Airline Industry Analysis & Case Studies

This assignment delves into various aspects of the airline industry. It requires analyzing academic articles on topics such as airline pricing strategies, customer loyalty, brand protection during crises, and the impact of airports on local development. The analysis should draw insights from provided research papers and consider real-world examples like British Airways and Emirates Airline.

FINANCIAL ANALYSIS AND
MANAGEMENT

TABLE OF CONTENTS
INTRODUCTION..............................................................................................................................3
Operational performance of British Airways.....................................................................................3
Strategic performance of British Airways..........................................................................................4
Stock market performance.................................................................................................................5
Financial analysis of British Airways.................................................................................................6
CONCLUSION...................................................................................................................................9
REFERENCES.................................................................................................................................10
Table 1Ratio analysis of Tesco....................................................................................................................7

INTRODUCTION
British Airways is the one of the fastest growing airline in the world. Consistent
improvement in service by innovating operations and commitment to make available best quality
service to the customers are the two basic factors that lead to strong growth in the firm business.
In the current report, operational performance of the British Airways is measured and along with
this, strategic condition of the company is also evaluated. In middle part of the report stock
analysis of British Airways is done and by reviewing line chart company stock performance is
measured. At end of the report, ratio analysis of company financial statements is done and its
current condition is evaluated in proper manner. By doing so entire research work is carried out
in present research study.
Operational performance of British Airways
Operational performance of British Airways improve to great extent. In year 2017 firm
make many changes in its operations. It can be observed that British Airlines become first
Airline Company that initiate trial self-service biometric boarding gates on international flights.
This service was first started in USA and now outside of the mentioned nation first started by
British Airways. Due to usage of advanced technology firm is reducing boarding time of the
investors on the airport. Due to adoption of advanced technology boarding process reduced
significantly (Mills, 2017). All these things will give investors a new experience in the airports.
Thus, it can be said that firm is making efforts to improve its operational efficiency. Safety and
security are the one of the core part of biometric facial recognition technology. In this technology
face of an individual is scanned and same is matched to the digital facial scan. By doing so it is
ensured that individual claim that it belong to specific nation is accurate and it is eligible to go on
aircraft. It can be said that firm is performing well and it is consistently looking for improving its
performance. In terms of payment system also British Airways is bringing innovation in its
services. World pay is processing billion of Pound of transactions that are related to the British
Airways on annual basis. Altogether, both firms are initiating first world card acceptance
program (Cornelissen. and Cornelissen, 2017). Thus, customer now through their cards also can
make payment to British Airways. It can be said that firm is working a lot for safety of its
customers and giving them better experience equivalent to the amount that they are paying to
British Airways for taking its services. British Airways become one of the fast airline globally

which is making use of high tech remote technology by using which aircraft can be pushed back.
Firm is focusing on modernizing its operations so that leading position can be maintained in the
market and tough competition can be given to rivals in the market.
Strategic performance of British Airways
Strategically British Airways perform well in the market. In past years British Airways
Company follow five strategic goals in the business. These five strategic goals are to become
airline of choice, to give top quality of service, fast expansion of the business and maintaining
leading position in London as well as meeting customer needs at workplace. All these five are
important for the firm and in this regard in past years firm take number of steps in its business.
British Airways increase is fleet size and increased number of airplanes in its fleets (Forgas and
et.al., 2010). By doing so it increase its passenger carrying capacity and give tough competition
to rivals. It can be said that firm grow its business at very fast rate. One of the major objective of
company is to become global airline of choice and in this regard it is providing best quality of
services to its customer that make travel memorable for them. In past years firm make many
changes in its services and improving quality of same and all these things lead to retaining
customers in the business. Second major objective of the company is to expand business at fast
rate and in this regard firm is entering in to collaboration agreements with other companies and
through them also providing services to its customers. In past years in this direction lots of
efforts are made and firm successfully manage its position in the market. Third main objective
of the company is to expand business at fast rate and in respect to this it is consistently
purchasing slots in varied airports so that more and more airplanes can be operated from same.
Fourth main objective of the company is to maintain leading position in the UK market and in
this regard it is consistently managing its influence. Firm is improving its operations and making
available high quality of service to the customers. By doing so it is making feel customers that
they are receiving more for the payment that they made to the company. Thus, it can be said that
firm successfully achieve its fourth main objective (Grundy and Moxon, 2013). Fifth and final
objective of company is to meet customer needs at workplace and in respect to this British
Airways takes lots of steps so that customer grievance can be solved at fast rate and in effective
way. Overall, it can be said that British Airways is giving solid performance in its business in
terms of strategy and it will further will grow its business at fast rate. Hence, investors can make
investment in the mentioned company and can earn good amount of profit on investment. In past

couple of years firm successfully generate good amount of return for its investors and it can be
said that it successfully maintain strong image among investors. In future also it is expected that
firm will be able to perform well and will continue create new growth paths by preparing good
strategy in its business. Thus, if investors makes an investment in the company then they can
earn good amount of return on investment amount (Brigo and Capponi, 2010). This is the reason
due to which there are large number of investors that are currently making an investment in
British Airways. In future also it is expected that these number of investors will increase at fast
rate.
Stock market performance
1 9 17 25 33 41 49 57 65 73 81 89 97 105 113 121 129 137 145 153 161 169 177
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Figure 1 British Airways share price
It can be seen from chart that stock price is increasing consistently from year 2003 to February
month of 2007. From 2007 to 2012 consistent declined comes in the firm stock price. However,
in middle time period elevation was observed in stock price but growth in stocks was not fast.
After, year 2012 stock gain momentum and stock price increase at fast rate. It can be said that in
last fifteen years stock give strong positive performance in the stock market and those investors
who hold stock for long time earn good amount of profit on invested amount. It can be said that
from investment point of view firm give good return to its investors and investment must be
made in the company stocks (Gregory, 2010). However, good amount of profit is mostly earned
by those investors who hold stocks for long term. It can be said that British Airways generated
strong return for investors most of times and it is the recession time period during which pressure

was observed on stock returns. It can be said that investors must regularly maintain investment in
company as it is fundamentally strong and innovating its business operations consistently which
reflect that in upcoming time period growth rate of company will be accelerated. It can be said
that there is lot of scope of earning of profit in British Airways shares.
Financial analysis of British Airways
Table 1Ratio analysis of Tesco
2016 2015 2014 2013 2012
Net profit 1345 2508 702 281 -100
Net sales 11443 11333 11719 11421 10827
Net profit ratio 12% 22% 6% 2% -1%
Current assets 2495 2047 3583 2915 1599
Current liability 5334 5700 5502 4627 4398
Current ratio 0.47 0.36 0.65 0.63 0.36
Debt 4470 3782 4121 3453 3326
Equity 4241 4598 2100 2455 2758
Debt equity ratio 1.05 0.82 1.96 1.41 1.21
Net profit 1345 2508 702 281 -100
Capital employed 8511 8380 6221 5908 6084
ROCE 16% 30% 11% 5% -2%
Net profit 1345 2508 702 281 -100
Assets 16471 13376 13426 11921 11837
Return on assets 8% 19% 5% 2% -1%
Sales 11443 2508 11719 11421 10827
Average account
receivable 625.5 536 532 510.5 474
Debtor turnover ratio 18.2941 4.679104 22.0282 22.3721 22.84177

6 8

 Net profit ratio: Measurement of firm performance is inevitable in order to make
investment decisions in respect to the company. Amid of British Airways facts revealed
that profitability percentage rose sharply and eventually it declined to 6%. Trend of
robust performance in business comes to end in 2016 and multiple factors impetus in low
profit earning in the business. Facts reflect that in year 2012 profit percentage was -1%
and same increased to 2% and 6% in year 2013 and 2014. Further this, rate elevate to
22% in year 2015 and declined to 12% in year 2016. So, firm successfully maintain a
level in terms of profit earning by sluggishness is observed in growth rate of earning of
profit in the business (Percoco, 2010). Top managers need to contemplate about factors
that impetus low profit in the business. Managers need to articulate strategy that they
intend to follow in respect to cost control at workplace in front of stakeholders so that
confidence can be restored again towards British Airways. Managers must foray for cost
control and improving management at workplace so that message can be forward to
stakeholders that even firm is exposed to risk management is fully committed towards
securing interest of stakeholders.
 Current ratio: Liquidity is the one of the factor on which managers have to lay down
emphasis in order to ensure that there is sufficient amount of cash in the business. Current
ratio is the one of the measurement that is employed by managers to evaluate current
condition of the firm in terms of its ability to make payment to creditors according to
requirements of the business. Current value of current ratio is 0.47 which is increment to
previous year current ratio whose value was 0.36 in year 2015. Value of ratio in year
2014, 2013 and 2012 was 0.65, 0.63 and 0.36. Facts are indicating that from 2012 to 2014
liquidity increased in the business but that level of availability of cash was not abundant.
Availability of cash in proportion to current liability dips to 0.36 in year 2015. Further, in
2016 sign of improvement observed slightly and value elevate to 0.47 (Bilotkach,
Gorodnichenko and Talavera, 2010). It can be said that company performance advance
little bit but more is expected from the business firm. This is because still firm is not able
to pay all its current liabilities by using current assets on time. Managers needs to curb
current liability growth rate by giving less debt to entities and initiating recovery of
receivables. In amid of this, factoring services can be employed and accent can be given

on fast recovery of bad debts. By doing so present scenario can be changed and
performance can be presumably can be improved in next fiscal year.
 Debt equity ratio: Shareholders give due importance to relevant ratio as it have accent for
them. Debt equity ratio is the mirror of the existing capital structure of the company.
Facts revealed that debt equity ratio value elevate from 1.21 to 1.96 from year 2012 to
2015. Proportion of debt was greater than equity and to some extent it can be assumed
that condition may become difficult for the firm in upcoming years if debt burden further
increase and profit level declined. In year 2016 and 2017 ratio value decreased to 0.82
and again increased to 1.05 (Cross, Higbie and Cross, 2011). Thus, on average basis debt
value atleast remain equal to equity. Overall picture indicates that management foray in
respect to advancing capital structure but lot more efforts are needed to be made to
handle situation. Restricting of the capital structure is the one of the option that is
available to the company but it is the last option that is available to the managers. For
upcoming years managers must try to yield more profit in the business so that major
finance needs can be meet from internal sources of finance. By doing so dependency on
external source of finance will be reduced and self-sufficiency will be increased in the
business.
 Return on capital employed: This ratio is also known by name ROCE and it indicate
return that can be earned on each unit of cash that is invested in the business. Facts
demonstrate that ROCE was -2% in year 2012 an increased to 30% in year 2015. Further,
value of ratio decreased to 16% in year 2016 which indicate that sudden ROCE value
become negative. Decline in profit and advancement in capital employed impetus low
ROCE in the business. In last four years strong performance or higher plunge is observed
in ROCE value which is sufficient to make inference that high amount of return were
delivered by the British Airways stocks to their shareholders (Moresi, 2010). If results of
both debt equity ratio and return on capital employed are combined then it can be
presumed that firm is moving towards locus of business problems in terms of expected
increase in finance cost and elevation in capital employed if further low profit yield in the
business. Managers need to prepare policy in respect to efficient and effective use of cash
in the business so that with availability of limited amount large financial need can be
meet.

 Return on assets: It is another ratio which is given due importance by the companies
because it help them in identifying that how much return they generated on assets that are
in the business. It can be seen that return on assets percentage was -1% in year 2012 and
it increased to 19% in year 2015. This point out that in past years abundant amount of
profit was generated and given to the shareholders. However, again return on assets value
decreased to 8% and low profitability is again basic reason behind such situation. Like
ROCE in case of this ratio also assets value increased but net profit amount decreased
and this results in generating low profit on assets. It can be said that in past years
sufficient amount of profit was generated for the investors by making effective use of
assets in the business but same thing does not repeat in last analyzed year and low return
generated for the investors (Wang, Lu and Tsai, 2011). It can be said that British Airways
managers need to look at situation very closely and by paying due attentiveness factors
need to be find out which spur elevation in expenditures in the business. By working on
relevant factors company performance can be improved to great extent.
 Debtor turnover ratio: It is another ratio which reflect efficiency with which debtors are
used to generate return in the business. It can be seen from table given above that debtor
turnover ratio value was 22.84 in year 2012 and it decrease slightly to 22.02. Further,
value declined to 4.67 and again value increased to 18.29 in year 2016. It can be said that
firm is generating less sales from its debtors in its business. This is the good strategy in
the company business as there are less chances of increase in value of bad debt in the
company business. It can be said that debtor turnover ratio is indicating that on this front
firm is on right track (Debtor turnover ratio or receivable turnover ratio, 2017). It can be
said that such kind of strategy ensured that there will be less capital in the business that
will be blocked in the debtors or bad debts. Hence, by following relevant tactics firm can
ensure that there will be sufficient amount of cash in the business to meet working capital
needs of the company on time. All these things make company strong in comparison to
its rivals and make it stronger than before. If further work carried out in this front then
operational efficiency can be increased in the business.
CONCLUSION
On the basis of above discussion it is concluded that there is significant importance of
ratio analysis method for the business firms because by using same lots of facts can be analyzed

in systematic way and firm performance can be evaluated in proper manner. It is also concluded
that British Airways is working a lot for improving its performance and it is working on
innovating its technology base at fast rate. All these things are accelerating firm business growth
rate. Financial condition of the firm is good but lots of things need to be done to bring in
excellent category.
REFERENCES
Books and Journals
Bilotkach, V., Gorodnichenko, Y. and Talavera, O., 2010. Are airlines' price-setting strategies
different?. Journal of Air Transport Management. 16(1) pp.1-6.
Brigo, D. and Capponi, A., 2010. Bilateral counterparty risk with application to
CDSs. Risk. 23(3). p.85.
Cornelissen, J. and Cornelissen, J.P., 2017. Corporate communication: A guide to theory and
practice. Sage.
Cross, R.G., Higbie, J.A. and Cross, Z.N., 2011. Milestones in the application of analytical
pricing and revenue management. Journal of Revenue and Pricing Management. 10(1).
pp.8-18.
Davis, K., 2016. A method to measure success dimensions relating to individual stakeholder
groups. International Journal of Project Management. 34(3). pp.480-493.
Derudder, B., Devriendt, L. and Witlox, F., 2010. A spatial analysis of multiple airport
cities. Journal of Transport Geography. 18(3). pp.345-353.
Drexl, J., 2010. Real Knowledge is to Know the Extent of One's Own Ignorance: On the
Consumer Harm Approach in Innovation-Related Competition Cases. Antitrust Law
Journal. 76(3). pp.677-708.
Forgas, S. and et.al., 2010. Antecedents of airline passenger loyalty: Low-cost versus traditional
airlines. Journal of Air Transport Management. 16(4). pp.229-233.
Gregory, M., 2010. Dirty Tricks: British Airways' Secret War Against Virgin Atlantic. Random
House.