Complete Solutions and Management Measure for Airline Fuel Management - Essay Example

These solutions cover fuel forecasting and planning, procurement, inventory and logistic management, contract management, and accounting and tax management. As a result, finance and purchase teams acquire a complete overview of airline inventory and obligation when they hedge and purchase fuel.

 Airline companies’ accounting management can automate and reduce fuel costs by the processing of both financial derivatives and physical fuel purchases used in hedging. Therefore, the accounting department should come up with aggregated financial-physical fuel view positions and cost risk exposure (Calder, 2013:9). In fuel planning and budgeting, the accounting department must conduct an analysis of “what-if” situations such as changes in the type of aircraft used, the introduction of new airports and routes, and forward cost curves. In addition, the accounts department must be able to report on actual fuel costs versus forecasted fuel costs to enable it to calculate the airlines hedged fuel plan (Calder, 2013:9).

Airline accounts management can effectively curl fuel use and get investments directly to the company’s bottom line through operating efficiently. Depending on the company’s requirements and decisions chosen to be part of its fuel management plan, the airline company can significantly boost fuel savings by approximate much of eight per cent (Centre for Aviation, 2013). In order to achieve these fuel savings, the accounting department needs to come up with a way, which ensures that; airline planning is enhanced to reduce fuel consumption, loading and balancing method ensure a favourable centre of gravity for all aeroplanes, the airport entrance planning is considered to ensure low fuel burn on the entrance grounds, and ensure there is daily operations improvement to recover from troubleshooting activities hence limiting the burning of wasted fuel (Centre for Aviation, 2013).  

Currently, all airlines’ accounting departments must ensure that they have a Fuel management information system, which is imperative to monitor fuel expenses and assist the accountants in coming up with effective solutions to minimize fuel costs. This is because airline fuel cost has become the biggest cost ranging between 25% and 50% of annual airline expenditure in all airlines across the world.  Airline calculations indicate that one dollar rise in fuel cost is equivalent to 1.6 billion dollars expenses of an entire airline company. It is highly important for the airline accounting department to develop effective fuel management software such as FuelPlus Software (Calder, 2013:9). This efficient fuel expense and management software in the accounting department can bring massive positive effects on the progressive running of an airline operation and cause a direct effect on the airline's profitability, sustainability, and competitiveness (Channel 4 Dispatches, 2013).

 As reported by the Centre for Aviation (CAPA) recently, financial optimism is now becoming the main cause of higher fuel prices. Whilst in the old days, the Fuel management system was seen as primarily a method of bringing commercial advantages, it is currently becoming an important element of an airline expense management toolkit. Fuel management is not just monitoring operational information, but also a widespread enterprise that involves all departments in the airport. The accounting department should work together with another department in aid of minimizing fuel cost hence maintaining low-cost airline and passenger safety. This is because an increase in fuel expenses will lead to an increase in air ticket costs hence a reduction in the number of passengers (Centre for Aviation, 2013). The accounting department must ensure that the planning team is responsible for evaluating a vigorous fuel volume estimate for the approaching financial year. This calculated information is useful by the purchasing department to consult fuel tenders for ensuring that there is sufficient fuel to sustain flight operation. The fuel tenders come up with new contracts, which the accounting department must consider regarding fuel cost updates and volume need changes (Channel 4 Dispatches, 2013).

The accounting department, however, must ensure that the dispatch body has all fuel statistical data together with the fuel price list to enable it to calculate the airline trip and tinkering fuel amounts for each trip. After each trip completion, the accounts department should collect airline and fuel consumption data to aid in tracking actual fuel consumption and uplift data. This data is compared with available contract prices for calculating accrued liabilities necessary for the accounting team to calculate end month report (Ryanair Annual Report, 2013).

 In conclusion, accountants have the responsibility of verifying all fuel products and other related services’ invoices. The accountants should go through all invoices to cross-check the flight’s operational information such as fuel delivery and airline events as well as important data like applicable taxes and fuel prices. This is evident that all departments in the airport should take part in data generation to enable the accounting department to manage fuel costs in a low-cost airline’s operations. All airline accounting departments must come up with a highly advanced Fuel Management System to enable the accountants to effectively manage the fuel consumption and regulate fuel expenses.