An article about the financial troubles of Air-India indicates that the airline plans to break even in
Question:
An article about the financial troubles of Air-India indicates that the airline plans to break even in 2000–2001:
Air-India has arrived at a difficult point in its history. Held back from modernization by government policy, it has no global alliance partners, an aging fleet and an enormous workforce. With no fuel for privatization, and an unwillingness to look at the carrier’s synergies with Indian Airlines, will the management be able to steer it out of trouble? Air-India’s financial position is precarious.
Its net loss of $43 million in 1997 to 1998 is ample evidence of the fact.
The airline is taking remedial action to reduce losses and aims to reach breakeven by 2000 to 2001. Losses in 1997 to 1998 were less than those for the previous year, when the carrier reported a loss of Rs2.97 billion, but the goal of breakeven in 2 years’ time will be an uphill struggle. At the root of Air-India’s difficulties are persistently low yields, on the one hand, and steadily rising costs on the other.
SOURCE: Dominic Jones, “Good Airline, Shame about Its Problems,” Airfinance Journal (March 1999), p. 31.
In light of the discussion in the chapter that breakeven is a reference point rather than a goal of business, reconcile the comment in the article that Air-
India has a goal of breaking even in two years.
Step by Step Answer:
Cost Accounting Traditions And Innovations
ISBN: 9780324180909
5th Edition
Authors: Jesse T. Barfield, Cecily A. Raiborn, Michael R. Kinney