Advertisements

Managers should know the numbers


At the end of June this year, Michael O’Leary from Ryanair was his usual self at the Paris Airshow. He let a few jibes fly at almost everyone. He also signed an order with Boeing for new aircraft, worth around $1.5 billion. Plans for future aircraft purchase were mentioned too and O’Leary compared two possible aircraft – one from Boeing and one from Airbus. While he suggested both were similar aircraft, the Boeing has 9 more seats and he said ‘that’s worth a million bucks’. When I read this , I thought is this just another quip or does we know his numbers well?

So, here are my calculations:

9 seats at average revenue of €70 = €630

Assume four flights per day per aircraft, so 630 x 4 =€2,520.

Finally, assume 360 flying days per year, this gives 360 x €2,520 = €907,200.

Let’s not argue over the rounding, and maybe my sums and assumptions are not correct. But a round €1million per aircraft per annum adds up to a lot of money. So although O’Leary’s rule of thumb may seem like a quip, it seems to be quite a good rough measure. He is an accountant after all!

Advertisements

Tags: ,

About martinjquinn

I am an accounting academic, accountant and author based near Dublin, Ireland.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: