An analysis of how 'management via accounting' can be applied to keep Essay

An analysis of how 'management via accounting' can be applied to keep fuel costs as low as possible at a low-cost airline, w - Essay Example This management essay is going to provide complete solutions and management measure for airline fuel management. These solutions cover fuel forecasting and planning, procurement, inventory and logistic management, contract management, and accounting and tax management. As a result, finance and purchase teams acquire a complete overview of airline inventory and obligation when they hedge and purchase fuel. Airline companies’ accounting management can automate and reduce fuel costs by processing of both financial derivatives and physical fuel purchases used in hedging. Therefore, the accounting department should come up with aggregated financial-physical fuel view positions and cost risk exposure (Calder, 2013:9). In fuel planning and budgeting, the accounting department must conduct an analysis of â€Å"what-if† situations such as changes in the type of aircraft used, introduction of new airports and routes, and forward cost curves. In addition, the accounts department m ust be able to report on actual fuel costs versus forecasted fuel costs to enable it calculate the airlines hedged fuel plan (Calder, 2013:9). Airline accounts management can effectively curl fuel use and get investments directly to the company’s bottom line through operating efficiently. ... lancing method ensure an favorable centre of gravity for all airplanes, the airport entrance planning is considered to ensure low fuel burn on the entrance grounds, and ensure there are daily operations improvement to recover from trouble shooting activities hence limiting burning of wasted fuel (Centre for Aviation, 2013). Currently, all airlines’ accounting departments must ensure that they have Fuel management information system, which is imperative to monitor fuel expenses and assist the accountants in coming up with effective solutions to minimize fuel costs. This is because airline fuel cost has become the biggest cost ranging between 25% and 50% of annual airline expenditure in all airlines across the world. Airline calculations indicate that one dollar rise in fuel cost is equivalent to 1.6 billion dollars expenses of an entire airline company. It is highly important for airline accounting department to develop effective fuel management software such as FuelPlus Softwa re (Calder, 2013:9). This efficient fuel expense and management software in the accounting department can bring massive positive effect on the progressive running of an airline operation and cause a direct effect on the airlines profitability, sustainability, and competitiveness (Channel 4 Dispatches, 2013). As reported by Centre for Aviation (CAPA) recently, the financial optimism is now becoming the main cause of higher fuel prices. Whilst in the old days, Fuel management system was seen as primarily a method of bringing commercial advantages, it is currently becoming an important element of an airline expense management toolkit. Fuel management is not just monitoring operational information, but also a widespread enterprise that involves all departments in the airport. The accounting