Financial analysis of wing in ground effect craft using monte carlo simulation

Abstract

Wing in Ground (WIG) crafts have the benefit of an aircraft with their high speed compared to water vehicles but with lower fuel consumption. These advantages make WIG as ideal solution for short range water transportation. However, the in depth studies of cost and benefit analysis of investing on WIG craft has never been done. This study compared three vessels of WIG craft, two vessel of aircraft and one fast ferry boat, they are WIG 33 seats, 50 seats, 150 seats, Austal 38 m aircraft (SAAB 340 and SAAB 200) and Fast Ferry Boat 74 m. Various components of the vessel prices and expenditures based on the rated travelling distance including initial costs, operation and maintenance costs, during the 5, 10 and 15-year life cycle period were economically evaluated by means of Discounted Cash Flow (DCF) analysis. DCF analysis estimates relevant Net Present Value (NPV) cash flow annually by assists of Monte Carlo Simulation at a certain Discount rate that represents opportunity costs and risks. In this study, the Discount rate was taken as 5% and the passenger load varied from 75% to 100% of capacity for the Monte Carlo Simulation in calculating the NPV. The Sensitivity Analysis was also conducted to identify factors that affect the investment. It is found that total vessel capital costs is the highest for the Austal 38 m aircraft, whereas it is the lowest for the WIG craft 33 seats. In addition, annual saving (profit) is calculated from the difference between yearly income and investment cost. Profits were identified as the factor which has the biggest influence in the investment. Investment costs of the WIG craft involve approximately in range from 92% to 125% of the total capital costs. The usage time of the WIG craft, which is for only 10 and 15 years, can provide profits to the investor with a lower operation, maintenance and other expenditure. At the end of 10-15 years life cycle period, the profits of the WIG craft 33 seats and 50 seats for the travelling distance less than 100 km are higher than Austal 38 m and fast ferry Boat 74 m, because of lower start-up costs. But the WIG craft 150 seats provides slightly greater benefits than the WIG craft 33 seats and 50 seats when the WIG craft is used for the travelling distance from 50 km to 200 km. According to the Mote Carlo Simulations NPV results, the NPV amounts show positive values for each WIG craft during 10 and 15 years life cycle periods. But the investment costs approximated about 92% above the total capital costs are very high. The sensitivity analysis also found that the discount rate and passenger load of the WIG craft have small effect on the NPV amounts. In future, the results of this economic study encourage the utilization of the WIG craft for short distance water transportation potential in Indonesia, especially in the region cross-connection between islands.