Question
Business overview Australian Flying School (AFS) is a company that provides aircraft pilot training and specialist instruction services to individuals (clients) which was incorporated in
Business overview Australian Flying School (AFS) is a company that provides aircraft pilot training and specialist instruction services to individuals (clients) which was incorporated in the State of Victoria in 1980. Tracey Miles and Jenny Wallis are the Directors of AFS, in addition to being the Chief Flying Instructors accredited by the Civil Aviation Authority (CAA). AFS is located at Newtown Airport, a private airport on the outskirts of Sydney. Each year
Newtown Airport is the location of the annual air-show and AFS is a key participant in the air- shows program. Tracey and Jenny view the expense as a marketing exercise aimed to
attract new prospective students. The flying school employs three Grade 1 Instructors and five Grade 2 Instructors, in addition to five administrative staff who manage the accounts receivables and payable functions, and student licensing confirmations with the CAA. The instructors receive company benefits of free independent (non-instruction) flying time of 200 hours per year to any location in Australia; however, this flying time is the minimum required by the CAA to maintain the Instructor rating licence. AFS is generally a highly profitable business, however in the 2019/20 financial year student enrolments were at an all-time low due to the Covid-19 pandemic and a tax loss of $250,000 was reported. Strategic Business Transactions & Key Client Matters The Directors have provided the following statement of the strategic business transactions and key client matters which have occurred over the 2020/21 financial year.
- After heavy marketing, Jenny managed to secure a training contract with an Australian based commercial airline, Kangaroo Airlines Ltd. The contract provided for AFS to train their first officers for a period of three years, commencing 10 May 2021 at a cost of $700,000 per annum. However, on 20 June 2021, 3 | P a g e Kangaroo Airlines decided to terminate their contract, effective immediately due to undisclosed reasons. Kangaroo Airlines refused to compensate AFS and so AFS engaged their solicitors to recover the loss in revenue. Finally, on 30 June 2021, Kangaroo Airlines agreed to pay compensation of $1,000,000 after lengthy legal discussions.
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