Harvard Business School 9-192-040 Rev. June 22, 1993 Accounting for Frequent Fliers By 1991, almost all U.S. airline companies offered frequent flier programs to their passengers. Under these programs, passengers could become members of a program where the miles they flew would be recorded and accumulated to earn free future flights. The proliferation and growth of frequent flier programs created concerns about the proper way to account for and report them in financial reports. The airlines, the
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August 18, 2010 Managing Director Sub: Technically inappropriate and deliberately damaging Appraisal Feedback for 2009-2010 Sir, I joined Tata steel as a GT of 1996 batch thinking that I am going to work for the Company and subsequently I would earn my growth in the Organisation. There were times when I was selected by management and sent to Japan for undergoing management development programme. I was called in cycle-2 of the PEP programme and put in IL4 and I was communicated as I was put in High
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(FFP: Frequent Flier Program) The case deals with the problem of estimating cost and obligations of the United Air Lines frequent flier program. The major accounting issue with FFPs is how an airline accounts for their economic value. Since FFPs represent a present obligation for an airline to provide customers with air travel at a later date, they are considered a liability. Incremental Cost Approach: One approach can be to estimate the value of points that are going to be redeemed and
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Harvard Business School 9-192-040 Rev. June 22, 1993 Accounting for Frequent Fliers By 1991, almost all U.S. airline companies offered frequent flier programs to their passengers. Under these programs, passengers could become members of a program where the miles they flew would be recorded and accumulated to earn free future flights. The proliferation and growth of frequent flier programs created concerns about the proper way to account for and report them in financial reports. The airlines, the
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method and why you rejected other approaches? They should account for the Frequent flier program based on the Incremental Cost Method in its financial statements. Excess capacity of around 64-67% throughout the years 1986-1990. The load factor is equal to the breakeven load factor. This results in only an incremental cost incurred of serving a passenger and not the loss of revenue on assigning a seat to a free flier when that seat can be filled by a passenger who travels without redeeming
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Chapter 2 Chapter 2 Strategy Analysis Discussion Questions 1. Judith, an accounting major, states, “Strategy analysis seems to be an unnecessary detour in doing financial statement analysis. Why can’t we just get straight to the accounting issues?” Explain to Judith why she might be wrong. Strategy analysis enables the analyst to understand the underlying economics of the firm and the industry in which the firm competes. There are a number of benefits to developing this knowledge before performing
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airline’s rewards program has lost 19% of its members and the flights booked by the remaining members have decreased 21%. Rising costs, particularly in the area of fuel and labor, have limited the airlines ability to compete for the high value frequent flier. Classic’s board of directors has mandated a 15% cost reduction in all departments over the next 18 months to protect the profitability of the company (University of Phoenix, 2012, Classic Airlines Scenario). Financial success is dependent upon
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customer service. Classic Airlines is facing the challenges on how to win back the members of the classic rewards that the company offer and how to keep the frequent fliers customers that they have retained to choose Classic over the competitor. This paper will explain some of the marketing concepts to beef up Classic’s frequent flier program with methods that will demonstrate a measurable return on investment (ROI), the marketing challenges it faces, and its current corporate value. Marketing
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addressed by management control systems may include accounting methods, employee incentive programs and performance measurement. Accounting methods are often implemented and evaluated as part of a management control system. To control financial activities within a company, the area may be broken down into financial and managerial accounting. Financial accounting generally focuses on internal issues, such as reporting sales costs, while managerial accounting may focus on methods for determining product
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success. The Southwest’s execution of its low-cost/no frills/low fares strategy is underpinned by some critically important policies, procedures, operating practices, and core values. Southwest Airlines’ key policies are low costs, low fares, frequent flights and fast expansion into new cities. The company has also been favored because it has entered into hedge contracts for low cost fuel. This has been falling. The company has the operating practices of efficient operations, lower costs and attention
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