Airline Cost Route Profitability System
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This document discusses route profitability systems and challenges in airline cost accounting. It outlines a cost hierarchy including direct, indirect, fixed and variable costs. It also discusses system dependencies and different models for route profitability analysis from traditional to advanced. The advanced model allows for multi-level profit analysis for strategic, operational and managerial decisions. It emphasizes the need for a system that reconciles to financial reports in real-time and supports activity-based costing and planning/budgeting.
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Airline Cost Route Profitability System
- 1. Route Profitability System Do Not Publish Without Approval Private Document, Confidential
- 2. Route Profitability Report – Challenges Cost Hierarchy System Dependability Types and models of RPS Advanced RP analysis and Cost Management Suggestion Topics Private Document, Confidential
- 4. Significant delays in cost reporting due to lack of real time access
- 5. Difficulty in having centralized control on Direct Operating Cost
- 6. Difficult in getting real time revenue/ flown reports
- 7. Dependencies on other feeder systems
- 8. Accuracy of allocations and accruals
- 9. Interpretation of statistics
- 10. Reconciliation/match with financial reports
- 11. Comparison with competitors or BenchmarkingPrivate Document, Confidential
- 16. Landing and Parking Fees
- 17. Fuel Costs
- 18. Variable Crew Cost
- 20. Catering
- 21. Pass Insurance
- 22. Other Pass related Exp
- 23. Direct Pass related Station CostsThis may vary based on the accounting/ reporting set up of each airline Private Document, Confidential
- 24. Other System Dependencies May vary based on the capabilities of the systems Private Document, Confidential
- 25. Route Profitability System (Traditional) Private Document, Confidential
- 26. Route Profitability Sys( Standard Cost Model) Private Document, Confidential
- 27. Route Profitability System (Advanced) Private Document, Confidential
- 28. RPS- Advanced Model Private Document, Confidential
- 29. Advanced RPS for Strategic, Operational and Managerial decisions LEVEL- 1 PROFIT For Next Day Decisions Logics Logics Logics Logics LEVEL- 2 PROFIT For Next Season Decisions LEVEL- 3 PROFIT RPS System For 2+ Year Decisions LEVEL- 4 PROFIT For 3+ Year Decisions LEVEL- 5 PROFIT Reconciliation to P&L Statement Logics Private Document, Confidential
- 30. Profit Contribution (PC) calculation in Advanced RPS LEVEL- 1 PROFIT Pass + Flight related cost LEVEL- 2 PROFIT Direct Fixed cost LEVEL- 3 PROFIT Fixed Station cost LEVEL- 4 PROFIT Sales & Marketing cost LEVEL- 5 PROFIT Administrative cost Private Document, Confidential Private Document, Confidential
- 31. Always better to have a system which matches 100% with Financial Reports RPS should not be a post mortem report, it should be real time Should have options to get the analytical for a route cause analysis Should support activity based costing model Should support planning and budgeting Should be simple and highly customizable Suggestion for selecting a right RPS Solution Private Document, Confidential
- 32. Sam Issac Airline Finance & Systems Expert Email: Sam.kalathra@gmail.com About Me: Having 18 years of working experience with various successful airlines in the Middle East, Asia & African Region. A Certified Management Accountant by profession, presented many aviation related subjects on Cost Reduction, Performance, Profitability Analysis, Airline Management etc in various international airline forums. I have also designed various cost management systems for airlines. Author Contact Private Document, Confidential