Free Essay

Accounting Analysis of the China Eastern Airlines Corporation Limited

In: Business and Management

Submitted By shanemcmahon1
Words 7555
Pages 31
[pic]
Master of Business Administration
AF5215
Financial Accounting for Executive

Group Project

Date: 07 Dec 2013

|Student ID |Student Name |
|12034578G |Yu Ka Kit, Eric |
|13022384G |Kevin Lo |
|13051317G |Esther Wong |
|12037974G |Simon Leung |

CONTENT
1. Executive Summary P. 4
2. Introduction P. 5
3. SWOT Analysis 3.1 Strength P. 7 3.2 Weakness P.8 3.3 Opportunity P.10 3.4 Threat P.11
4. Performance Overall 4.1 Turnover Growth P.12 4.2 Profit Before Taxation P.12 4.3 Net Profit P.12 4.4 Cash P.12 4.5 Earning Per Share(EPS) P.13
5. Liquidity Ratios 5.1 Current Ratio P.13 5.2 Quick (Acid Test) Ratio P.13 5.3 Working Capital P.13
6. Profitability Ratios 6.1 Return on Equity (ROE) P.14 6.2 Return on Assets (ROA) P.14 6.3 Operating margin P.14 6.4 Fixed Asset Turnover P.15
7. Financing Ratios 7.1 Debt/Assets ratio P.15 7.2 Debt-to-Equity Ratio P.15 7.3 Cash Flow Leverage P.16 7.4 Price Earning (P-E) ratio P.16 7.5 Depreciation to Net Fixed Assets Ratio P.16 7.6 Labor Cost Ratio P.16 7.7 Sales per employee ratio P.17
8. Accounting-Related Ethical Issues P.17
9. Business Decision Making Analysis 9.1 Recommendation: Buy/Hold P.18 9.2 Recommendation: Sell P.19 9.3 Conclusion: From investor point of view: Buy/Hold P.20
10. Loan Decision Recommendation 10.1 Conclusion: From Bank's Point of View P.21
11. Merger & Acquisition Decision P.21 11.1 Conclusion
Appendix 1
CEA – 5 years Profit & Loss, Balance Sheet from 2008 to 2012 P.22
Appendix 2
CSA – 5 years Profit & Loss, Balance Sheet from 2008 to 2012 P.25
Appendix 3 - Consolidated Income Statement P.28
Appendix 4 - Consolidated Balance Sheet P.29
EXECUTIVE SUMMARY The China Eastern Airlines Corporation Limited (the “CEA”) is one of the three major airlines (Air China, China Southern Airline & China Eastern Airline) in Mainland China and it has been listed on the Hong Kong Stock Exchange (Stock Code 0670) in April 2006. It has been ranked the world’s top 5 airlines in terms of number of passengers which reaches 73 million per year. The turnover is RMB$85.2 billion per year which includes an over 50% increment against 2008. With the rapid growth on demand, they own over 430 aircrafts to serve domestic and international routes.

To the aviation industry, the financial risk management is a key factor of the company to reach the positive net profit because there are a variety of financial risks to impact the business, such as market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and fuel price risk), credit risk and liquidity risk. CEA utilizes the leverage on the currency exchange to reduce the fuel expenses and achieving good cost control. From the ratio analysis, the performance of Year 2010 and 2011 were most successful because the ROE of 2010 and 2011 got the duo peak at 35.5% and 24.1% respectively. Moreover, CEA earned more operating profits from its assets in these 2 years as ROA (5.2% on 2010 & 4.2% on 2011) was generally high. Comparing with the China Southern Airline (the “CSA”), the ROE was relative lower on 2010 and 2011, at 30.2% and 21.5% respectively. Moreover, the business of CEA has been picking up on 2012 and the net profit and ROE is higher than CSA for the first time. In short, better ROE with less risk is more crucial for a company to succeed.

1. INTRODUCTION China Eastern Airlines was established in 1988, and it was the country’s first airlines going public in the international market, it is listed in Singapore Stock Exchange, Hong Kong Stock Exchange and New York Stock Exchange now. The largest shareholder is Chinese government which holds 61.64% ownership, and some shares are held publicly, including 6.17% A Shares, and 32.19% H Shares.

Over the years, China Eastern Airlines took over China General Aviation and Great Wall Airlines in 1997, and it merged with China Yunnan Airlines and China Northwest Airlines in 2003. In February 2010, China Eastern Airlines merged with Shanghai Airlines, which has reduced the over-competition between two Shanghai centered airlines, whereas Shanghai Airlines became wholly owned by China Eastern Airlines, but Shanghai Airlines can retain the brand. In March 2012, Qantas Group has set up a strategic alliance with China Eastern Airlines, Jetstar Hong Kong is then founded, which is a low cost airline based at Hong Kong International airport. The main hubs of China Eastern Airlines are Shanghai Pudong International Airport and Hongqiao International Airport. The secondary hubs are the Kunming Changshui International Aiport and Xian Xianyang International Airport. It provides domestic, international and regional routes for both passengers and cargo services; it has carried more than 73 million domestic, regional and international passengers in 2012.

In terms of passenger numbers, China Eastern Airlines is the second largest of the top three state-owned airlines of China, following China Southern Airlines and ahead of Air China. China Eastern Airlines is very strong at the domestic routes, accounting for 89.9% of its revenue, whereas cargo revenue is about 10.1% in year 2012.

When we talk about the top 10 North Asia Airlines by passenger seats, China Eastern Airlines is also the second largest in North Asia.(Source: CAPA, Week starting 31 Mar, 2013)
|Ranking |Airline |Seats |
|1 |China Southern Airlines |1,773,387 |
|2 |China Eastern Airlines |1,638,692 |
|3 |All Nippon Airways |1,498,216 |
|4 |Air China |1,305,777 |
|5 |Japan Airlines |962,136 |
|6 |Korean Air |587,253 |
|7 |Hainan Airlines |549,565 |
|8 |Xiamen Airlines |523,280 |
|9 |Shenzhen Airlines |519,178 |
|10 |Cathay Pacific |512,796 |

However, if we talk about the global Top 10 International Airlines by seats per week, there is just one mainland airline in Top 30, which is China Eastern Airlines. [pic]
Source: CAPA, week commencing 6 May 2012

2. SWOT ANALYSIS
3.1 Strength 1. China Eastern Airlines, being one of the China’s Big Three, which are the state-owned carriers that account for the majority of air traffic. Its passenger volume already ranked first among all the domestic airlines. 2. It has very strong domestic route network after the merger with Shanghai Airlines, this has ensured its strong presence in domestic Chinese market. China Eastern Airlines hubs at Shanghai Pudong International Airport and Shanghai Hongqiao International Airport, it carried more than 73 million domestic and international passengers annually. 3. The operating performance is strong, the revenues are record high, up to RMB 85.2 billion in 2012, and the operating profit is up to RMB 4.2 billion in 2012, which is the fourth profitable year consecutively. 4. It has strong national policy support, even in the dark age of Asia Financial Crisis and World Economic Tsunami in 2008, China Eastern Airlines has got enormous funding from China government. 5. It offers a variety of services, including domestic routes, regional routes, international routes and air freight services. 6. It has strong presence on routes in Asia, North America and Australia, services also extended to Rome and other European destinations, operations stretches to North America already, with direct flights to New York from Shanghai, making it the longest non-stop route for the airline.

3.2 Weakness 1. The Chinese government owns the majority stake of China Eastern Airlines, therefore the operations are lack of flexibility, and it has an image of a state enterprise. 2. Chinese government controls so many aspects of the operations, and the flaws of weak management skills are obvious. 3. China Eastern Airlines has many incidents in the past; it has a bad records and bad reputation, reflecting the poor management. 4. It has become a giant of the aviation industry in practice after the merge with Shanghai Airlines, however, the political leadership and organizational inefficiencies make it slow to react to market changes. 5. The number of staffs maintained after the merger, and some duplication of routes are happening, particularly at Hongqiao airport. All in all, showing the poor and ineffective management which have caused the redundancy. 6. Structural inefficiencies, duplication of resources and persistent government influences have affected the competitiveness of the company. 7. Relies too heavily on the domestic market, for it accounts for 70.21% of the total revenues, and it is facing heavy competitions from other transportation means, such as the high speed railway. 8. The services are not up to international standards, and due to the rising economy and higher expectations of the consumers, China Eastern Airlines will be less preferred. 9. For China Eastern Airlines, the total number of passengers increased 6.33% in 2012. And there is a growth of 9.06% on international routes, 3.56% on regional routes, and 6.12% in domestic routes; all figures falling behind the national aviation growth.

3.3 Opportunity 1. With the world’s largest population, rising incomes and increasing urbanization, China is a nation of huge aviation growth now, and China Eastern Airlines benefits from the rapid economic growth of China. The number of passengers handled by the Chinese mainland airport surpassed 600 million, and benefited from that boom, China Eastern Airlines has reached the second position of the North Asia Top 10 Airlines. 2. Passenger numbers has reached 73.07 million, international passengers have reached 7.90 million, regional passengers have reached 2.81 million, and the domestic passengers have reached 62.36 million, which reflects the room for more aviation demand. 3. Cargo and mail traffic account for 10.10% revenue of China Eastern Airlines, and the export performance of China has been improving continuously after the economic tsunami, therefore the cargo and mail traffic volume should increase also. 4. The safety management of China Eastern Airlines has improved remarkably throughout the years. 5. The number of tourists in China is increasing, and China Eastern Airlines is strong on the domestic routes, on the other hand, there is remarkable growth in global airline traffic after the Economic Tsunami in 2008.

3.4 Threat 1. Rising fuel prices affects the business of aviation industry continuously, as China Eastern Airlines is the mid-price airlines, the profit margin will be much affected. 2. Due to the fleet expansion plan from 2009 to 2013, huge numbers of new aircrafts will arrive in the coming years, there will be an enormous funding requirement. 3. Business operations intervened by the Chinese government can affect growth because of its strict and un-adaptive regulations. 4. Global economic downturn has decreased the demand of international and domestic passenger traffic and cargo transportation needs. Moreover, international route facing more instable political and economic turbulence, which account for 25.28% of the passenger revenues. 5. As there are many budget airlines emerging, and many of them are coming from China, the competition will become harder and harder. 6. Online presences of the competitors are increasing and better services provided by other airlines at similar cost. 7. Substitute like high speed railway has intensified the competition in domestic route, which accounts for 70.21% of the group’s passenger revenues.

4. Performance overall
4.1 Turnover growth
[pic]
In 2012, China Eastern Airline (CEA) revenue is RMB85,253 million, growth 3.5% compare to year 2011. The revenue growth rate is less aggressive than past 2 years. Compare with close competitor in the industry, China Eastern Airline growth rate is lower than China Southern Airline (CSA) 10.1% increased in 2012.

4.2 Profit Before Taxation
[pic]
In 2012, Profit Before Taxation of CEA is RMB 3,012 million, year on year drops 37.8%. It is continuous 2nd year drop from 2010. Comparing the peak in 2010, RMB 5,417 million, CEA drops 44.4% performance of 2012. CSA Profit Before Taxation drops 31.6% in year 2012. To compare the peak in 2010, CSA drops 41.5% in 2012.

4.3 Net Profit
[pic]
In 2012, CEA Net Profit is RMB 2,954 million, year on year drops 35.4%. Comparing with the peak in 2010, CEA drops 40.42% from RMB 4,958 million drops to RMB 2,954 million. Competitor - CSA 2012 Net Profit is RMB 2,619 million, year on year drops 48.7%. To compare it’s peak in 2010, CSA drops 54.8% from RMB 5,794 million drops to RMB2,619 million. CEA’s Net Profit in 2012 is the first time over CSA in the past 5 years. From the income statement, it shows CSA have RMB 1,166 million minority interest have to paid however, CEA have positive income on this item. That’s why CEA have lower Profit before tax than CSA but have higher value in Net Profit in 2012.

4.4 Cash
[pic]
CEA have RMB 4,238 million cash in 2012 and it drops 37.3% yearly. While CSA cash is more than double of CEA amount RMB 10,404 million in 2012.

4.5 Earning per share (EPS) = Net profit less preferred dividends/ Average weighted # of ordinary shares
[pic]
In 2012, CEA EPS drops 35.4% from 2011’s 0.41 to 2012’s 0.26 while CSA EPS drops 49.7% from 2011’s 0.52 to 2012’s 0.27. Comparing the EPS with 2010, CEA 2012 EPS drops 40% while CSA EPS drops 55% respectively.

5. Liquidity ratios
5.1 Current Ratio = Current Assets/Current Liabilities
Implication : Short-term debt paying ability
[pic]
CEA current ratio of 2012 drops from 2011’s 0.32 to 0.26 while CSA current ratio of 2012 drops from 2011’s 0.44 to 0.34. As CEA current ratio is lower than CSA, the Short-term debt paying ability of CEA is poorer than CSA.

5.2 Quick (Acid Test) Ratio = (Cash + Marketable securities + net receivables)/Current liabilities
Implication : Immediate Short Term Liquidity
[pic]
CEA quick ratio drops from 2011’s 0.21 to 2012’s 015 while CSA quick ratio drops from 2011’s 0.38 to 2012’s 0.29. CEA quick ratio is lower than CSA mean the Immediate Short Term Liquidity of CEA is poorer than CSA.

5.3 Working Capital = Current Assets – Current Liabilities
Implication : Immediate Short Term Liquidity
[pic]
CEA working capital in 2012’s -35,947 million and it record decrease in continues 2 years from 2010’s -27,183 million to 2011’s -29,678 million. CEA drops 132% when comparing 2013 to 2010 working capital. CSA working capital in 2012’s -16,466 million and it record decrease in continues 2 years from 2010’s -24,928 million to 2011’s -31,944 million. CSA drops 194% when comparing 2013 to 2010 working capital. To compare the trend of working capital between CEA and CSA, CSA has poorer immediate short term liquidity.

6. Profitability Ratios
6.1 Return on equity (ROE) = Net profit before tax/Total equity
Implication : Profitability of all equity investors’ investment
[pic]
CEA 2012’s Return on equity (ROE) is 12.3% while 2011’s ROE is 22.2% and 2010 is 32.7%. CEA ROE drops in last 2 continuous years. CSA 2012’s ROE is 11.9% while 2011 is 18.3% and 2010 is 26.7%. CSA ROE drops in last 2 continuous years. In 2012, CEA’s ROE 12.3% is still slightly better than CSA’s ROE 11.9% but the comparative advantage of CEA get smaller comparing 2010 CEA ROE 32.7% vs CSA ROE 26.7%. The comparative advantage of CEA’ s Profitability of all equity investors’ investment is similar to CSA in 2012.

6.2 Return on Assets (ROA) = Net profit before tax/Total Assets
Implication : Overall profitability of assets
[pic]
In 2012, CEA ROA drops from 2011’s 4.2% to 2.4% while CSA ROA drops from 2011’s 5.4% to 3.3%. CEA’s ROA is lower than CSA in 2012 and 2011, the Overall profitability of assets of CEA is lower than CSA.

6.3 Operating margin = EBITDA/Sales
Implication : Profitability independently of an enterprise’s financing and tax position
[pic]
In 2012, CEA operating margin drops from 2011’s 3.78 to 2.94 while CSA slightly raise from 2011’s 0.22 to 2012’s 0.23. To compare Profitability independently of an enterprise’s financing and tax position, CEA is doing better than CSA in year 2012 and 2011.

6.4 Fixed Asset Turnover = Sales/Fixed Assets
Implication : Measure how well the business is using its fixed assets to generate sales
[pic]
In 2012, CEA ‘s Fixed Asset turnover drops from 2011’s 95.6% to 2012’s 88.6% while CSA’s Fixed Asset turnover drops from 2011’s 82.6% to 2012’s 79.5%. To compare how well the business is using its fixed assets to generate sales, CEA is doing better than CSA from 2010 to 2012.

7. Financing ratios
7.1 Debt/Assets ratio = Total Liabilities/Total Assets
Implication : Measure the total amount of liabilities to total amount of assets. If Debt to total assets ratio is highly leveraged, could be in danger if creditor start to demand repayment of debt.
[pic]
In 2012, CEA Debt/Asset ratio drop slightly from 2011’s 81% to 2012’s 80.2%. It records continuous decreasing from past 5 years since 2008’s 117.3%. CSA Debt/Asset ratio raise from 2011’s 70.8% to 72.1%. To compare Debt/Asset ratio, CEA is worse than CSA. It means CEA has more risk if creditor start to demand repayment of debt than CSA.

7.2 Debt-to-Equity Ratio = Total Liabilities/Total Equity
Implication : Measure the degree or financial leverage of the firm. Higher debt of the firm means higher it’s financial leverage, higher it’s financial risk of bankruptcy.
[pic]
In 2012, CEA Debt-to-Equity Ratio drops from 2011’s 426.2% to 2012’s 404.3% while CSA Debt-to-Equity Ratio drops from 2011’s 242.6% to 2012’s 258.5%. To compare the financial leverage of the firm in 2012, CEA (404.3%) is higher than CSA (258.5%) it means CEA has higher potential risk of bankruptcy.

7.3 Cash Flow Leverage = Total liabilities/EBITDA
Implication : Measure how well a company can afford to pay off its debts. Too high cash flow leverage may lead to refusal of loan application.
[pic]
CEA cash flow leverage raise in 3 continuous years since 2010’s 735.6% to 2011’s 922.2% and 2012’s 986.2% while CSA cash flow leverage also raise in 3 continuous years, 2010’s 770.4% to 2011’s 1163.2% and 2012’s 1210.3%. CEA cash flow leverage is increase from the past 3 years but it’s still lower than CSA. CEA affordability to pay off its debts is better than CSA when they need to raise loan from financial institutions.

7.4 Valuation
Price Earning (P-E) ratio = Market price of the stock /earning per share
Implication : Measure current market price per share divide by earning per share. Higher P-E means the current market price is over-priced or not.
# Market price based on HKEx closing figure on 29 Nov 2013.
CEA 2012 P-E raise from 2011’s6.11 to 9.47 while CSA P-E raise from 2011’s 5.29 to 10.32. CEA price earning ratio is lower than CSA.

7.5 Others:
Depreciation to Net Fixed Assets Ratio = Depreciation / Net Fixed Assets
Implication:
[pic]
In 2012, CEA Depreciation to Net Fixed Assets decrease from 2011’s 8.08% to 7.86% while CSA Depreciation to Net Fixed Assets raise from 2011’s 7.28% to 6.83%. CEA is doing than CSA in Depreciation to Net Fixed Assets in 2012.

7.6 Labor Cost Ratio: Salary expense / revenue
Implication: Measure the salary expense to revenue generated
[pic]
In 2012, CEA Labor cost ratio raise from 2011’s 10.51% to 11.8% while CSA Labor cost ratio raise from 2011’s 13% to 13.44%. To compare Labor cost ratio, CEA is doing better than CSA in year 2011 & 2012.

7.7 Sales per employee ratio: Revenue/Total employees
Implication: Measure the revenue to total number of employees
[pic]
In 2012, CEA Sales per employee ratio drops from 2011’s 1.38 to 2012’s 1.29 while CSA Sales per employee ratio raise from 2011’s 1.22 to 2012’s 1.30. To compare Sales per employee ratio, CEA is worse than CSA in 2012. CEA have to spend effort to control growth of number of employees or raise revenue.

8. ACCOUNTING-RELATED ETHICAL ISSUES Company’s Directors have responsibility to give a true and fair view in accordance with International Financial Reporting Standards and the disclosure requirements of the Hong Kong Companies Ordinance. For example, the director decision is needed to ensure the internal consolidated financial statements which are free from material misstatement, such as Profit, Cash flow and Liquidity...etc. Those data will influence or mislead the investor’s decision-making process.

The Auditor has responsibility to provide an opinion on the consolidated financial statements basing on their audit. Ensuring the internal consolidated financial statements are free from material misstatement. Auditor needs to give a true and fair view to design the audit procedures that are in the circumstances appropriately. Besides, Auditor is also needed to evaluate the appropriateness of accounting policies used and the reasonableness of Director’s accounting estimation.

In Purchases or Sale of Assets of the Company: According to the Supervisory committee report , There is no insider trading, any acts prejudicial to the interests of the shareholders of major acquisitions, asset disposal and connect transactions.

About the internal control of the company, the company has a developed internal control regulation system and implements it in satisfactory level.

9. BUSINESS DECISION MAKING ANALYSIS:

9.1 Recommendation: Buy/Hold
External/Internal factors for consideration:
1) Chinese government plans to enhance the flexibility of two-way floating RMB exchange rate. Central bank will step back from the foreign exchange of market intervention. Floating exchange rate system will be established by market. RMB value will be raised. According to Financial report 2012, big proportion of long term bank borrowing is in USD. Group will be benefit from RMB value increase.
2) Deputy Director of National Civil Aviation announced the plan to ease the impact of the policy (aircraft procurement, tariffs, access routes…etc.) in a way to encourage more low-cost airline to enter the market.
3) CEA has 3.5% increases in Group’s revenue comparing with last year. Transportation revenue has recorded 3.83% increases from the previous year
4) Based on the year-on-year growth rates of 9.2% and 12.2% in the number of passengers and passenger turnover, passenger revenues only increase by 3.3%
5) Company aims to reduce the ticket price to maintain the volume. The passenger load factor is increased by 0.24ppts to 79%
6) About the Human Resources, the majority of the employees is working in or based in China. The Group has no significant turnover of employees or difficulties in recruiting new employees.
7) P/E Ratio is 9.47 (Profit applicable to each ordinary share)

9.2 Recommendation: Sell
External/Internal factors for consideration:
1) High-speed railway over airline transportation becoming more common.
2) The number of business passenger is decreased and the number of traveling passenger is increased. The aviation industry business is lower than the expectation in 1H2013.
However, the demand of airline transportation is still high due to the competitive ticket price from airlines. The company’s profitability will be reduced.
3) CEA’s operating expenses are increased by 7.4% year-to-year to RMB42.14 billion in total. Business expansion of the company’s subsidiaries raises the indirect operating costs and other costs with a total amount of RMB5.19 billion, up 27.7% year-to-year to RMB1.13 billion.
4) The costs of D&A and fuel increased by RMB330 million (+9.1%) and RMB310 million (+2.1%) respectively compared with the same period of last year.
5) The Company's fuel cost is increased by 2.1% comparing with same period of last year.
6) Finance income was RMB349 million, it has RMB1,675 million decrease comparing with same period in last year’s RMB2,024 million.
7) Finance costs has RMB235 million increase due to interest expenses arising from increased borrowings and finance leases.
8) The price of aviation fuel accumulatively increased to RMB400/ton since July.
CEA's profits would be improved in 2H compared with 1H, but it has a risk of downturn pressure comparing with the same period of last year.

9.3 Conclusion: From investor point of view: Buy/Hold.
It is because CEA is a major airline (Big 3) in China. And the relationship with Chinese government will help them to overcome any difficulties of finance or other issues. Considering the P/E is 9.47, and the benefit from RMB value increase. It is in acceptable level of buying shares in stock market.

10. Loan Decision Recommendation:
External/Internal factors for consideration
1) Passenger traffic volume grows 8.14% in first three quarters comparing with last year.
Revenue has slightly increased by 3.83%, but the net profit is reducing 28.2% because CEA purchased new passenger aircrafts (20 sets). The EPS was RMB0.054 comparing with same period in last year which is RMB0.077.
2) Group’s current liabilities exceeded its current assets by RMB35,948 million.
3) The values of Group’s assets used to secure certain bank loans. It shows 23.08% increase comparing with last year.

10.1 Conclusion: From Bank's point of view.
CEA bought aircraft which increased their liabilities. Since the company has China background and they are the Big 3 in China, Bank could consider lending the loan to company with higher interest rate

11. Merger & Acquisition decision
External/Internal factors for consideration
1) One of Big 3 airline in China
2) Chinese government background
11.1 Conclusion:
Merger & Acquisition is not applicable in this company because China Eastern Airline is a strategic pillar organization in China (China government has political concern).
Appendix 1
China Eastern Airline – 5 years Profit & Loss, Balance Sheet from 2008 to 2012
|P&L (in RMB Millions) | | | | | |
|Income Statement | | | | | |
|Year-end 31 Dec (Rmb mn) |2008 |2009 |2010 |2011 |2012 |
|Total revenue |41,073 |38,990 |73,804 |82,403 |85,253 |
|Operating expenses |(56,828) |(38,465) |(68,765) |(79,292) |(82,745) |
|EBITDA |(10,974) |5,728 |11,797 |10,077 |10,065 |
|Depreciation and amortization |(4,782) |(5,203) |(6,758) |(6,966) |(7,557) |
|Operating profit (EBIT) |(15,756) |525 |5,039 |3,111 |2,508 |
|Finance expenses |(2,328) |(1,755) |(1,502) |(1,463) |(1,697) |
|Finance income |2,062 |205 |1,155 |2,024 |349 |
|Gains on disposals | | | | |- |
|Net associated profits |94 |(23) |67 |107 |133 |
|Other net gains/losses |672 |1,288 |659 |1,061 |1,720 |
|Profit before tax |(15,256) |240 |5,417 |4,840 |3,012 |
|Tax |(74) |(53) |(133) |(264) |(204) |
|Profit after tax |(15,330) |187 |5,284 |4,576 |2,808 |
|Minority interest |(61) |(28) |(326) |(1) |146 |
|Net profit |(15,392) |159 |4,958 |4,576 |2,954 |
|Average weighted # of ordinary shares |4,867 |9,582 |11,277 |11,277 |11,277 |
|Basic EPS (Rmb) |(3.16) |0.02 |0.44 |0.41 |0.26 |
| | | | | | |
|Balance Sheet | | | | | |
|Year-end 31 Dec (Rmb mn) |2008 |2009 |2010 |2011 |2012 |
|Cash and equivalent |3,451 |1,735 |3,078 |6,755 |4,238 |
|Receivables |1,165 |1,371 |2,127 |2,504 |2,962 |
|Flight parts |871 |932 |1,287 |1,556 |2,088 |
|Other current assets |4,912 |2,825 |5,588 |2,893 |3,387 |
|Total current assets |10,399 |6,863 |12,080 |13,708 |12,675 |
|Net fixed assets |60,088 |62,756 |76,585 |86,197 |96,196 |
|Intangible assets |165 |70 |11,333 |11,354 |11,449 |
|Other assets |1,024 |1,010 |1,879 |1,978 |2,013 |
|Associates & other LT investments |1,374 |1,153 |1,456 |1,501 |1,486 |
|Total other assets |62,651 |64,988 |91,253 |101,030 |111,144 |
|Total assets |73,050 |71,851 |103,332 |114,738 |123,819 |
|Short term debt |28,430 |14,455 |17,348 |20,630 |25,245 |
|Payables |5,459 |6,480 |4,275 |2,693 |3,075 |
|Current portion of LT liabilities |213 |610 |339 |375 |734 |
|Other current liabilities |19,755 |13,965 |17,301 |19,688 |19,568 |
|Total current liabilities |53,857 |35,510 |39,263 |43,386 |48,622 |
|Long term debt |27,480 |30,250 |40,425 |41,405 |42,349 |
|Other liabilities |4,353 |4,415 |7,082 |8,142 |8,294 |
|Total other liabilities |31,833 |34,664 |47,507 |49,547 |50,643 |
|Total liabilities |85,690 |70,175 |86,770 |92,933 |99,265 |
|Share capital |4,867 |9,582 |11,277 |11,277 |11,277 |
|Share premium and other reserves |(17,964) |(8,347) |3,995 |8,849 |11,649 |
|Minority Interest |458 |442 |1,291 |1,679 |1,628 |
|Total equity |(12,640) |1,677 |16,562 |21,805 |24,554 |
|Total liabilities and equity |73,050 |71,851 |103,332 |114,738 |123,819 |
| | | | | | |
| | | | | | |
| | | | | | |
|Cash Flow Statement | | | | | |
|Year-end 31 Dec (Rmb mn) |2008 |2009 |2010 |2011 |2012 |
|Net profit |(15,392) |159 |4,958 |4,576 |2,954 |
|Depreciation |4,782 |5,203 |6,758 |6,966 |7,557 |
|Associate share of (profits)/ loss |(94) |23 |(67) |(107) |(133) |
|Total gross cash flow |(10,704) |5,385 |11,649 |11,435 |10,378 |
|Change in total working capital | |(2,552) |(3,014) |2,890 |(863) |
|Total operating cash flow |(10,704) |2,833 |8,636 |14,325 |9,515 |
|Capex less disposals | |(7,871) |(20,587) |(16,578) |(17,556) |
|Change in other assets | |110 |(12,133) |(120) |(130) |
|Change in associates | |198 |(236) |61 |148 |
|Total investment cash flow |- |(7,563) |(32,955) |(16,637) |(17,537) |
|Change in gross debt | |(11,205) |13,068 |4,262 |5,559 |
|Change in other long term liabilities | |62 |2,668 |1,060 |152 |
|Change in equity | |14,157 |9,927 |667 |(205) |
|Total financing cash flow | |3,014 |25,663 |5,989 |5,506 |
|Total cash flow | |(1,716) |1,343 |3,676 |(2,517) |
|Cash balance at beginning of the Year | |- |(1,716) |(373) |3,303 |
|Cash balance at end of the Year | |(1,716) |(373) |3,303 |787 |
| | | | | | |
|Key Ratios | | | | | |
|Year-end 31 Dec (Rmb mn) |2008 |2009 |2010 |2011 |2012 |
|Growth (y/y) | | | | | |
|Turnover | |-5.1% |89.3% |11.7% |3.5% |
|Net profit | |-101.0% |3022.3% |-7.7% |-35.4% |
|Profitability | | | | | |
|Operating margin (%) |-38.36 |1.35 |6.83 |3.78 |2.94 |
|Pre-tax margin (%) |-37.14 |0.62 |7.34 |5.87 |3.53 |
|Net margin (%) |-37.47 |0.41 |6.72 |5.55 |3.47 |
|Financial | | | | | |
|Cash (Rmb mn) |3,451 |1,735 |3,078 |6,755 |4,238 |
|ST debt (Rmb mn) |28,430 |14,455 |17,348 |20,630 |25,245 |
|LT debt (Rmb mn) |27,480 |30,250 |40,425 |41,405 |42,349 |
|Net debt (Rmb mn) |52,459 |42,970 |54,695 |55,280 |63,356 |
|Net debt/equity (%) |(415.0) |2,562.9 |330.2 |253.5 |258.0 |
|Debt/equity (%) |(442.3) |2,666.4 |348.8 |284.5 |275.3 |
|Current ratio (x) |0.2 |0.19 |0.31 |0.32 |0.26 |
|Quick ratio (x) |0.1 |0.09 |0.13 |0.21 |0.15 |
|Economic Value | | | | | |
|NOPAT (Rmb mn) |(15,829) |472 |4,906 |2,847 |2,304 |
|Total capital (Rmb mn) |43,271 |46,382 |74,335 |83,840 |92,148 |
|Gross debt/capital (%) |129.2 |96.4 |77.7 |74.0 |73.4 |
|Equity/capital (%) |(29.2) |3.6 |22.3 |26.0 |26.6 |
|Valuation | | | | | |
|P/E (X) |(0.8) |149.64 |5.64 |6.11 |9.47 |
|P/BV (X) |(0.9) |19.24 |1.83 |1.39 |1.22 |
|P/CFPS (X) |(1.1) |8.39 |3.24 |1.95 |2.94 |
|EV/Sales (X) |2.0 |1.82 |1.12 |1.01 |1.07 |
|EV/EBITDA (X) |(7.3) |12.38 |7.01 |8.26 |9.07 |
|EV/EBIT (X) |(5.1) |135.22 |16.41 |26.76 |36.41 |
|Performance | | | | | |
|ROA (%) | |0.22 |5.66 |4.20 |2.48 |
|ROE (%) | |(2.9) |54.37 |23.85 |12.74 |
|ROIC (%) | |1.02 |6.60 |3.40 |2.50 |
|Asset turnover (X) | |0.54 |0.84 |0.76 |0.71 |
|Working capital/sales (%) | |(73.5) |(36.8) |(36.0) |(42.2) |
|A/R collection days | |11.87 |8.65 |10.26 |11.70 |
|Coverage | | | | | |
|Interest coverage |(4.7) |3.26 |7.85 |6.89 |5.93 |
|Value per share (Rmb) | | | | | |
|Earnings per share |(3.2) |0.02 |0.44 |0.41 |0.26 |
|Book value per share |(2.7) |0.13 |1.35 |1.78 |2.03 |
|Sales per share |8.4 |4.07 |6.54 |7.31 |7.56 |
|Cash flow per share |(2.2) |0.30 |0.77 |1.27 |0.84 |
|Gross cash per share |0.7 |0.18 |0.27 |0.60 |0.38 |
|Net cash per share |(10.8) |(4.48) |(4.85) |(4.90) |(5.62) |

Appendix 2
China Southern Airline – 5 years Profit & Loss, Balance Sheet from 2008 to 2012
|P&L (in RMB Millions) | | | | | |
|Income Statement | | | | | |
|Year-end 31 Dec (Rmb mn) |2008 |2009 |2010 |2011 |2012 |
|Total revenue |53,913 |52,967 |74,140 |87,252 |96,100 |
|Operating expenses |(61,767) |(55,351) |(70,685) |(87,063) |(95,877) |
|EBITDA |(2,108) |3,587 |10,516 |7,878 |8,487 |
|Depreciation and amortization |(5,746) |(5,971) |(7,061) |(7,689) |(8,264) |
|Operating profit (EBIT) |(7,854) |(2,384) |3,455 |189 |223 |
|Finance expenses |(1,987) |(1,497) |(1,265) |(1,067) |(1,376) |
|Finance income |103 |68 |93 |179 |235 |
|Net associated profits |158 |283 |167 |581 |438 |
|Other net gains/losses |4,856 |3,962 |5,642 |7,048 |5,218 |
|Profit before tax |(4,724) |432 |8,092 |6,930 |4,738 |
|Tax |(62) |95 |(1,678) |(840) |(954) |
|Profit after tax |(4,786) |527 |6,414 |6,090 |3,784 |
|Minority interest |(37) |(197) |(620) |(980) |(1,165) |
|Net profit |(4,823) |330 |5,794 |5,110 |2,619 |
|Average weighted # of ordinary shares |6,561 |8,003 |9,818 |9,818 |9,818 |
|Basic EPS (Rmb) |(0.74) |0.04 |0.59 |0.52 |0.27 |
| | | | | | |
|Balance Sheet | | | | | |
|Year-end 31 Dec (Rmb mn) |2008 |2009 |2010 |2011 |2012 |
|Cash and equivalent |4,649 |4,343 |10,404 |9,935 |10,082 |
|Receivables |2,688 |2,767 |3,386 |7,135 |3,992 |
|Flight parts |1,229 |1,256 |1,355 |1,618 |1,708 |
|Other current assets |682 |762 |714 |797 |1,005 |
|Total current assets |9,248 |9,128 |15,859 |19,485 |16,787 |
|Net fixed assets |71,089 |82,248 |92,026 |105,583 |120,927 |
|Other assets |579 |2,337 |1,962 |2,544 |3,037 |
|Associates & other LT investments |2,126 |1,037 |1,488 |1,800 |1,703 |
|Total other assets |73,794 |85,622 |95,476 |109,927 |125,667 |
|Total assets |83,042 |94,750 |111,335 |129,412 |142,454 |
|Short term debt |25,647 |22,488 |10,991 |20,573 |24,393 |
|Payables |1,781 |1,431 |1,806 |2,847 |1,825 |
|Current portion of LT liabilities |2,244 |2,196 |3,604 |5,299 |4,854 |
|Other current liabilities |11,866 |11,983 |15,924 |15,694 |17,659 |
|Total current liabilities |41,538 |38,098 |32,325 |44,413 |48,731 |
|Long term debt |28,586 |39,762 |44,652 |43,090 |49,567 |
|Other liabilities |3,439 |3,628 |4,042 |4,132 |4,422 |
|Total other liabilities |32,025 |43,390 |48,694 |47,222 |53,989 |
|Total liabilities |73,563 |81,488 |81,019 |91,635 |102,720 |
|Share capital |6,561 |8,003 |9,818 |9,818 |9,818 |
|Share premium and other reserves |460 |2,348 |16,999 |22,357 |23,021 |
|Minority Interest |2,458 |2,911 |3,499 |5,602 |6,895 |
|Total equity |9,479 |13,262 |30,316 |37,777 |39,734 |
|Total liabilities and equity |83,042 |94,750 |111,335 |129,412 |142,454 |
| | | | | | |
| | | | | | |
|Cash Flow Statement | | | | | |
|Year-end 31 Dec (Rmb mn) |2008 |2009 |2010 |2011 |2012 |
|Net profit |(4,823) |330 |5,794 |5,110 |2,619 |
|Depreciation |5,746 |5,971 |7,061 |7,689 |8,264 |
|Associate share of (profits)/ loss |(158) |(283) |(167) |(581) |(438) |
|Total gross cash flow |765 |6,018 |12,688 |12,218 |10,445 |
|Change in total working capital | |(467) |5,054 |(1,589) |3,343 |
|Total operating cash flow |765 |5,551 |17,742 |10,629 |13,788 |
|Capex less disposals | |(17,130) |(16,839) |(21,246) |(23,608) |
|Change in other assets | |(1,758) |375 |(582) |(493) |
|Change in associates | |1,372 |(284) |269 |535 |
|Total investment cash flow |- |(17,516) |(16,748) |(21,559) |(23,566) |
|Change in gross debt | |8,017 |(6,607) |8,020 |10,297 |
|Change in other long term liabilities | |189 |414 |90 |290 |
|Change in equity | |3,453 |11,260 |2,351 |(662) |
|Total financing cash flow |- |11,659 |5,067 |10,461 |9,925 |
|Total cash flow | |(306) |6,061 |(469) |147 |
|Cash balance at beginning of the Year | |4,649 |4,343 |10,404 |9,935 |
|Cash balance at end of the Year |4,649 |4,343 |10,404 |9,935 |10,082 |
| | | | | | |
|Key Ratios | | | | | |
|Year-end 31 Dec (Rmb mn) |2008 |2009 |2010 |2011 |2012 |
|Growth (y/y) | | | | | |
|Turnover | |-2% |40.0% |17.7% |10.1% |
|Net profit | |-107% |1655.8% |-11.8% |-48.7% |
|Profitability | | | | | |
|Operating margin (%) |-14.57 |-4.50 |4.66 |0.22 |0.23 |
|Net margin (%) |-8.95 |0.62 |7.81 |5.86 |2.73 |
|Financial | | | | | |
|Cash (Rmb mn) |4,649 |4,343 |10,404 |9,935 |10,082 |
|Net debt/equity (%) |523.1 |436.64 |149.22 |142.22 |160.76 |
|Debt/equity (%) |572.1 |469.39 |183.54 |168.52 |186.14 |
|Current ratio (x) |0.2 |0.24 |0.49 |0.44 |0.34 |
|Quick ratio (x) |0.2 |0.19 |0.43 |0.38 |0.29 |
|Economic Value | | | | | |
|NOPAT (Rmb mn) |(7,916) |(2,289) |1,777 |(651) |(731) |
|Total capital (Rmb mn) |63,712 |75,512 |85,959 |101,440 |113,694 |
|Gross debt/capital (%) |85.1 |82.4 |64.7 |62.8 |65.1 |
|Equity/capital (%) |14.9 |17.6 |35.3 |37.2 |34.9 |
|Valuation | | | | | |
|P/E (X) |(3.7) |66.7 |4.7 |5.3 |10.3 |
|P/BV (X) |2.6 |2.1 |1.0 |0.8 |0.8 |
|P/CFPS (X) |23.6 |4.0 |1.5 |2.5 |2.0 |
|EV/Sales (X) |1.4 |1.6 |1.0 |0.9 |0.9 |
|EV/EBITDA (X) |(36.3) |23.7 |6.9 |10.2 |10.7 |
|EV/EBIT (X) |(9.8) |(35.6) |20.9 |427.2 |407.6 |
|Performance | | | | | |
|ROA (%) | |0.4 |5.6 |4.2 |1.9 |
|ROE (%) | |2.9 |26.6 |15.0 |6.8 |
|ROIC (%) | |(3.0) |2.1 |(0.6) |(0.6) |
|Asset turnover (X) | |0.6 |0.7 |0.7 |0.7 |
|Working capital/sales (%) | |(54.7) |(22.2) |(28.6) |(33.2) |
|A/R collection days | |18.8 |15.1 |22.0 |21.1 |
|Coverage | | | | | |
|Interest coverage |(1.1) |2.4 |8.3 |7.4 |6.2 |
|Value per share (Rmb) | | | | | |
|Earnings per share |(0.7) |0.0 |0.6 |0.5 |0.3 |
|Book value per share |1.1 |1.3 |2.7 |3.3 |3.3 |
|Sales per share |8.2 |6.6 |7.6 |8.9 |9.8 |
|Cash flow per share |0.1 |0.7 |1.8 |1.1 |1.4 |
|Gross cash per share |0.7 |0.5 |1.1 |1.0 |1.0 |
|Net cash per share |(7.6) |(7.2) |(4.6) |(5.5) |(6.5) |
| |
|Appendix 3 – Consolidated Income Statement |

|Consolidated Income Statement |RMB '000 |RMB '000 | | |
| |2012 |2011 |$ Variance |% Change |
|Revenues |85,253,317 |82,403,130 |2,850,187 |3.46% |
|Other operating income |1,719,626 |1,061,451 |658,175 |62.01% |
|Operating expenses | | | | |
|Aircraft fuel |-29,871,506 |-29,229,011 |-642,495 |2.20% |
|Gain on fair value movements of derivatives | | | | |
|financial instruments |24,831 |86,851 |-62,020 |-71.41% |
|Take-off and landing charges |-9,065,649 |-8,350,181 |-715,468 |8.57% |
|Depreciation and amortization |-7,556,910 |-6,965,570 |-591,340 |8.49% |
|Wages, salaries and benefits |-10,059,043 |-8,664,854 |-1,394,189 |16.09% |
|Aircraft maintenance |-4,432,741 |-4,405,900 |-26,841 |0.61% |
|Impairment reversals/(charges) |13,467 |-638,316 |651,783 |-102.11% |
|Food and beverages |-2,031,425 |-2,022,367 |-9,058 |0.45% |
|Aircraft operating lease rentals |-4,438,169 |-4,128,420 |-309,749 |7.50% |
|Other operating lease rentals |-609,111 |-491,901 |-117,210 |23.83% |
|Selling and marketing expenses |-3,727,437 |-3,739,682 |12,245 |-0.33% |
|Civil aviation infrastructure levies |-1,414,457 |-1,321,373 |-93,084 |7.04% |
|Ground services and other charges |-594,057 |-567,552 |-26,505 |4.67% |
|Office, administrative and other expenses |-8,982,628 |-8,853,751 |-128,877 |1.46% |
|Total operating expenses |-82,744,835 |-79,292,027 |-3,452,808 |4.35% |
|Operating profit |4,228,108 |4,172,554 |55,554 |1.33% |
|Share of results of associates |103,209 |75,435 |27,774 |36.82% |
|Share of results of jointly controlled entities |29,960 |31,437 |-1,477 |-4.70% |
|Finance income |348,601 |2,024,002 |-1,675,401 |-82.78% |
|Finance costs |-1,697,474 |-1,462,727 |-234,747 |16.05% |
|Profit before income tax |3,012,404 |4,840,701 |-1,828,297 |-37.77% |
|Income tax |-204,801 |-264,229 |59,428 |-22.49% |
|Profit for the year |2,807,603 |4,576,472 |-1,768,869 |-38.65% |
|Other comprehensive (loss)/income | | | | |
|for the year | | | | |
|Cash flow hedges, net of tax |-9,211 |-132,446 |123,235 |-93.05% |
|Fair value movements of available-for-sale | | | | |
|investments |-389 |486 |-875 |-180.04% |
|Fair value movements of available-for-sale | | | | |
|investments held by an associate |2,188 |-2,701 |4,889 |-181.01% |
|Total comprehensive income for the year |2,800,191 |4,441,811 |-1,641,620 |-36.96% |

Appendix 4 – Consolidated Balance Sheet
|Consolidated Balance Sheet |2012 |2011 |$ Vairance |% Change |
| |RMB '000 |RMB '000 | | |
|Non-current assets | | | | |
|Intangible assets |11,449,099 |11,353,590 |95,509 |0.84% |
|Property, plant and equipment |82,518,761 |73,757,795 |8,760,966 |11.88% |
|Lease prepayments |1,781,846 |1,471,272 |310,574 |21.11% |
|Advanced payments on acquisition of aircraft |11,894,891 |10,968,344 |926,547 |8.45% |
|Investments in subsidiaries |833,472 |837,589 |-4,117 |-0.49% |
|Investments in associates |418,159 |423,256 |-5,097 |-1.20% |
|Investments in jointly controlled entities |234,690 |240,380 |-5,690 |-2.37% |
|Available-for-sale financial assets |1,958,256 |1,929,834 |28,422 |1.47% |
|Other long-term assets |54,561 |44,418 |10,143 |22.84% |
|Derivative assets |0 |4,365 |-4,365 |-100.00% |
| |111,143,735 |101,030,843 |10,112,892 |10.01% |
|Current assets | | | | |
|Flight equipment spare parts |2,087,978 |1,555,544 |532,434 |34.23% |
|Trade receivables |2,962,181 |2,504,026 |458,155 |18.30% |
|Prepayments and other receivables |3,368,648 |2,410,895 |957,753 |39.73% |
|Derivative assets |18,074 |0 |18,074 | |
|Restricted bank deposits and short-term bank deposits |1,726,251 |2,894,287 |-1,168,036 |-40.36% |
|Cash and cash equivalents |2,511,696 |3,860,973 |-1,349,277 |-34.95% |
|Assets held for sale |0 |482,313 |-482,313 |-100.00% |
| |12,674,828 |13,708,038 |-1,033,210 |-7.54% |
|Current liabilities | | | | |
|Sales in advance of carriage |3,094,427 |3,197,649 |-103,222 |-3.23% |
|Trade payables and notes payable |3,075,325 |2,692,624 |382,701 |14.21% |
|Other payables and accrued expenses |16,256,225 |16,267,287 |-11,062 |-0.07% |
|Current portion of obligations under finance leases |2,605,269 |2,459,259 |146,010 |5.94% |
|Current portion of borrowings |22,639,955 |18,171,130 |4,468,825 |24.59% |
|Income tax payable |181,788 |172,319 |9,469 |5.50% |
|Current portion of provision for return condition checks for |734,205 |375,409 |358,796 |95.57% |
|aircraft under operating leases | | | | |
|Derivative liabilities |35,813 |51,063 |-15,250 |-29.87% |
| |48,623,007 |43,386,740 |5,236,267 |12.07% |
|Net current liabilities |-35,948,179 |-29,678,702 |-6,269,477 |21.12% |
| | | | | |
|Total assets less current liabilities |75,195,556 |71,352,141 |3,843,415 |5.39% |

Similar Documents

Premium Essay

Accounting

...ISSUES IN ACCOUNTING EDUCATION Vol. 22, No. 4 November 2007 pp. 685–708 China Eastern Airlines: People’s Republic of China Accounting Standards, International Financial Reporting Standards, or U.S. Generally Accepted Accounting Principles? John L. Haverty ABSTRACT: China Eastern Airlines, headquartered in the People’s Republic of China, has been listed and traded on the New York Stock Exchange since 1997. In its 2005 annual report, China Eastern Airlines presents two sets of financial statements: one prepared under People’s Republic of China accounting regulations, and a second set prepared under International Financial Reporting Standards. In addition, as a listed company on the New York Stock Exchange, China Eastern Airlines files Form 20-F with the United States Securities and Exchange Commission. This filing includes a limited reconciliation of net income and net assets from International Financial Reporting Standards to United States’ generally accepted accounting principles. Your job is to examine these financial statements, explore any differences noted between each of the financial statements and U.S. GAAP, and highlight some issues to be included in a financial analysis of China Eastern Airlines for possible inclusion in an investment portfolio. W INTRODUCTION alt Gregory is a junior portfolio analyst at Chartgood, a portfolio manager for several major mutual funds. Susan Bedell, the portfolio manager, just informed Walt that one of the funds she managed, the Global...

Words: 9328 - Pages: 38

Premium Essay

Delts

...GLOBAL AVIATION GROUP 2013 Airline Disclosures Handbook Financial reporting and management trends in the global aviation industry kpmg.com KPMG’s Global Aviation practice KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 156 countries and have 152,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Through its member firms, KPMG has invested extensively in developing an experienced aviation team. KPMG’s understanding of the aviation industry is both current and forward looking, thanks to KPMG’s global experience, knowledge sharing, industry training and use of professionals with direct experience in the aviation industry. KPMG member firms serve many of the market leaders within the airline sector. We are leading providers of external audit services with 33% market share of the top 50 airlines by revenue. We also provide other services to over half of these top 50 airlines. KPMG member firms’ strength lies in our professionals and their knowledge and experience gathered from working with a large and diverse client base. KPMG’s airline industry experience helps the teams understand both your business priorities and the strategic issues facing your company. KPMG’s Global Aviation practice’s presence in many international markets, combined with industry knowledge, positions KPMG...

Words: 11825 - Pages: 48

Premium Essay

Ryanair Analysis

...logistics 13 Marketing and Sales 13 Service 13 Margin 14 Joint Venture 14 SECTION C 15 Ryanair Business Strategy 15 Low Fares: 15 Customer service: 15 Frequent Point-to-Point Flights on Short-Haul Routes: 15 Low Operating Costs: 15 Taking Advantage of the Internet: 16 Commitment to Safety and Quality Maintenance: 16 Enhancement of Operating Results through Ancillary Services: 16 Analysis of the airline business models 16 Ryanair’s strategy in future: 17 Focused Criteria for Growth: 17 New Aircraft-markers: 18 New design ‘standing seats’ 18 SWOT Analysis 19 Strengths 19 Weakness 19 Opportunities 19 Threats 19 BIBLIOGRAPHY 20 RYANAIR THE COMPANY The company was incorporated in 1995 and became Ryanair limited, and in 1996 it changed to a holding company for Ryanair limited. Registered no: 249885 and located in Ireland and with registered offices at: Ryanair limited Corporate Headquarters Dublin Airport Co Dublin Ireland Phone: 353-1-812-12121984 Fax: 353-1-812-1213 Ryanair is a public limited company with 45 bases and a 29.8% share in Aer Lingus with an operating fleet of 272. Flights commenced in operations in 1985. Staff: On march 31 2011, the companies...

Words: 6162 - Pages: 25

Premium Essay

Singapore 09-10

...singapore airlines annual report 2009/2010 Singapore Airlines achieved a net profit attributable to equity holders of S$216 million for the financial year ended 31 March 2010. During the first half of the year, demand for air travel declined due to the global economic slowdown as well as the outbreak of Influenza A (H1N1). The Group recorded a net loss attributable to equity holders of S$466 million for the first half of the financial year. Despite the difficult times, the Airline did not lose sight of its commitment to delivering product and service innovation. Singapore Airlines continued to invest in its long-term future by flying its flagship aircraft, the Airbus A380, to more destinations, rolling out a cabin renewal programme for selected Boeing 777 aircraft, and opening a new service centre in the heart of Singapore’s premier shopping belt. Market conditions gradually improved in the second half of the financial year. Reflecting this, the Airline recorded higher passenger and cargo traffic. Together with the S$404 million net profit in the third quarter, the fourth quarter net profit of S$278 million reversed the S$466 million loss recorded in the first half of the financial year. The business outlook for the Group in FY 2010-2011 is encouraging, although the sustainability of the recovery depends on developments in the world economy and on business and consumer confidence. The Airline plans to increase capacity in a measured manner in the new financial year. This...

Words: 68860 - Pages: 276

Premium Essay

Cabin Crew

...018 The Year in Review 020 Network 021 Fleet Management 022 Products and Services 026 People Development 030 Environment 031 Supporting Our Communities 032 Subsidiaries 036 Selected Awards 038 Statement on Risk Management 039 Corporate Governance Report 065 Financials 201 Notice of Annual General Meeting On the Cover: Flight Stewardess Nur Surya Ambiah is featured with the Dendrobium Singapore Girl Orchid. THE SINGAPORE AIRLINES GROUP ACHIEVED A NET PROFIT ATTRIBUTABLE TO EQUITY SHAREHOLDERS OF $379 MILLION FOR THE FINANCIAL YEAR ENDED 31 MARCH 2013. THIS WAS DESPITE RECORDING A LOWER OPERATING PROFIT AMID PERSISTENTLY HIGH FUEL PRICES AND LOWER YIELDS DUE TO WEAK GLOBAL ECONOMIC CONDITIONS. The 2012/13 financial year was one of significant development for the SIA Group, with numerous initiatives to strengthen the three main pillars of our brand promise, namely Service Excellence, Product Leadership and Network Connectivity. 002 SINGAPORE AIRLINES STATISTICAL HIGHLIGHTS Financial Statistics R1 2012-13 The Group Financial Results ($ million) Total revenue Total expenditure Operating profit Profit before taxation Profit attributable to owners of the Parent Financial Position ($ million) Share capital Treasury shares Capital reserve Foreign currency translation reserve Share-based compensation reserve Fair value reserve General reserve Equity attributable to owners of the Parent Return on equity holders’ funds (%)...

Words: 70806 - Pages: 284

Premium Essay

Strategy Case Studies

...Transformation A series of fatal accidents, coupled with operational inefficiencies snowballed Korean Air into troubled times. Then, at the beginning of the 21st century, its CEO/ Chairman, Yang-Ho Cho undertook various transformation initiatives - for instance, improving service quality and safety standards, technology integration, upgrading pilot training, better business focus; putting in place a professional management team, improving corporate image through sponsorship marketing, etc. He gave a new corporate direction in the form of '10,10,10' goal. However, Korean Air is held up by a slew of challenges. Among which are inefficiencies of - Chaebol system of management, possible clash of its cargo business with its own shipping company, limited focus on the domestic market and growing competition from LCCs. How would Korean Air manage growth as a family-owned conglomerate? The case offers enriching scope for analysing a family business’s turnaround strategies, with all the legacy costs involved. Pedagogical Objectives • To discuss the (operational) dynamics of Korean Chaebols - their influence/ effects on the country’s industrial sector and the economy as a whole • To analyse how family-owned businesses manage the transition phase - from a supplier-driven economy to a demanddriven economy • To identify all the possible reasons for Korean Air ’s turbulent times and assessing whether they are controllable or not • To critically evaluate Korean Air ’s transformation efforts - in terms...

Words: 71150 - Pages: 285

Premium Essay

Qantas Financial Year End 2012 Review

...QANTAS ANNUAL REPORT 2012 Broadening our horizons Qantas Annual Report 006 008 010 012 018 028 037 065 138 153 CHAIRMAN’S REPORT CEO’S REPORT FINANCIAL PERFORMANCE BOARD OF DIRECTORS REVIEW OF OPERATIONS CORPORATE GOVERNANCE STATEMENT DIRECTORS’ REPORT FINANCIAL REPORT SUSTAINABILITY REPORT FINANCIAL CALENDAR AND ADDITIONAL INFORMATION Broadening our horizons 002 QANTAS ANNUAL REPORT 2012 Broadening our horizons Building on unique Australian qualities – and the skills of its 33,600 people – the Qantas Group is broadening its horizons to secure a successful and profitable future. 003 004 QANTAS ANNUAL REPORT 2012 Heading For the Qantas Group, 2011/2012 was a year of transformation. We recorded an Underlying Profit Before Tax* despite significant challenges. We continued to build Qantas’ strong domestic network, Jetstar and Qantas Frequent Flyer. And we launched a five-year plan to turn around Qantas’ international network. FOR THE YEAR ENDED 30 JUNE 2012 *For explanations of non-statutory measures see the Review of Operations. 005 Building a stronger Qantas for our people, our customers, our shareholders and Australia The Qantas Group has a broad portfolio and a clearly defined strategy, with the following core goals: — Build on the Group’s strong domestic businesses through a clear focus on the customer. — Turn around Qantas International through the “four pillars” of targeting global gateways, growing with Asia, improving...

Words: 66911 - Pages: 268

Free Essay

Developing Global Strategies for Service Businesses

...Developing Global Strategies for Service Businesses. Author: Lovelock, Christopher H. Yip, George S. Source: California Management Review. 38(2): 64-86. 1996 Winter. Abstract  A study provides a framework for developing global strategies for service businesses. It integrates existing, separate frameworks on globalization and on service businesses, analyzes how the distinctive characteristics of service businesses affect globalization and which do not. It then applies the new framework to numerous industry and company examples, with particular emphasis on the role of information technology. Full Text  How do the distinctive characteristics of service businesses affect globalization and the use of global strategy? This is a crucial question for managers in numerous industries. Not only are services continuing to grow rapidly in domestic economies, but international trade in services is increasing, too. The United States, like some other developed countries, has a trade surplus in services that helps offset the deficit in merchandise trade. In contrast, Japan has been much less successful in internationalizing its service businesses.1 So it is essential to national competitiveness that governments, as well as companies, achieve a better understanding of how to develop effective global strategies for different types of service businesses.  Most research to date has focused either on why and how service firms internationalize or on different modes of internationalization.2 In...

Words: 5412 - Pages: 22

Premium Essay

Doing Business with Brazil

...Doing Business in Brazil Transfer Paper: International Management Project: Investing in Real Estate Florent Carayon 1 1 – What is the Business Environment in Brazil? a) Over all idea about the country: The word "Brazil" comes from Brazil wood, a tree that once grew plentifully along the Brazilian coast. * Brazil, officially the Federative Republic of Brazil, is the largest country in both South America and the Latin American region. It is the world's fifth largest country, both by geographical area and by population. • • • • • • • • • • • • Capital: Brasília Dialling code: +55 Currency: Brazilian real President: Dilma Rousseff Official language: Portuguese Life expectancy: 74 Over All Idea about the Country Currency: Brazilian real (BRL, R$) Population Total: 200.4 Million Fiscal year: Calendar year Trade organisations: Unasul, WTO, Mercosur, G-20 and others GDP: $ 2.246 Trillion (2013), rank: 7th GDP growth: 2.3%. b) Business environment: The Federal Republic of Brazil is the fifth largest country in the world in terms of population (196 million) and size. It is the 8th largest economy (by GDP – purchasing power parity) in the world. Already the 8th largest economy in the world, Brazil has undoubtedly arrived at an important crossroads. Not only is its population rising by approximately two million people a year, but the inexorable shift towards mass urbanisation continues unabated. UN estimates predict that by 2015, 33...

Words: 3203 - Pages: 13

Premium Essay

The Firm and Its Environment

...of specificity in environmental analysis, depending on the locus of the decision-making group Predict how changes occurring in the environment might influence future competition and value creation Incorporate understanding of environmental changes into the development of strategy Consider options for influencing changes in the firm’s environment so as to improve future value creation Analyze customers and competitors to develop a competitive advantage and strategy Appreciate that strategy is realized in the future: decisions are made now but their realization occurs in the future In late 2000, GE proposed to take over Honeywell. Both these firms are U.S.-based, and the value of the merger was $USB42. But a merger between two such large firms has global implications and ramifications. Although the U.S. Federal Trade Commission (FTC) had approved the merger, the European Union (EU) decided to oppose it on the grounds that it had the potential to reduce competition in Europe. Its concern was that GE’s strong position in the manufacture of jet engines and its ability to offer finance, if added to Honeywell’s aviation electronic business, would allow the merged entity to bundle their products together. This bundling would, in the view of the European Commission, amount to unfair competition. At the center of the objection is the fact that GE owns a company, Gecas, which is an aircraft-leasing firm. In 2001, Gecas owned 790 aircraft, which it leased to airlines, and managed another 321 aircraft...

Words: 16181 - Pages: 65

Premium Essay

Masters in Business Management

...ANNUAL REPORT 2014 1. HIGHLIGHTS The financial and operating highlights for Air Canada for the periods indicated are as follows. FOURTH QUARTER CANADIAN DOLLARS IN MILLIONS, EXCEPT WHERE INDICATED 2014 2013 FULL YEAR $ Change 2014 2013 $ Change FINANCIAL PERFORMANCE METRICS Operating revenues 3,104 2,894 210 13,272 12,382 890 106 135 (29) 815 619 196 (206) (141) (65) (710) (617) (93) (100) (6) (94) 105 10 95 67 3 64 531 340 191 3.4% 1.8% 1.6 pp 6.1% 4.3% 1.8 pp 3.4% 4.7% (1.3) pp 6.1% 5.0% 1.1 pp 319 277 42 1,671 1,433 238 319 359 (40) 1,671 1,515 156 Operating income Non-operating expense (1) Net income (loss) Adjusted net income (2) Operating margin, excluding the impact of benefit plan amendments % (3) Operating margin % EBITDAR, excluding the impact of benefit plan amendments (3)(4) EBITDAR (4) EBITDAR margin, excluding the impact of benefit plan amendments % (3)(4) EBITDAR margin % (4) 10.3% 9.6% 0.7 pp 12.6% 11.6% 1.0 pp 10.3% 12.4% (2.1) pp 12.6% 12.2% 0.4 pp Unrestricted liquidity (5) 2,685 2,364 321 2,685 2,364 321 Free cash flow (6) (366) (276) (90) (560) (231) (329) Adjusted net debt (7) 5,132 4,351 781 5,132 4,351 781 Return on invested capital (“ROIC”)...

Words: 75753 - Pages: 304

Premium Essay

Positioning Strategy with a New Identity: a Case Study of Vietnam Airlines

...POSITIONING STRATEGY WITH A NEW IDENTITY: A case study of VIETNAM AIRLINES by Le Hong Dac A research study submitted in partial fulfillment of the requirements for the degree of Master in Business Administration Examination Committee: Dr. Truong Quang (Chairman) Dr. Clemens Bechter Dr. Lalit.M.Johri Nationality: Vietnamese Previous Degree: Bachelor of Economics University of Agriculture and Forestry HoChiMinh City, Vietnam Scholarship Donor: The Government of Switzerland Asian Institute of Technology School of Management Bangkok, Thailand August 1999 Acknowledgement I wish to express my profound gratitude and great appreciation to my advisor Dr. Truong Quang for his valuable guidance, advice and encouragement throughout the research study. Special thanks are extended to the other members of the Examination Committee, Dr. Clemens Bechter and Dr.Lalit.M.Johri for taking interests and giving valuable suggestions to improve the content of this study. Deep appreciation and thanks are also extended to Mr. Luong Hoai Nam, Mr. Trinh Ngoc Thanh, Mr. Duong Tri Thanh, Mr. Mai Quoc Tuan, Mr. Nguyen Thuong Hai, Mrs. Nguyen Thi Minh Yen and Mr. Le Dinh Tuan of Vietnam Airlines Corporation for providing me the desired information and data for this research study. I fall short of words...

Words: 27680 - Pages: 111

Free Essay

Air Canada

...international full-service airline and the largest provider of scheduled passenger services in the domestic market, the transborder market and each of the Canada-Europe, Canada-Pacific, Canada-Caribbean/Central America and Canada-South America markets. Passenger transportation is the principal business of the Corporation and, in 2009, represented 87% of its total operating revenues. During 2009, Air Canada, together with Jazz, operated, on average, approximately 1,331 scheduled flights daily and carried almost 31 million passengers. In 2009, Air Canada and Jazz provided direct passenger air transportation to 156 destinations and, through commercial agreements with other unaffiliated regional airlines referred to as tier III carriers, to an additional 11 destinations, for a total of 167 direct destinations on five continents. The Corporation’s primary hubs are located in Toronto, Montreal, Vancouver and Calgary. Air Canada also operates an extensive global network in conjunction with its international partners. Air Canada is a founding member of the Star Alliance Network, the world’s largest airline alliance group. The Star Alliance Network includes 26 member airlines. Through its strategic and commercial arrangements with Star Alliance members, Air Canada is able to offer its customers access to approximately 1,077 destinations in 175 countries, as well as reciprocal participation in frequent flyer programs and use of airport lounges. The Corporation also generates revenue...

Words: 78010 - Pages: 313

Premium Essay

A Overview of Strategic Alliance

...An overview of strategic alliances Dean Elmuti Lumpkin College of Business and Applied Sciences, Eastern Illinois University, Charleston, Illinois, USA Yunus Kathawala Lumpkin College of Business and Applied Sciences, Eastern Illinois University, Charleston, Illinois, USA Keywords Strategic alliances, Competitive advantage, Success Introduction Nike, the largest producer of athletic footwear in the world, does not manufacture a single shoe. Gallo, the largest wine company on earth, does not grow a single grape. Boeing, the pre-eminent aircraft manufacturer, makes little more than cockpits and wing bits (Quinn, 1995, p. 1). Abstract Strategic alliances can be effective ways to diffuse new technologies rapidly, to enter a new market, to bypass governmental restrictions expeditiously, and to learn quickly from the leading firms in a given field. However, strategic alliances are not simple or easy to create, develop, and support. Strategic alliances projects often fail because of tactical errors made by management. By using a well managed strategic alliances agreement, companies can gain in markets that would otherwise be uneconomical. Considerable time and energy must be put forth by all involved in order to create a successful alliance. It is essential that corporations enter into strategic alliances arrangements with a comprehensive plan outlining detailed expectations, requirements, and expected benefits. ``How can this be?'' you ask. These companies, like...

Words: 8851 - Pages: 36

Free Essay

Corporate Governance in Malaysia: the Effect of Corporate Reforms and State Business Relation in Malaysia

...found that companies which are involved in corporate malpractice but have good relationship with states will always be excluded from the legal corporate action. Keywords: corporate governance, corporate reforms, political economy, state business relation INTRODUCTION Asian Financial Crisis in 1997 not only introduced the term of corporate governance but also drew attention of the public about the weaknesses of Malaysian corporate governance practice. After 1998, Malaysian government decided to adopt corporate reforms that could enhance the quality of good corporate management practice. This included the introduction of the new Malaysian code and rules for corporate governance. The debate of corporate governance in Malaysia are often limited to agencies involved directly in law enforcement such as the Ministry of...

Words: 4860 - Pages: 20