economy
The economy of Australia is still depressed which makes the unemployment
still rising and the fragile business and consumer confidence tainting the
performance outlook for the coming year.
 The irregular exchange rate
The exchange rate of AUD to USD is fragile and will influence the cost for
airlines because the international payment are fully use US dollars.
 The irregular fuel price
The volatile market price of the fuel is a major danger for all airlines. (Batt,
2011) That is because the mainly cost of operating flights is the fuel cost. A
small change of the fuel price could lead to a huge lose for airline companies,
especially for the small companies which do not have much cash flow.
 The carbon tax
Many airlines today reserve a carbon tax each year, as in the future, the world
could charge every airline for carbon emission which will be a large cost for
every airline.
 The interest rates

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