Easy Jey and Ryan Air Financial Analysis

Topics: Balance sheet, Asset, Revenue Pages: 39 (12715 words) Published: May 29, 2013
Avation Executive Committee|
Easy Jet And Ryan Air|
Analyzing the financial performance of 2 of Europe’s Largest Low Cost Carriers across 3 Financial Years (2012 – 2010)| |


Table of Contents

Executive Summary2
Easy Jet6
Ryan Air8
Comparing Profitability of Easy Jet & Ryan Air10
Easy Jet14
Ryan Air15
Comparing Efficiency of Easy Jet & Ryan Air16
Easy Jet19
Ryan Air21
Comparing Liquidity of Easy Jet & Ryan Air22
Easy Jet24
Ryan Air25
Comparing Gearing of Easy Jet & Ryan Air26
Horizontal Analysis27
Easy Jet28
Ryan Air29
Comparing Easy Jet and Ryan Air using Horizontal Analysis30
Balance Sheet30
Income Statement32
Vertical Analysis of the Balance Sheet34
Easy Jet34
Ryan Air35
Comparing Easy Jet and Ryan Air Using Vertical Analysis of the Balance Sheet36
Conclusions & Recommendations38
Appendix A: Profitability Ratio Calculations44
Appendix B: Efficiency Ratio Calculations47
Appendix C: Liquidity Ratio Calculations50
Appendix D: Gearing Ratio Calculations51
Appendix E: Horizontal Analysis Calculations53
Appendix F: Vertical Analysis Calculations55

Executive Summary

This report provides an analysis and evaluation of the most 3 fiscal years of profitability, efficiency, liquidity and financial gearing of Easy Jet & Ryan Air. It also provides a comparison of the financial stability of the two low cost carriers. Methods of analysis include horizontal and vertical analyses as well as ratios analysis for each of the 4 key areas of profitability, liquidity, efficiency and gearing. Ratio’s such and return on shareholders’ funds (ROSF), sales revenue per capital employed (SRCE), current ratio (CR) and gearing ratio (GR) as amongst some of the key ratios used to for analysis. All calculations and assumption made during ratio calculation can be found in the appendix. The analysis conducted in the report has limitations which affect the completeness of it. Some of the limitations include: * The two low cost carriers annul reports deal with two difference currencies and therefore an assumption that 1 GBP = 1 Euro has been made which makes the analysis less accurate. * The fiscal years taken into account of the two low cost carriers are not the same, it is possible that Easy Jet’s 2012 annual report has taken into account sales figures of Europe’s summer 2012 whilst Ryan Air’s 2012 annual report hasn’t which makes the analysis less accurate. A similar case is posed for the annual reports of 2010 where Ryan Air includes the 2009 Europe summer sales figures whilst Easy Jet’s 2010 Annual report doesn’t. Whilst analyzing we came across the fact that Ryan Air is more profitable and liquid when compared to Easy Jet. However Easy Jet is more efficient and has better financial gearing. The horizontal and vertical analysis conducted revealed key areas of strength and weaknesses in the income statement and balance sheet that proved the fact that Ryan Air was more profitable yet why Easy Jet more efficient. When analyzed further these were some of the main reason for Ryan Air’s high profitability & liquidity: 1) High ancillary revenue

2) Low average fare
3) Larger fleet Size
4) Larger number of sectors flown
5) Larger number of airports served
6) Foreign exchange gain due to the weakening of the Euro 7) Decrease in capital expenditure to invest in future opportunities 8) Exit of other low cost competitors in the European industry 9) Operating from bases that have better on time performance Ryan Air do however need to target on improving:

1) Reducing borrowing & loans by paying off using access liquidity. 2) Improvement on customer care and efficiency by taking a close look at their routes, bases and flights to maximize the...
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