Asea Brown Boveri

1
The Bottom Line
2
Eagle AirlinesShareholders Report
3
Debt Equity Ratio
4
Return on Equity
5
Net Income
6
Sources of Profit
7
Stock Price
8
Finance

• The key to the whole finance plan was that
  operations generated cash flows
• Debt, then repurchases, then dividends
• Lowest debt possible
• Quarterly debt service obligation
• Debt over repurchases

9
Finance

• Short, long term interest rate differences
• Stock repurchases
• Repurchased stock every quarter using operating
  cash flows
• After making extra large debt payment
• Dividends
• Beginning when no more expansion possible
• Smoothing
• Small increases each quarter

10
Going Forward

• Well positioned financially
• Essentially no debt
• Plenty of cash on hand
• Time to look at buying a competitor or making
  especially large stock repurchase

11
Markets

• Entered the resort markets (17, 20) early
• Entered markets (2, 3, 6, 13, 15, 11, 14)
• 17 markets, 48 flights
• Criteria
• Was our fraction of the market big enough for the
  route to be profitable?
• Avoided type A markets
• Who would our main competitors be?
• Avoided teams 1 5 because of their higher fare

12
Competitors

• Never any other true luxury carriers
• Several normal carriers charging maximum fare
  (.42) without providing any increased cabin
  service (1, 5)
• Quarter 6, an imitator (2) showed up
• Charging .42, providing highest cabin service

13
Our Response

• Team 2 operated in 1/3 of our markets we were
  in ½ of their markets
• Ran a promotional fare 1, bring our average fare
  down to .44 in those markets
• Part of the quarter 7 turnaround
• Reduced resort flights
• Ran promo fare 1 to push us above breakeven
• Conversion to smaller aircraft
• Retained promo fares through the recession,
  dropping all by the 12th quarter

14
Planes

• Purchased 7 planes
• 3 British Aerospace Jet Streams (18)
• 4 Havilland Dash 8 (36)
• Fit the luxury strategy
• Optimum range for the larger planes fit the 600
  mile distance to the resort markets.
• Plane mix changes (Qtrs 3,4,7,9,10)
• Mileage penalty (Qtrs 7 and 8)

15
Plane Mix

16
Passenger Load Factor

• Ran between 55-60, where a luxury carrier should
  be
• Breakeven was around 9 passengers per flight, or
  27 per day in a 3 flight market
• Average daily passengers in Q14 was 31.26
• Key was the spread between yield and cost of
  available seat miles

17
Our Strategy

• Cut Costs
• Changed Employee Compensation
• Focused on Paying Down Debt
• Diversification