Financial Comparison of Ryanair and British Airways

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Financial comparison of Ryanair and British Airways
Aviation Finance 12CVC062
Balázs Baumgartner (B015926)

10/12/2012

Table of Contents
Review of Ryanair’s and British Airway’s current financial situation ........................................................ 2 Liquidity ..................................................................................................................................................... 2 Performance and earning .......................................................................................................................... 3 Solvency..................................................................................................................................................... 3 Fleet commitments ................................................................................................................................... 4 Financing in the short run ......................................................................................................................... 6 Shareholders’ equity and dividend policy ................................................................................................. 7 Depreciation .............................................................................................................................................. 7 Future financing ........................................................................................................................................ 8 Conclusion ................................................................................................................................................. 9 Reference list ........................................................................................................................................... 10

1

Ryanair is considered as the pioneer of the low-cost business model, while British Airways is constantly ranked amongst the world’s best legacy carriers. Both of these airlines are dominant companies in their segment with high passenger numbers and vast network coverage. Therefore the following question rises – how these airlines are different in terms of finance and which business model is more fruitful in the middle of an economic downturn? In order to find the answer a thorough financial investigation has been conducted relying on the data outlined in the airlines’ annual reports. In the first section of the report the emphasis is put on the current financial situation of the airlines, while outlining the existing sources of finance. These sources are investigated thoroughly in the second part. The final section evaluates the possible or available sources to finance future investments.

Review of Ryanair’s and British Airway’s current financial situation Ryanair in the fiscal year of 2012 has generated a total of €4,390.2m operating revenue mainly through scheduled revenues. The company has increased its operating revenues since 2010 by €1,2bn primarily due to fare increases. In 2012 the total operating expense was €3,707m. This is also the peak in the last three years, mostly attributable to fuel and oil costs, which have almost doubled since 2010. Hence the net profit for the 2012 fiscal year was €560.4m, the highest in the history of the company. British Airways in the fiscal year ended 2011 December 31 accounted a profit of £672m after paying the taxes. This can be considered as a significant improvement after 2010’s profit of £170m. These figures do not provide enough in-depth information on the airlines’ real situation. In order to identify the sources of finance and the real position of BA and Ryanair further investigation with the use of ratios is required.

Liquidity
Current ratio is a liquidity measure that compares the liquid or current assets of the airline with its current liabilities. (Atrill, McLaney 2002)

For the fiscal year of 2012 Ryanair’s CR was 2.1355, which represents high liquidity. Generally the...
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