Analysis of Ryanair's Financial Statements

The provided document is an assignment that involves analyzing the financial statements of Ryanair and Norwegian Air Shuttle. The analysis includes calculating the debt-equity ratio and current ratio for both companies. The results show that Ryanair has a higher debt-equity ratio than Norwegian Air Shuttle, which suggests that the former may be more susceptible to non-payment of dues. The assignment recommends that Ryanair should change its capital structure to increase shareholder equity and reduce debt. Additionally, it advises Ryanair to focus on customer satisfaction to maintain revenue growth and explore new markets for fleet utilization.

Running head: AVIATION MANAGEMENT
Aviation Management
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
Introduction:...............................................................................................................................3
Financial Analysis:.....................................................................................................................3
Operational performance analysis of the entity:........................................................................5
SWOT Analysis:........................................................................................................................8
Benchmarking..........................................................................................................................10
Recommendations and suggestions:........................................................................................13
Reference..................................................................................................................................15
Appendix 1. Profit and loss statement of the company:..........................................................17
Appendix 2: Consolidated financial position...........................................................................18
Appendix 3: Financial statement of Ryan Air..........................................................................19

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Introduction:
In the following report, an effort has been made to throw light on the operating and
financial performance of Ryan Air. In addition to its operating and financial performance the
financial environment in which it operates have been analysed in details with respect the
strength, weakness, opportunity and threats faced by the company in its daily operations. In
pursuance of analysis of various financial aspects and operating efficiency of the company
many financial and operating tools have been used like financial ratios, SWOT analysis,
RASM, PRASM, YEILD, Ancillary revenue as % of total revenue and total revenue per PAP.
After the detailed analysis, based on the obtained results and their respective implications
some suggestions and recommendations in respect of the performance and future possibility
of improvement will be given to the company (Van der Linden 2015).
Ryanair DAC was founded in the year 1984 primarily as an Irish low cost airline and
with its headquarters in Swords, Dublin, Ireland. Its operational performance can be judged
apparently from the fact that in the year it became the largest European airline in respect of
highest passengers flown (Eriksson and Steenhuis 2015). It was also the largest carrier of
international passenger. The airline caters to customers from 34 countries belonging to
Europe, Africa and the Middle East.
Financial Analysis:
Financial analysis enables to get a deeper understanding of the financial needs of the
company and the way it is able to meet them. A proper financial performance and position of
an entity helps in increasing the safety and the value for the shareholders (Ashcraft and

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Ashcraft 2015). In pursuance of getting a deeper understanding of the financial position and
performance of the entity, a detailed analysis of the financial ratios is being conducted.
a) CURRENT RATIO:
CURRENT RATIO
2015 2016
CURRENT ASSETS 5742 4821.5
CURRENT LIABILITIES 3346 3369.5
CURRENT RATIO 1.72 1.43
The current ratio of the company has decreased over the period of one year because of the
fact that the current assets of the company have reduced from 5742 in the year 2015 to 4821
in the year 2016. The reduction in the current asset and the comparatively lesser change
increase in the current liabilities have pushed the current ratio lower.
b) DEBT EQUITY RATIO:
DEBT EQUITY RATIO
2015 2016
TOTAL LIABILITIES 8154.3 7621.5
EQUITY 4035.1 3596.8
DEBT EQUITY RATIO 2.02 2.12
The total liabilities of the company have experienced a fall in the amount which is higher
than the fall in the equity of the company. This disparity in the percentage of change has
resulted in the slight increase of the debt equity ratio of the company.
c) RASM:

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RASM
2015 2016
OPERATING INCOME 1042.9 1460.1
AVAILABLE SEAT MILES 79690 87451
RASM 0.01 0.02
The change in the available seat miles is substantially higher than that of the change in
operating income of the country. The difference in the degree of change recorded by the
company in the available seat miles is way more than the amount by which the operating
income of the company has increased over the period of one year.
d) CASM:
CASM
2015 2016
OPERATING COSTS 4611.1 5075.7
AVAILABLE SEAT MILES 79690 87451
CASM 0.06 0.06
It is seen that the company has not been able to reduce its cost per average seat mile. But at
the same time it has also not increased whereas the revenue of the company has increased
significantly. This is the main reason that the profitability of the company has increased over
the years.
Operational performance analysis of the entity:
In addition to ensuring that the company is meeting its financial liabilities and goals quite
comfortably it must be ensured that the operational effectiveness and efficiency of the
organisation. It should be ensured that the operation is sufficient to fulfil the basic
requirements of creation of value for the shareholders of the company like proper cash flow
and customer creation along with ensuring the smooth functioning of the assets of the

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company. Some of the indicators of the operational performance of the organisation are as
follows:
a) Revenue:
The revenue trend of the company clearly demonstrates the popularity of the brand
among the customers is increasing day by day over the years. This is a good sign that the
company has been able to increase its revenue over the years (Wong and Brooks 2015). The
steep increase in the revenue of the company has been attributed to the success of company’s
Always Getting Better program which seeks to provide better quality products and services to
the company. In addition to this the company also launched its own online portal and app
thus making booking for the customers easy.
b) Adjusted profits:

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The rise in the profits can be attributed to the fact that despite increasing revenue and
company’s growth in more expensive airports around the world the management of the
company gave intense focus on the costs of the company. Thus the company was able to
reduce its unit costs to 6% a reduction of 2%. This reduction in the operating costs of the
company coupled with increased revenue has increased the profitability of the company over
the years.
c) Fleet:

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The company was able to get delivery of 41 new Boeing 737-800 aircrafts which enabled the
company to grow its fleet along with the routes it operated on. Due to induction of these
Boeing aircrafts the fleet of the company has increased significantly this year.
d) Traffic:
The traffic of the company increase by around 18% that amounted to about 106.4 million
passengers and the load factor of the company rose from 88% to 93%. Due to the
establishment of 7 new bases and 100 new routes the company was able to increase the traffic
to such extent over the years.
SWOT Analysis:
An accurate and effective SWOT analysis enables an entity to objectively measure its
strengths and weaknesses. This gives it the opportunity to leverage its strengths to get a better
share in the market and work upon its weaknesses to overcome them and come at par
performance level of the competitors (Liao 2015). In addition to this the opportunities present
in the market can be taken up by the entity by using the first mover’s advantage. The threats
can be effectively mitigated by the entity before they become lethal for the performance of
the company.
Strengths:

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o The airline was the first one to be based upon the low cost model and thus enjoys a
significant amount of expertise over its competitors in this segment.
o The airline is the largest passenger carrier in all of Europe. Thus, it is implied that it
enjoys significant share of the European market.
o Due to its large fleet size and large magnitude of operations in the European market it
is able to utilise the economies of scale very efficiently and effectively thus enabling
it to keep the cost low.
o The superior and consistent performance on the part of the airline ensures it to capture
new markets faster using predatory pricing strategy.
o The company has established multiple new bases and have expanded its operations to
100 new routes
Weakness:
o The low cost tag used by the airline often comes along with poor service to the
customers and ambiguous pricing policies like misleading baggage policies etc.
o Being a low cost airline the company is susceptible to seasonal and performance
fluctuations. This is because of the fact that low cost airline is preferred mostly by
leisure travellers and sudden change in the customer composition and occupancy can
impact the performance of the airline across all markets.
Opportunities:
o The company is well poised to increase its revenue through its various ancillary
services.
o It has a proper programme in place called always getting better which focuses on
improving the experience of the consumer. Thus, it has immense opportunity to
improve its quality of service.

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Threats:
o The recent Brexit will result in pressure on the prices of the airline.
o The fuel prices of the company are constantly fluctuating affecting its prices.
o Some other low cost airlines are developing
Benchmarking
In order to conduct the benchmarking Norwegian Air Shuttle has been chosen as
competitor of the company. Some of the parameters on which the comparison will be done
will comprise some of the operational and financial indicators of both the company (Jackson
and Area 2018).
a) Revenue:
It can be observed from the snippet that the company has been registered good increase in the
revenue. This can be attributed to the increasing routes on which the airline is conducting its
operations.
b) Fleet size:

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As per the information given out in the annual reports of the company, the size of the fleet
has increased by 21. This is lower than the number of fleets inducted by Ryan air. However
the company is going to become the first airline in all of Europe to induct and operate the
Boeing 737 Max 8 which the upgraded model of the one inducted by Ryan air.

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c) Debt-equity ratio:
2015 2016
2.02 2.12
9.67
8.33
Debt equity ratio
Ryan Air Norwegian Air shuttle
The calculation above shows that the Norwegian Air Shuttle is using more debt in its capital
structure than Ryan Air.
d) Current ratio:

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2015 2016
1.72
1.43
0.47 0.43
Current ratio
Ryan Air Norwegian Air shuttle
While the current ratio of Ryan air is reducing the current ratio of its competitor Norwegian
Air Shuttle is also reducing but at a lower rate. This shows complete difference between the
approaches adopted by the two companies in respect of the working capital of the companies.
Recommendations and suggestions:
After going through the analysis, the following recommendations and suggestions can be
made in respect of Ryan air:
a) The company is reducing the current ratio over the years but it should exercise caution
regarding any further delay in the amount as it will make it susceptible to non-
payment of the dues as and when they occur.
b) The company should change the capital structure. It should increase the shareholders
portion in order to reduce the debt equity ratio and improve its solvency position over
the years.
c) The company must makes sure that the customer satisfaction level should reach at
such a point that in the future years it becomes a cake walk for the company to
maintain the trend in the revenue of the company.

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d) The company should immediately make use of its growing fleet for the purpose of
entering into growing markets of Middle East, Africa and such nations.

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Reference
Ashcraft, K.L. and Ashcraft, C., 2015. Breaking the “glass slipper”: What diversity
interventions can learn from the historical evolution of occupational identity in ICT and
commercial aviation. In Connecting women (pp. 137-155). Springer, Cham.
Eriksson, S. and Steenhuis, H.J. eds., 2015. The global commercial aviation industry.
Routledge.
Hari, T.K., Yaakob, Z. and Binitha, N.N., 2015. Aviation biofuel from renewable resources:
Routes, opportunities and challenges. Renewable and Sustainable Energy Reviews, 42,
pp.1234-1244.
Jackson, S. and Area, G.L.A., 2018. Selected Works on the Application of Systems
Engineering to the Commercial Aviation Domain.
Liao, M.Y., 2015. Safety Culture in commercial aviation: Differences in perspective between
Chinese and Western pilots. Safety science, 79, pp.193-205.
Mawhood, R.K., Gazis, E., Hoefnagels, R., De Jong, S. and Slade, R., 2015. Technological
and commercial maturity of aviation biofuels: Emerging options to produce jet from
lignocellulosic biomass.
O’Connor, P., Flin, R., Fletcher, G. and Hemsley, P., 2017. Methods used to evaluate the
effectiveness of flightcrew CRM training in the UK aviation industry. Crew Resource
Management: Critical Essays.

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Pilarski, A.M., 2016. Why can't we make money in aviation?. Routledge.
Seneviratne, D. and Molesworth, B.R., 2015. Employing humour and celebrities to
manipulate passengers’ attention to pre-flight safety briefing videos in commercial
aviation. Safety science, 75, pp.130-135.
Van der Linden, F.R., 2015. Airlines and Air Mail: The Post Office and the Birth of the
Commercial Aviation Industry. University Press of Kentucky.
Wiegmann, D.A. and Shappell, S.A., 2017. A human error approach to aviation accident
analysis: The human factors analysis and classification system. Routledge.
Wong, S. and Brooks, N., 2015. Evolving risk-based security: A review of current issues and
emerging trends impacting security screening in the aviation industry. Journal of Air
Transport Management, 48, pp.60-64.

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Appendix 1. Profit and loss statement of the company:

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Appendix 2: Consolidated financial position

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Appendix 3: Financial statement of Norwegian Air Shuttle

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