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19th May 2017
Seat revenues have been contributing almost 80% of the total revenues of easyJet in 2009 and 2010 however the situation changed and with more focus from the management, the seat revenues have been able to improve and their contribution in the total revenues are now almost 98%. Among different operating costs, the fuel is one of the major expenses of the airline. The fuel expense is almost 25 to 30% of the sales. The ratio of fuel costs to sales was around 25% in 2010 and then it increased to 26.5% in 2011 and in 2012, this costs further increased to around 30%. Therefore the increasing fuel cost is one of the major factors that the company needs to look at particularly in a situation where Ryanair is able to reduce its ratio of fuel expense to sales.
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The other important cost is the ground operations of the airline. The ground operations have been fluctuating. In 2009 and 2010 ground operations used to be 9% of the sales however this has increased and it is now almost 25% of the sales. Thus the management needs to analyze and identify why the cost has increased over the last two years and identify whether this costs can be reduced to improve profitability.
The ratio of operating profit has been improving since 2009. In the year 2009, it was 2.25 which increased to 5.84% in 2010 and the same pattern has been continued as the operating profit has increased by 7.8% in 2011. The operating profit to sales of easyJet has further enhanced and thus showing that the company has been consistently able to reduce its overall operating cost and this has helped in increasing the operating profit. The operating profit then increased to 8.6% in the year 2012. Similar trend has been found in the profit before tax of the income statement using vertical analysis. However the net profit has shown a similar trend except in the year 2012 as the net profit to sales ratio was almost same as the year 2011 i.e. close to 6.5%. Other than that, the profit to sales ratio has been increasing since 2009 when it was as low as 2.67% and then jumped to 4% in the next year and then further increased to 6.52% in 2011.
2012 | 2011 | 2010 | 2009 | |
Seat Revenue | 98.44% | 98.17% | 80.78% | 80.64% |
Non-seat revenue | 1.56% | 1.83% | 19.22% | 19.36% |
Total revenue | 100.00% | 100.00% | 100.00% | 100.00% |
Fuel | -29.81% | -26.56% | -24.67% | -18.06% |
Ground operations | -24.78% | -26.74% | -9.23% | -9.60% |
Crew | -11.21% | -11.79% | -11.30% | -11.50% |
Navigation | -7.27% | -8.26% | -8.61% | -8.71% |
Maintenance | -5.27% | -5.19% | -5.95% | -6.06% |
Selling and marketing | -2.70% | -2.95% | 0.00% | 0.00% |
Other costs | -5.19% | -4.95% | 0.00% | 0.00% |
EBITDAR | 13.78% | 13.56% | 12.15% | 8.44% |
Aircraft dry leasing | -2.46% | -3.16% | -3.43% | -4.36% |
Depreciation | -2.52% | -2.40% | -2.44% | -2.08% |
Amortization of intangible assets | -0.21% | -0.20% | -0.21% | -0.16% |
Operating profit | 8.59% | 7.79% | 5.84% | 2.25% |
Interest receivable and other financing income | 0.29% | 0.26% | 0.24% | 0.84% |
Interest payable and other financing charges | -0.65% | -0.87% | -0.90% | -1.05% |
Net finance charges | -0.36% | -0.61% | -0.66% | -0.20% |
Profit before tax | 8.23% | 7.18% | 5.18% | 2.05% |
Tax charge | -1.61% | -0.67% | -1.10% | 0.62% |
Profit for the year | 6.62% | 6.52% | 4.08% | 2.67% |
Noncurrent assets is an important component of the total assets and noncurrent assets of Ryanair compromise around 57% to 60% of the total assets of the airline. Among all the non-current assets of Ryanair, PPE is the most important one as it is almost 55 to 57% of the total assets. The total current assets of Ryanair comprise of around 40% to 43% of the total assets. Among all the components of current assets of Ryanair, cash and cash equivalent is the most important one. The ratio of cash to total assets is almost 30% and thus it is indicating the strategy of the airline to have sufficient funds on hand in order to meet their routine needs.
On the liabilities section of the balance sheet of Ryanair, the noncurrent liabilities almost comprise of 43% of the total assets. Thus it is indicating the fact that the company has a good portion of assets raised through debt. Among all the non-current liabilities, the debt is the most important one which is around 36% to 38% of the total assets. The current liabilities of the airline is almost 20% of the total assets. among this category of the balance sheet, Accrued expenses and other liabilities is the most important one with around 14% of the total assets.
The last section of the balance sheet that has the shareholders equity is almost 37% of the total assets. moreover, the main component among these is the retained earnings which is almost 27% of the total assets value.
The trend in the balance sheet has remained more or less the same and there has been slight changes and no drastic changes in the balance sheet of Ryanair since 2009. Moreover, the management has kept a specific level of debt in their capital structure in order to capitalize and further enhance the earnings through leverage.
Non-current assets | 2012 | % to assets | 2011 | % to assets | 2010 | % to assets | 2009 | % to assets |
Property, plant and equipment | 4,925.20 | 54.72% | 4,933.70 | 57.40% | 4,314.20 | 57.04% | 3644.824 | 57.06% |
Intangible assets | 46.8 | 0.52% | 46.8 | 0.54% | 46.8 | 0.62% | 46.841 | 0.73% |
Available for sale financial assets | 149.7 | 1.66% | 114 | 1.33% | 116.2 | 1.54% | 93.15 | 1.46% |
Derivative financial instruments | 3.3 | 0.04% | 23.9 | 0.28% | 22.8 | 0.30% | 59.97 | 0.94% |
Total non-current assets | 5,125.00 | 56.94% | 5,118.40 | 59.54% | 4,500.00 | 59.50% | 3844.785 | 60.19% |
Current assets | ||||||||
Inventories | 2.8 | 0.03% | 2.7 | 0.03% | 2.5 | 0.03% | 2.075 | 0.03% |
Other assets | 64.9 | 0.72% | 99.4 | 1.16% | 80.6 | 1.07% | 91.053 | 1.43% |
Current tax | 9.3 | 0.10% | 0.5 | 0.01% | 0 | 0.00% | 0 | 0.00% |
Trade receivables | 51.5 | 0.57% | 50.6 | 0.59% | 44.3 | 0.59% | 41.791 | 0.65% |
Derivative financial instruments | 231.9 | 2.58% | 383.8 | 4.46% | 122.6 | 1.62% | 129.962 | 2.03% |
Restricted cash | 35.1 | 0.39% | 42.9 | 0.50% | 67.8 | 0.90% | 291.601 | 4.56% |
Financial assets: cash > 3 months | 772.2 | 8.58% | 869.4 | 10.11% | 1,267.70 | 16.76% | 403.401 | 6.32% |
Cash and cash equivalents | 2,708.30 | 30.09% | 2,028.30 | 23.60% | 1,477.90 | 19.54% | 1583.194 | 24.78% |
Total current assets | 3,876.00 | 43.06% | 3,477.60 | 40.46% | 3,063.40 | 40.50% | 2543.077 | 39.81% |
Total assets | 9,001.00 | 100.00% | 8,596.00 | 100.00% | 7,563.40 | 100.00% | 6387.862 | 100.00% |
Current liabilities | ||||||||
Trade payables | 181.2 | 2.01% | 150.8 | 1.75% | 154 | 2.04% | 132.671 | 2.08% |
Accrued expenses and other liabilities | 1,237.20 | 13.75% | 1,224.30 | 14.24% | 1,088.20 | 14.39% | 905.715 | 14.18% |
Current maturities of debt | 368.4 | 4.09% | 336.7 | 3.92% | 265.5 | 3.51% | 202.941 | 3.18% |
Current tax | 0.00% | 0.00% | 0.9 | 0.01% | 0.425 | 0.01% | ||
Derivative financial instruments | 28.2 | 0.31% | 125.4 | 1.46% | 41 | 0.54% | 137.439 | 2.15% |
Total current liabilities | 1,815.00 | 20.16% | 1,837.20 | 21.37% | 1,549.60 | 20.49% | 1379.191 | 21.59% |
Non-current liabilities | ||||||||
Provisions | 103.2 | 1.15% | 89.6 | 1.04% | 102.9 | 1.36% | 71.964 | 1.13% |
Derivative financial instruments | 53.6 | 0.60% | 8.3 | 0.10% | 35.4 | 0.47% | 54.074 | 0.85% |
Deferred tax | 319.4 | 3.55% | 267.7 | 3.11% | 199.6 | 2.64% | 155.524 | 2.43% |
Other creditors | 146.3 | 1.63% | 126.6 | 1.47% | 136.6 | 1.81% | 106.549 | 1.67% |
Non-current maturities of debt | 3,256.80 | 36.18% | 3,312.70 | 38.54% | 2,690.70 | 35.58% | 2195.499 | 34.37% |
Total non-current liabilities | 3,879.30 | 43.10% | 3,804.90 | 44.26% | 3,165.20 | 41.85% | 2583.61 | 40.45% |
Shareholders’ equity | ||||||||
Issued share capital | 9.3 | 0.10% | 9.5 | 0.11% | 9.4 | 0.12% | 9.354 | 0.15% |
Share premium account | 666.4 | 7.40% | 659.3 | 7.67% | 631.9 | 8.35% | 617.426 | 9.67% |
Capital redemption reserve | 0.7 | 0.01% | 0.5 | 0.01% | 0.5 | 0.01% | 0.493 | 0.01% |
Retained earnings | 2,400.10 | 26.66% | 1,967.60 | 22.89% | 2,083.50 | 27.55% | 1777.727 | 27.83% |
Other reserves | 230.2 | 2.56% | 317 | 3.69% | 123.3 | 1.63% | 20.061 | 0.31% |
Shareholders’ equity | 3,306.70 | 36.74% | 2,953.90 | 34.36% | 2,848.60 | 37.66% | 2425.061 | 37.96% |
Total liabilities and shareholders‟ equity | 9,001.00 | 100.00% | 8,596.00 | 100.00% | 7,563.40 | 100.00% | 6387.862 | 100.00% |
The ratio of non-current assets to the total assets of easyJet has been increasing. The ratio was previously 60% in 2009 and gradually it has moved up to almost 70% of the total assets. Thus it is showing that the airline is focusing on having more fixed assets and fewer current assets. Property, plant and equipment is the major component in this category just like Ryanair. However Ryanair was more focused on keeping the same ratio of PPE to total assets however the trend is different as the ratio of PPE to total assets have been increasing. It was previously 44% but gradually it has increased to almost 56% and this is the main reasons why the fixed assets of easyJet have increased.
The current assets to total assets have a value of around 40% however this was decreased to almost 31%. Cash has been the most important current asset of the company; however the management has decided to keep low cash in comparison to previous years. Moreover, the strategy is opposite of what Ryanair has adapted as it kept almost 30% cash of the total assets whereas easyJet has reduced this to only 15% in the year 2012.
On the other hand, the ratio of non-current liabilities has also decreased. It was 35% in the year 2009 and it remained the same in 2010 and 2011 however in 2012, this ratio was decreased to 29%. The major component in the non-current liabilities is the debt or long term borrowings which decreased as well. The long term debt was almost 27% in 2009 and it has decreased to 19% in 2012. Thus showing that the management is more concerned to reduce its risk and have less debt in their capital structure in comparison to take advantage of leverage.
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Shareholders equity has been around 36% to 42% to the total assets. Retained earnings is the most important component in the shareholders equity which has been increasing since 2009. It was almost 16% in 2009 but then increased to 17.6% in 2010 and then to 21% and 23% in 2011 and 2012 respectively.
2012 | % to assets | 2011 | % to assets | 2010 | % to assets | 2009 | % to assets | |
Non-current assets | ||||||||
Goodwill | 365 | 8.50% | 365 | 8.17% | 365.4 | 9.13% | 365.4 | 9.95% |
Other intangible assets | 91 | 2.12% | 86 | 1.92% | 86.8 | 2.17% | 81.7 | 2.22% |
Property, plant and equipment | 2395 | 55.76% | 2149 | 48.09% | 1,928.10 | 48.17% | 1,612.20 | 43.89% |
Derivative financial instruments | 21 | 0.49% | 24 | 0.54% | 8.2 | 0.20% | 7.8 | 0.21% |
Loan notes | 10 | 0.23% | 11 | 0.25% | 13.1 | 0.33% | 12.6 | 0.34% |
Restricted cash | 29 | 0.68% | 33 | 0.74% | 32.5 | 0.81% | 48 | 1.31% |
Other non-current assets | 57 | 1.33% | 63 | 1.41% | 53.5 | 1.34% | 62.7 | 1.71% |
Deferred tax assets | 0.4 | 0.01% | ||||||
Total Non-current assets | 2968 | 69.10% | 2731 | 61.11% | 2,487.60 | 62.15% | 2,190.80 | 59.65% |
Current assets | ||||||||
Assets held for sale | 73.2 | 1.83% | 73.2 | 1.99% | ||||
Trade and other receivables | 241 | 5.61% | 165 | 3.69% | 194.1 | 4.85% | 241.8 | 6.58% |
Derivative financial instruments | 73 | 1.70% | 83 | 1.86% | 52.6 | 1.31% | 68 | 1.85% |
Restricted cash | 130 | 3.03% | 90 | 2.01% | 23.1 | 0.58% | 24.3 | 0.66% |
Money market deposits | 238 | 5.54% | 300 | 6.71% | 260 | 6.50% | 286.3 | 7.79% |
Cash and cash equivalents | 645 | 15.02% | 1100 | 24.61% | 911.9 | 22.78% | 788.6 | 21.47% |
Total Current assets | 1327 | 30.90% | 1738 | 38.89% | 1,514.90 | 37.85% | 1,482.20 | 40.35% |
Total Assets | 4,295.00 | 100.00% | 4,469.00 | 100.00% | 4,002.50 | 100.00% | 3,673.00 | 100.00% |
Current liabilities | ||||||||
Trade and other payables | -1021 | 23.77% | -916 | 20.50% | -828.7 | 20.70% | -750.7 | 20.44% |
Borrowings | -129 | 3.00% | -155 | 3.47% | -127.4 | 3.18% | -117.6 | 3.20% |
Derivative financial instruments | -26 | 0.61% | -52 | 1.16% | -9.6 | 0.24% | -91.1 | 2.48% |
Current tax liabilities | -29 | 0.68% | -9 | 0.20% | -27.5 | 0.69% | -57.7 | 1.57% |
Maintenance provisions | -59 | 1.37% | -45 | 1.01% | -71.4 | 1.78% | -45.1 | 1.23% |
Total Current liabilities | -1264 | 29.43% | -1177 | 26.34% | -1,064.60 | 26.60% | -1,062.20 | 28.92% |
Net current assets | 450.3 | 420 | ||||||
Non-current liabilities | ||||||||
Borrowings | -828 | 19.28% | -1145 | 25.62% | -1,084.60 | 27.10% | -1,003.00 | 27.31% |
Derivative financial instruments | -24 | 0.56% | -27 | 0.60% | -4 | 0.10% | -2.6 | 0.07% |
Non-current deferred income | -46 | 1.07% | -59 | 1.32% | -56.6 | 1.41% | -52.6 | 1.43% |
Maintenance provisions | -141 | 3.28% | -177 | 3.96% | -144.1 | 3.60% | -168.6 | 4.59% |
Deferred tax liabilities | -198 | 4.61% | -179 | 4.01% | -147.9 | 3.70% | -76.7 | 2.09% |
Non-current liabilities | -1237 | 28.80% | -1587 | 35.51% | -1,437.20 | 35.91% | -1,303.50 | 35.49% |
Net Assets | 1794 | 41.77% | 1705 | 38.15% | 1,500.70 | 37.49% | 1,307.30 | 35.59% |
Shareholders’ equity | ||||||||
Share capital | 108 | 2.51% | 108 | 2.42% | 107.3 | 2.68% | 106 | 2.89% |
Share premium | 656 | 15.27% | 654 | 14.63% | 651.6 | 16.28% | 642.5 | 17.49% |
Hedging reserve | 42 | 0.98% | 14 | 0.31% | 34.8 | 0.87% | -23.9 | -0.65% |
Translation reserve | 1 | 0.02% | 1 | 0.02% | 0.8 | 0.02% | -0.4 | -0.01% |
Retained earnings | 987 | 22.98% | 928 | 20.77% | 706.2 | 17.64% | 583.1 | 15.88% |
Total Shareholders’ equity | 1794 | 41.77% | 1705 | 38.15% | 1,500.70 | 37.49% | 1,307.30 | 35.59% |
Total Shareholders’ equity + liabilities | 4,295.00 | 100.00% | 4,469.00 | 100.00% | 4,002.50 | 100.00% | 3,673.00 | 100.00% |
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