Stefney Christian Date: 06/26/2023 To: From: New England Patriot Subject: Analysis of Aircraft Purchase vs. Chartering Decision I've done a thorough analysis of the decision to buy or charter a plane for the Patriots' away games, as well as the option to lease the purchased plane. I present findings and recommendations for review based on the information and considerations presented below. 1. Costs of chartering aircraft for away games: Charter fees: The team would have to pay for the rental of the aircraft, which includes the cost per hour of flight and any additional charges for services. Fuel costs: The team would be responsible for covering the fuel expenses for the flights. Maintenance and repairs: If any issues arise during the flights, the team might have to bear the costs of maintenance and repairs to ensure the safety and reliability of the aircraft. Crew expenses: The team would need to cover the salaries, accommodation, and other expenses for the flight crew members. Insurance: The team would have to acquire insurance coverage for the chartered flights, including liability insurance. Ground handling and parking fees: Charges associated with airport facilities, parking the aircraft, and ground handling services would need to be paid. 2. Costs of owning and flying own aircraft: Aircraft acquisition: The initial cost of purchasing the aircraft, such as the two Boeing 767 planes bought by the Patriots for $10 million. Aircraft maintenance: Regular maintenance and inspections, engine overhauls, and repairs to keep the aircraft in airworthy condition. Crew salaries and training: Hiring and training pilots and flight attendants, along with their ongoing salaries and benefits. Fuel costs: The team would still have to cover the expenses for fueling the aircraft. Insurance: Obtaining comprehensive insurance coverage for the owned aircraft, including hull insurance and liability coverage. Storage and hangar fees: Renting or building hangars to store the planes when not in use. Regulatory compliance: Complying with aviation regulations, licensing, permits, and certifications. Depreciation: The value of the aircraft depreciates over time, which would be an accounting cost but not a cash outflow. 3. Costs appearing on both lists and relevant to the Patriots' purchase decision: Fuel costs Insurance expenses Crew-related expenses (salaries, training, etc.) Maintenance and repairs 4. Qualitative factors influencing the Patriots' aircraft decision: Branding and image: The planes painted with the team's logo and colors would enhance the Patriots' brand and create a distinctive identity. Control and flexibility: Owning the planes allows the team to have greater control over flight schedules and logistics, potentially leading to improved performance and player well-being. Team cohesion: Traveling together on owned planes can foster team bonding and create a more cohesive atmosphere. Long-term cost considerations: Assessing the potential cost savings and benefits of owning planes over the long run. 5. Costs relevant to pricing decision for renting the planes: Rental rates: Determining the appropriate rates based on market demand, competition, and the cost structure associated with owning and maintaining the planes. Marketing and advertising expenses: Promoting the rental services to potential clients and attracting customers. Additional services: Pricing any additional services or amenities that might be offered along with the plane rental. 6. Aircraft depreciation and its relevance to rental pricing: Aircraft depreciation is generally not a relevant cost to consider when pricing the rental of the Patriots' aircraft. Depreciation is an accounting concept that represents the reduction in the value of the asset over time. Rental pricing is typically based on operational costs, market demand, and competition, rather than accounting depreciation. 7. Capital budgeting tools for analyzing the aircraft purchase decision: Net Present Value (NPV) analysis: Assessing the present value of cash flows associated with the aircraft purchase, including acquisition costs, operating expenses, and potential revenue from renting the planes. NPV helps determine the project's profitability. Internal Rate of Return (IRR): Determine rate of return from aircraft purchases. Evaluate project feasibility by comparing IRR to desired rate of return or cost of capital. Thank you for your attention. Sincerely, Stefney Christian

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