Financial and Operational Performance Analysis of Emirates Airline

This report evaluates the financial and operational performance of Emirates Airline, including its competitive advantage, operational activities, and financial performance through ratio analysis. It also includes a comparative analysis with key competitors and recommendations for improvement.

Managing operation and finance
3/10/2019

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Contents
Introduction......................................................................................................................................2
Overview of the company................................................................................................................3
Industry........................................................................................................................................3
Competitors of the company........................................................................................................3
Competitive advantage................................................................................................................4
Operational activities of Emirates...............................................................................................4
Financial performance (Ratio analysis)...........................................................................................5
Liquidity ratio..............................................................................................................................5
Profitability ratio..........................................................................................................................7
Gearing ratio................................................................................................................................8
Efficiency ratio............................................................................................................................9
Comparative Analysis between Emirates, Qatar, and Lufthansa Airlines.....................................10
Recommendations..........................................................................................................................13
Conclusion.....................................................................................................................................14
References......................................................................................................................................15
Appendix........................................................................................................................................17

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Introduction
In the present competitive world, it is essential for every company to perform business
operations effective as this helps them in dealing with the competitors. The aim of the report is to
evaluate the financial as well as the operational performance of the corporation. The business
that has been designated for the analysis is Emirates airline, a well-known airline that is based in
Dubai, UAE. The report includes the analysis related to the operations of the company that
include the features that make the company different from its competitors. The financial
performance of the company is appraised with the help of ratio analysis. The analysis helps in
analysing the liquidity, profitability, and solvency of the company. In addition to this, the report
includes the evaluation of its performance against the key competitors has been undertaken.

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Overview of the company
Emirates airline is well-known company who is performing its airline operations in Dubai,
United Arab Emirates. The company started in the year 1985 when the company introduced
operations with the two aircraft. Currently, the company is flying with the world’s major fleets of
the Airbus A380 and with the Boeing 777s (Emirates Group, 2019). This helps the company to
offer comfort to customers of the newest and greatest well-organized wide-body aeroplane in the
skies. Emirates motivate their tourists across the world with the rising linkage in worldwide
destination industry primary onboard entertainment that is locally encouraged cuisine as well as
the excellent service. The company is the global airline who is serving its services in 155 airports
with 83 countries from its hub that is in Dubai.
Industry
Emirates airline deals business operations in UAE aviation sector and with the steady growth that
benefit from the wide range of expertise and to achieve in offering advanced international airport
solution that has boosted the UAE’s national carriers. The fleet of the national air carriers
includes Emirates, Etihad Airways, Air Arabia, as well as the fly Dubai (WAM, 2018).
Competitors of the company
In the present airline industry, the Emirates airline finds different competitors in the market that
include Etihad Airways, Qatar Airways, fly Dubai and many others. The competitors of the
company within the airline industry have been able to reduce their airfares due to which it is able
to give the tough competition to the Emirates. Standards of the service provision between
competitors have improved because of the increase in the companies across the industry of flight.

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Thus, a strong rivalry that Emirates Airline has encouraged and given an increase for improved
service delivery (Emirates Group, 2019). These companies are considered as competitors
because they are present in the market from long. This shows that the company have mastered
the art of profitability and reduced expenses among the market of the airline.
Competitive advantage
Dubai based Emirates Airline is considered as rising airlines in the world providing a rise in the
global passenger travel industry. The company has a competitive advantage that is it is
considered as the cost-efficient processes in the carrier industry, which is offering it a
competitive gain. The company is able to manage the lean personnel similar to that of low charge
carriers and it has a flat organisation that keeps the low above charges.
Operational activities of Emirates
The operational department of operations grips numerous mechanisms at the operational ground
across the Emirates airline. It has been found that it majorly emphasizes on the safe, lawful as
well as the well-organized process of airline that comprise of training and scheduling packages
undertaken by Flight Deck Crew in order to accomplish the controlling requirement that achieve
effective excellence processes incompetent, safe and customer approachable method (Emirates
Group, 2019). The operations of the company include the technical unit of the organisation for
effective serving facilities to new ways and their performance with the additional obligatory
operating statistics to flight crew with the motive to safeguard ground process and in-flight to the
clients. In addition to this, the operations of the flight department majorly include below-given
divisions: -
 Flight Training Operation

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 Flight Support Operation
 Flight Performance Operation
 Emirates Network Operation and Logistics
 Flight facilities Training
Financial performance (Ratio analysis)
Financial performance is a subjective measure that shows organisations are effectively making
use of the assets from its primary mode of business and generating the revenue. The evaluation
of the financial performance is essential as it measures the outcomes of the company’s policies
and operations in financial terms. The financial performance of Emirates is calculated with the
help of ratio analysis.
Ratio analysis is considered as the form of the financial statement analysis that is majorly used
by a company with a motive to get quick indicators of organisation financial performance in
different key areas.
Liquidity ratio
A liquidity ratio is a ratio that majorly shows whether business existing assets will be sufficient
to encounter the company’s obligation when they become due. Emirates found that it is capable
to accomplish its obligations or not (Emirates, 2019). Thus, different ratios under the liquidity
ratios are calculated which include current ratio and quick ratio. In addition to this, the operation
advantage is evaluated which shows the efficiency of business in terms of its processes (Al
Nimer, Warrad and Al Mari, 2015).
Ratio Analysis
LIQUIDITY RATIOS 2017 2018

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Current ratio Current assets
$
27,836.00 0.73
$
34,170.00 0.84
Current liabilities
$
38,382.00
$
40,566.00
Quick ratio Quick assets
$
25,598.00 0.67
$
31,783.00 0.78
Current Liabilities
$
38,382.00
$
40,566.00
Operating leverage Fixed assets 93,722.00 77% 93,417.00 73%
Total assets 121,558.00 127,587.00
 Current ratio: - Current ratio is one of the liquidity ratios that help the emirates to
measures the ability of the company with the motive to pay off the short-term obligations.
In the year 2017, the company was able to pay complete obligations due to which ratio
was 0.73 and in the year 2018, the assets of the company increase due to which ratio was
0.84. This shows that Emirates is not able to maintain liquidity in the market.
 Quick ratio: - Quick ratio is a pointer of business short-term liquidity location and it
evaluates the business ability (Penman, 2015). The quick ratio shows how quickly the
company sell off its current assets with the motive to pay off the obligations. Emirates
quick ratio for the year 2017 was 0.67 and 0.78 for 2018. The increase in the ratio is good
but still, the liquidity is not maintained by Emirates Company.
 Operating leverage: - The ratio of operating leverage is one of the financial efficiency
ratios which helps the company to measure the percentage of the total cost that is made
up of the variable as well as the fixed cost (Trotman and Carson, 2018). Emirates
measure the sensitivity of the business operating income to its sales. In the year 2017 and
2018, Emirates is able to attain the operating leverage ratio with 77% and 73%
respectively. The high operating advantage shows the high fixed cost that means that

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there is a rise in the sales that might lead to massive variations in profit. This ratio helps
the company to attract investors.
Profitability ratio
This ratio reflects the ability of the organisation to attain a satisfactory profit as well as the return
on investment. Emirates airline majorly makes use of this ratio as this indicates good financial
health as well as the effectiveness of management of the company for its assets (Das, 2019).
PROFITABILITY RATIOS 2017 2018
Net profit margin EBIT
$
1,490.00 1.78%
$
3,023.00 3.31%
Net Sales
$
83,832.00
$
91,225.00
Return on Assets Net income
$
1,490.00 1.23%
$
3,023.00 2.37%
Total assets
$
121,558.00
$
127,587.00
Return on capital
employed EBIT
$
1,450.00 1.74%
$
3,023.00 3.47%
Capital Employed
$
83,176.00
$
87,021.00
 Net profit margin: - The net profit margin is calculated by the company to evaluate the
profit. This means it shows that net income or profit is generated as the percentage of
revenue. In the year 2017, the profit generates by Emirates was 1.78% of the sales which
increase in the year 2018 and reached to 3.31%.
 Return on Assets: - Return on assets ration shows how the profitability of the company
is related to the total assets (Daft and Albers, 2012). The return that is attained by

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Emirates Company from the assets was 1.23% and 3.47% in 2017 and 2018. The high
ratio shows that revenue of Emirates is improving which makes it more profitable.
 Return on capital employed: - ROCE is one of the financial ratios that measure the
profitability of the company and its efficiency with which the capital is employed. ROCE
of the Emirates company is increasing from the year 2017 to 2018 from 1.74% to 3.47%.
This shows that an emirate is able to attain a high return from the capital that is employed
by them.
Gearing ratio
Gearing ratio helps the business to extend the amount of the rented reserves to its equity.
Emirates airline makes use of this ratio with the motive to analyse the financial risk that is faced
by the company while dealing in the market (Sedláček, 2016).
GEARING RATIOS 2017 2018
Debt ratio Total Debt
$
10,831.00 0.09
$
9,030.00 0.07
Total Assets
$
121,558.00
$
127,587.00
Debt to equity ratio Total Debt
$
10,831.00 0.31
$
9,030.00 0.24
Total Equity
$
35,094.00
$
37,046.00
 Debt ratio: - Debt ratio is one of the financial ratios, which indicates the amount the
assets of the company that are offered through debt. Emirates calculate this ratio as it
helps the company to evaluate the health of the business. In the year 2017, the debt ratio
was high then the year 2018 that is 0.9 and 0.7 respectively. A high debt ratio makes it

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difficult to borrow the amount. Thus, according to the fact, Emirates have improved its
performance due to which it is able to borrow the amount easily.
 Debt-to-equity ratio: - This ratio is the financial ratio that indicates the relative amount
of the shareholder’s equity and debt that is used by the company with the motive to
finance assets of the company (Weygandt, Kimmel and Kieso, 2015). In the year, 2017
the debt to equity ratio is 0.31 which is high than the year 2018 which is 0.24. This has
been found that a high ratio indicates that the company is not able to make sufficient cash
to accomplish the responsibilities. While on the other hand, the low debt to equity ratio
indicates that Emirates airline is not able to take advantage of increasing incomes.
Efficiency ratio
Efficiency ratio is majorly used with the motive to analyse the way through which the company
make use of its assets as well as the liabilities. Emirates make use of this ratio with the motive to
analyse the turnover of receivables with the repayment of liabilities, the quantity, and usage of
equity and many others (Pilbeam, 2018).
EFFICIENCY
Inventory turnover ratio Sales
$
83,832.00 38.60
$
91,225.00 39.45
Average Inventory
$
2,172.00
$
2,312.50
Receivables turnover
Ratio Net Sales
$
83,832.00 8.71
$
91,225.00 8.58
Average Total Receivables
$
9,621.50
$
10,638.00

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 Inventory turnover ratio: - This ratio shows the way through which the company can
manage the inventory by comparing the COGS with average inventory for a particular
period. Emirates Company is able to find the increase in effective use of the inventory
from 38.60 to 39.45.
 Receivables Turnover Ratio: - This ratio helps the company in measuring the efficiency
of the company in spreading the credit as well as gathering debts (Emirates Group, 2019).
High receivable turnover is achieved which shows that company collection accounts
receivable is efficient. The company is able to maintain effective customers who help
them in paying off debt.
Comparative Analysis between Emirates, Qatar, and Lufthansa Airlines
Emirates
(2017) Qatar (2017)
Lufthansa
(2017)
Current ratio Current assets 0.73 1.62 0.87
Current liabilities
Quick ratio Quick assets 0.67 1.55 0.80
Current Liabilities
Operating leverage Fixed assets 77% 75% 51%
Total assets
Net profit margin EBIT 1.78% 5% 9%
Net Sales
Return on Assets Net income 1.23% 2% 6%
Total assets
Return on capital
employed EBIT 1.74% 2% 13%
Capital Employed

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Debt ratio Total Debt 0.09 0.18 0.08
Total Assets
Debt to equity ratio Total Debt 0.31 0.28 0.30
Total Equity
Inventory turnover ratio Sales 38.60 67.95 27.16
Average Inventory
Receivables turnover
Ratio Net Sales 8.71 10.44 -
Average Total
Receivables
Liquidity Ratio Analysis
A liquidity ratio is a financial ratio that helps in analysing whether the current assets of the
company are enough to fulfil its obligations (Drake and Fabozzi, 2012). From the above data, it
could be said that Emirates with 0.73 current ratio and 0.67 quick ratios is not able to maintain its
liquidity, which can be in the end raise hurdle while meeting its obligations. Similarly, Lufthansa
Airlines is also incapable of meeting its obligation due to low liquidity position in the market
(Lufthansa Group, 2017). On the other side, with 1.62 current assets and 1.55 quick assets, Qatar
Airlines is able to maintain its liquidity position in comparison to the other two airlines.
Profitability Ratio Analysis
Profitability ratio signifies the capability of the company to attain a satisfactory profit along with
return on investment. Under the comparative analysis of three airlines, i.e. it can be observed that

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Emirates has low profitability ratio in comparison to Qatar and Lufthansa Airlines due to their
broad operations across the world (Qatar, 2018).
Gearing Ratio
Gearing ratio is one of the financial ratios used by businesses in order to compare some type of
owner's equity to debt, or borrowed funds. It is considered that low debt to equity ratio represents
the superior performance of the company in the market. From the above analysis, it could be
observed that all the three airlines that are Emirates, Qatar, and Lufthansa have a similar range of
debt to equity ratio i.e. 0.31, 0.28, and 0.30 respectively.
Solvency Ratio Analysis
The solvency ratio is considered as one of the key metrics that is utilized to evaluate the
capability of the company to meet its debt duties. In addition, it mostly used by the prospective
lenders of the business. Based on the above calculation, it could be said that Qatar has strong
solvency position with 67.95 inventory turnover ratio in comparison to the other two players i.e.
Emirates and Lufthansa with 38.60 and 27.16 respectively.

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Recommendations
It is recommended to the Emirates to increase its segments that will be one of the revenue
sources for the company. This will contribute effectively in improving the liquidity that is
maintained by the company. Moreover, this has been found in the comparison that profitability
of Emirates is comparatively less with its competitors. Thus, the investment in the different
segments will help the company to attain high returns, which will effectively contribute in
improving the profitability as well as attract the investors to make the investment. This attraction
will enhance the goodwill of the company in the market, which will ultimately contribute in
improving the sales of services that are offered, by company. Further, it is recommended to the
company to implement time-based activity costing which will help them in managing the cost of
every operation. This management further reduce the cost and lead to the improvement in the
profit of company.

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Conclusion
In the end, this can be concluded that Emirates is successfully performing its corporate processes
in Aviation industry of UAE. The analysis related to the operations of the company, its
competitors, industry and how it is different from its competitors is explained. In addition, the
financial performance of the company is evaluated with the use of ratios. The analysis shows that
the company is not able to maintain the standard liquidity ratio. However, it is effective in
managing the profitability as well as the financial risk of the company. Further, the report
includes the competitor’s analysis of Emirates with another airline. The competitive analysis
shows that Qatar and Lufthansa are giving tough competition to Emirates. The profit of the
competitors is high then emirates but this is possible because these have operations at different
segments.

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References
Al Nimer, M., Warrad, L., and Al Mari, R. (2015) The Impact of liquidity on Jordanian banks
profitability through return on assets. European Journal of Business and Management, 7(7), 229-
232.
Daft, J. and Albers, S. (2012) A profitability analysis of low-cost long-haul flight
operations. Journal of Air Transport Management, 19, pp.49-54.
Das, S. (2019) Cash flow ratios and financial performance: A comparative
study. Accounting, 5(1), pp.1-20.
Drake, P.P. and Fabozzi, F.J. (2012) Financial ratio analysis. Encyclopedia of Financial Models.
Emirates Group (2019) About us [Online]. Available from:
https://www.emirates.com/in/english/about-us/ [Accessed on 10th March 2018]
Emirates Group (2019) Annual Report 2016-17 [Online]. Available from:
https://cdn.ek.aero/downloads/ek/pdfs/report/annual_report_2017.pdf [Accessed on 10th March
2018]
Emirates Group (2019) Annual Report 2017-18 [Online]. Available from:
https://cdn.ek.aero/downloads/ek/pdfs/report/annual_report_2018.pdf [Accessed on 10th March
2018]
Lufthansa Group (2017) Annual Report [Online]. Available from https://investor-
relations.lufthansagroup.com/fileadmin/downloads/en/financial-reports/annual-reports/LH-AR-
2017-e.pdf [Accessed 10 March 2019]

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Penman, S. H. (2015) Financial Ratios and Equity Valuation. Wiley Encyclopedia of
Management, 1-7.
Pilbeam, K. (2018). Finance & financial markets. Macmillan International Higher Education.
Qatar (2018) Annual Report Fiscal 2018 [Online]. Available from:
https://www.qatarairways.com/content/dam/documents/annual-reports/2018/19630-Annual-
Report-2018-EN-Digital.pdf [Accessed on 10th March 2018]
Sedláček, J. (2016). Financial Statements in the Financial Decision Making. European Financial
Systems 2016, 678.
Trotman, K., and Carson, E. (2018). Financial accounting: an integrated approach. Cengage
AU.
WAM (2018) Aviation in UAE: A continuing success story [Online]. Available from:
https://gulfnews.com/business/aviation/aviation-in-uae-a-continuing-success-story-1.2224997
[Accessed on 10th March 2018]
Weygandt, J. J., Kimmel, P. D., and Kieso, D. E. (2015). Financial & Managerial Accounting.
John Wiley & Sons.

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Appendix
The below given are income statement and balance sheet of Emirates for 2018 and 2017.
(Source: Emirates Group, 2019)

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(Source: Emirates Group, 2019)

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