T&H Airlines

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Management Report for T&H Airlines Executive Summary T&H is a domestic airline that until now has been self-insured. Current Company CFO, Bill Albertson, is studying the best option in terms of insurance for the company, to minimize risk at the lowest possible cost. To analyze this issue a simulation model for T&H Airlines was developed using the company data and the industry information. Two quotes were presented and considered by the company CFO. Quote number one has a premium of 150% of actual losses and a minimum and maximum of $5 and $12 per 1,000 insured, while policy two has a premium of 100% of actual losses and a minimum and maximum of $6 and $9 per 1,000 insured. After examining the results from the simulation model, and looking at numbers as well as graphs, from the two quotes, quote number two is more appropriated for the company. Background Recognizing the complexity of the industry and the imperative need to offer the best service at the lowest possible cost, it is important to do a comprehensive study to come up with the best alternative that suits the company’s needs. To remain profitable in this dynamic economy, it is necessary to be cost-effective and eliminate all the unnecessary expenses but at the same time protecting the company’s assets to the maximum extent possible. Therefore it is fundamental that the company acquire an insurance policy with enough coverage for partial hull damages and total hull losses that doesn’t boost overall costs unjustifiably. The main purpose of this management report is to establish the best alternative to self-insurance by the company, given the three possible options: Continue as self-insured, Quote one, and quote two. These options are examined based on the following probabilities than an event actually happens. 1. Probability of 0 total hull loss in a given year 2. Probability of 1

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