Comparing B767 & B787: Financial Analysis & Recommendation - Essay Sample

Introduction

In the paper at hand, there is the presentation of the financial information for the WestJet surrounding the two sets of aircrafts, the old B 767 and the new B 787 which needs to be purchased depending on its financial favorability to the project at hand. The paper mainly entails the presented analysis of the financials for the two aircrafts, followed by the recommendation on the way forward to take regarding whether the old B 767 aircraft should be maintained for ,use or the new B 787 should be purchased and sued in the newly acquired market of European countries.

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First, there is the detailed presentation of the methodology used in the conduction of the analysis where the financial stature of the two aircrafts such that there is the final conclusion on the recommended route to be taken by WestJet company. Using the financial information of Embry Riddle aeronautical university, where there was the recorded financial information such as operational costs and statistics, ratios, financial data, as well as the operating indicators, there was the extracting of the information specifically belonging to the WestJet company. The information was then used for analysis activities in the excel workbook. The extracted information, specifically, belonged to the Boeing 767, the old model of aircraft in the fleet of the company. There was also the use of researched information belonging to the newly developed model of Boeing 787 which has similar mission capabilities like those of Boeing 767 but with some advantages such as reduced fuel consumption per seat mile, less maintenance costs, more comfort to the passengers, as well as a shorter payback period and operating life.

The information used in the excel, which was fed into the empty cells of the formatted excel spreadsheet, were those of the gallons/block per hour, block hours/year, maintenance costs/block hour, number of seats, block hour speed, purchase price, and finally the sales price of the old aircraft being disposed after its useful life (Lu, 2010). Since the excel spreadsheet had been programmed, there was the conduction of the sensitivity analysis facilitated by the use of different values of discount rate and projected fuel costs. The results of the run sensitivity analysis in the excel spreadsheet were those of different values of net present values as well as those of the costs per available seat mile (CASM) (Wittmer et al, 2011). The two values were required to be changing as the discount rate values were changed during the conduction of the sensitivity analysis. The net present values, located in the lower right corners of the parallel works of the two aircrafts, represented the operating costs which of the two aircrafts, the expectation from the results were that the aircraft with the lowest net present value as well as the cost per available seat mile was chosen as the viable option for the project since it had the favorable values for the project. Such values include low costs of maintenance, low fuel consumption, more comfort for the passengers aboard the aircrafts, and thus more reliability on the aircraft to perform the air transportation activities. Such an aircraft, including its fleet, would dictate the cost effectiveness of operating them as well as heightened profits.Thus, after filing all the empty cells of the excel spreadsheet provided, there was the running of the sensitivity analysis using three different values of discount rates. Using the discount rate of 0.8, the B767 part had the net present values of $333,998,023 and the cost per available seat mile of 0.00089 while the B 787 part had the net present values of $498,862,219 and the cost per available seat mile of 0.00085. the second sensitivity analysis had the net present values of $915,408,824 and the cost per available seat mile of 0.00243 while the B 787 part had the net present values of $2,048,203,413 and the cost per available seat mile of 0.00350. The third sensitivity analysis had the net present values of $654,981,830 and the cost per available seat mile of 0.00174 while the B 787 part had the net present values of $1,324,953,666 and the cost per available seat mile of 0.00227. it can be observed that there is a consistency in the values of the costs of available seats per mile, which are lower for the B787 and higher for B767. However, for the values of the net present values, for the three sensitivity analyses carried out, those of B767 are lower than those of the B787. Thus, the operating cost values can literally be taken to mean that the new Boeing 787 aircraft can require some expensive machinery and technology for maintenance, which also rhymes its profitability level (Mondal, 2015). However, once maintained, it can last for a longer period of time compared to the Boeing 767 aircraft which requires more frequent maintenance in the long run (Wittmer, Bieger, & Muller, 2011). Thus, from the analysis, it is recommended that WestJet company acquires the new B787 fleet of aircrafts.

Fuel price discount rates 1.64 1.86 1.92

1.2% 1.6% 1.8%

References

Lu, B. (2010). The Boeing 787 dreamliner designing an aircraft for the future. Journal of Young Investigators, ISSN: 1539, 4026, 34.

Mondal, K. (2015). Multivariable control of fixed wing aircrafts. Arizona State University.

Shehadi, M., Hosni, M., & Jones, B. W. (2015, March). Airflow distribution in the longitudinal plan of a Boeing 767 mockup cabin. In ASME 2014 International Mechanical Engineering Congress and Exposition. American Society of Mechanical Engineers Digital Collection.

Wittmer, A., Bieger, T., & Muller, R. (Eds.). (2011). Aviation systems: management of the integrated aviation value chain. Springer Science & Business Media.