EASTERN MEDITERRANEAN UNIVERSITYDEPARTMENT:

TOURISM AND HOSPITALITY MANAGEMENT

NAME: FREDERICK BASSEY

STUDENT NUMBER: 135147

TITLE: APPLY BREAK-EVEN ANALYSIS CHPT 4 

COMPANY PROFILE

• Turkish Airlines was established on 20 May 1933 as State Airlines Administration

•Turkish Airline has been in existence for 81 years

•The slogan of Turkish Airline is Widen your World

•It has a Total number of 18,667 employees as at November 2013

•The Airline’s headquartered is at the Turkish Airlines General Management Building of Atatürk Airport Istanbul, Turkey

•Turkish Airline operates scheduled services to 41 domestic and 203 international airports in Europe, Asia, America and Africa

•It flights schedules covers 244 destinations

•Turkish Airline is the fourth-largest carrier in the world by number of destinations

Revenue 18.78 billion

Operating income 1.48 billion

Net income 683 million

Total assets 25.4 billion

Total equity 6.96 billion

COMPANY MISSIONTo become the preferred leading European air carrier with a global network of coverage thanks to its strict compliance with flight safety, reliability, product line, service quality and competitiveness, whilst maintaining its identity as the flag carrier of the Republic of Turkey in the civil air transportation industry.

COMPANY VISIONTo become an air carrier with;

•a continued growth trend over industry average

•zero major accidents/crashes

•most envied service levels worldwide

•unit costs equating with low cost carriers

•sales and distribution costs below industry averages

•an entrepreneurship that creates business opportunities for fellow members in the Star Alliance and takes advantage of the business potential provided by them

•a staff well adapted to modern governance principles by observing the best interests of not only shareholders but also stakeholders

•a personnel constantly developing their qualifications with the awareness of the close relationship between the benefits for the company and the added value that they contribute

CORE VALUES

•Honesty and Fair Dealing•Customer Satisfaction•Demonstrating Respect to Individuals•Innovation•Team Work•Leadership•Productivity•Confidentiality•“Open Door” Policy

BREAKEVEN ANALYSIS (APPLICATION)•Breakeven analysis is an analytical management tool

•Breakeven analysis is an analytical tool under COST-VOLUME-PROFIT analysis (CVP) which is an analytical technique for profit planning. CVP is the relationship between sales, cost and profits. This analysis studies the behavior of cost.

•The break-even level or break-even point represents the sales amount—in either unit or revenue terms

•A company has broken even when its total sales or revenues equal its total expenses. At the breakeven point, no profit has been made, nor have any losses been incurred

•The breakeven determines margin

The formula for calculating the breakeven point is give asBE Quantity = TFC/(P-VC)

This is the calculation for the number of unit to be sold for the firm to breakeven (no loss no Profit or TR = TE)

Example: say Turkish airline has a total fixed cost 2milliontl and variable cost of 3000tl and each seat in the aircraft sells at 5000 tl. How many seats will Turkish Airline have to sell in one day to breakeven?Solution:

FC= 2,000,000tlVC= 3000tlP= 5000tlBE quantity = TFC/(P-VC)2,000,000/(5000-3000)

= 1000 seats

Example 2: if Turkish airline wants to make a profit of 1million, how many seats will they have to sell? Using the figures from example 1

Solution = FC + Target profit/(P-VC)2,000,000+1,000,000/(5000-3000)

= 1500 seats

Example 3: if Turkish airline were to sell a total of 2000 seats, how much profit would it make?

Solution:

(R-VC)-FC = ProfitR= P * Nos of seat = 5000* 2000 = 10,000,000VC = VC * Nos of seat = 3000 *2000 = 6,000,000FC = 1,000,000Profit = (10,000,000-6,000,000)- 2,000,000

=2,000,00tl

Finally, a good understanding of the breakeven analysis will help management make strategic decisions, such as marketing, accounting (cost) etc…

THANK YOU FOR YOUR ATTENTION