Improving Profitability and Performance at Flyme Plc - Critical Essays

Flyme Plc are a UK airline company operating in the mid to long haul market. Flyme Ltd became successful due to the overall company strategy of offering excellent customer service for lower than average ticket prices.

However, in recent years the company’s reputation was negatively impacted by mixed customer reviews. Customers often report inconsistent levels of service and quality from flight to flight, such as number of cabin crew on duty, different size in-flight meals and number of in-flight movies available.

Flyme Plc’s 2018/2019 management accounts show a turnover of £165m. Turnover has continued to grow steadily at an average rate of 8% year on year for the past ten years. However, the Managing Director, Gail Zulu, is increasingly concerned of reducing gross and net profit margins. Despite the growth in sales, gross profit has fallen steadily at a rate of 2% and net profit at a rate of 4% year on year for the past five years.

You have been employed by Mrs Zulu as a Management Accountant in order to directly address the problems of reducing gross and net profits.

• The stock of refreshments etc on each airplane can differ significantly in volume, quality and cost
• The airline has begun to lose market share as other airlines are considered to be more innovative regarding their inflight meals and entertainment selection.
• You have been unable to identify any set targets for gross profit levels on each flight
• The company uses incremental budgeting. Last year’s results are adjusted for any known material changes and then inflation is added at the latest Consumer Price Index (CPI) rate.
• Airport turnarounds (the time between the plane landing with one set of passengers and takes off with the next set of passengers) are extremely expensive. This cost seems to be increasing, but there is no recorded information on the detail of this operation.
• There have been recent complaints from airplane cabin crew regarding a lack of training. This has led to a higher than usual staff turnover and is suspected to be linked to some customer complaints.

a) Critically compare three costing methods that may aid Flyme Plc to both understand and reduce their direct costs.

b) Critically compare two budgeting methods with the current method used at Flyme Plc that will aid a reduction in overheads.

c) Critically evaluate how Flyme Plc can use the Balanced Scorecard in order to improve company performance.

• You should make a recommendation at the end of each section as to what is most suitable to PlayIt.

• This assignment should be in the form of 3 critical academic essays (submitted as one document).

• You must follow the conventions of critical academic writing including the rules outlined below.

• Each of the sections a) to c) is of equal weighting. The overall word limit is 3,000 words, this may be split across each section as you see fit (see comments on ‘Word Count’ below).
• This module is assessed 100% by this assignment.