A Case Study on Cost Estimation and Profitability Analysis at Continental Airlines

Business Strategy – BAD 4013 – SUMMER 1999 Case Study Southwest Airlines I. Strategic Profile and Case Analysis Purpose The mission of Southwest Airlines is dedication to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride, and company spirit. Twenty-seven years ago, Rolling King, owner of floundering commuter airline, and Herb Kelleher, King’s lawyer, got together and decided to start a different kind of airline that would provide a short-haul, low-fair, high-frequency, point-to-point service in the United States. The company began service on June 18, 1971 with flights between Dallas, Houston, and San Antonio (“The Golden Triangle” as Herb called it). Southwest Airlines is the fourth

the terrorist attacks in New York on September 11 hit the airline hard in the third quarter of

Even though other airlines have undergone mergers, United Airlines has maintained poor industry performance since 2010, which begins to provide the evidence of an internal problem. The airline has employed three CEO’s since 2010, one of which acted unethically with the organization’s resources (Kinicki & Fugate, 2018). Neither of the CEO’s approached the organization the same way, and neither of the CEO’s attempted to unify the organization; after CEO Oscar Munoz suffered a heart attack, many executives left and the cohesiveness of the organization suffered even further. Since Mr. Munoz’ return in 2016, profit have increased and progress has been reported in a few contract negotiations (Kinicki & Fugate, 2018).

In the past three years the airline industry has faced an unparalleled list of challenges and American Airlines has certainly had more than the others. Year by year AA has tried to recover with a great deal of effort to turn the company around. The strategies they are applying to counteract the status are : Lower costs to compete, give to the customers the service they are expecting

C V P Analysis 1 CVP Analysis Understand how cost behavior and cost-volume-profit analysis are used by managers. 2 Questions Addressed by CVP Analysis  How much must I sell to earn my desired income?  How will income be affected if I reduce selling prices to increase sales volume?

All these factors have allowed Alaska Airlines to rise and remain financially stable. The airline is one of few that weathered the 2000s financial crisis well, and avoided mergers when so many others have been forced into such actions. This report will analyze these factors and related them to Alaska’s current financial performance. It will then make recommendations to maintain profitability, and predict future airline status.

The purpose of this memorandum is to address the profitability issues at Continental Airlines and to estimate the costs for 2009 to forecast the future outlook of the company. To address these issues, I used regression analysis to observe what effect the 11% reduction in flying capacity would have on the firm’s future operating costs. I also used the results from the regression analysis to verify the costs that, if reduced, would further comply with the implementation of cost-cutting initiatives and operational efficiencies that the company is striving for. Lastly, I consolidated the data to forecast Continental’s financial outlook for 2009, then provided insight

Founded in 1971, Southwest Airlines is a low cost carrier that last year celebrated 41 consecutive years of profitability by posting record earnings in 2014 (PRNewswire, 2014). While its main competitive advantage is being able to provide service at a lower cost than other airlines, it also is able to differentiate itself from competitors through excellent customer service and through response in the form of rapid airport turn-around times and a larger number of flight options than its competitors. There are two main constants that have been critical to its success. From a corporate culture standpoint, the company values and empowers employees at all levels, creating a favorable labor relations climate. From an operations standpoint, the company has maintained the same strategic focus in four key areas that have kept the profits rolling in despite external upheavals, such as spikes in fuel prices, mega-mergers that solidified competition, and even the financial meltdown of 2008 and the 9/11 terrorist attacks, which saw drastic cutbacks in both business and leisure discretionary travel (Mutzabaugh, 2014). This paper will provide an overview of the company’s operating philosophy and explain how those four key areas relate to its overall strategy.

Today Virgin Atlantic finds itself in a year of change. With a new CEO at the helm, new aircraft arriving in the fall of 2014, and a new partnership, major changes are underway. 2013 saw pay freezes for personnel, eliminating a layer of management, redesign of food trays, and other cost cutting measures. The trend for 2014 has been to keep tightening the financial belt and reign in the high cost draining the company’s revenue. The implementation of the new routes with Delta should support the financial turnaround and help make Virgin Atlantic profitable again.

The history of the airline industry has proven to be one of the most turbulent and unreliable industries to date. Many airlines have found ways to succeed, or simply keep their heads above water, while other companies have not been so lucky. We 've seen legacy airlines such as Pan American and Trans World Atlantic, who once reigned the industry, fall beyond recovery into bankruptcy and forced to shut down, while other airlines have become very successful. One airline that has been able to make air travel a profitable business is Continental Airlines. Continental Airlines was founded in 1934 as a very prosperous company and over their colorful 64-year history has experienced both tremendous success and extreme difficulty.

IV. Strategy Formulation: The effort to control costs will force the company to focus on profitable routes and ruthlessly cut service to unprofitable areas going forward. (The company has shown a willingness to take this sort of approach.) It will also force the company to form strong alliances with other carriers that essentially protect its own territory by providing alliance coverage of different markets. Company officials will have to

Provided the business insights and financial analytics which allowed the CFO of ASCO Australasia make informed decisions for reducing costs and better understanding performance across all three divisions.

The current increase in fuel price gives impact on airlines all over the world. This lead to bankruptcies, reduction in flight amount, service and operation among airlines globally. Fuel and crew are the two major component in airlines and drives the operating cost.

The managing director of Gouna Limited, Andy Birk, relies on shareholders’ requests and his own interests when making decisions on new ventures or the development of a new product/service. This means that the Director does not consider other factors that may be influential in the decision making process. Making decisions based on his own interests makes the situation worse as there is no consultation with the rest of the shareholders or any expert that can offer valuable advice. Besides, the decisions are made without proper understanding of the costs associated with different business activities. This manner of decision making is bound to have detrimental effects on the company especially in its finances. This report discusses the need for proper understanding of cost behaviour at Gouna Limited. It also examines two of the methods used in deriving a cost function, and explains the Cost-Volume-Profit (CVP) analysis method.

This paper examines the stock and accounting performance of three major airlines in the United States in the aftermath of the September 11, 2001, terrorist attacks. September 11 (9/11) resulted in dramatic changes in the airline industry and had significant implications for the economic gains and future prospects of most airlines. Our study focuses on the stock market's perception of the viability of low-cost versus full-service business models in the aftermath of 9/11. We choose Southwest Airlines as a typical