Profit margin, something that i don't get...

[elitemedia]

Hi everybody,

I have actually a problem with my profit margins, which are ridiculous... 0,47% , how do you manage them to get higher ? I dont understand, i own a lot of my aircrafts, my personnel is always at 100% exactly (not more not less) i make the rates which are proposed... if i try to raise prices of 5% my LF's dramaticly drop above 50%....

What am i doing wrong ? my aircrafts are used around 18 hours a day (213 aircrafts fleet).... my company image at 89%....

Does anyone have the same problem ?

[Kontio]

The way I understand it is that if you spend almost all your profit on airplanes (lease or buy), that will reflect badly on your profit margin. I'm not really worried about that, low figures just mean that I am trying to grow as rapidly as I can. What else can you spend your money on, anyway? Someone who understands the income statement better may want to correct me, though...

[elitemedia]

Well maybe im wrong, but if you buy aircrafts it shouldn't affect and drop down your profit, as own aircrafts are part of airline value ?

[ban2]

your profit margin will drop if you buy and keep buying but your company value should keep going up.

[Tarkan]

I am not sure if this will help you but by my understanding, the margin is a function of your total profit divided by your sales revenue * 100 to give you a percent
Its calculated on a monthly basis

There could be several reasons why your costs are such a high proportion of your income
- High maintenance
- High Fuel
- Cash issues if you are expanding your fleet rapidly
- High leasing

The best way would obviously be to improve your sales revenue and cut costs out a bit..perhaps a period of consolidation if you are expanding rapidly?

[blair21088]

ban2 has it right. when you are growing your airline all your profits get used to buy or lease new aircraft which kills your profit margin.