Pegasus

Analysis of Pegasus case

I will describe the main mistakes made on the Pagasus Travel Business Plan through the following memo.

The first issue is portrayed in the cover letter where it is indicated, the new business will be financed with venture capitalists and bank loans. Normally, bank loans are not granted for venture activities. Only few lines of credit are obtainable mainly through governmental support to small enterprises but this is not the case. The original investment is higher than USD$2M.

Then, one of the assumptions to support this business is the expansion of the company to the European market, mainly UK. Nevertheless, most of the demographic information is built using US studies and just mentioned that UK senior citizens will be 3.2M but there is not an additional analysis of the european demographics, market and competitors. Extrapolation of the US environment is not a right assumption to support expansion and profits in Europe.

The company assume to have losses during the first three years until they enter in the european market. If the profits are really obtained with the entry to Europe, why Pegasus is not focusing all its energy in Europe from day 1.

European market also represents that one of the main aspects to analyze is the devaluation rates but this is only mentioned in a paragraph without a deep analysis of how to handle the business under different exchange rates scenarios.

Additionally, all statistics showed a very good increase on the use of internet for online booking, use of internet by senior citizens, baby boomers increase etc, all these studies referred to periods 2 or 3 years or more after the year of incorporation that can be inferred is 2000. The first year sales are expected to be 5% of Travelocity’s revenue in 1999. There is gap in the data from the first year of operations and the market forecasted data. The case failed to address current demands.

The basis of the business is to outsource the service from...