Financial Analysis of Qantas: Sustainability Initiatives and Improvement in Financial Position

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Financial Analysis of Qantas

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Introduction
The present report is developed for carrying out an analysis of the financial performance
of a company listed on the ASX. This is done by providing a comparison of the financial
information of the selected company over the last two years. This is done for providing a
comparison of the financial information of the company in their annual reports over the year
2017-2018. This is followed by providing a discussion of the sustainability initiatives of the
selected company. The company selected for the purpose is Qantas Airways, a leading and one
of the largest airline of the Australia.
Answer 1
Discussion in the Improvement within the Financial Position of Qantas over 2017-2018
As analyzed on the basis of financial information provided in the airline annual report, its
profit before tax has recorded an increase of $203 million in the year 2018 as compared with that
of the year 2017. This is on account of the successful turnaround of its ambitious three-year
program that has emphasized on managing its rising fuel costs. The increase was mainly due to
the higher revenue realized from the customers and transformation achieved by it by re-
structuring its business. This mainly included the initiatives taken by the Qantas Group through
introducing Dreamliner and restructuring of its Singapore hub. The introduction of technological
innovations has also resulted in decreasing the fuel costs that has enabled it to maximize its fuel
efficiency and thereby realizing higher revenue. There has also been depicted a strong
performance in its balance sheet with achieving a control over its net debt at $4.9 billion
indicating that it has maintained an optimum capital structure (Qantas Group : Annual Report,
2018). The net debt has depicted a decrease of about 33% in the year 2018 as compared with
previous year as stated from the results of its net debt ratio:
Also, there has been increase in its return on investment in the year 2018 as compared with
previous year. The ratio has depicted an increase of about 10% by depicting a rise from 20 to
22% during the financial year 2017-2018. There has also been depicted an increase in the

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Earning per share from the year 2017-2018 from 56 to 64 and thus depicted a rise of about 5.3
per cent over the financial year 2017-2018 (Qantas Group: Annual Report, 2017) & (Qantas
Group: Annual Report, 2018). The same can be depicted through the following graph:
Key Financial Ratios
Financial Data
Particulars 2017 2018
$M $M
Net Profit $ 853.00 $ 980.00
Net Sales $ 16,057.00 $ 17,060.00
Shareholder's Equity $ 3,540.00 $ 3,959.00
Current Assets $ 3,119.00 $ 3,712.00
Current Liabilities $ 7,095.00 $ 7,596.00
Total Liabilities $ 13,681.00 $ 14,688.00
Financial Ratios
Ratios 2017 2018
Net Profit Ratio 5.31% 5.74%
Return on Equity 24.10% 24.75%
Current ratio 0.44 0.49
Debt to equity Ratio 3.86 3.71
(Damodaran, 2011)
Thus, it can be said that there has been improvement in the financial performance of
Qantas Airways over the financial period 2017-2018. This is primarily on account of higher
profitability achieved by the airline through re-structuring of its business operations (Davies &
Crawford, 2011). This has enabled it to reduced debt in its capital structure and providing larger
return to the shareholders (Brigham & Michael, 2013).
Answer 2