The New England Patriots recently became the first National Football League $($NFL$)$ franchise to buy its own team aircraft. The Patriots purchased two Boeing $767$ planes for a total of about $$12$ million. Both planes have been painted with the team$$s logo and colors for another $$500,000.$

The Patriots will use the planes for the ten round trips for its away games during the $20232024$ season. If the team would make the playoffs or Super Bowl, it would also use the planes for those games.

If a franchise does not own its own planes, the costs of chartering planes is estimated to be about $$4$ million for the season.

The Patriots management has indicated that it may rent out the planes when not in use by the team.

Discussion Questions

$1.$ The Patriots estimated that operating their two airplanes would incur the following costs for the year$/$season:

a$.$ $$800,000$ for crew salaries $($pilots and attendants for the whole year$)$

b$.$ $$950,000$ for fuel

c$.$ $$650,000$ for maintenance

d$.$ $$300,000$ for insurance

e$.$ $$250,000$ in landing$/$gate fees

f$.$ $$400,000$ in storage of the planes for the year

g$.$ $$225,000$ in transportation to and from the airport

h$.$ $$600,000$ in depreciation

Compare the cost of operating their own planes with the cost to charter the needed planes just for the games when needed.

$2.$ With that information explain why you think the Patriots decided to own their aircraft rather than chartering from others?

$3.$ What qualitative factors may have influenced the Patriots$$ aircraft decision?

$4.$ If the Patriots decided to rent their aircraft out to others when they are not using it $($off season$)$ which of the costs listed above would be relevant to deciding how much to rent it to others for? $($Imagine you have to justify the price you are charging for the rental$)$

$5.$ What was your reasoning behind including or excluding all of the costs listed in #$4.$

$6.$ How much would the Patriots have to make from renting out the planes $($cash flow on top of any cost savings$)$ during a year to give them a positive NPV$?$ Go ahead and estimate a reasonable cost of capital and explain your calculations.