Economics for Engineering Management
Airplanes -- Internet access -- Technological innovations, Engineering economy, Economic analysis, New products -- Development
Air Internet, LLC was established in January, 2000 to provide Internet service on airplanes. We completed a market survey and established that there would be sufficiently high demand for our service to make the endeavor profitable. We also completed a technical analysis to determine what would be necessary to make the service available. Finally, we conducted an ergonomics test to discover usability issues. We have resolved the potential problems in these areas and are ready to proceed with development plans.
Advances in supporting technologies and their commercialization is continuously making portable computing a necessity. Despite recent dot-com business reversals, business people need access to the Internet particularly on long flights, so they may exchange email messages, retrieve documents from company networks and participate in virtual meetings. Essentially, we plan to pull together existing technologies, with minor adaptations in some cases, to provide a service. Our timing to introduce the service into the market must be immediate as the opportunity could easily be invented or copied elsewhere. Also, we estimate the life of this service to be five years due to rapid advances in technology.
To this end, we need $11,163,193 immediately for development, production and marketing in the first year (2001 ). According to our estimates, our net profits for years two through five will be $106,835,359. We used the Internal Rate of Return (IRR) method for the project selection. As the project is a high-risk investment, we are looking at a rate ofnreturn in excess of 100%. Business justification and economic analysis follows in this paper.
Chauhan, Avnish; Gul, Rakhman; Ho, Jonathan C.T.; Iqbal, Shahzada; and Unruh, Janet, "Economic Analysis of Air Internet, LLC" (2001). Engineering and Technology Management Student Projects. 2114.