Accounting project

Topics: Airline, Lufthansa, Star Alliance Pages: 49 (10027 words) Published: November 1, 2013
Table of Contents

1. Introduction
1.1 Purpose
The main aim of this report is to analyse in-depth finance evaluation of 3 big airline companies in the world. The target company chosen for this analysis is Malaysia Airlines and the 2 comparable companies are Cathay Pacific and Lufthansa. This report examines each company’s financial performance and also provides recommendation for Malaysia Airlines in creating value for its shareholders. 1.2 Methodology

This report adopts an extensive review from Malaysia Airlines annual reports, Cathay Pacific annual reports, Lufthansa annual reports, financial statements of those companies and trade publications. 1.3 Scope

The companies discussed in this report are Malaysia Airlines, Cathay Pacific and Lufthansa. 1.4 Limitation
All information gathered for this report are secondary data, thus the accuracy is limited to the sources. Despite lack of primary data from market survey or interview, wide-ranging credible news article, and reports from consulting companies are incorporated.

2. Companies Profile
2.1 Target Company: Malaysia Airlines
Malaysia Airlines (MAS) is the government owned flag carrier of Malaysia. Based in Kuala Lumpur, Malaysia, the airline flies to over 60 destinations across the globe to Europe, North America, Middle East, South Asia, East Asia, Australia and New Zealand. Currently it operates over 100 aircrafts of Boeing and Airbus fleet. MAS subsidiaries include MASKargo, MASwings and Firefly. Skytrax, the world’s largest and most reliable airline survey, registers MAS as a five star airline together with Singapore Airlines, Qatar Airways, Asiana Airlines and Cathay Pacific (Skytrax, 2012a). MAS is listed on the stock exchange of Bursa Malaysia. Recently the airline is facing constant high losses due to poor management, stiff competition from budget carriers and rising fuel costs. In 2011, Malaysia Airlines recorded a stunning net loss of RM2.52 billion, which was the largest in its company history. As a result several routes have to be closed down to minimize the losses. 2.1.1 Company History

In 1987, Malaysia Airlines commenced operations after the airline changed its name from Malaysian Airline System. The airline began in 1947 as Malayan Airways, being renamed Malaysian Airways after Malaysia gained independence. After that, it changed its name once more to Malaysia-Singapore Airlines and thereafter ceased its operation. It was then divided into Malaysia Airlines and Singapore Airlines. First flights began on 1 October 1972 and MAS took all domestic routes within Malaysia and international routes out of the country. Soon after that, Malaysia Airline System rapidly expanded its services, including introducing long-haul flights from Kuala Lumpur to London. In the same year, MAS operated flights to more than 34 regional destinations and six international services. 2.1.2 Business Overview

Prior to the Asian Financial Crisis in 1997, the airline suffered losses of as much as RM 260 million after earning a record-breaking RM319 million profit in the financial year 1996/1997. The airline then introduced measures to bring its P&L back into the black. For the financial year 1999/2000, the airline cut its losses from RM700 million in the year 1998/1999 to RM259 million. However, the airline plunged into further losses in the following year, amounting to RM417 million in FY2000/2001 and RM836 million in FY2001/2002. With these losses, the airline cut many unprofitable routes. The airline recovered from its losses in the year 2002/2003. It achieved its then-highest profit in the year 2003/2004, totalling RM461 million. In the year 2005, Malaysia Airlines reported a loss of RM1.3 billion. Revenue for the financial period was up by 10.3% or RM826.9 million, compared to the same period for 2004, driven by a 10.2% growth in passenger traffic. International passenger revenue increased by RM457.6 million or 8.4%, to RM5.9 billion, while cargo revenue...

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BBC
Cathay Pacific Airways Limited. (2008). Cathay Pacific Airways Limited Annual Report 2008. Retrieved from http://downloads.cathaypacific.com/cx/investor/annualreports/2008_interim-report_en.pdf
Cathay Pacific Airways Limited
Cathay Pacific Airways Limited. (2010). Cathay Pacific Airways Limited Annual Report 2010. Retrieved from http://downloads.cathaypacific.com/cx/investor/annualreports/2010_interim-report_en.pdf
Cathay Pacific Airways Limited
Deutsche Lufthansa AG. (2009). Lufthansa Annual Report 2009. Retrieved from http://investor-relations.lufthansa.com/fileadmin/downloads/en/financial-reports/annual-reports/LH-AR-2009-e.pdf
Deutsche Lufthansa AG
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Investopedia
Lufthansa Technik. (2012). About us. Retrieved October 2, 2012, from http://www.lufthansa-technik.com/about-us;jsessionid=9DD2352A1CA3A76A806BC012BC1389A2.webbox2
Lufthansa
Lufthansa. (2012b). Business segments: Catering. Retrieved October 3, 2012. from http://konzern.lufthansa.com/en/business-segments/catering.html
Malaysian Airline System Berhad
Malaysian Airline System Berhad. (2009). 2009 Annual Report. Retrieved from http://ir.chartnexus.com/mas/doc/ar/ar2009.pdf
Malaysian Airline System Berhad
Malaysian Airline System Berhad. (2011). 2011 Annual Report. Retrieved from http://ir.chartnexus.com/mas/doc/ar/ar2011.pdf
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Sidhu, B. K. and Yee, L.H. (2012, May 24). MAS bonds secured. Retrieved from The Star Online: http://biz.thestar.com.my/news/story.asp?file=/2012/5/24/business/11348967&sec=business
Skytrax
Skytrax. (2012b). The World’s 4-star Airlines. Retrieved October 1, 2012, from http://www.airlinequality.com/StarRanking/4star.htm
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Yahoo Finance. (2012). Malaysia Airlines says losses deepen in 4Q. Retrieved September 26, 2012, from http://finance.yahoo.com/news/malaysia-airlines-says-losses-deepen-110842605.html
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