Management Accounting, 7th Edition Solution Manual

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IRM t/aLangfield-Smith, Thorne, Smith, HiltonManagement Accounting7e1CHAPTER 1Management Accounting: Informationfor CreatingValueand Managing ResourcesANSWERS TO REVIEW QUESTIONS1.1There are many possible answers to the question.Qantas, the national airline of Australia, has faced a number of changes to the businessenvironmentover the last20years, including deregulation of the domestic aviation industry.This resulted in increased competition as new companies attempted to enter the industry. Themost notable of these was two failed attempts by Compass to succeed in the market and gainmarket share by savagely cutting prices. Its major competitor, Ansett Australia, collapsed in2001 resulting in Qantas having almost a monopoly for a short period. A powerful UK airline,Virgin, has also entered the market, with a history of taking legal action against marketleaders who attempt to intimidate them using predatory pricing. Further, Impulse Airlines, alocal airline, started operations, only to be eventually taken over by Qantas. On top of all this,the international terrorism crisis of 11 September 2001 saw a substantial contraction ofinternational air travel for a period of many months, leading to the collapse of several UnitedStates airlines many times the size of Qantas.Other changes to the business environment have included unrest and war in the Middle Eastand speculation in oil,resulting in volatility and serious increases in fuel prices;bombings inBali in 2002;the outbreak of SARS in 2003;natural disasters such as the Asian tsunami;theheavy subsidisation of competing national carriers,especially by Middle Eastern countries;the entry of Tiger Airways into Australia;extra capacity gained by Virgin Blue;the shiftingof significant parts of engineering maintenance operations offshore;publicity surrounding aseries of safety and engineering concerns and an audit by CASA in 2008 finding thatmaintenance by Qantas was not up to its own standards;and financial uncertainty arisingfrom the 2008 credit crisis and share market collapse. In more recent times,two differentvolcanoeshavecaused the cancellation of flightsforseveral days, and the explosion of anengine in a new range of aircraft, the A380, in November 2010 caused the grounding of thatfleet until January 2011while the reason was explored and overcome (see'Real life'inChapter 21, page 955).

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