Fund Management

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  • Topic: Qantas, Airline, Boeing 747-400
  • Pages : 38 (11687 words )
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  • Published : September 8, 2012
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Qantas Airways|
Growth Strategy Report|
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Jin Ju
ID: 213016540

Letter of Transmittal
To Dr. Shrimal Perera:
Department of Accounting and Finance,
Room 3.43, Building H,
Caulfield Campus, Monash University,
23th May, 2011.

Dear Board of Directors:
A copy of the Growth Strategy Report for Qantas Airways is attached.

The report has evaluated Qantas Airways’ performance in past five years with a view to recommended a financially justified strategy for a strategic planning horizon of three years. The proposed strategy is conducting a joint venture between Qantas Airways and Cathay Pacific Airways Ltd, which will contribute to maximum firm value and shareholders’ value.

If you have any further queries regarding to this report, please contact me. I would like to discuss with you for further clarification.

Yours sincerely

Jin Ju

Executive Summary

This report will provide a financially justified growth strategy for Qantas Airways, which is entering into a joint venture with the national carrier of Hong Kong, Cathay Pacific Airways Ltd to expand Qantas premium full-service brand in the East Asia market. Based on the huge potential growth within Eastern Asia markets for premium flights, and Cathay Pacific extraordinary performance as a premium carrier in this region, the joint venture will enable Qantas Airways to expand its premium market in China and achieve cost reduction.

The report starts with an overview of core business and current position of Qantas Airways, and then moves on to SWOT analysis to discuss the external and internal environments in order to identify this optimal strategy. The proposed growth strategy comes out with a positive NPV and a higher IRR. Based on the optimal debt-equity structure of Qantas, new ordinary shares are proposed to issue in order to finance this joint venture. The forecasted income statements and balance sheet both show positive more outcomes from this project. The report will also consider the impacts on future dividend policy, capital structure and the associated risks with this joint venture.

Overall, the proposed joint venture will be beneficial for Qantas Airways. It will be an important step for Qantas, not only to expand its business into the fast growing market mainland China, achieve better connectivity from the East to Southeast Asian routes, but also an opportunity to reduce its high expenditure.

Table of contents:
1. Introduction………………………………………………………………………………6 2.1 Purpose………………………………………………………………………………..6 2.2 Scope ………………………………………………………………………………….6 2.3 Limitations…………………………………………………………………………….6 2.4 Methodology…………………………………………………………………………..6 2. Backgrounds for proposed project- Joint venture with Cathay Pacific………………7 3. Proposed joint venture with Cathay Pacific Airways……………………………….…8 3.1 Introduction of Cathay Pacific Airways……………………………………………….8 3.2 Justification for the Joint Venture……………………………………………………..9 3.3 The content of Joint Venture with Cathay Pacific Airways…………………………11 3.4 Valuation of the projects……………………………………………………………..12 4. The funding strategy for the joint venture…………………………………………….13 5. The forecasts of statements……………………………………………………………..15 6. Impact on dividend policy and capital structure…………………………………..…16 7. Risks from the project………………………………………………………………….17 8. Conclusion……………………………………………………………………………….19 9. Reference……………………………………………………………………..…………20 10. Appendix………………………………………………………………………….…….25 Appendix 1: Backgrounds of Qantas Airways…………………………………………….25 1.1 Qantas Airways’ services and markets…………………………………………………25 1.2 Mission and Vision……………………………………………………………………….28 1.3 Growth preference assessment………………………..………….………………………28 1.4 External environments……………………………………………………………………29 1.5.1 Pest analysis………………………………………………………………...…….29 1.5.2 Porter’s Five forces Analysis……………………………………………………31...
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