Kingfisher Airline Revival Plan
AF2110 Management Accounting 1 Kingfisher Airline Revival Plan
Group 8
CONTENTS
1) Introduction
3-4
2) Decision Analysis
Buy or lease decision
Aircraft configuration decision
Pricing decision
4-7
3) Cost Analysis
Variable cost
Commission expense
Fuel cost
Employee cost
Fixed cost
Aircraft leasing cost and depreciation
Landing and navigation cost
Interest expense
7-9
4) Other Recommendation
Transform into low fixed cost structure
Lowering the currency related cost
Practice divisional profitability analysis
Join alliance
Practice grid routing system
9-12
5) Reference
13-15
6) Appendix
Estimation used by the relevant cost analysis
Estimation used by the sales mix analysis
Forecast Operation
16-17
1. Introduction
We are going to investigate Kingfisher Airlines (KFA) for in-depth analysis, which would integrate management accounting topics of cost behavior, sales mix, buy or lease decision, pricing decision making and performance measurement.
Kingfisher Airlines was an Indian full-service airline established in 2003{1}. It started commercial operations, involving domestic and international flights, on 9 May 2005. On one hand, it was nominated by Skytrax as a world 5-Star Airline for the 2010 ranking period because of its excellent product and service quality{2}. On the other hand, Kingfisher Airlines had not made profit since starting operations in 2005, so it tried to reduce cost{3}. For example, from 10 April 2012, Kingfisher Airlines had suspended all international journeys. A partial lock-out happened on 1 October in the same year because of the delay payment of salaries, which eventually led to labour strike. On 20 October 2012, Directorate General of Civil Aviation (DGCA) prohibited Kingfisher Airlines from flying on the grounds of potential inconvenience to the travelling public. Bangalore International Airport Limited also sued Kingfisher Airlines for the user development fee and passenger
Group 8
CONTENTS
1) Introduction
3-4
2) Decision Analysis
Buy or lease decision
Aircraft configuration decision
Pricing decision
4-7
3) Cost Analysis
Variable cost
Commission expense
Fuel cost
Employee cost
Fixed cost
Aircraft leasing cost and depreciation
Landing and navigation cost
Interest expense
7-9
4) Other Recommendation
Transform into low fixed cost structure
Lowering the currency related cost
Practice divisional profitability analysis
Join alliance
Practice grid routing system
9-12
5) Reference
13-15
6) Appendix
Estimation used by the relevant cost analysis
Estimation used by the sales mix analysis
Forecast Operation
16-17
1. Introduction
We are going to investigate Kingfisher Airlines (KFA) for in-depth analysis, which would integrate management accounting topics of cost behavior, sales mix, buy or lease decision, pricing decision making and performance measurement.
Kingfisher Airlines was an Indian full-service airline established in 2003{1}. It started commercial operations, involving domestic and international flights, on 9 May 2005. On one hand, it was nominated by Skytrax as a world 5-Star Airline for the 2010 ranking period because of its excellent product and service quality{2}. On the other hand, Kingfisher Airlines had not made profit since starting operations in 2005, so it tried to reduce cost{3}. For example, from 10 April 2012, Kingfisher Airlines had suspended all international journeys. A partial lock-out happened on 1 October in the same year because of the delay payment of salaries, which eventually led to labour strike. On 20 October 2012, Directorate General of Civil Aviation (DGCA) prohibited Kingfisher Airlines from flying on the grounds of potential inconvenience to the travelling public. Bangalore International Airport Limited also sued Kingfisher Airlines for the user development fee and passenger