ipl-logo

Singapore Airlines Case Summary

1095 Words5 Pages

Summary The case shows the differences in depreciation as the major operating expense in the examples of two airlines: Delta AL and Singapore AL. It also displays different practices in calculating the depreciation expense. Question 1: Calculate the annual depreciation expense that Delta and Singapore AL would record for each $100 gross value of aircraft. For each airline, there are several periods with different asset life and residual values. Considering that: Depreciation = (Asset value – Residual Value) / Asset useful life, then Delta (Exhibits 4) Straight-line method Before July 1, 1986 July 1, 1986 – March 31, 1993 After April 1, 1993 Asset Useful life (years) 10 15 20 Residual Value (%) 10 10 5 Depreciation ($) 9 6 4.75 Singapore …show more content…

As mentioned in the Exhibits 4 and 8, both companies are using the straight-line method of depreciation, thus, we see no the significant difference. Delta had a higher asset useful life in comparison to Singapore Airlines. The residual value index of Delta was less than Singapore Airlines. Why they use different depreciable lives and salvage values? Singapore may plan to use the equipment over fewer years as the estimate a higher residual value. Singapore Airlines is using a residual value of 20% over a relatively short useful life, compared to Delta Airlines over a 20 year useful life with 5 % residual value. There is a significant difference in the depreciation expense and this has an impact on comparing profitability of the companies. The company is changing the useful life of its aircraft from e.g. 15 to 20 years for Delta (April 1, 1193) to reflect in the aircraft replacement strategy. The change is reducing the depreciation expense and would reduce the expenses by a similar amount each year over the remaining life. This leads to an increased profitability due to an accounting …show more content…

Singapore Airlines’ strategy is focus on high level of customer service and business travelers as important market target. To support these high-level quality standards it is important to offer new aircrafts so the depreciation short term is fully aligned with this vision. Question 5 Does the difference in the average age of Delta’s and Singapore’s aircraft fleets have any impact on the amount of depreciation expense? If so, how much? Singapore Airlines have to renew their fleet more frequently than Delta Airlines, due to a shorter aging period for their aircrafts. At some point in time, Delta Airlines will end up with a bigger number of aircrafts, which would be older than the ones of Singapore Airlines. If we consider that the average age of Delta’s airplanes is 8.8 years, and of Singapore airlines is 5.1 (both: case - pgs. 2 and 3) then the difference in airplane ages will be 3.7 years. Using the average gross value (calculated in Q3) and assuming 3% of inflation before 1993, we can calculate the increased value of the fleet: Average gross value $

Show More
Related

Pure Train Case Study

653 Words | 3 Pages

However, in circumstances where it is sufficiently evident that the costs of providing services under the contract are incurred on other than a straight-line basis, revenue must be “recognized over the contract period in proportion to the costs that are expected to be incurred in performing services under the contract” (FASB ASC 605-20-25-3). Since the extended warranties demand that Pure-Train provide customer service and repair in 36-months, the revenue must be recognized in income over this contract period. As mentioned above, the revenue from these contracts needs to be deferred and recognized in income on a straight-line basis over the contract period. This could result in being recognized as revenue evenly over the contract

Read More

Home Depot Financial Analysis

365 Words | 2 Pages

Edmonds, T. P., Tsay, B., & Olds, P. R. (2011). Fundamental managerial accounting concepts (6th ed.). New York, NY: McGraw-Hill

Read More

Air Canada Financial Statement Analysis

1206 Words | 5 Pages

On the evening of April 6, 2011, a dynamic aviator named Charles. He packs a bag of mail in his small N466CD plane and takes off from Chicago for St. Louis. A same day, other four pilots flew four plane loads of mail from St. Louis to Chicago. At that time, Charles was chief pilot of Aircraft Corporation, which was the first aviation company to hold a United States airmail contract. It is one of scores of companies that consolidated to form those days in United States Airlines.

Read More

The Guns Of August Analysis

769 Words | 4 Pages

Topic Sentence: The growth of militaries made countries confident they’d win power for their nation. Proof: In Barbara Tuchman’s book entitled, The Guns of August, she says,”You will be home before the leaves have fallen from the trees.”

Read More

Hong Kong Dragon Airlines Case Study

2150 Words | 9 Pages

The most significant component of cash outflows in case of purchase option was the cost of the replacement spare engine. Our cash flows included the tax shield on depreciation, and maintenances costs associated with the purchase and use of the engine. We determined the after tax cash flows under both options, in case of Hong Kong Air purchase option, the after-tax cash flows are, cost of the V2500 spare engine, the tax shield on depreciation and maintenances costs and the after tax discount rate was used. In case of the lease option, the after-tax cash flows are; include; monthly rental at 8% of engine price, rate per flight hour, rate per engine cycle all over the period of the lease not less than 10 years.(ref) The discount rate used was the after tax cost of debt.

Read More

Southwest Airlines Case Study Essay

1023 Words | 5 Pages

Case Analysis #1 – “Southwest Airlines: Is It Still the King of Cheap Flights” 1. Answer the questions at the end of the case. 1. Airline customers can be segmented in a variety of ways. Two of these include by purpose of travel and their destinations.

Read More

Business Strategy Case Study: Delta Airlines

742 Words | 3 Pages

Delta airline was expanding its business into low-cost airline segment by launching new independent subsidiary by the name of Song. Song’s primary business model was to target women and the segment of business class people. In effect to reduce the cost, Song management decided to fly high load factor on the drag of 900 miles. Moreover, the company increased the number of

Read More

Southwest Airlines Management Accounting System

1505 Words | 7 Pages

Introduction: Here in this assignment a management accounting report needs to be prepared for analyzing how management accounting can be useful in providing the managerial information for the purpose of decision making. The organization selected to make this analysis is Southwest Airline. It is a management accounting report in which starting from the background of the company, the management accounting system of the company has been analyzed and how its’ providing the information for the purpose of management decisions being evaluated. Background of the company: Southwest Airlines was shaped in 1978 with reason to serve voyaging service via air course. What's more, after consolidation southwest aircrafts persistently succeed regarding productivity, great worker and union connection and consumer loyalty.

Read More

Full Employment Essay

904 Words | 4 Pages

Depreciation is the reduction of a value in stocks. Output is how much that is produced and being sold or exported and Savings is money that is not being spent and maybe put away so it doesn’t get spend • dK = Depreciation • Y =

Read More

Southwest Airlines Case Study Summary

747 Words | 3 Pages

Ramada’s problem was first discovered when their management found out about D. K Shifflet’s latest survey about customer satisfaction in the hospitality industry, which it then shows that mid-tier hotels continuing to go downward. Later on they continued on their research and decided to hire a third party to find out more about the survey and also to observe their own company’s system. It results in a management dilemma, Ramada needs to prevent themselves from falling. Then it raises some questions on how can their management improve their performance to achieve the level of customer satisfaction they desire. They then found out three main concerns that they need to put more effort to.

Read More

Alice Inc Case Study Solution

1145 Words | 5 Pages

As you can see in Appendix 1 our analysis revealed that according to new cost accounting system the profitability of Regular model is about 90% whereas profits from selling Deluxe model is about 10%. In the meantime production costs of Regular model is about 45% and Deluxe model is 55%. Thus we may conclude that for Alice, Inc. it is not profitable to produce Deluxe model comparing to Regular model, as costs for production of Deluxe model are higher but the profit is lower.

Read More

Singapore Airlines Case Study

3552 Words | 15 Pages

1.0 Introduction to Strategic Management Strategic management practices the formation; achievement and reaching the major objectives executed by the management of the company, by considering the capital and a task of the internal and external environments in which the company wishes to compete. 1.1 Introduction to Singapore Airlines Singapore Airlines (SIA) is established in year 1972 with remarkable performance among its competitors in the industry throughout its 35-year-long history till date (Heracleous & Wirtz, 2009). According to Singapore Airlines (2014), SIA is one of the youngest aircraft fleets worldwide to destinations crossing a network of more six continents, with its iconic Singapore Girl providing excellent standard of service to customers. Throughout the years of operations, SIA has an impressive ever-growing list of industry 's leading innovations such as offering free headsets along with a choice of meals and drinks in Economy Class in the 1970s, followed by introducing satellite based in-flight telephones in year 1991, involving an ample panel of renowned chefs, the International Culinary Panel, to provide lush in-flight meals in year 1998, developing audio and video on demand (AVOD) capabilities on KrisWorld in year 2001, and lastly flying the airbus of A380 from Singapore to Sydney on 25 October 2007 (Singapore Airlines, 2014).

Read More

Swot Analysis Of Nok Air

1728 Words | 7 Pages

Another vertical differentiation is the service on board. Most low-cost airlines try to maintain cost-effectiveness or lower their cost by not offering additional service to the passengers such as extra foods and drinks. However, Nok Air does provide a box of Auntie Anne bread, and beverages to the passengers during onboarding, while Air Asia provides nothing. This is considered to be the vertical price discrimination because all passengers agree that having some foods and drinks during on boarding is better, but there is no guarantee that food served by Nok Air is the best choice for them.

Read More

SWOT Analysis Of Flydubai: Low Fist Airlines

1467 Words | 6 Pages

For instance, with the global financial crisis and later the Eurozone crisis, the number of travellers has significantly reduced due to economic hardships. This has affected the profit levels of the airline as well as slowed down its growth prospects. The airline also faces intense competition from other low cost airlines forcing it to extensively invest in product differentiation to counter the competition. This is an expensive

Read More

Malaysia Airlines Case Study

893 Words | 4 Pages

Until today, this incident is still affecting Malaysia Airlines in different aspects. Especially, on their corporate image, reputation and finance. Not only Malaysia Airlines, but the image and reputation of our country are also being affected because Malaysia Airlines have strong bonding with the government and they as a representative role stood out to speak for Malaysia Airlines. Malaysia government had given a very bad impression to others on their crisis management and crisis communications. Experts criticized their crisis management by saying “crisis in managing crisis” and “make a crisis worst” due to their failure in crisis communications.

Read More

More about Singapore Airlines Case Summary

Related Topics

Open Document