Applying break even analysis: Case study of Turkish Airline

1. EASTERN MEDITERRANEAN UNIVERSITY
DEPARTMENT:
TOURISM AND HOSPITALITY MANAGEMENT
NAME: FREDERICK BASSEY
STUDENT NUMBER: 135147
TITLE: APPLY BREAK-EVEN ANALYSIS CHPT 4

2. 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

3. •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

4. Revenue 18.78 billion
Operating income
1.48 billion
Net income
683 million
Total assets
25.4 billion
Total equity
6.96 billion

5. COMPANY MISSION
To 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.

6. COMPANY VISION
To 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

7. •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

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

9. 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

10. The formula for calculating the breakeven point is give
as
BE 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)

11. 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= 2,000,000tl
VC= 3000tl
P= 5000tl
BE quantity = TFC/(P-VC)
2,000,000/(5000-3000)
= 1000 seats

12. 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

13. Example 3: if Turkish airline were to sell a total of
2000 seats, how much profit would it make?
Solution:
(R-VC)-FC = Profit
R= P * Nos of seat = 5000* 2000 = 10,000,000
VC = VC * Nos of seat = 3000 *2000 = 6,000,000
FC = 1,000,000
Profit = (10,000,000-6,000,000)- 2,000,000
=2,000,00tl

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

15. THANK YOU
FOR YOUR ATTENTION