British Airways Case Study: Data Types, Financials, and Business Risks

This report presents a comprehensive case study of British Airways, addressing various aspects of data analysis and financial performance. The report begins by differentiating between qualitative and quantitative data, exploring their collection methods and applications. It then delves into the analysis of British Airways' aircraft fleet, comparing manufacturers and calculating percentages. Furthermore, the report examines the airline's financial health through key ratios such as Return on Employed Capital, Return on Equity, and the Current Ratio, offering insights into its efficiency and liquidity. Finally, the report identifies and discusses the major business risks faced by British Airways, including competition, economic conditions, government intervention, and employee relations, providing a holistic view of the airline's operational environment and financial strategies. The report uses data from the company's 2017 annual report.

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Using information
Name:
Tutor:
Institution:
A case study of British Airways

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PART 1:
Qualitative data is data that provides understanding and perceptions concerning a given problem.
It is mostly approximated thus the researcher should be well equipped with knowledge
concerning the type of data that is required way before it is collected. Nature of this data is
descriptive thus analyzing it becomes a little bit complex and difficult. Data is categorized in
terms of physical characteristics and object properties. Interpretation of this data, that is in terms
of appearance, smell, texture, gender, nationality, and others, is done either verbally or written
descriptions form assuming numbers. To collect this data, there are several strategies that are
used; observation, interviews, focus group, archival materials such as newspapers and
magazines.
Quantitative data is the type of data that focuses on numbers or quantity, as it computes values
and counts. This data is stated in numerical form and it is majorly used for statistical analysis
(Crowder 2017). It is used in statistical tests and computation. It deals with measurements such
as weights, heights, volume, size, length, speed and humidity among others. Its presented in
tables, graphs, charts and diagrams, and other forms. It is either continuous or discrete and is
collected using surveys, observations, interviews and experiments (Hurst Relander & Cordes
2016).
The key differences between qualitative and quantitative data are elaborated. Qualitative data
involves objects categorization that is based on attributes while as quantitative mainly involves
countable data that is in number and value form (Goertzen 2017). The research methodology in
qualitative is exploratory as in quantitative its conclusive naturally. Basing on the inquiry
approach, qualitative data is subjective and complete while as quantitative is objective and has a
certain aim. Analysis of qualitative data is usually non statistical whereas quantitative data is
analyzed using statistical methods (Mihas 2019). Data collection method in qualitative is
unstructured while in quantitative the methods involved has a structure. Qualitative data is used
to show the level of understanding but quantitative data indicates the occurrence level. Small
non-representatives’ samples are used in drawing qualitative data in small amounts while as
large sized data drawn for quantitative is from representative samples. Quantitative data provides
an initial understanding as it elaborates a problem unlike quantitative that gives
recommendations that require actions to be taken (Mertens, Pugliese & Recker, 2017).

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The main difference between horizontal and vertical analysis is basically concerned with time
frame. Analyzing horizontally gives an eye at a number of years and vertical involves just a
single year. Horizontal analysis offers the financial information difference of one company that
has same financial income types in different years. It is majorly beneficial when looking for the
change in percentage that has occurred in the company over each of the past years. Vertical
analysis shows all of the company’s financial information of a specific year. Every item is
expressed as a percentage of a given statistic. This analysis allows the organization to compare it
production with that of other organizations under the same field. On horizontal, analysis focuses
on the amounts in the financial statements that have been in the past and are converted to be a
percentage of the amount from a specific base year. On the other hand, vertical analysis involves
results in each of the amount of the balance sheet and each amount of the income statement that
are expressed in a percentage of the total assets and net sales respectively.
Big data is the gathering and analysis of data sets that are compound in volume, velocity
of where collection was done and variety dimensions. It involves massive volume of structured
and unstructured data that is difficult to process using database and a software that is traditional.
It is used to develop an analysis of comprehensions that promote good decisions and business
moves that are strategic and systematic (De Mauro et al., 2016). This is achieved by the use of
multidisciplinary groups that has subject area experts, computational experts, statisticians and
machine learner experts. Statistical data is gathering, analysis and interpretation of numerical
data with the help of the theory of probability that include methods that draw inferences
concerning properties of a given population from a conducted examination of a randomly
selected sample. It is used in analyzing things and updating on current happenings
mathematically. The distinction that is present between these two types of data is that, big data
requires statistical tools and methods to compute and perform analysis while as the statistical
data requires these tools and an addition of well trained and skilled personnel (De Mauro et al.,
2015).
Data quality is the state in which a set of properties of qualitative or quantitative data
satisfies its requirements (Madar 2015). These properties are in terms of its completeness, how
accurate, validity, availability, rate of consistency, timeliness and its relevance. Data quality is
important in financial statement as it shows accuracy, data timelines and completeness that help

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in meeting the relevant regulatory needs (Enyi 2019). This also help in amenability to assess with
their own objectives of data quality. Accuracy is very crucial in financial reports as they help the
organizations management to make effective and well-versed decisions concerning the
objectives, goals and strategies of the company. They also provide financial information of the
company that is then presented to shareholders and investors. The accuracy of the information
provided in the financial statements, helps in increasing the reliability as they take that the health
and performance information to be complete (Adeneye & Ahmed 2015). The information should
be relevant since the investors require it so that they can make decisions on matters involving the
company financially. It calls for cautiousness as this involves a huge risk of losing money.
Therefore, the quality of these financial statements should be commendable and of high
dependence on making the rightful profitable decisions for the company. Also when quality is
maintained, through the financial statements, finance organizations are able to understand the
relationships among its customers (Williams & Dobelman 2017). This understanding makes it
easier for this firms to comply with the laundering regulations of anti-money to meet the needs of
the customers. Since financial statements are used in giving a clear picture of the company
finances management, data quality ensure no false information or misinterpretation that affects
the value add is avoided (Fraser et al., 2010).
Part 2: BRITISH AIRWAYS CASE STUDY
1 a) As at December 2017, the aircraft type that had the largest number of aircraft was the Airbus
A320 that was at sixty-seven aircrafts.
b) As at December 2017, Airbus manufacturer had a total of one hundred and forty-two aircrafts,
that is, (1+44+67+18+12= 142), Boeing manufacturer represented its aircraft type with a total of
one hundred and thirty, that is, (36+3+8+46+12+9+16=130) and the Embraer manufacturer had a
representation of a total of twenty-one aircrafts, that is, (6+15=21). Basing on this analysis, the
Airbus aircraft manufacturer had the biggest representation in the British Airways fleet (Petrescu
et al,. 2017).
c) The percentage that the Airbus manufacturer takes in representing itself in the British Airways
fleet over the total in 2017 is:
= 142
293 * 100 = 48.46%

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d) percentage of these three manufacturers is;
Airbus manufacturer= 48.46% ~ 49%
Boeing manufacturer= 130
293 * 100 = 44.37% ~44%
Embraer manufacturer = 21
293 * 100 = 7.17% ~ 7%
49%
44%
7%
Percentage of each aircract manufacturer
Airbus Boeing Embraer
e) A graph illustration showing the total number of each type of the aircraft in the British
Airways fleet as at December 2017.

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A318 A319 A320 A321 A350 A380 747-
400 757-
200 767-
300 777-
200 777-
300 787-8 787-9 787-
10 E170 E190
1
44
67
18
0
12
36
3 8
46
12 9 16
0 6
15
Airbus Boeing Embraer
2) Performance of the British Airways Group is elaborated in terms of the employed Return on
capital, Return on Equity and the Current Ratio (Birchler 2017).
a)
Return on the Employed Capital.
This is a financial ratio that is used in valuation, accounting and financing. It is a measure
necessary for comparing relative profitability of companies after considering the amount of
capital that has been used. It considers debts and other forms of liabilities providing a good
indication of the financial performance for companies with substantial debt. The ROCE helps the
investors to identify the company that utilizes its capital to the maximum for profit generation
(Johan 2018).
Return on the Employed Capital: = Earnings Before Interest∧Taxes
Capital Employed
Capital Employed = Total Assets – Current Liabilities.
= $16678 – $5468 = $11120
= 12226
11120 = 1.099

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Since the British Airways company has a higher Return on the Employed Capital, that is, 1.099,
it is clear that they utilize their finances effectively.
Return on equity ratio is a profitability ratio that shows the amount of profits generated by the
firm and the investments of the shareholders. It acts an indicator of management effectiveness
after using financing equity to fund operations and promote company’s growth. It helps in
tracking the progress of the company and how it maintains a profitable trending rate of what it is
earning and hence keeping it on top of the competition (Ichsani & Suhardi 2015).
Return on Equity: = Net Income
Shareholder s' Equity
Net income = Total Revenue - total expenses.
= $12226 – $4144 = $8082
Since the total revenue exceeds the expenses, after the deductions, the amount obtained is the
profit. This profit is used by the company to pay debts, make payments to the shareholders and
invest more in new equipment.
= 8082
5774 = 1. 400
The Return on equity ratio is higher than the Return on Capital Employed ratio, thus there is a
high utilization of the debts available (Marx, Mojon & Velde 2019).
Current ratio is liquidity ratio that measures the ability of the company to pay for the obligations
that are due within a year. Investors and analysts are able to tell of the maximization strategies
that the company uses on the current assets so as it can cover the current debts. The current ratio
gives the Airways an idea on how it is going to operate and strategic conduction of its activities.
The Airways is able to meet the demands of their creditors.
Current Ratio: = Current Assets
Current Liabilities
= 16678
5468 = 3.050

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This ratio suggests that the British Airways company has an efficient management concerning
the capital involved. This is because the ratio is above the standard ratio of 1.5. It also shows that
the company has the ability to pay off its debts and they do not depend on the current assets for
finances.
3) a) Competition- The operative markets involved are highly competitive. British Airways face
competition from the other airlines and indirect flights, charter services and other transport
modes (Pel, Njegovan & Behrens 2017). A few competitors have lower cost structures thus
having a high competitive advantage like government involvement. Instead of comparing the
competitors’ fare with theirs, the discounts being offered to customers affect the Airways
negatively failing to maintain the passengers’ congestion. This risk is easily pointed out due to its
market position, that is globally and their network, alliances and customer diversification
(Borenstein 2017).
b) The conditions of the economy- British Airways revenue is delicate towards the economic
state in the field of operation. Declination in the global economy affects the Airways financial
position. Reviews of the revenue are made by the Revenue Projection Group frequently and the
outcome is later analyzed by the management and effective actions are taken (Shaw 2016).
c) Government intervention- Airline industry regulation policy has increased covering a number
of activities such as rights of flying routes, security controls, airport slot access and
environmental controls. The Airways ability to comply and take in any changes concerning these
regulations maintains the financial and operational performance. Government plan to add
environmental taxes through the introduction of taxation procedure per flight (Jaimovich &
Rebelo 2017). This change benefits even all of their as it reduces the relative cost of doing
business from their necessary hubs (Camilleri 2018).
d) Employee relations- British Airways has a large workforce that is unionized. Joint negotiating
takes place on a regular ordered basis and strategized bargaining process interferes with
operations that highly affects the performance of the business. Airways continued determination
to manage the cost of employment upsurges the risk in terms of employment field.
e) Brand reputation – The Brand of the Airways has an important marketable value. Brand loss
especially through one event or several events may greatly impact the Airways leadership

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positions. This also influence the customers position and may eventually affect the future of the
revenue generation and the Airways profitability. The top management group frequently
monitors the customers’ fulfillment by conducting a Survey monthly of the Think Customer
globally and checking the advancement made by using the BA product to moderate this Brand
risk (Tsao 2016).
f) Debt funding- Airways carry significant debt that require to be repaid. Their ability to finance
all the operations that are currently working, the committed aircrafts tips and the future growth
plans of the fleet are fragile to factors such as the conditions of the financial market. Most of its
capital commitments are related on the assets and financed early such that there is no assurance
that this Airway will further offer attractive security for their lenders especially in the future. The
Treasury Committee review the financial position whereby the outcomes are tabled and further
discussed to offer the necessary remedies.
g) Price of the fuel and the fluctuation of the currency.
This Airways company uses an estimated amount of tones of the jet fuel per year, that is, about
six million. The price volatility of petroleum products and the oil mostly has a material impact
on their operation process and outcomes. The risk of price is circumvented via the petroleum
products derived and oil purchase in advancing markets that produce a profit or loss. There is
exposure to the current revenue risk, borrowings in the foreign currencies and purchases. The
Group involved helps in seeking the reduced exposure of foreign exchange that arise during
transactions while performing a matching policy that involves receipts and payments made. It
also reduced when selling the excess or buying the downfall of the obligations that comes with
this currency. This exposure tends to reach the group at an extent of non-performing towards the
financial contract that may result into financial loss.
h) Long term network disruptions event- A few events can bring the rise of disruptions that are
long term. This may lead to revenue loss and additional of extra costs. Management plans on
how to deal with the risks to a point they are easy to handle or feasible.
i) Consolidation or deregulation – With the airways competitive market, there is need for
rationality with the given conditions of the market. Rationalizing takes in airways future failures
and consolidation, Acquiring and merging among its competitors creating chance for the

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potential of the market revenue and position being affected. Iberia mergers and American airlines
with joint Business Agreement introduces risks of planning, that is, set up processes, design that
is sub optimal delivery risks like planned benefits realization. This risks are addressed by the
management. Operative markets are always regulated by the government to control or resist the
entry of the market. Once there is a no consistent regulation, growth opportunities that may bear
negative influence on the Airways margin can chip in (Wong 2018).
j) Safety and security incidents – This is a concern that need attention especially that of the
customers and the airways staff members. Failure for the airways management to being
responsive to these incidents may reduce their operation, financial and performance rate. Once
operations have been controlled by the Operations Control Incident Centre, a structured strategy
is adopted to deal with these incidents.
4) The British airways has been increasing in terms of it production. From the chart below, it is
clear that the revenues of the company are steadily going up year after year. There has been a
noticeable increase in revenue from the year 2013 to the year 2014. In 2013 the British airways
company made a revenue of eleven thousand four hundred and twenty-one British pounds which
was increased to eleven thousand seven hundred and nineteen British pounds in the following
year. The revenue went down to eleven thousand one hundred and eleven in the year 2015 but
again raised in 2016 up to eleven thousand three hundred and ninety-eight. These two
consecutive years were associated with poor performance. Although 2016 can be considered
better that the previous year, since the revenue went up even though by a small percentage.
Further analysis of the chart shows that; the revenue went up dramatically in the year 2017. This
year recorded the highest revenues which was twelve thousand two hundred and twenty-six. The
deviation of the revenue is varying from year to year. However, it cannot be considered as an
average deviation since, in 2015 was rather drastic. Generally, the company has been on the
watch out for strategies that ensure its continuous growth over the five years.

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