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Cost Management Analysis Report

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Betty Yan Ma

on 26 November 2013

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Transcript of Cost Management Analysis Report

Purpose: Analyze the efficiency of Cost Management Process.
Cost Management Analysis Report
Presented by:
Betty Yan Ma
Heeba Mohammad
George Daoud
Peter Bakos
Wei Wei Tian
WestJet Overview
- Company Description
- Key Issues
- Competitive Advantage

Air Canada Overview:
- Company Description
- Key Issues
Comparative Analysis
Largest airline In Canada
15th largest commercial airline in the world
Founded in 1937 by Government of Canada.
175 Destinations on 5 continents
Main focus on Safety

Company Description
Main Concern
Should Air Canada/WestJet increase capacity to meet market demand?
Low cost service
Air Canada Rouge (July, 2013):
An Affordable service that take you to famous holiday locations

Objective: Provide discounted travel. Therefore, cost must be reduced.

Problem: Air Canada books more customers onto a plane than it can actually accommodate.
Objective: Maintaining high load factor
Compensation Cost: $200, $400,$800
Long-Term Potential Issue: Customer disappointment
Cost Management Analysis
Cost Management
“The initiative in quality and time areas, as well as improve the decisions they must make when faced with many constraints” (Horngren, p.922)
Allows Managers to take:
Balance Scorecard (BSC)
Cause and effect Diagram
On-Time Performance (OTP)
Theory of Constraints (TOC) /Capacity Management

Theories and Concepts
Low Punctuality
In 2012, only 55% of flights arrived on time.

Low punctuality decreases customer satisfaction and causes inconvenience.

Costs emerge from lower wages and benefits.
The decrease in employees’ wages and benefits reduces their engagement in work.

Company Description
Canada's Most preferred airline launched in 1996.

First Mover: Low Cost Flying
85 Destinations in 18 Countries
Delivered 8 consecutive year of profitability
Ranked the 9th largest airline in North America
Low Cost Carrier (LCC)
WestJet cost strategy attempts to:
Keep Costs as low as possible
Use the savings and gains to offset reduced fares price
Mitigate risks of unfavorable fuel costs
Quality Control Problems
On-Time Performance (OTP)
Capacity Management/ TOC
Introduced new affordable regional aircraft, Encore in 2013.
Objectives of Capacity Growth (Encore):
Improve Fight Schedules
Improve performance by increasing flight frequency.
Increase Load Factor
Drive down $100M in annual costs by the end of 2015.
Comparative Analysis
Summary and Recommendations
WestJet's positive Revenue and earnings
Air Canada Rouge - In Long-Term
Management strategy needs to be developed to motivate employees.

Or another way that does not deprive employees' benefit.
A15 Performance : % of flights that arrived within 15 minutes of their schedule arrival time.
WestJet’s costs are half of Air Canada’s and WestJet has boasted a 30% or better cost-advantage over Air Canada to turn in a higher profit.
The cause of delay is mostly related to international connections and reparations of its various types of aircraft.
Full transcript