An Analysis of a Strategic Transformation Plan: The Case of Alaska Airlines

In 2003, amid the turmoil of the U.S. airline industry in the post-9/11 environment, the senior management of the Alaska Air Group announced a “strategic vision” entitled “Alaska 2010.” The pronouncement articulated positions with regard to cost leadership, product differentiation, and growth. This study empirically assesses the efficacy of this decision with regard to the major network carrier of the air group, Alaska Airlines. The analysis focuses on the period beginning with the announcement and ending in 2010.The implementation of such a strategic protocol is dynamic and inter-temporal in nature. Therefore, it is often difficult to assess the effectiveness of changes in strategies, particularly since such effectiveness is often a function of the confounding forces of organizational strategy and market conditions. Thus, this study utilizes the multi-period methodology of the strategic variance analysis of operating income.This methodology decomposes operating income into three components: (1) growth, (2) price recovery, and (3) productivity. This is of particular interest from a strategic planning perspective, as the price component evaluates a company’s product differentiation strategy while the productivity component evaluates whether an airline’s low cost strategy was successful because of efficiency gains

An Analysis of a Strategic Transformation Plan: The Case of Alaska Airlines

In 2003, amid the turmoil of the U.S. airline industry in the post-9/11 environment, the senior management of the Alaska Air Group announced a “strategic vision” entitled “Alaska 2010.” The pronouncement articulated positions with regard to cost leadership, product differentiation, and growth. This study empirically assesses the efficacy of this decision with regard to the major network carrier of the air group, Alaska Airlines. The analysis focuses on the period beginning with the announcement and ending in 2010. The implementation of such a strategic protocol is dynamic and inter-temporal in nature. Therefore, it is often difficult to assess the effectiveness of changes in strategies, particularly since such effectiveness is often a function of the confounding forces of organizational strategy and market conditions. Thus, this study utilizes the multi-period methodology of the strategic variance analysis of operating income. This methodology decomposes operating income into three components: (1) growth, (2) price recovery, and (3) productivity. This is of particular interest from a strategic planning perspective, as the price component evaluates a company’s product differentiation strategy while the productivity component evaluates whether an airline’s low cost strategy was successful because of efficiency gains

Distortions in the measurement of the efficiency of financial leverage strategies in the airline industry when operating leases are ignored

The Financial Accounting Standards Board and the International Accounting Standards Board have set forth a proposal requiring companies to capitalize operating leases and include them as assets and liabilities on their balance sheets. The proposal is motivated by the fact that current methods accounting for operating leases hide a great deal of off-book leverage and thus are misleading to investors. Such a change would have a significant impact on the U.S. airline industry where aircraft and property operating leases are quite prevalent. This study utilizes an in-depth strategic management perspective in examining how well U.S. airlines pursue optimization strategies with regard to the management of financial leverage in order to achieve desired targets of growth and profitability. Such benchmarking is accomplished by utilizing the DEA model suggested by Capobianco and Fernandes (2004). This study demonstrates the distortion inherent in inter-airline benchmarking when operating leases are not capitalized on the balance sheet

A Strategic Variance Analysis of the Profitability of U.S. Network Air Carriers

Airlines, as part of their strategic planning process, articulate positions with regard to cost leadership, product differentiation, and growth. Decisions implemented are dynamic and inter-temporal in nature. Therefore, it is often difficult to assess the effectiveness of changes in strategies, particularly since such effectiveness is often a function of the confounding forces of organizational strategy and market conditions. Managers thus need a multi-period methodology to evaluate the implementation of strategic positions. One such approach is the strategic variance analysis of operating income. Horngren et al. (2000, 2006, 2012) demonstrate a methodological template for decomposing operating income into three components: (1) growth, (2) price recovery, and (3) productivity. It is suggested that the price recovery component assesses a firm’s product differentiation strategy and that the productivity component assesses a firm’s low-cost strategy. Thus, this framework is very much in the spirit of Porter’s (1980) seminal work.This study examines U.S. network airlines in the post-9/11 environment. Utilizing the above methodology, it first identifies comparative strategic positions across airlines and then assesses the implementation efficacy of these positions

Assessing the Strategic Evolution of U.S. Low-Cost Carriers in the Post-9/11 Environment

It has been suggested in the literature that low-cost airlines have, in varying degrees, departed from the original low-cost model introduced by Southwest Airlines. This study provides a multi-year analysis in the post-9/11 time period, for the years 2004-2009, of the demonstrated strategic positioning choices of U. S. low-cost airlines. The sample utilized is restricted to U. S. low-cost carriers so as not to conflate operating environments. Furthermore, a quantitative methodology is employed to measure effectively these choices and to facilitate inter-airline comparisons. Airlines, as part of their strategic planning process, articulate positions with regard to cost leadership, product differentiation, and growth. Decisions implemented are dynamic and inter-temporal in nature. Managers thus need a multi-period methodology to evaluate the implementation of strategic positions. One such approach is the strategic analysis of operating income utilized in this study

Assessing the strategic evolution of U.S. low cost airlines in the post-9/11 environment

It has been suggested in the literature that low-cost airlines have, in varying degrees, departed from the original low-cost model introduced by Southwest Airlines. This study provides a multi-year analysis in the post-9/11 time period, for the years 2004-2009, of the demonstrated strategic positioning choices of U. S. low-cost airlines. The sample utilized is restricted to U. S. low-cost carriers so as not to conflate operating environments. Furthermore, a quantitative methodology is employed to measure effectively these choices and to facilitate inter-airline comparisons. Airlines, as part of their strategic planning process, articulate positions with regard to cost leadership, product differentiation, and growth. Decisions implemented are dynamic and inter-temporal in nature. Managers thus need a multi-period methodology to evaluate the implementation of strategic positions. One such approach is the strategic analysis of operating income utilized in this study

Research on the Nature, Characteristics, and Causes of Accounting Errors: The Need For a Multi-method Approach

Knowledge of the occurrence and detection of errors in accounting populations is of great importance to auditors in assessing risks, evaluating the efficacy of statistical sampling methods, and planning effective and efficient audit procedures to address risks. A significant body of research exists that examines these issues. Prior studies have focused primarily on auditordetected errors. A basic assumption of these studies is that detected errors are an accurate reflection of all significant errors present. That is, there are not a substantial number of undetected errors, or that undetected errors share the same characteristics (e.g., error direction) as detected errors. However, little evidence exists regarding the accuracy of this assumption. Further, there has been little consideration of factors that may affect differences between detected and actual errors and the implications of these differences on research conclusions. This paper presents a model of the variables involved in the error generation and error detection processes. Variables that have been explored in prior research are discussed along with those requiring further investigation. Finally, the paper identifies confounding variables to be controlled in future studies and makes suggestions for improving extant error study methods

The impact of lease accounting standards on airlines with operating leases: Implications for benchmarking and financial analysis

In 2016, the Financial Accounting Standards Board (FASB) has issued a new standard for lease accounting. The standard requires capitalization by lessees of most leases currently treated as rentals, i.e., those currently classified as operating leases under the existing standard for lease accounting. We examine the impact on airlines that currently make use of operating leases. Several key financial ratios are examined before capitalization and then after capitalization on a pro forma basis. The results indicate that working capital, leverage, and solvency change dramatically in a negative direction, and airline rankings based on those ratios also change, which has implications for benchmarking performance