Explain how management accounting can supply information to assist the management of an Airline company (for example Easyjet, Emirates airline, British Airways etc) of your choice.
British Airways is one of the biggest commercial airlines globally. It is reflected as the countrywide carrier of the UK (United Kingdom)due to its enormous convoy, pair flights as well as term in uses. It is connected to more than 561terminuses and 160countries internationally, comprising USA, United Kingdom, Asia, Africa, UAE, etc.(Monti, 2007 ). It is also being premeditated like the frontrunner in the airline’s business globally. It is recognized for its fineness, eminence, and amenities (either on the ground or in in-flight). Apart from the biggest global listed air company in The United Kingdom, British Airways presented numerous facilities and services to its clients to assure their suitability. The airline company is also being denationalized, and its shares are transacted on the stock-exchange of London. As past smidgen its roots again, British Airways was created with the arrival of British Overseas Airways Corporation, Cardiff Airlines and North-east Air Company from the year 1975.
Conversely, British Airways had its first flight facility from the First World War that makes it as ancient as an era. All the way through the past, British Airways had extended its actions by buying numerous min or air companies under its business(Woodley, 2006 ). Presently, The United Kingdom, as well as Spanish banner-transporters, have amalgamated and turn up with an official contract that British Airways and Spain Airlines, will syndicate their actions in a novel business named as Global Airlines Group. They have agreed to amalgamate due to a slump that seriously smashes the operations of both air companies.
Due to the inauguration of novel terminal-5 at Heathrow airfield by the British Airways, the airlines also confronted issues with the training of employees that also led to flight termination and grievances of misplaced baggage. Furthermore, the increasing petroleum rates also result in an increase in rates of tickets. So, the objective of this report is to describe in what way management accounting can assist the administration of British Airways, chiefly the key techniques that are constructive to the airlines (Jarvis, 2014 ).
Management accounting is a limited kind of accounting where the provided information is additionally explicit. Moreover, it subsists to aid administrators by assisting them work as resolution creators, organizers and supervisors of their particular divisions or zones of accountability. It also helps the managers in creating judgments or solving issues and providing accounting info essential to create accurate prospect strategies (ABDEL, 2011 ). They are expected to deliver fiscal or monetary information that is chiefly accessible to those in administrative place. These are required in the jobs of policymaking, forecasting and controlling to facilitate the industry work efficiently and competently.
Strategy-making and forecasting are one of the critical jobs enacted by the management accounting. There are examples that the organization wants to resolve with the finest selection to be followed that at the similar period constructive to the business. The determined passages of an Act will be assessed as to its expenses and welfares that are the part of forecasting. Moreover, the information will be additional operative if the outcome of the review revealed that the profits offset the expenses. Control is another crucial job that comprises an evaluation of actual presentation with the strategy, so that deviancies from the novel strategy are recognized and remedial action is performed(Thukaram, 2007 ). Financial Accounting, as well as Management Accounting is the two fold zones of accounting in that they are dissimilar from each one about the data they deliver as well as to where the data is anticipated. Management accounting offers limited information for the management, but financial accounting information is all-purpose in nature projected to entire investors. The job of management accounting isaugmentedby the practice of diverse management accounting methods, for example, absorption costing, cost accounting, revenue costing, etc.
The part enacted by management accounting is quite critical as occasionally there all results are dissimilar from the forecasts, and the welfares did not offset the expenses of delivered information (Holtzman, 2013 ). Due to these disadvantages and to append age above role, management accounting techniques are presented.
Activity-Based Costing (ABC): It is a costing method that classifies activities in a company and allocates the cost of every activity with resources to all goods and facilities conferring to the real depletion by each one. The management accounting techniques that is beneficial for the constant developments of British Airways is the Activity-Based Costing. This conventional methodology is recommended by numerous experts and researchers as the application of ABC has a constructive impact on the fiscal performance of the company. It also delivers information regarding cost as well as performance measurement. This technique is also valid in confronting the unadorned competition as it will provide the business the capability to control its expenses and valued their goods competitively. United Kingdom companies that implemented ABC overtook the corresponding non-ABC companies by around 28% in the 4 years. This technique might be supportive to British Airways chiefly when it decided to syndicate work with Airlines of Spain(Bradtke, 2007 ). The amalgamation has been fruitful in the market place as the prices of shares of both air companies have upsurge. Conversely, the agreement amongst British Airways and Airlines of Spain has to contemplate numerous consequences that required instant consideration. One of British Airway’s main difficulties is the apportionment of expenses for labor agreements as well as workers retirement pension. It has a shortfall of Dollar 5.71 billion in its worker’s retirement pension proposal, and it needs to be settled instantaneously or else Spanish Airlines may extract out of the contract. Financial experts recommended that with the cost data of ABC, costing might be informal for British Airways established on a specific demand for every activity. For instance, if British Airway simplements ABC technique it will ensure an exact distribution of their funds(Zeuner, 2013 ). Short fall is sue regarding its worker’s retirement pension proposal as well as mislays instigated by cutting of expeditions will be controlled if managers of the company nimplemented ABC in creating decisions.
Sensitivity Analysis: This technique is practically applied in decision making, forecasting as well as in evaluating threats. An example of air company investments is the amalgamation of British Airways with Spanish Airways that is a quite dicey decision. But, by sensitivity analysis, British Airways leaders will have the option to gaze at every contribution separately and critically evaluated the consequence of the project in the nearby prospect. Queries regarding the susceptibility of dissimilar choices will be retorted by this technique; for example, in what way the incomes of British Airways will be exaggerated if it amalgamated with Spanish Airlines. All the decisions will be verified to recognize the influence of consequences. For instance, British Airways has dual choices to contemplate to expurgate its expenses i.e. to amalgamate with Spanish Airlines so that operational costs will be abridged or reduce its figure of terminuses to govern overhead(Chatterjee & Hadi, 2009 ).
There are some other management accounting techniques whose notions are not appropriate to the current condition of British Airways like ratio analyzes or standard costing. Management accounting is prospect-leaning, and the idea of the above techniques does not match the conditions.
The role of a management accounting must be acknowledged first so that application of management techniques becomes additional operative. The Certified public accountant, as well as managers should recognize that how plans must be altered from period to period in order to deal with the persistently varying situations. For instance, maximum of the air companies currently are bearing in mind the notion of amalgamation. This notion should be sustained with facts and data that need to be progressive, so that the investigation can be reflected secured. There must be a wide-ranging opinion of the company as well as the accounting info must also be comprehensive to all persons that are the nmfragment of it. This analysis might be strengthened more if gain access to financial records, competitions as well as the fiscal system of British Airways is made accessible(Little, 2008 ). The entire accounting records must correspondingly be revolutionary and not olden to overlap through the notion of management accounting. There is a narrow-minded attention on this analysis bearing in mind that the maximum of the period the issue is concentrated on the amalgamation deeds of British Airways and Spanish Airlines. If entire required facts are made accessible, like, whole market place investigation in every apprehensive area, then there will be abundant understandings on what additional techniques the business must think through.
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Strengths 1. Robust Support of UK Government. 2. Sturdy Core in UK. 3. Resilient trademark existence and exceptional universal manifestation. 4. It has a convoy dimension in excess of 271 airplanes. 5. It has approximately 161 global terminuses through 7 continents. |
Weaknesses 1. Stark Rivalry from other Airlines in UK. 2. Strong competition leads to restricted market segment. |
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Opportunities 1. The Heathrow Terminal is the main pivot through the world and it has a chief existence in UK. 2. Increasing its worldwide operations. |
Threats 1. Increasing Petrol Prices. 2. Escalating Labour Expenses. 3. Growing Competition in the marketplace of Europe.. |
British Airways has upheld its individuality to grow into one of the frontrunners in the commercial airline business(Pine & Gilmore, 2011 ). It is essential to conclude that regardless of the universal slump the air company still succeeded to develop its plans and increase its funds. The amalgamation process with Spanish Airlines is virtuous chance for British Airways to create status and accordingly augmented its marketplace share price. Though the amalgamation had created difficulties but British Airways still succeeded to uphold its image and status in the marketplace. By implementing the diverse management accounting techniques, the supervisors learned to create improved decisions as well as vigilant planning to control expenses(Steffan, 2008 ).
ABDEL, G., 2011. Review of Management Accounting Research. Hampshire: Palgrave Macmillan.
Bradtke, D., 2007. Activity-Based-Costing. Germany: GRIN Verlag.
Chatterjee, S. & Hadi, S. A., 2009. Sensitivity Analysis in Linear Regression. New York: John Wiley & Sons.
Holtzman, P., 2013. Managerial Accounting For Dummies. New Jeresy: John Wiley & Sons.
Jarvis, P., 2014. British Airways. Gloucestershire: Amberley Publishing Limited.
Little, G., 2008. Test of Professional Competence in Management Accounting. Oxford: Elsevier.
Monti, G., 2007. EC Competition Law. s.l.:Cambridge University Press.
Pine, J. & Gilmore, H. J., 2011. The Experience Economy. Harvard : Harvard Business Press.
Steffan, B., 2008. Essential Management Accounting. London: Kogan Page Publishers.
Thukaram, M., 2007. Management Accounting. New Delhi: New Age International.
Woodley, C., 2006. The History of British European Airways. South Yorkshire: Casemate Publishers.
Zeuner, P., 2013. Activity-Based Costing. Germany: GRIN Verlag.
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