Management Accounting Assignment

Task 1 (Word limit 1000)

THE INCREASING COMPETITIVE PRESSURES IN AUSTRALIA’S AIRLINE INDUSTRY

The following excerpt from an issue of Adelaide’s The Advertiser illustrates the increasing competitive pressures associated with global competition.

Overseas airfares dive

Airfares to the United States have hit record lows, with return sales fares from Sydney to Los Angeles for under $850.

Delta Airways is offering the sale to celebrate its first anniversary of flights from Sydney.

Travel.com.au executive general manager of flights Helen Demetriou said she expected airlines such as United Airlines and V Australia to match the fares.Before V Australia launched last year, fares to the US were around $2000.

There are now several airlines operating the route, including Qantas, Air New Zealand and Hawaiian Airlines.

‘There’s been great competition,’ Ms Demetriou said. ‘They’re all trying to gain market share. Historically, there have been limited carriers flying to the US so they could pretty much charge a premium, but now there’s more flights and more capacity, it’s becoming a lot more competitive.’

Figures from the International Air Transport Association show international economy class airfares are now 10 per cent lower than their peak before the global financial crisis.

Premium airfares rose 16.4 per cent in April, but are still 15 per cent down on prices before the crisis.

Source: Based on Saurine (2010)

Required

The above scenario highlights the turbulent competitive environment faced by many airlines.

Suppose you have just been appointed as the new management accountant in a medium size airline in Australia. Write a report to the management including management accounting information you might provide for them to be competitive in the industry.

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