Transatlantic Airlines report Essay

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 airline industry has long attempted to segment the air travel market in order to effectively target its constituents. The classic airline model consists of First Class, Business Class and Economy, and the demographics that make up the classes have both similarities and differences to the other classes. For instance there may be similarities between business class travellers on a particular flight, but they will not all be travelling for the same reason. An almost-universal characteristic of air travel is that customers do not fly for the sake of flying; the destination is the important element and the travel is a by-product, a means-to-an-end that involves the necessity of an aircraft that gets the customer from point A to point B.

Jerome Simelane, the airline's Commercial GM, “By using what we have learned over the years about international airline best practice‚ we have also created a cost structure which allows us to offer competitive fares without cutting any corners on quality‚ safety and reliability."

A $2 increase on admission prices has the potential to increase revenues with a low risk of profit loss. A loss would only occur if the price change were to lose more than 572 visitors. An increase to $14 a ticket will bring in extra profits and still remains below the competitors and the ROM’s regular hours

American airlines is a corporation that exhibits all of the characteristics of a firm in an industry where good tactical management is the key to success. This company and its regional airline partner American eagle serve almost 250 cities around the world and operate more than 3600 daily flights. Its goal is to provide safe, dependable and friendly air transportation along with related services, making a great effort to transform any experience into a positive one. All of the services that this company has and the image that they are trying to keep in every day activities make each day an inevitable challenge for its employees.

The airline business is an industry that is competitive and unique, focussing on consumer choice and the responsiveness of airlines to changes in the external business environment. For any airline, this environment can be very complex as it is ‘hard for them to fully understand and impossible for them to fully control’ (The Times, n.d. p1). Virgin Atlantic is an international airline that is based in the UK. It was started by the entrepreneur Richard Branson in 1982 and now flies to 30 destinations around the world (Virgin Atlantic Airways Ltd, 2011). By looking at

Since Continental already locked in their fuel prices for the year I believe that a reduction in the available seat miles per flight would see a large drop in fuel costs. According to the regression results, there is a high correlation between available seat miles and fuel. The regression yielded a cost of about $ .08 for each available seat mile flown. I again used a 10% decrease and the overall costs savings were quite significant. I would expect Continental to incur a fuel expense of $ 499,238,476 in the first quarter and $2,333,641,754 for the year. By comparing these results to the prior estimated fuel costs, there is a cost savings of approximately $ 921,611,677 for 2009. Reducing these available seat miles should not be reasonable difficult considering the potential it has for immense cost savings.

147 (1) Assume that BlueSky purchases three identical aircraft. How many coach seats should BlueSky order for the three new aircraft? (2) Now suppose that the three aircraft can be different sizes, between 240 and 380 coach seats. (a) How do you think the three aircraft should be allocated among the six routes? In other words, should the same aircraft always fly the same routes? Why or why not? (Hint: You do not need an optimization model to answer this question). (b) How many coach seats should BlueSky order for each of the three new aircraft? (3) Because it is cheaper to manufacture three identical planes, Airbus is offering BlueSky a one-time, $5 million discount if it will order three identical aircraft. Should BlueSky take the discount? In deciding this, you may assume that BlueSky operates 3 banks per weekday through Houston, and that the revenues and demands for every bank on every weekday are equal to the demands in Tables 1 and 2 of the (A) Case.

1. Instead of 16 different prices, American simplified its pricing structure to include only 4 kinds of fares: a first-class fare, a coach fare that can be bought anytime before flight time (full-fare), 21-day advance-purchase fare, and 7-day advance-purchase fare. The new fare structure was expected to reduce administrative labor costs related to managing different fares by $25 million annually. The change was also

Leisure travelers overall will be made better off by the new fare structure. These travelers have more flexibility and can take advantage of the advance purchase discounts and Saturday-night stay discounts. An exception to this is leisure travelers who had found “loop holes” in the old fare system by using “creative ticketing” and waiting for deep discounts. These leisure travelers may pay higher rates because the deep discounts will no longer be offered.

Today’s aviation industry is considered to be more robust then ever before. On most days, upwards of 100,000 flights across the world depart, delivering goods and servicing for travel. Passengers worldwide are finding air travel to be fast, reliable, safe and relatively inexpensive. While flight in itself remains the same, aircraft manufacturers are constantly looking for ways to improve such factors. Unfortunately, in today’s worldwide climate, there are several items which have a direct impact on ticket pricing. These items include taxes and fees, fuel cost, and ticket sell‘s. Furthermore with the increased sophistication of aircrafts today, cost to purchase, maintain, and operate such aircraft are significantly more than years past. However,

Over the years, company sustained low operation costs and tickets prices following well-developed strategy. Among other measures, it was able to keep prices low by flying only one airplane type, minimizing service and maintenance expenses, and convincing employees to cut gate turn-around times and make the airline more efficient (Fitzpatrick, 2005).

Because technology has transformed the way many businesses operate, there are now fewer reasons to travel for business when one can effectively facilitate meetings remotely such as using video conferencing. This has reduced the number of diverter travelers so that companies can save or reallocate monies previously set aside for travel. Competitor innovation or pricing changes cause additional uncertainty. From a risk perspective, Piedmont will have to assess the impact if fewer diverters decide to travel at the last minute, which would be the worst-case scenario with fewer discounted fares available. Continual evaluation of the Revenue Enhancement Department’s process for discounted seating allows Marilyn to assess the potential of lost revenue.

Fares Management-To enable Malaysia Airlines to distribute fares more efficiently around the world and to improve pr icing decisions.

Elimination of several services including in-flight meals, assigned seating and baggage transfer to connecting airlines results in costs savings; and