ABSTRACT
This chapter requires the estimation of items in an airline's future profit and loss statement. It focuses on cash flow, which might also include assumptions on long-term finance, as well as working capital or short-term financial needs. The chapter presents an examination of airlines' approach based on shorter-term budgets and longer-term financial planning. The appropriate level of working capital is determined by the levels of current assets and current liabilities. Forecasts of cash disbursements should include capital expenditure, progress payments on aircraft acquisitions, future dividend and tax payments, and the proceeds of asset sales. The B777-200 is marginally the preferred alternative using the pay-back period and the net present value criteria, but the Airbus A330-300 comes out better on internal rate of return and profitability index. The pessimistic scenario might take a high fuel price increase, low GDP growth, and low market share. The chapter discusses the essentials of preparing the financial part of a start-up airline business plan.
