the university of hull the financial planning and control in the airline industry

403 Pages·2008·13.62 MB·English

CONTENTS
PAGES
Abstract
Dedication
Acknowledgements IV
Tables of Contents V
List of Tables XIII
List of Figures XV
Abbreviations XVI
PART I: METHODOLOGY AND THEORETICAL PERSPECTIVES 1
CHAPTER ONE: INTRODUCTION 2
1.1 Essential Features of Financial Planning and
Control 3
1.2 Importance of the Airline Industry 4
1.3 Background of the Problem 8
1.4 Objectives of the Research 10
1.5 Scope of the Research Methodology 11
1.5.1 Literature Review 11
1.5.2 Evaluation of Practice Based on Empirical
Study 11
1.6 Overview of the Research 12
1.7 Scope of the Research 14
CHAPTER TWO: THE ROLE OF ACCOUNTING DATA IN FINANCIAL
PLANNING AND CONTROL 16
2.1 Introduction 17
2.2 Accounting Data and Financial Planning 18
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2.2.1 Accounting and Information 18
2.2.2 Accounting Information as an Economic Good 20
2.2.3 The Relationship of Accounting to the
Management Function 22
2.2.4 Accounting and Management Information Systems. 24
2.2.5 Accounting Data for Managerial Planning 26
2.3 Accounting Information Systems and Control 30
2.3.1 Accounting Information and Organisational
Control 30
2.3.2 Effectiveness of Control 32
2.3.3 Responsibility Accounting 37
2.4 Problems of Planning and Control in Nationalised
Industries 38
2.4.1 Scope of Nationalised Industries 38
2.4.1.1 Nationalisation -A General Overview . 38
2.4.1.2 Nationalised Industries -An Overview 41
2.4.2 Government and Nationalised Industries 44
2.4.2.1 Governmental Influence on Public
Transport 44
2.4.2.2 Objectives of Government Intervention
in Nationalised Industries 47
2.4.3 Planning and Control in Nationalised
Industries 49
2.5 The Airline industry and Accounting Systems 53
2.5.1 The Main Features of an Airline's Financial
Structure 53
2.5.2 The American Civil Aeronautics Board's (CAB)
Uniform Accounting System 55
2.5.3 The General Accounting Provisions 56
2.6 Summary 60
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CHAPTER THREE: FINANCIAL PLANNING AND CONTROL:
A CONCEPTUAL FRAMEWORK FOR THE AIRLINE

INDUSTRY 62
3.1 Introduction 63
3.2 Review of Planning Literature 63
3.2.1 Planning and the Environment 63
3.2.2 Planning and Management 65
3.2.3 Planning and the Human Factor 67
3.2.4 Concepts of Planning 68
3.2.4.1 Corporate Planning 68
3.2.4.1.1 Process and Structure of
Corporate Planning 68
3.2.4.1.2 Corporate Planning Constraints 71
3.2.4.2 Operational Planning 71
3.3 Financial Planning 73
3.3.1 Links between Financial, Operational and
Corporate Planning 73
3.3.2 Financial Planning Objectives and
Limitations 74
3.4 Control Concept -A Review 78
3.4.1 Why Control is Essential, 78
3.4.2 What is Control? 79
3.4.3 Management Control Systems 80
3.4.4 Structure of Management Control System 81
3.5 Financial Planning in the Airline Literature 82
3.6 Structure of the Conceptual Framework 85
3.6.1 The Theoretical Framework 85
3.6.1.1 Techniques of Financial Planning
and Control 86
3.6.1.2 Financial Planning and Forecasting 87
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3.6.1.3 Model Forecast 88
3.6.1.4 The Cash Budget Analysis 89
3.6.1.5 Break-Even Chart and Sensitivity
Analysis 90
3.6.1.6 Control and Feedback 91
3.6.2 Elements of the Co-ordinated Framework . 92
3.7 Summary 96
PART II: THE PRACTICE OF FINANCIAL PLANNING AND CONTROL
IN TELE AIRLINE INDUSTRY: BRITISH AIRWAYS AND
EGYPTAIR 98
CHAPTER FOUR: FINANCIAL PLANNING AT BRITISH AIRWAYS . . . 99
4.1 Introduction 100
4.2 Procedures for Collecting the Data Required for
the Empirical Study 100
4.3 Background of the Company 105
4.3.1 Privatisation of British Airways 107
4.3.2 Takeover of British Caledonian Airways 109
4.3.3 British Airways Organisation Structure 112
4.3.4 British Airways Market and the effect
of the British Caledonian Acquisition 115
4.3.4.1 United Kingdom Domestic Market
Centre 115
4.3.4.2 European Market Centre 115
4.3.4.3 Southern Market Centre 115
4.3.4.4 North Atlantic Market Centre 116
4.3.4.5 Middle East and Indian Subcontinent
Market Centre 116
4.3.4.6 Far East Market Centre 116
4.3.4.7 Australia and New Zealand Market
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Centre 117
4.3.5 British Airways Fleet 118
4.4 Financial Planning Procedures at British
Airways 123
4.4.1 Strategic and Financial Planning 123
4.4.2 Financial Planning Targets 125
4.4.3 The Economic Planning and Market-Place
Performance Unit 126
4.4.4 Structure of the Financial Planning
Process 126
4.4.4.1 The Annual Budget Process 126
4.4.4.2 The Tactical Plan 129
4.4.4.3 Operational Planning 131
4.4.4.4 Manpower Planning 131
4.4.4.5 Capital Expenditure Budget 134
4.4.4.6 Cash Budget Analysis 136
4.4.5 The Possibility of Changing the Budget
during the Budget Period 138
4.4.6 Evaluation of the Financial Planning
System 139
4.5 Summary 142
CH4P2'ER FIVE: CONTROL PROCEDURES AT BRITISH AIRWAYS . 144
5.1 Introduction 145
5.2 The Cost Accounting System 145
5.2.1 Cost Classification 145
5.2.2 Methods of Cost Allocation 146
5.3 Control Procedures 155
5.3.1 The Control Process and Budgetary Control
System 155
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5.3.2 Flow of Information throughout the
Airline 163
5.4 Productivity Measures 164
5.4.1 The Productivity Measures 164
5.4.2 Cargo Activity 173
5.4.3 Variance Analysis 173
5.4.4 Revenue Analysis 174
5.4.5 Sensitivity Analysis 175
5.4.6 The Funds Statement 175
5.5 Evaluation of the Control System 176
5.6 Accounting System 177
5.6.1 Brief Description of the System 178
5.6.2 Accounting Policies 185
5.7 British Airways' Role in Fixing Fares 187
5.8 The Extent of Government Influence 189
5.9 Summary 191
CHAPTER SIX: FINANCIAL PLANNING AT EGUTIA/R 193
6.1 Introduction 194
6.2 A Brief Introduction of the Egyptian Economy 194
6.2.1 Economic Planning 194
6.2.2 The Main Features of Current Economic
Activity 195
6.2.2.1 The Present Performance of the
Egyptian Economy 195
6.2.2.2 The 1987/8-1991/2 Five-Year Plan:
The Main Features 202
6.3 Financial Planning at Egyptair 210
6.3.1 Procedures for Collecting the Data Required
for the Empirical Study 210
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6.3.2 The Egyptian Airline Industry "Egyptair" 217
6.3.2.1 Background of the Company 217
6.3.2.2 The Airline's Organisation Structure 219
6.3.2.3 Egyptair's Fleet 227
6.3.2.4 Egyptair's National and International
Market 229
6.4.2 Financial Planning Procedures 233
6.4.2.1 The Five-Year Strategic Plan 233
6.4.2.2 Processes of Setting the Strategic
Plan 233
6.4.2.3 The Airline's Annual Budget Process 237
6.4.2.4 Manpower Planning 246
6.4.2.5 The Cash Budget Analysis 249
6.5 Evaluation of the Financial Planning System 253
6.6 Summary 254
CHAPTER SEVEN: CONTROL PROCEDURES AT EGTTTAIR 256
7.1 Introduction 257
7.2 The Cost Accounting System 257
7.3 The Control Procedures 262
7.4 Productivity Measures at Egyptair 265
7.5 Revenue Analysis 270
7.6 Evaluation of the Control System 274
7.7 The Accounting System 276
7.7.1 Foundation of the Central Agency for
Auditing 277
7.7.2 Structure of the U.A.S. and its relationship
to Planing and Control Processes 278
7.7.2.1 System's Chart of Accounts 280
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7.7.2.2 Relationship of the U.A.S. to
Planning and Control Processes
and its implication to Egyptair .. 283
7.7.3 The Exchange Rate Policy 290
7.8 The Extent of Government Influence 295
7.8.1 Ministry of Civil Aviation 297
7.8.2 Ministry of Finance 297
7.8.3 Ministry of Planning 298
7.8.4 The National Investment Bank 302
7.8.5 Civil Aviation Authority 303
7.9 Summary 305
CHAPTER EIGHT: &ROTARY, CONCLUSIONS AND RECOIRIENDATIONS 307
8.1 Introduction 308
8.2 Summary of the Research 310
8.3 Conclusions 327
8.4 Recommendations of the Research 337
APPENDICES 347
BIBLIOGRAPHY 373
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LIST OF TABLES
4.1 Acquisition of British Caledonian 110
4.2 British Airways Fleet on 31/3/1989 122
4.3 Manpower Situation at British Airways on
31/211989 135
4.4 Comparative Application of Funds Statements during
the period 1983/4-1988/9 137
5.1 Comparative Productivity Performance during the
period 1983/4-1988/9 166
5.2 Analysis of the total Airline's Operations during
the period 1983/4-1988/9 168
5.3 Analysis of the Company's Turnover and Operation
Surplus by Geographical Area during the period
1983/4-1988/9 170
5.4 Comparative Financial Statements for the period
1983/4-1988/9 172
6.1 Savings of the Egyptian Expatriates Compared with
other Sectors during the period 1980/1-1986/7.... 200
6.2 Summary of the Main Economic Features from
1980/1-1986/7 201
6.3 Targeted Quantitative Production of the Main
Main Manufactured Products at the end of the
Second Five-Year Plan 1987/8-1991/2 204
6.4 Gross Domestic Product by Economic Sectors at the
end of the Second Five-Year Plan 1987/8-1991/2 ... 205
6.5 Investment of Public Sector during the Five-Year
Plan 1987/8-1991/2 compared with Five-year plan
1982/3-1986/7 207
6.6 Public and Private Sectors' Investment during the
Second Five-Year Plan 1987/8-1991/2 208
6.7 Egyptair's Fleet in April 1989 228
6.8 Number of Passengers carried by Egyptair
during the period from 1984/5-1987/8 according to
the Marketing Regions 230
6.9 Number of Passengers carried Free by Egyptair's
Fleet during the period 1984/5-1987/8 232
6.10 Egyptair's Five-Year Plan Projects 1987/8-1991/2 . 236
6.11 Egyptair's Comparative Annual Budgets for the
Financial Years 1987/8 and 1988/9 245
6.12 The Manpower Situation on 30/6/1988 compared with
the previous years 1984/5-1987/8 247
6.13 The Manpower Turnover during the period
1984/5-1987/8 248
6.14 Number of Employees which they did not take part
in production during the period 1985/6-1987/8 ... 248
6.15 Egyptair's Comparative Resources and Uses Statements
for the Financial Years 1985/6 and 1987/8 251
6.16 Egyptair's Comparative Resources and Uses Statements
for the Financial Years 1985/6 and 1987/8 as
percentages of the total (Vertically) 252
7.1 Summary of the Company's Main Activity during the
period 1985/6-1987/8 267
7.2 Development of the Company's Revenue, Total Value
Added, Net Value Added, Wages and Average Number of
Staff during the period 1985/6-1987/8 268
7.3 Company's Economic Indicators during the period
1985/6-1987/8 269
7.4 Routes Sector's Revenues during the period
1984/5-1987/8 271
7.5 Services Sector's Revenues during the period
1984/5-1987/8 272
7.6 The Company's Main Sectors actual Revenues and Costs
compared with the Budgets for the year 1987/8 ... 275
7.7 The Egyptian Uniform Chart of Accounts 282
7.8 Development of the Exchange Rate of the Egyptian
Pound against the American Dollar from 1957 to

1988 291
7.9 Effect of the Foreign Exchange Policy on Egyptair's
Loans 294
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