Qantas Limited: A Comprehensive Business Valuation and Analysis

This report provides a comprehensive business analysis of Qantas Limited, an Australian aviation company. It examines the company's financial performance, competitive landscape, and strategic initiatives. The analysis includes Porter's 5 Forces model, SWOT analysis, and an overview of Qantas's corporate strategy and accounting policies. The report compares Qantas's financial position in 2013 and 2017, highlighting key similarities and differences. It also assesses the bargaining power of suppliers and buyers, threats of new entry and substitutes, and competition among existing players. Furthermore, it evaluates the company's strengths, weaknesses, opportunities, and threats. The study also covers accounting policies, including leasing and depreciation, and offers recommendations and conclusions based on the findings.

Running Head: Business Analysis and Valuation
1

Business Analysis and Valuation 2
Executive summary
Business valuation and evaluation is a process which is followed by the companies to
measure the financial performance and the financial changes into an organization. In the
report, the study has been performed on Qantas limited. In the study, various financial and
non financial factors of the company have been measured to identify the performance of the
business. Porter’s 5 forces model, SWOT analysis, corporate strategy of the company etc has
been evaluated to identify the non financial performance of the company. Further, the
financial performance of the company has been measured on the basis of financial statement
of the company. The report explains that the performance of Qantas is quite competitive in
the market.

Business Analysis and Valuation 3
Contents
Company overview...........................................................................................................5
Competitive analysis.........................................................................................................5
Bargaining power of suppliers......................................................................................5
Bargaining power of buyers..........................................................................................5
Threats of new entry.....................................................................................................6
Threat of substitute.......................................................................................................6
Competition among the existing players......................................................................6
SWOT analysis.................................................................................................................7
Strength.........................................................................................................................7
Weakness......................................................................................................................7
Opportunity...................................................................................................................7
Threat............................................................................................................................7
Corporate strategy.............................................................................................................8
Accounting policies..........................................................................................................8
Leasing accounting policies..........................................................................................9
Depreciation policy.......................................................................................................9
Qantas financial position in 2013.....................................................................................9
Financial performance..................................................................................................9
Financial position........................................................................................................10
Qantas financial position in 2017...................................................................................10
Financial performance................................................................................................10
Financial position........................................................................................................10
Similarities and differences among 2013 and 2016........................................................10

Business Analysis and Valuation 4
Similarities..................................................................................................................10
Differences..................................................................................................................11
Recommendation and conclusion...................................................................................11
References.......................................................................................................................12
Appendix.........................................................................................................................14

Business Analysis and Valuation 5
Company overview:
Qantas limited is an Australian company which is running its business in aviation
industry. In 920, company has been established at Queensland. It is one of the largest aviation
companies in Australian market. The company has launched two new brands to manage the
effectiveness and the efficiency of the business. The name of the brands is Jetstar and Qantas.
The company has also diversified its business and market. The Qantas is offering its services
at many destinations in Australia as well as at international level. The company has entered
into various new countries and market to grab the opportunities. The services of the company
are quite competitive and it is the oldest airline comapny in Australian market which has
developed the base of loyal customers. Though, the last few decades were not that much good
for the company. Various up and down has been faced by the company in last few decades.
The case study also evaluate about the Qantas case study (Qantas Limited, 2018).
Competitive analysis (Porter’s 5 forces model):
Michael porter has invented the technique and explained that the competitive position
and the industry position of the company could be evaluated on the basis of five forces. Five
forces includes bargaining power of suppliers, bargaining power of buyers, threats of new
entry, threat of substitute, competition among the existing players (Chung, 2018). The five
forces model analysis of Qantas limited is as follows:
Bargaining power of suppliers:
Bargaining power of supplier explains about the conditions and the policies which are
imposed by the industry’s suppliers on the industry while selling the products (raw material)
to the industry. It measures that how much price of the raw material could be affected due to
the suppliers of the company. In case of Qantas limited, it has been recognized that in the
aviation industry, only few suppliers are there and thus the suppliers of the company are in a
position to dominate the stock price of the company (Deegan, 2013). It has been found
through the case study and evaluation that the suppliers of the industry are manipulating and
the bargaining power of suppliers in the industry is quite higher.
Bargaining power of buyers:
Bargaining power of buyer explains about the conditions and the policies which are
imposed by the industry’s customers on the industry while buying the products (raw material)
and services from the industry. It measures that how much price of the finished products and

Business Analysis and Valuation 6
the services could be affected due to the customers of the company. In case of Qantas limited,
it has been recognized that in the aviation industry, huge customers are there and thus the
customers of the company are not in a position to dominate the product and service of the
company. It has been found through the case study and evaluation that the customers of the
industry are not manipulating and thus the bargaining power of customers in the industry is
quite lower.
Threats of new entry:
Threat of new entry explains about the organizations which are trying and planning to
enter into the new market and the industry. The new firm’s entry has huge affect on the old
businesses which are already operating in the industry. In the case of Qantas limited, it has
been found that in local market, the threat of entrants of the company is lower. However,
there are various firms from worldwide which are trying to enter into the airline market. It
explains that the local threat of the comapny is quite lower from the new entries but on the
other hand, level threat is quite higher at international level (Deegan, 2013).
Threat of substitute:
Threat of substitute explains about the products and the services which are used by the
competitors as the substitute product of the company. The substitute product has huge affect
on the businesses which are operating in the industry. In the case of Qantas limited, it has
been found that the threat from substitute products are quite average. As the substitute
products of the company are taxies, local transport etc which could be used by the customers
for local travelling only (Glajnaric, 2016). It explains that the local threat of the comapny is
quite higher from the substitute products but on the other hand, the threat at international
level is lower.
Competition among the existing players:
Threat of competition explains about the companies which are operating in the same
industry and offering the same products and the qualities to the customers of the company.
The competition has huge affect on the businesses and the turnover of the company. In the
case of Qantas limited, it has been found that the threat from competition are quite average.
As the Qantas are oldest company and largest company in Australia. It explains that the local
threat of the comapny is quite lower from the competition but on the other hand, the threat at
international level is quite higher.

Business Analysis and Valuation 7
Few changes are required to be done by the management of the company to manage
the business of the company and set the competitive advantage in the industry and in the
market.
SWOT analysis:
SWOT analysis in an internal assessment tool. It evaluates the strength, weakness,
opportunity and threat position. The SWOT analysis makes it easier for an organization to
identify the performance and the market opportunities of the company. SWOT analysis study
has been done on Qantas limited to recognize the performance of the company. The below
table describe about the SWOT of Qantas limited:
Strength:
1. Company has strongly placed and
managed the business at domestic and
international level.
2. The Australian government help the
company to enhance the performance
and the strategies and rules of the
company are also in the favour of the
company.
3. Qantas is Australian largest and
oldest aviation company
4. The promotional campaign and
advertising policy of the company is
quite strong (CAPA Centre for
Aviation, 2018).
5. Currently, there are 80 main
destinations where the company is
offering its services.
Weakness:
1. The main issues with the company are
its fluctuation in the price.
2. There are only 80 destinations where
the company is offering the services.
Company is till need to cover more
area.
3. The current issues of the company
and the industry have harmed the
presence and the goodwill of the
company (Laux and Leuz, 2009).
Opportunity:
1. The Qantas limited has the
opportunity to become the market
Threat:
1. Fuel prices are increasing rapidly
which has affects the activities of the

Business Analysis and Valuation 8
leader in the market.
2. The company could diversify the
market more through serving at new
destinations.
3. For entering into the new market,
joint venture and tie up could be done
by the company.
business.
2. The labour prices of the company are
also increasing.
3. Huge competition is faced by the
company at international level (Bui et
al, 2016).
On the basis of the study, it has been recognized that the strength and the
opportunities of the company are quite huge. Company could make the new strategies to grab
the opportunities through using the strength of the company.
Corporate strategy:
The Qantas case study and the evaluation study on the strategies and the policy of the
company explain that the strategies of the company has been altered and modify by the
management of the company in current time from 1992. In 1992, Australia flagship airlines
were using by the company to serve the customers to travel at international destinations.
However, the domestic policy of the company briefs that no changes have occurred into the
corporate strategy from 1992. Till now, company is offering its services in lower cost along
with the help of its subsidiary company “Jetstar” to its customers (Ross, Westerfield and
Jordan, 2008).
However, the company has launched various new segments in which the high cost
services are also provided by the company to its customers. For enhancing the market share
and for grabbing the new opportunities, the company has launched new low cost and high
cost services at international level as well. Though, it has been found that the few changes
into the corporate strategy have helped the comapny of manage and enhance the market share
at international level.
Accounting policies:
An accountant and auditor are required to evaluate all the accounting policies
according to IFRS and AASB. These accounting policies must be used by the companies

Business Analysis and Valuation 9
while preparing the annual reports of the company. Following are few policies which should
be evaluated by the auditor:
Leasing accounting policies:
Aviation industry evaluates that explains that airline industry and its equipment are
quite costly so the owners of the company does not evaluate to purchase the equipments.
They take the equipment on lease so that with the changes into the technology, the equipment
could be changed. Occasionally, the businesses who are operating their activities into the
industry find the option of leasing more valuable than the option of purchase Thus, an auditor
should be evaluated on the equipment of the company and must analyze that which option
has been chosen by the company and how the company has recorded the equipment into the
balance sheet of the company (Schroeder, Clark and Cathey, 2001). It explains that it is
crucial for an auditor to investigate the recording process and system of the organization and
evaluate the balance sheet’s lease amount on the basis of accounting standards and the
international financial recording system.
Depreciation policy:
Moreover, it has been evaluated that it is a requirement for an accountant and the
auditor to estimate the technique of depreciation of the organization and measure the
depreciation amount of the company accordingly. Various depreciation techniques are there
in the accounting which could be evaluated by the organizations to evaluate worth of the
equipment and the machineries. For example, straight line method, declining units of
production, double depreciation etc. (SKIFT, 2018). In airline industry, each depreciation
technique could not be evaluated by the company and thus the accountant must evaluate that
which depreciation is used by the companies to measure the true worth of the machineries. It
explains that an auditor and accountant must look on the various depreciation tools of an
organization and measure that whether the company is following the same depreciation
technique or not. Auditor should examine that whether the true depreciation value has been
calculated by the company or not.
Qantas financial position in 2013:
Qantas financial position and financial performance of the year 2013 is as follows:
Financial performance:

Business Analysis and Valuation 10
Annual report (2013) of Qantas limited explains about the better financial
performance of the company. The sales of the company were $ 15,577 million and the cost of
revenue was $ 7,220 m. thus, the gross profit was $ 8,357 million. $ 17 million is the net
profit before tax expenses of the company in 2013 (Chung, 2018). It also explains that the net
profit was $ 5 million. The annual report of the company explains that the position and the
performance of the company is quite better.
Financial position:
Annual report (2013) of Qantas limited explains about the better financial position of
the company. The total current assets of the company were $ 5,245 million and the total
assets were $ 20,200 m. Further, the total liabilities of the company were $ 14,251 m and the
stockholder equity was $ 5,949 m (The wall street journal, 2018). The annual report of the
company explains that the position and the performance of the company have been better.
Qantas financial position in 2017:
Qantas financial position and financial performance of the year 2017 is as follows:
Financial performance:
Annual report (2013) of Qantas limited explains about the better financial
performance of the company. The sales of the company were $ 15,680 million and the cost of
revenue was $ 6,475 m. thus, the gross profit was $ 9,205 million. $ 1,181 million is the net
profit before tax expenses of the company in 2013 (Chung, 2018). It also explains that the net
profit was $ 852 million. The annual report of the company explains that the position and the
performance of the company are quite better.
Financial position:
Annual report (2013) of Qantas limited explains about the better financial position of
the company. The total current assets of the company were $ 3,119 million and the total
assets were $ 17,221 m. Further, the total liabilities of the company were $ 13,684 m and the
stockholder equity was $ 3,537 m. The annual report of the company explains that the
position and the performance of the company have been better.
Similarities and differences among 2013 and 2016:
Similarities:

Business Analysis and Valuation 11
Further, it has been found that the financial position and financial performance of the
company has been better in 2013 as well as in 2017. The net income and the gross profit of
the company has been better in both the years as well as the financial performance of the
company has been better as well.
Differences:
Further, the financial performance of the company has been lower and the statement
of the financial performance of the company explains that the performance of the company
has been lower.
Recommendation and conclusion:
The above financial statement and the study on the Qantas limited express that the
position of the company has been better. The corporate strategy and the financial statement of
the company explains that the various changes have helped the company to manage the
performance and position in the Australian market as well as international market.

Business Analysis and Valuation 12
References:
Annual Report. 2013. Qantas Airline group. (Online). Available at:
http://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEPjF1tpgyw/
file/annual-reports/2013AnnualReport.pdf (Accessed as on 16th May 2018).
Annual Report. 2013. Qantas Airline group. (Online). Available at:
https://www.qantasnewsroom.com.au/media-releases/qantas-201213-full-year-financial-
results/ (Accessed as on 16th May 2018).
Annual Report. 2017. Qantas Airline group. (Online). Available at:
http://investor.qantas.com/annual-report-2017/ (Accessed as on 16th May 2018).
Bui, S.B.D., Petersen, T., Poulsen, J.N. and Gazerani, P., 2016. Headaches attributed to
airplane travel: a Danish survey. The journal of headache and pain, 17(1), p.33.
CAPA Centre for Aviation. 2018. Qantas Airline group. (Online). Available at:
https://centreforaviation.com/data/profiles/airline-groups/qantas-group (Accessed as on 16th
May 2018).
Chung, F. 2018. Qantas posts record $1.53 billion full-year profit. (Online). Available at:
http://www.news.com.au/finance/business/travel/qantas-just-had-its-best-year-ever/news-
story/f19ad5ddc1320591487eec0a5ffab7ab (Accessed as on 16th May 2018).
Deegan, C. 2013. Financial accounting theory. McGraw-Hill Education Australia.
Glajnaric, M., 2016. The importance of dividend paying stocks. Equity, 30(2), p.6.
Laux, C. and Leuz, C., 2009. The crisis of fair-value accounting: Making sense of the recent
debate. Accounting, organizations and society, 34(6), pp.826-834.
Qantas limited. 2018. Home. (Online). Available at: https://www.qantaslimited.com/
(Accessed as on 16th May 2018).
Ross, S.A., Westerfield, R. and Jordan, B.D., 2008. Fundamentals of corporate finance. Tata
McGraw-Hill Education.
Schroeder, R.G., Clark, M.W. and Cathey, J.M., 2001. Accounting theory and
analysis. Chapel Hill: University of North Carolina.

Business Analysis and Valuation 13
SKIFT. 2018. Qantas Airline group. (Online). Available at:
https://skift.com/2017/02/23/qantas-profit-dips-7-5-percent-amid-overseas-competition/
(Accessed as on 16th May 2018).
The wall street Journal. 2018. Qantas Airline group. (Online). Available at:
http://quotes.wsj.com/AU/XASX/QAN/financials/annual/balance-sheet (Accessed as on 16th
May 2018).

Business Analysis and Valuation 14
Appendix:
QANTAS AIRWAYS LTD (QAN) INCOME STATEMENT
Fiscal year ends in June. AUD in millions
except per share data.
2013-
06
2017-
06 Changes
Revenue 15577 15680 0.66%
Cost of revenue 7220 6475 -10.32%
Gross profit 8357 9205 10.15%
Operating expenses
Sales, General and administrative 5216 5281 1.25%
Other operating expenses 3262 2931 -10.15%
Total operating expenses 8478 8212 -3.14%
Operating income -121 993 -920.66%
Interest Expense 296 235 -20.61%
Other income (expense) 434 423 -2.53%
Income before income taxes 17 1181 6847.06%
Provision for income taxes 11 328 2881.82%
Net income from continuing ops 6 853 14116.67%
Other -1 -1 0.00%
Net income 5 852 16940.00%
Net income available to common shareholders 5 852 16940.00%
Earnings per share
Basic 0 0.46
Diluted 0 0.46
Weighted average shares outstanding
Basic 2112 1853 -12.26%
Diluted 2112 1853 -12.26%
EBITDA 1763 2798 58.71%
QANTAS AIRWAYS LTD (QAN) BALANCE SHEET
Fiscal year ends in June. AUD in
millions except per share data.
2013-
06
2017-
06 Changes
Assets
Current assets
Cash
Cash and cash equivalents 2829 1775 -37.26%
Short-term investments 180 100 -44.44%
Total cash 3009 1875 -37.69%
Receivables 1436 784 -45.40%
Inventories 364 351 -3.57%
Prepaid expenses 102
-
100.00%
Other current assets 334 109 -67.37%

Business Analysis and Valuation 15
Total current assets 5245 3119 -40.53%
Non-current assets
Property, plant and equipment
Gross property, plant and equipment 23944 25940 8.34%
Accumulated Depreciation
-
10117
-
13687 35.29%
Net property, plant and equipment 13827 12253 -11.38%
Equity and other investments 217 257 18.43%
Goodwill 197 207 5.08%
Intangible assets 517 818 58.22%
Deferred income taxes
Other long-term assets 197 567 187.82%
Total non-current assets 14955 14102 -5.70%
Total assets 20200 17221 -14.75%
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt 592 330 -44.26%
Capital leases 243 103 -57.61%
Accounts payable 655 2067 215.57%
Deferred revenues 3032 3685 21.54%
Other current liabilities 1848 910 -50.76%
Total current liabilities 6370 7095 11.38%
Non-current liabilities
Long-term debt 4612 3144 -31.83%
Capital leases 633 1261 99.21%
Deferred taxes liabilities 673 353 -47.55%
Other long-term liabilities 1963 1831 -6.72%
Total non-current liabilities 7881 6589 -16.39%
Total liabilities 14251 13684 -3.98%
Stockholders' equity
Common stock 4650 3053 -34.34%
Retained earnings 1171 472 -59.69%
Accumulated other comprehensive
income 128 12 -90.63%
Total stockholders' equity 5949 3537 -40.54%
Total liabilities and stockholders'
equity 20200 17221 -14.75%