comparative analysis of: ryanair and british airways ryanair and british airways dr agata kocia

Comparative analysis of:Comparative analysis of: Ryanair and British AirwaysRyanair and British Airways

dr Agata Kocia

Ryanair

established: 1985 flies to more than 150 cities in Europe with

more than 230 aircrafts headquarters: London Stansted employs more than 7 000 people short-haul carrier aim 1: improve punctuality aim 2: focus on cost cutting

reduce the number of complaints (due to for example, lost luggage) online booking one model-type aircraft

British Airways

established: 1974 flies to over 300 destinations worldwide with

more than 238 aircrafts headquartered in Heathrow, London long-haul distance carrier possible impact on financial reports: a merger

with Iberia brand aim 1: maintain positive brand perception aim 2: Create new channels of income

Air carrier sector: Risks

brand reputation competitor prices fuel prices government regulation security issues long-term disruptions exchange rate fluctuations

Macroeconomic and financial analysis

Macroeconomic analysis

IRELANDIRELAND UNITED KINGDOMUNITED KINGDOM

20072007 20082008 20092009 20072007 20082008 20092009

Gross domestic Gross domestic product (GDP) (%)product (GDP) (%)

4,94,9 4,44,4 -3,4-3,4 2,82,8 3,13,1 0,70,7

Inflation (%)Inflation (%) 3,93,9 4,94,9 4,14,1 3,03,0 2,32,3 3,63,6

Unemployment (%)Unemployment (%) 4,64,6 4,64,6 6,16,1 2,92,9 5,35,3 5,65,6

Trade deficitTrade deficit 23502350 21022102 28852885 32803280 37243724 24982498

Stock exchange index Stock exchange index value value

9,4089,408ISEQ®

6,9506,950ISEQ®

2,3612,361ISEQ®

6,6216,621FTSE 100

6,0536,053FTSE 100

4,4174,417FTSE 100

Financial statement overview (1)

British AirwaysBritish Airways 20072007 20082008 20092009

Income from operationsIncome from operations £602 mln£602 mln £875 mln£875 mln (£220) mln(£220) mln

RevenuesRevenues 8,4928,492 8,7538,753 8,9928,992

Fuel costsFuel costs 1,9311,931 2,0552,055 2,9692,969

Airplane maintenance costs Airplane maintenance costs 414414 451451 510510

Total short-term assetsTotal short-term assets 3,4313,431 3,1483,148 2,3462,346

Cash and cash equivalentsCash and cash equivalents 713713 683683 402402

Cash flows from operations Cash flows from operations 756756 303303 133133

RyanAirRyanAir 20072007 20082008 20092009

Net income Net income €€435,600 435,600 mlnmln

€€390,708 390,708 mlnmln

(€169,173) (€169,173) mlnmln

Income from operationsIncome from operations 2,236,8952,236,895 2,713,8222,713,822 2,941,9652,941,965

Fuel costsFuel costs 1,257,0621,257,062 791,327791,327 693,331693,331

Airport costsAirport costs 273,613273,613 396,326396,326 443,387443,387

Total long-term debtTotal long-term debt 2,033,7422,033,742 2,268,2072,268,207 2,583,6102,583,610

Cash and cash equivalentsCash and cash equivalents 1,346,4191,346,419 1,470,8491,470,849 1,583,1941,583,194

Net flows from operationsNet flows from operations 900,836900,836 703,902703,902 413,134413,134

Financial statement overview (2)

Ratio analysis

Ratios (1)

Return on assets (ROA) 2007 2008 2009 Ryanair 7,9% 6,5% -2,6% British Airways 2,7% 6,1% -3,2%

Return on equity (ROE) 2007 2008 2009 5-letnia średnia dla

branży

Ryanair 19,2% 15,5% 0,0% -3,4% British Airways 13,7% 27,3% -29,2% -3,4%

Ratios (2)

Current ratio 2007 2008 2009 Ryanair 2,11 1,53 1,80 British Airways 0,95 0,97 0,56

Ratios (3)

Debt to equity ratio 2007 2008 2009 Ryanair 0,69 0,76 1,03 British Airways 1,20 0,85 1,65

Currency risk

Currency risk comes from … receivables from the sale of air

tickets liabilities related to the purchase of

fuel foreign debt purchase of / merger with other

companies

Currency risk: Receivables from the sale of tickets

value of a ticket denominated in pounds can be reduced (increased) if the pound is losing (increasing in) value

foreign demand for domestic and international flights is inversely proportional to the value of national currency

domestic demand for international flights is inversely proportional to the value of national currency

Strategies to protect against currency risk

natural hedging only works if the currencies move in the

opposite direction foreign exchange reserves and matching

strategies foreign exchange hedging derivatives diversification policy

Currency risk graph (1)

Currency risk graph (2)

Currency risk graph (3)

Currency risk graph (4)

Thank you for your attention!