Eagle Airlines Case

The scope of this report is to provide advisory content to Eagle Airlines regarding the profitability of investment in a new aircraft, Piper Chieftain, as well as general recommendations on the profitability of operations. For the purposes of the analysis, several methods were employed in order to evaluate how changes in uncertain input parameters affect profitability: case scenarios, one-way sensitivity analysis, two-way sensitivity analysis and Monte Carlo simulations. Sensitivity analysis highlighted the importance of two parameters on impacting the annual cashflow and thus profitability: capacity of scheduled flight and ticket price/person-hour, while indicated potential of profitability for the investment. The results of Monte Carlo analysis proved that the probability of a catastrophic loss is very unlikely, while the probability of the investment to prove profitable is 73.3%, so the purchase of Piper Chieftain is suggested. Finally, our general recommendation for Eagle Airlines is to focus on maintaining a strong presence in the scheduled flights since this category seems to have the largest impact on annual cashflow and overall profitability.