Air France - KLM Financial Analysis.
I chose Air France as a company to analyze it financially-speaking. But, as my major is in economy in ENPC, I will also include strategic information in this report.
I based the financial accounting on the data provided by Yahoo! Finance, which are the three statements, back to March 31, 2007 for the oldest report base. I also reviewed some of other companies in the same business line, especially for main indicators (EBIT, ROC, ROA, P/E...). It will be mentioned when done so.
Air France-KLM is one of the major airline companies, and results of the merge of Air France and KLM in 2005. As for any other company in this business line, it has been toughly hit by increasing price of oil, (especially peak prices of summer 2008) followed by global economic recession from fall 2008, that made many stock prices plunge. Add to this the fierce competition of the other low-cost airlines such as easyJet or RyanAir, operating from Ireland and its attractive taxes, and the competition with Gulf companies. These companies entered the increasing market and draw to them an important share of the new and former customers, forcing former major companies to vied with them by betting on quality of attendance, diversification of services (such as short and long transporters, cargo transport, maintenance services). Since a few months, AF-KLM also provides charter flights to compete with low-cost ones, but still betting on the quality. A specific point for this kind of industry is the importance of the alliance : AF-KLM is a member of the SkyTeam with fifteen other airlines, whose main competitor is Star Alliance (n°1). Their networking’s quality and density is one of the main key for their international strategic development. But Air France is still recovering from 2008 crisis, that hit it especially in 2009-2010.
2. Financial Analysis
Let’s see some details about financial statements, annotated (quick answers to third question) | 1. Profitability |Rate of return on assets / owner’s equity ? | | | | |Return On Equity |-9.20% |Negative. Means profitability problems. | | | | |Actual share prices & eurocrisis accounts | | | | |for this. | | |How expensive is company’s stock ? |(Mr31, 2011) |Low (we’d expect 10 to 15). But it’s | | | |5.33 |underrated now, because of crisis. | | |Price / Earnings | | | | |What has been the dividend ? | |This is a very good dividend yield, but it | | |Dividend Yield |0.21 |is 6-month dated. | |2. Liquidity |Enough cash to meet current obligations ? | |Degradation from 2006 years (competition?), | | |Working Capital |€-1,83M |risky. | | |Accounts receivable well-managed ? | | | | |Current Ratio...