MBAA 523 Advanced Aviation Economics – MEMO

This assignment has three objectives: 

1. Become familiar with the type and magnitude of mainline aircraft operating costs; 
2. Understand the operating economics of new versus older aircraft; and, 
3. Learn how net present value analysis is used in capital acquisition decision-making. 

InselAir has engaged the aviation consulting firm IFC International to evaluate whether it should continue its fleet expansion with new aircraft instead of the aging McDonnell Douglas MD-80 aircraft that are the backbone of its small fleet. You are the senior financial analyst with IFC assigned to this project and will prepare a memorandum with your conclusions to InselAir’s Chief Executive Officer Albert Kluyver.