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@Arun – I suggest that you look at some of the responses above
Your choice will be fine as long as you establish their strategic objectives and business models. Although I don’t recommend citing Wikipedia in your RAP this link gives you a brief insight into these for virgin Australia https://en.m.wikipedia.org/wiki/Virgin_Australia
Qantas as the former ‘national’ carrier had the traditional airline model (where most airlines were government controlled) l but has had to adapt to a more commercial model of late and has undergone a major restructuring. Again wiki provides some useful basic info (but check the validity of it)
https://en.m.wikipedia.org/wiki/Qantas
An understanding of the business environment the airlines operate in is very important and you should read the CEO and directors’ reports to the shareholders to understand the strategic direction if both companies. This will help strengthen both your business and financial analysis
@trephena – Thanks for your timely response! I hope you will be there to answer my queries should I have any as I progress with the RAP as I have found your responses to be very helpful and to the point. 🙂
Altering figures of competitor for comparison purpose is not difficult, it requires some effort. If it is possible, i always recommend to do it. Otherwise you can see political, economic and other macro factors whether they were up or down too much during different months compared to competitor. So, if there weren’t too much changes to these factors then you may write different year ends under limitation of information section of RAP and then write how did you overcome this.
Regards,
Hammad Ahmed Qureshi – OBU Registered Mentor.Hi, i want to know that can British Airways be used with Easyjet as it’s competitor for thesis? i was confused that Easyjet is a low cost company and even though british airways focus on maintaining low costs but i wasn’t sure if i could use easyjet as it’s competitor.
Also, if i choose to focus on Ryan air and use Easyjet as it’s competitor, i was confused about the difference in currencies and how to deal with that. Since everything would be dealt in euros if i choose Ryanair, so i would have to convert all the calculations of Easyjet into euros at current rate or what?Also about year ends
also about year ends* all ryan air, BA and Easyjet have different year ends. i’m really confused.
@MahinAdnan
Yes, you can compare them. With regards to ratios, you do not need to convert currencies for those ratios in which measurement base is not currency i.e. its %, days, number etc. Where it is measured in currency such as EPS, you can convert at last date of year end. For comparison of figures such as sales, convert them at closing rate or measure trend such as % change from year to other.
Please see coming example for different year ends Year ends, where Company A has 31 March and Competitor has 30 June year end. You may adjust their financial statements for example for year ended June 2014 of competitor, you can deduct quarter ended June 2014 from annual financial statements until June 2014 and add quarter until quarter until June 2013 for aligning year ends to company A. You should do this if you feel that there are different rules, economic situation etc, which effected during difference of 3 months.
Otherwise, you need to write different year ends under limitation of bench-marking and information gathering, also you need to tell how did you overcome this.
Regards,
Hammad Ahmed Qureshi – OBU Registered Mentor.thank you for your guidance. I just want to be more sure of what i’m doing:
if i choose British Airways and Easyjet, BA has december as it’s year end and easyjet has september. Both are UK based and there isn’t exactly too strong of differences in rules or economic situation. In my limitation analysis, what would be my explanation of how i overcame this if i choose not to make changes?also, they both have consolidated f/s. is that fine if i compare their consolidated f/s?
Also i don’t want to take risk using a company where i can have issues regarding currency or year end issues, can anyone please help me with who can be a domestic competitor for Ryan air or easyjet or british airways?
I am not planning to escape anywhere unless there is a personal or family crisis 🙂
@trephena Can you guide me? I am planning to finally take Air Canada and Westjet after alot of research that took the whole day. I am really confused about my companies. Please guide me.
@MahinAdnan
Yes, you can but please ensure none of the company is only cargo focused. They must have passenger service too and i recommend choose the one with major passenger service income.
Regards,
Hammad Ahmed Qureshi – OBU Registered Mentor
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I am looking at EasyJet for my RAP, and am currently torn as to who to use as a comparator. I have got the accounts for both Ryanair and BA, but cannot decide which would be better- Ryanair as a similar low cost airline, or BA in order to make the comparison with a more traditional carrier.
From what I have read on here it looks like closest is best, so Ryanair? Of course their accounts are in Euros, which is an added limitation
@jenecho
It is fine to chose any in same industry, but would be better if you look at their scale of operations and then decide the most close competitor which challenge your main company.
Currency is not an issue as you will doing ratio analysis and most of them are measured in %, days, number etc. but where you need figures in currency such as sales you can convert them at last date of year end for your analysis purpose.
Regards,
Hammad Ahmed Qureshi – OBU Registered Mentor@MahinAdnan
Either you need to align easy jet year end to BA, or you can look at economic, legal and other changes such as seasonality which effected Easy JET during Oct-Sep.If there are no big changes during 3 months, then you can write in limitations of information section that there are different year ends of BA and Easyjet. In answer to this, you will write with some references or justification that economic and other factors remained much stable during 3 different months covered in both companies financial statements, hence you did not aligned year ends.
It is always fine to do consolidated FS analysis but ensure your analysis cover both regional & sub companies performance and service & product performance.
Please do not be confuse on companies, try and select one with a competitor which are listed for topic 8 and start work as soon as possible because from now onward, you have enough time but not much to delay.
Regards,
Hammad Ahmed Qureshi – OBU Registered Mentor.@MahinAdnan – go for Ryanair and EasyJet as they are better comparators. Please take a look at previous posts as there is probably a lot of relevant advice there for you. The currency thing is NOT a major issue as you work mainly in ratios not absolute figures. DO NOT attempt currency translation as it is not necessary and in the context of dividends paid and declared currency translation becomes a nonsense
Hello everybody!
Are the air carriers suppose to purchase airport slots from the country they belong?
For example KLM want to land or take off in/from Schipol airport, does it mean it have to purchase a pair of airport slots? Now if they can’t utilise a minimum of 80% they can sell the slots to another carrier. What advantage do they have on selling other than increasing their cash flows? And yes no longer an intangible asset so no amortisation cost!
This is pretty interesting but i’ am not sure if i’ am going on the right track 🙁and oh also how does season affect airport slots?
Yes, airports do purchase slots from airport owner where they want their planes to be landed, takeoff & held for some time.
For KLM, yes it need to purchase slots. If they sell slots, they can improve liquidity or even make profit in case of high demand and low available slots at busy airport. For intangible asset, you need to look company’s accounts for its recognition & accounting.
Seasonal effects are there for airport slots. Examples are, Islamic Annual Hajj season in Saudi Arabia, where flights land in Jeddah Airport from all of world, so slots are tight. Similarly, if any country is holding a world cup and final match is in a particular city, so slots available may be limited due to seasonal demand at that city’s airport. Also, tourism season depending on weather may fluctuate slots.
Regards,
Hammad Ahmed Qureshi – OBU Registered Mentor.Hi,
Is it advisable to do business analysis using PESTEL and Porter’s 5 forces for the airline industry?
I am based in India and there is immense competition between the airlines. Or should I stick with the standard PESTEL and SWOT?
Thanks
Thank you sir @Hammad Ahmed, Can you please tell me how operating lease and pensions affect the gearing levels?
As pensions and operating lease are obligations of the company, so while calculating gearing ration, you may add these to loans and other debts. This will increase gearing.
Regards,
Hammad Ahmed Qureshi – OBU Registered Mentor.Yes these are fine and totally your choice. I will recommend you to choose SWOT and Porter.
Regards,
Hammad Ahmed Qureshi – OBU Registered Mentor.@hammadahmedqureshi said:
@rayman417Altering figures of competitor for comparison purpose is not difficult, it requires some effort. If it is possible, i always recommend to do it. Otherwise you can see political, economic and other macro factors whether they were up or down too much during different months compared to competitor. So, if there weren’t too much changes to these factors then you may write different year ends under limitation of information section of RAP and then write how did you overcome this.
Regards,
Hammad Ahmed Qureshi – OBU Registered Mentor.My main org. year end is 30 Mar and the compatetor is 31 Dec, can I use Q1 reports of the compatetor of each year for the balance sheet comparison purposes. For the P&L shall I add up the figures for example from Q2 2013 to Q1 2014 or just add up Q2 to Q4 and then extrapolate them??
This problem has been discussed on this topic forum and also many, many times on
https://opentuition.com/topic/quick-clarification-financial-year-results/So please look at the answers there.
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