West Wind

Questions for Session 7

California Company (the yogurt manufacturer):

This West Coast company's CEO, Milo Winston, wants to exchange his old King Air 200 for Atlantic's Westwind. His King Air 200 is priced at $1.9 million and has agreed to buy the Westwind for $3.8 million if he is given a Demonstration flight. Since this commitment is not binding, there is a high probability of him not buying the Westwind in the end. As the West Coast Salesperson has said in the case, Milo does not seem like a potential buyer. And with the demonstration costs eating into the profits for Atlantic Aviation, it would not be a good decision to give Milo the demonstration flight. Also considering his company's Assets (7 million, inclusive of the King Air), it doesn't seem probable that he would spend 55.42% of its company's assets in the plane. He is ready to pay the $2 per mile for the demonstration trip but eventually there would be further losses in the whole deal which may not work out for Atlantic Aviation.

Thus in our opinion, the demonstration should not be given.

Steel Firm:

The CEO, Michael Redner has flown in Westwind and is happy with the plane. However, even after this they want 2 more demonstrations else they would cancel the order. The demonstration flights are of the total period of 10 days (the distance of which is not known). Thus the expenses would be on Atlantic Aviation even though $2 per statute mile would be given by Ellis.

In addition, Ellis has also asked for free training for the seven mechanics and pilots for the 3 planes. This cost also would have to be borne by Atlantic Aviation.

Looking at all the data, even though Atlantic abides with all the conditions put forward by Ellis, Atlantic would be able to maintain some profits and thus the demonstrations would be accomodable. Thus in our opinion, Atlantic should give the 2 demonstrations as requested by Ellis.

Chicago