Delta Song Case Analysis

The United States carries over one third of the globe’s total traffic, where Over 1.5 billion passengers fly annually. Over the past 20 years, air travel has grown at an average of about 5% per year, the reason for annual change is usually differences in economic growth, and of course other environmental factors, such as the current war. As a rule, the annual growth in air travel has been about twice the annual growth in GDP. Deregulation, liberalization, and competition have essentially altered the management strategies and practices of airlines. Productivity improvements and cost management have been two of the greatest concerns for US airlines for the past twenty years. As a whole, the airline industry must continue to improve their specialization in terms of fleet utilization, pricing and revenue management, and schedule optimization.

A. Some of the possible drivers of salary cost are Number or Departures, Revenue Ton Miles, Revenue Miles scheduled, Revenue passenger miles and there are countless more you could use.

The projected costs in 2004 (column 3) are calculated by dividing the actual costs for the first five months of 2004 (column 2) by the percent of 2003 costs that occurred in the first five months (column 1). For example, Atlanta’s actual 2004 costs of $40,228 divided by 2003’s 22.88% yields projected 2004 costs of approximately $175,822.

Southwest Airlines is a company that is known for its low ticket prices and profitability despite the highly risky industry in which it operates. This essay examines the cost behavior, cost volume profit (CVP), activity based costing (ABC), budgeting process, costing and decision making policies of the firm. The essay will discuss how the airline integrates these concepts in its daily operations.

The model analyses quarter by quarter. As off now the budget and expected revenue is as follows:

| Target # of Passengers = Fixed Cost + Target Profit/ Unit Contribution Margin = 3,600,000 + 1,071,428 / (Selling Price – Variable Cost Per unit) = 4,671,429 / (205 – 85) = 4,671,429 / 120 = 38,928.57

Salary cost for Delta consists of the payment to flight attendants and pilots so it can be determined by the hours flown. The miles and the time flown are correlated so between these cost drivers, available ton miles seems

Artist these days don’t earn as much money as they used to and the main reason is music files getting shared when they

The airline industry is an extremely competitive industry and is also a highly seasonal industry. Profit can be drastically affected by fluctuations in energy prices or economic downturns (Maverick, 2015). Key financial metrics utilized by analysts in the airline industry include the quick ratio, the return on assets ratio and the debt capitalization ratio, which was already covered earlier (Maverick, 2015).

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

Driver’s Cost = (% of wage overtime x budgeted hours x 1.5 x base wage rate) + (% regular pay x budgeted hours x base wage rate)

7. Though numbers given in the cost data can not be contested, I would definitely contest the way total cost has been computed. The item 345 department operates within a large manufacturing facility that churns out number of other products too. Hence judging the profitability of item 345 on the basis of total cost is not practical.

Piedmont Airlines recently invested over $1 million in state of the art equipment and employee development in order to forecast and analyze the appropriate amount of discounted fares to offer per flight. The company discovered that by offering several discounted flights to consumers willing to book their travel well in advance of their departure date left many options available for the business traveler who needed to book much closer to the actual departure date. The analysis was the task of the Revenue Enhancement Department (RED) managed by Marilyn Hoppe. While this state of the art equipment was a step in the right direction, Marilyn believed that there were still a lot of subjective decisions being made and

Airlines must operate within a low-margin, high-fixed-cost environment, making profitability particularly sensitive to decreases in volume, either from environmental factors (e.g., the September 11,2001 attacks) or from competition. Moreover, the airline business is labor-intensive. Labor costs as a percentage of revenues ranges from a low of about 25 percent for the low-fare airlines to almost 50

Some of the ways costs are figured in the airline industry are as follows: available seat miles, revenue passenger miles, load factor, and revenue per available seat miles. The available seat miles calculation is the “number of seats available multiplied by the number of miles flown” (Wikipedia, 2007). The revenue passenger miles calculation is the