Comparative analysis of ratio is the main feature of the ratios analysis. Comparative analysis accounts developing comparison of ratios of firm across years, entitled as the horizontal analysis, whereas comparison within the components of the main financial statements is entitled as the vertical analysis.
Another, measure of comparative analysis is developing comparison of the company across competitors. This methodology provides insight about the position of the firm within industry. Further, such comparison also provides information pertaining to the chances improvement in various operational constituents.
By analyzing the financial statements of the two airlines, it has been identified that the revenues of the airlines have been increasing. Moreover, the report identified increasing profits of the two airlines. However by analyzing the two companies in detail, it has been identified that the increase in the revenue of Ryanair is a lot more than the increase in the revenue of the easyJet. Moreover, with the passage of time, Ryanair and its traffic has been increasing at a higher pace than easyJet.
Ryanair reported a loss in 2009, however from then on and with the increase in demand of the airlines particularly low cost airline, Ryanair has been able to enhance its profits. The company has been able to increase its profits from a net loss of €169 million in 2009 to a profit of €560 million in the year 2012. Thus a constant increase in the profits has been identified in the financial performance of the firm. However comparing Ryanair with easyJet the profits have not increased with the same pace, though the profits have increased. The profitability of the airline in the year 2009 was €71 million which has increased to €255 million.
The other important difference identified with the two companies is how the management has approach the liquidity of the airline. Ryanair is happy to keep sufficient level of current assets in comparison to the current liabilities whereas easyJet is not so interested in keeping too many current assets and thus the liquidity position of Ryanair is more stable or it can be said that it has more current assets to current liabilities than the current assets and current liabilities of easyJet. In addition to this, Ryanair has too much cash on hand and it could be to meet the operating expenses and ensure that the operations of the airlines are maintained and completed appropriately however easyJet is not slanted to keep too much cash on hand.
Gearing ratio also shows the differences between the two companies. Ryanair has been constantly increasing the ratio of debt in the capital structure and this would result in further increasing the earnings of the shareholders as the management is trying to take advantage of the leverage concept. However easyJet on the other hand has been trying to reduce the ratio of debt in the capital structure. Reduction in the debt would result in reducing the risk of the airline; however this would mean lower earnings to the shareholders.
Besides financial assessment, other important aspects that differentiate Ryanair is the customer satisfaction level. In the airline industry, managing time and being on time is important and it has an important role in the customer satisfaction level. Ryanair is 95% of the times on time whereas easyJet has increased this aspect and it has increased being on time from 66% in 2010 to 88% in the year 2012 and the impact of being on time, has further helped easyJet to increase its revenues and increase the customer satisfaction level. Moreover, the feature that differentiates easyJet in comparison to Ryanair is that easyJet is that it is ranked as number 1 or 2 on 49 of the top 100 routes of the world. Thus this has helped in improving the revenues of the airline.
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The report has presented the financial analysis of two of the leading international airlines; Ryanair and easyJet. Both the airlines have been operating in the low cost airline sector. In addition to this, both the airlines have been showing growth over the past three to four years and as a result of the growing trend of the companies, the sales and revenues of the companies have been increasing and so is the profits. Moreover, with the quality service and meeting the customer expectations and ensuring customer satisfaction Ryanair has become the leader in the market as it carries the highest number of passengers in a year. Though, easyJet is not far behind as it is ranked as the third largest airline in terms of number of passengers travelling through airline.
There are several recommendations and strategies that could help both the airlines to further improve their financial performances. One of the most important aspects is to make sure that the flights are on time as this is one of the most important elements in the airline industry in satisfying the customers. As the customers would be more satisfied, it would result in increasing revenues and thus increasing profits. Moreover, both the airlines need to further focus on better managing their human resource and particularly the cabin crew staff as they are directly interacting with the customers. The more training employees would be given, the better they would be able to manage and tackle the situations and thus it would further result in increasing customer satisfaction. It is important for the airlines to not only focus on the financial aspect or financial figures but focus on satisfying the customers and other important elements such as satisfying employees, managing operations adequately as if all these aspects are managed properly then it will ultimately result in increasing the sales and profits of the airlines.
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|Total operating revenues – continuing operations||4,390.20||3,629.50||2,988.10||2,941.97|
|Fuel and oil||-1,593.60||-1,227.00||-893.9||-1,257.06|
|Maintenance, materials and repairs||-104||-93.9||-66.81|
|Airport and handling charges||-554||-491.8||-459.1||-443.39|
|Marketing, distribution and other||-180||-154.6||-144.8||-12.75|
|Icelandic volcanic ash related cost||0||-12.4||0|
|Total operating expenses||-3,707.00||-3,141.30||-2,586.00||-2,849.33|
|Operating profit – continuing operations||683.2||488.2||402.1||92.63|
|Foreign exchange gain/(loss)||4.3||-0.6||-1||4.44|
|Loss on impairment of available-for-sale financial asset||0||0||-13.5||-222.54|
|Gain on disposal of property, plant and equipment||10.4||0||2||0.00|
|Total other expense||-50.2||-67.3||-61.1||-273.12|
|Profit before tax||633||420.9||341||-180.49|
|Tax expense on profit on ordinary activities||-72.6||-46.3||-35.7||11.31|
|Profit for the year – all attributable to equity holders of parent||560.4||374.6||305.3||-169.17|
|Basic earnings per ordinary share (euro cent)||38.03||25.21||20.68||-0.01|
|Diluted earnings per ordinary share (euro cent)||37.94||25.14||20.6||-0.01|
|Number of ordinary shares (in Ms)||1,473.70||1,485.70||1,476.40||1,478.47|
|Number of diluted shares (in Ms)||1,477.00||1,490.10||1,481.70||1,478.47|
|Property, plant and equipment||4,925.20||4,933.70||4,314.20||3644.824|
|Available for sale financial assets||149.7||114||116.2||93.15|
|Derivative financial instruments||3.3||23.9||22.8||59.97|
|Total non-current assets||5,125.00||5,118.40||4,500.00||3844.785|
|Derivative financial instruments||231.9||383.8||122.6||129.962|
|Financial assets: cash > 3 months||772.2||869.4||1,267.70||403.401|
|Cash and cash equivalents||2,708.30||2,028.30||1,477.90||1583.194|
|Total current assets||3,876.00||3,477.60||3,063.40||2543.077|
|Accrued expenses and other liabilities||1,237.20||1,224.30||1,088.20||905.715|
|Current maturities of debt||368.4||336.7||265.5||202.941|
|Derivative financial instruments||28.2||125.4||41||137.439|
|Total current liabilities||1,815.00||1,837.20||1,549.60||1379.191|
|Derivative financial instruments||53.6||8.3||35.4||54.074|
|Non-current maturities of debt||3,256.80||3,312.70||2,690.70||2195.499|
|Total non-current liabilities||3,879.30||3,804.90||3,165.20||2583.61|
|Issued share capital||9.3||9.5||9.4||9.354|
|Share premium account||666.4||659.3||631.9||617.426|
|Capital redemption reserve||0.7||0.5||0.5||0.493|
|Total liabilities and shareholders’ equity||9,001.00||8,596.00||7,563.40||6387.862|
|Selling and marketing||-104||-102|
|Aircraft dry leasing||-95||-109||-102||-116.2|
|Amortization of intangible assets||-8||-7||-6.2||-4.4|
|Interest receivable and other financing income||11||9||7.1||22.5|
|Interest payable and other financing charges||-25||-30||-26.7||-27.9|
|Net finance charges||-14||-21||-19.6||-5.4|
|Profit before tax||317||248||154||54.7|
|Profit for the year||255||225||121.3||71.2|
|Earnings per share|
|Other intangible assets||91||86||86.8||81.7|
|Property, plant and equipment||2395||2149||1,928.10||1,612.20|
|Derivative financial instruments||21||24||8.2||7.8|
|Other non-current assets||57||63||53.5||62.7|
|Deferred tax assets||0||0||0||0.4|
|Total Non-current assets||2968||2731||2,487.60||2,190.80|
|Assets held for sale||73.2||73.2|
|Trade and other receivables||241||165||194.1||241.8|
|Derivative financial instruments||73||83||52.6||68|
|Money market deposits||238||300||260||286.3|
|Cash and cash equivalents||645||1100||911.9||788.6|
|Total Current assets||1327||1738||1,514.90||1,482.20|
|Trade and other payables||-1021||-916||-828.7||-750.7|
|Derivative financial instruments||-26||-52||-9.6||-91.1|
|Current tax liabilities||-29||-9||-27.5||-57.7|
|Total Current liabilities||-1264||-1177||-1,064.60||-1,062.20|
|Net current assets||450.3||420|
|Derivative financial instruments||-24||-27||-4||-2.6|
|Non-current deferred income||-46||-59||-56.6||-52.6|
|Deferred tax liabilities||-198||-179||-147.9||-76.7|
|Total Shareholders’ equity||1794||1705||1,500.70||1,307.30|
|Total Shareholders’ equity + liabilities||3,031.00||3,292.00||2,937.90||2,610.80|
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