Scandinavian Airlines and British Airways - Essay Example

Name: Institution: Topic: Comparative Analysis Report of Scandinavian Airlines and British Airways Professor: Date of Submission: Table of Contents Executive Summary 4 Introduction 5 Profitability Ratios 6 Return on Capital Employed (ROCE) 6 Operating Profit Margin 7 Return on Equity 7 Net Profit Margin 7 Current Ratio 8 Networking Capital to Ratio 8 Debt to Equity Ratio 9 Debt to Assets Ratio 9 Long term Debt to Equity Ratio 9 Efficiency Ratios 9 Asset Turnover Ratio 9 Debtors Turnover Ratio 10 Vertical Analysis 11 Linking Horizontal and Vertical Analysis 11 Conclusion 12 Recommendations 13 Financing 13 Marketing 13 Performance Appraisal System and Motivation 13 SWOT Analysis 14 Benchmarking 14 References 15 Appendix 17 Table 1.1: Profitability Ratios: Scandinavian Airlines 17 Table 1.2: Profitability Ratios: British Airways 17 Table 2.1:Liquidity Ratios: SAS 18 Table 2.2: Liquidity Ratios: British Airways. 18 Table 3.1:Gearing Ratios: Scandinavian Airlines 19 Table 3.2: Gearing Ratios: British Airways 19 Table 4.1: Efficiency Ratios: Scandinavian Airlines 20 Table 4.2: Efficiency Ratios: British Airways 20 Table 5.1 Horizontal Analysis: Scandinavian Airlines 20 Table 5.2 Horizontal Analysis: British Airways 23 Table 6.1 Vertical Analysis: Scandinavian Airlines 27 Table 6.2 Vertical Analysis: British Airways 29 Executive Summary Information in the financial statement is useful to various groups of stakeholders and therefore precise and accurate analysis of this information is important as the information influences the decision making of these stake holders. Comparability of financial statements is an accounting concept and decisions are effectively made when comparable information is available. Comparing the two companies revealed that they were heavily indebted to short term obligations and that these two companies were operating on losses. The president of the Scandinavian airlines explained that the economy was facing weak economic trends and with the earthquake that hit Japan in 2011 would explain the non conducive environment that the airline was operating on. He explained of the instability in oil prices leading to increased operational costs. The heightened competition resulted in low returns but the company was working towards reduction of costs as the president stated that a 3.7% drop in costs was realized in 2011. The British Airways chairman explained that the major challenge they were facing was the risks of high interest rate, longevity and inflation rates. However the merger between British Airways Plc and Iberia turned around the performance of this company from operating losses in 2009 and 2010 to realize a profit of £672 million in 2011. This paper will thoroughly compare the financial statements of The Scandinavian Airlines and The British Airways for the years ending 2009, 2010 and 2011. Ratio analysis of liquidity levels, profitability, gearing and efficiency levels of these companies will be used as well as the vertical and horizontal analysis to compare the performances of these two companies. Introduction Financial statement analysis is the use balance sheet and income statement data to come up with values for financial interpretation and identification of the strengths and weaknesses of an organization (Stickney et al., 2006). Various techniques of financial statement analysis are: trend analysis, comparative statements, common size percentages, ratio and fund analysis as well as changes in working capital changes (Libby et al., 2004). For the purpose of analyzing Scandinavian Airlines and the British airways, ratio analysis, trend and comparative analysis will be undertaken. For a successful financial analysis, comparison has to be made from similar organizations such as the Scandinavian Airlines and the British Airways. The use of ratios to analyze these two companies will reveal their similarities, trends, as well as differences in these companies (Palepu & Healy, 2007). As Gregory (2008) notes, the stakeholders of the information contained in a financial statement include, potential investors, creditors, managers, shareholders, the government and creditors and they require the information for different reasons. Use of historical data is a major limitation of ratio analysis as it is therefore assumed that it reflects on the future trends whereas no one could be certain of the future (Palepu & Healy, 2007). Resvine et al (2004) explains that another limitation of using financial statements in analysis is that GAAP allows management to hide or omit important information in the financial statements and decision makers should be aware of this to incorporate other methods in aid of decision making. The analysis of profitability, liquidity, gearing and efficiency ratios will be used as well as vertical and horizontal analysis to compare the performances of Scandinavian and British Airways. Profitability Ratios Return on Capital Employed (ROCE) Return on capital employed (ROCE) shows how well an organization is using its capital to realize profits (Resvine et al., 2004). The long term liabilities and shareholders funds constitute capital employed and the intangible assets, idle assets and fictitious assets are to be excluded in the calculation of capital employed (Bhattacharya &Asish, 2007). Libby et al. (2004) explains that profit for calculating ROCE should be before tax payment since it has no relation in the earnings of the company and it’s also paid after earning profits. The performance of Scandinavian Airlines (SAS) improved and even though it operated on losses for the three years, a reduction on the loss is noted resulting to improvement in performance. As seen from table 1.1, ROCE increased from -14.8% to -11.4% to -6.6% in 2009, 2010 and 2011 consecutively. Even though British Airways (BA) performed poorly in 2009 and 2010 registering an increase it its losses from 6.6% to 8.0% (table 1.2), there is a tremendous improvement in 2011 where it realized a profit of 679 million thus realizing a return on capital at 9.2% (table 1.2). Comparison between the two companies show that British Airways increased its shareholder’s equity resulting from the merger in 2011.Scandinavian Airlines has increased its long term debt as compared to The British Airways over three years period Operating Profit Margin SAS has operated on losses for the three years but the losses reduced reporting an improvement in the operation margin from -7.6% to -3.9% (table 1.1). This improvement is attributable to SAS reduction in operating expenses over the three years. BA’s operating margin deteriorated from -4.5% in 2009 to -6.6% in 2010 but improved to 6.8% in 2011 (table 1.2).The reduction in the first two years is because of a reduction in the revenue levels and the opposite is true for year 2012. Return on Equity It shows the utilization of shareholder’s equity (Gregory, 2008).ROE of SAS improved from - 23.0% in 2009 to -9.5% in 2011 (table 1.1).The positive change being as a result of reduction of the losses for the three years. B A’s has a better ROE than SAS in 2011 of 24.1 % although it experienced a decline from -19.4% to 20.1% in 2009 and 2010 respectively as shown in table 1.2. Net Profit Margin It is a measure of the net profit and it should be neither low nor high (Stickney et al., 2007). The two companies experienced losses in 2009 and 2010 but for the two years, SAS position improved than that of BA with the latter reporting a profit in 2011 an a net profit margin of 6.7%.From table 1.1 SAS had a net profit margin of -5.8%, -5.4% and -2.9% for 2009, 2010 and 2011 respectively. This was an improvement as compared to BA deteriorating performance from -4.0% to -5.3% in 2009 and 2010 respectively. Liquidity Ratios Liquidity is the ability of an organization to meet cash requirements as they fall due as well as the unexpected short term obligations (Gregory, 2008). Current Ratio This is the comparison between the current assets and the current liabilities and the company with a higher ratio is considered to have a better liquidity (Bhattacharya &Asish, 2007).The ratio that is considered to be safe is that of 2:1.SAS reported a current ratio of 0.7, 0.8 and 0.7 in 2009, 2010 and 2011(table 2.1), while BA reported 0.6, 0.7 and 0.8 in the three years as seen from table 2.2. The two companies are not doing well on their liquidity and may experience cash flow problems in the future. Networking Capital to Ratio The two companies are not managing their networking capital effectively with higher levels of current liabilities thus resulting to the negative values of the ratio.SAS reported a networking capital ratio of -0.1, -0.05 and -0.08 ( table 2.1) in the three years respectively while BA had -0.2, -0.1 and -0.1 (table 2.2). Gearing Ratios Debt to Equity Ratio This ratio shows the proportion of debt and shareholders equity in the financing of the business and a ratio of 1:1 is acceptable (McConnell & Servaes, 1995). The two companies had ratios greater than 1.Table 3.1 shows SAS having 2.7, 1.9 and 2.2 in 2009, 2010 and 2011 respectively. From table 3.2 BA had 4.7, 4 and 3.1 in the three years. Comparing the two companies show that BA is at a greater financial risk than SAS. Debt to Assets Ratio SAS maintained a ratio of 0.7 (table 3.1) while BA maintained 0.8 (table 3.2) for the three years. This shows that the two companies are heavily indebted and this results to high costs of servicing the debts for these companies. Long term Debt to Equity Ratio In 2009 and 2010 SAS had ratio of 0.3 and 0.4 in 2011 (table 3.1).BA had a ratio of 0.5 in 2009 and 2011 but a 0.4 in 2010 (table 3.2).This shows that even thought he two companies are heavily indebted, most of that debt is for the short term and therefore their positions are to improve in the future even though they fall at a risk of having cash flow problems in the short run. Efficiency Ratios Asset Turnover Ratio This shows the sales per the assets invested (Ahn et al., 2006). From table 4.1, SAS had 1.9, 1.5 and 1.7 from 2009 to 2011 while BA had 1.5, 1.2 and 1.3 respectively from table 4.2. The two companies are maintaining their asset turnover as there are no drastic changes in the three years. It shows that the assets invested are able to generate more sales than the invested amounts. Debtors Turnover Ratio White et al. (2002) explains this ratio as one which shows how long it takes for debtors to be converted in to cash and that a high ratio indicates that shorter periods are taken. From table 4.1 SAS had 52, 54, and 34 days from 2009 to 2011 while BA had 22, 23 and 17 days (table 4.2). This shows that SAS was dong well in debts collection in 2009 and 2010 as it had high days but deteriorated in 2011.BA is not doing well at all as this result to a lot of money being held by debtors leading to financial strain for the company. Horizontal Analysis This is comparing information in the financial statement for a period of time using a base year to identify any changes or trends whatsoever (Stickney et al., 2007). This helps in identifying what has affected the financial and profitability positions of a company as well how each item relates to a change in another item (Ahn et al., 2006). The balance sheets and income statements of The Scandinavian Airlines and The British Airways will be used for the horizontal analysis for the years ending 2009, 2010 and 2011 with 2009 being the base year. From table 5.1, the long term receivables have reduced from 326% to 139% in 2010 and 2011 as compared to 2009 while the cash and cash balances have reduced from 354% to 194% in 2010 and 2011.From the income statement, depreciation has increased from 102% to 131% in 2010 and 2011. From table 5.2 , BA experienced an increase in softwares from 123% to 241% in 2010 and 2011 as compared to2009. While the employment benefits assets increased from 142% to 324% in 2010 and 2011, Derivatives financial instruments reduced from 900% to 200% in the two years in comparison with 2009.For the reserves they increased from 161% to 315% while the current tax payable increased for a 50% to 300% in 2010 and in 2011. From the income statement, restructuring costs reduced fro a 109% to 15% in 2010 and 2011 Vertical Analysis This is where each item in the financial statement is expressed as a percentage of another item in it (White et al., 2002). This analysis helps in comparing the financial statement to another company’s or the industrial average (Ahn et al., 2006). From table 6.1, SAS maintained the fixed assets at 70%, 73% and 76% in 2009, 2010 and 2011 respectively. The cash and bank balances were maintained at 2% for the three years. The long term liabilities were at 31%, 33% and 35% in 2009, 2010 and 2012 respectively. From table 6.2, BA had it fixed assets maintained at 78% in 2009 and at 75% in 2010 and 2011.The cash and cash equivalents were at 4%, 7% and 5% in 2009, 2010 and 2011 respectively. The non current liabilities were at 43%, 45% and 43% in 2009, 2010 and 2011 respectively Linking Horizontal and Vertical Analysis The two analyses indicated that the two companies held a lot of their assets in fixed assets and that the two companies held low cash and bank balances. Due the nature of the business these two companies operate, it is expected that they should own aircrafts and that is why most of their assets are held in fixed assets. However, holding low cash balances results to cash flow problems. This is evident from the ratio analysis covered earlier on. Conclusion The limitation in using ratio analysis is that differences in accounting methods for the companies results to misleading information and hence ratios should be used as just indicators and other sources should be analyzed to make a decision on the future o the company. Such measures could be industrial trends, consumer tastes as well as technological changes. It would be prudent for these companies to appreciate that political and economic instability affects the business environment in which the companies are operating in and these are some of other factors that should be considered when the companies are giving predictions for future performances. Cultural differences should also be taken into consideration as the companies venture in to the international market as this will help them in understanding the market they serve better as they understand the people’s way of life as this affects the trends and ways of doing business with these individuals. Lastly, organizations nowadays are focusing on managing non financial intangible assets namely: customer relationships, effective operating processes as well as innovative services and products making the process of performance evaluation a complicated one (Kaplan and Norton, 2001). It is due to these developments that now strategic performance measurement systems (SPMS) have been adopted as they are able to provide financial and non financial measures for managers improving strategic competitiveness of the companies (Chenhall, 2005). Recommendations Financing I recommend that these two companies explore an option of taking a large debt facility and equity when needed. This will help in easing on the short term debt that the two companies are heavily indebted and this would offer them a lower cost of capital and this also soles cash flow problems as well as any need of raising the short term debts. And to minimize on future risks on interest rates the companies could consider locking rates in forward fixed rates (Stickney et al. 2004). This will ensure that managers will remain focused in value creation for the shareholders than brainstorming in solving short term financial distresses. Marketing For reducing operational costs, these companies should endeavor to explore more social media options and this will greatly reduce marketing costs. Performance Appraisal System and Motivation Highly motivated employees will tend to have increased productivity and when each an individual worker is notified what is expected from them and are made to understand what high performance is, they are motivated to perform as expected (Bruce, 2002).Different forms of motivation arise from diverse employee backgrounds and characteristics (Silberman,2003). Therefore, the management of these companies should identify the different employee behaviors to know how to motivate their employees for improved company performance. Motivation is also based on the performance appraisal as the employees are able to evaluate their past performances and undertake corrective actions for improved performance (Chen & Chu, 2007).This saves the companies the costs of recruitments due to turnovers of un motivated employees and also save on man hours that would be lost due employee absenteeism following job dissatisfactions. SWOT Analysis This is evaluating the strengths, weaknesses, opportunities and threats facing a company .Successful SWOT analysis aids in making the decision as to what strategies the companies should implement for improved performance. After the companies identify their weaknesses and threats, they will take corrective actions to strengthen them to align them in the corridors of opportunities and as windows of opportunities open up, they will be in prepared to take advantage of them for improved productivity. Benchmarking For continuous improvement, the companies need to benchmark themselves with the industry leaders in the areas hey are operating in. Benchmarking is identification of the superior practices of other companies and in return internalizing these practices for the companies to gain competitive advantage. These companies should therefore learn what the best performers in the industry are doing and implement these processes for improved performance. References http://sasannualreport2011.com/en/Start/Formal+Annual+Report/Accounts+... http://www.britishairways.com/cms/global/microsites/ba_reports0910/fin... Ahn, S., Denis, D.J., & Denis, D.K.(2006). Leverage and investment in diversified firms: Journal of Financial Economics, 79, 317-337. Bhattacharya, & Asish, K. (2007).Introduction to Financial Statement Analysis: Ratio Analysis. New Delhi: Elsevier, pp.32-45 Bruce, A., 2002. “How To Motivate Every Employee”. McGraw-Hill Trade, USA Chen, Dar-Hsin, and Chu, Chen-Ming., 2007. “Performance Appraisal Systems In Service and Manufacturing Industries: Evidence from Taiwan”. International Journal of Management, Vol.24 No. 3 September 2007 Chenhall, R.H. (2005), “ Integrative Strategic Performance Measurement System, Strateic Alignment of Manufacturing, Learning and Strategic outcomes: an exploratory study”, Accouting, Organizations and Society, Vol.30 No.5,pp.395-422. Gregory,M. (2008). Essentials of Financial Statement Analysis: An introduction to Financial Analysis. Worthy and James. Kaplan, R.S. and Norton,D.P. (2001), The Strategy-focused Organization: How Balanced ScorecardCompanies Thrive in the New Business Environment, Harvard Business School Press,Boston,MA. Revsine, L., Collins, D.W., & Johnson,W.B. (2004). Financial reporting and analysis, 3rd edition. Upper Saddle River, NJ: Prentice Hall. Silberman, M. L., 2003. “Active Manager’s Tool Kit”. McGraw-Hill Trade, USA Stickney, C.P.,Brown,P.R., & Wahlen. J.M. (2007).Financial reporting, financial statement Analysis and valuation. 6th edition.South-Western: Thompson. White, G.I., Sondhi, A.C., & Fried, D. (2002).The analysis and use of financial statements, 3rd edition. Wiley. Stickney, C.P., & Weil,R.L.(2006).Financial accounting: An introduction to concepts, methods, and uses. 11th edition.South-Western: Thomson. Libby, R., Libby,P.A & Short, D.G.(2004).Financial accounting. 4th edition. Irwin:McGraw- Hill. McConnell, J.J., & Servaes, H. (1995).Equity ownership and the two faces of debt: Journal of Financial Economics, 39, 131-157. Palepu, K.G., & Healy, P.M.(2007).Business analysis & valuation using financial statements. 4th edition.South-Western:Thomson Appendix Table 1.1: Profitability Ratios: Scandinavian Airlines     2011 2010 2009 Return on capital employed Profit before interest & tax (PBIT)X 100% Capital employed (Shareholders equity + Longterm Debt) – Intangible assets (1,629)x100 24,629 = (6.6%)  (3,069)x100 26,956 = (11.4%)  (3,423)x100 23,162 = (14.8%) Operating Profit margin PBIT __ X 100% Turnover (1,629)x100 41,412 = (3.9%)  (3,069)x100 41,070 = (7.5%)  (3,423)x100 44,918 = (7.6%) Return on equity (ROE) Profit after tax ________X 100% Shareholder funds ( capital + reserves) (1,187)x100 12,433 = (9.5%)  (2,218)x100 14,438 = (15.4%)  (2,620)x100 11,389 = (23.0%) Net Profit margin Net Profit X 100% Turnover (1,187)x100 41,412 = (2.9%)  (2,218)x100 41,070 = (5.4%)  (2,620)x100 44,918 = (5.8%) (Stickney et al., 2004). Table 1.2: Profitability Ratios: British Airways     2011 2010 2009 Return on capital employed Profit before interest & tax (PBIT) X 100% Capital employed (Shareholders equity + Longterm Debt) – Intangible Assets 679x100 (7,339) = 9.2% (531)x100 (6,668) = (8.0%)  (401)x100 (6,079) = (6.6%) Operating Profit margin PBIT __ X 100% Turnover 679x100 9,987 = 6.8%  (531)x100 7,994 = (6.6%)  (401)x100 8,992 = (4.5%) Return on equity (ROE) Profit after tax ________ X 100% Shareholder funds ( capital + reserves) 672x100 (2,782) = 24.1%  (425)x100 2,113 = (20.1%)   (358)x100 1,846 = (19.4%) Net Profit margin Net Profit X 100% Turnover 672x100 (9,987) = 6.7%  (425)x100 7,994 = (5.3%)  (358)x100 8,992 = (4.0%) (Stickney et al. 2004). Table 2.1:Liquidity Ratios: SAS     2011 2010 2009 Current Ratio Current Assets (CA) Current Liabilities (CL)  9302 = 0.7 12,863  11,234 = 0.8 13,455  12,859 = 0.7 18,037 Net working capital to turnover Ratio C A- C L Turnover 9302 -12863 41,412 = -0.08 11,234 -13455 41,070 = -0.05  12,859 -18,037 44,918 = -0.1 (Bhattacharya, & Asish, 2007). Table 2.2: Liquidity Ratios: British Airways.     2011 2010 2009 Current Ratio Current Assets (CA) Current Liabilities (CL)  2, 774 = 0.8 3,683  2, 674 = 0.7 3,740  2, 346 = 0.6 4,142 Net working capital to turnover Ratio C A- C L Turnover 2,774 -3,683 9,987 = -0.1 2,674 -3,740 7,994 = -0.1  2,346 -4,142= -0.2 8,992 (Bhattacharya, & Asish, 2007). Table 3.1:Gearing Ratios: Scandinavian Airlines     2011 2010 2009 Debt - Equity Ratio Total Debt___ Equity ( Shareholders funds)  26,752 = 2.2 12,433  27,387 = 1.9 14,438  31,106 = 2.7 11,389 Total Debt to Asset Ratio Total Debt________ Total Assets (Liabilities + Equity)  26,752 = 0.7 39,185  27,387 = 0.7 41,825  31,106 = 0.7 42,495 Long term Debt to asset Ratio Long term Debt Total Assets  13,889 = 0.4 39,185  13,932 = 0.3 41,825  13,069 = 0.3 42,495 (McConnell & Servaes 1995). Table 3.2: Gearing Ratios: British Airways     2011 2010 2009 Debt - Equity Ratio Total Debt___ Equity ( Shareholders funds) 8,587 = 3.1 2,782  8,564 = 4 2,113  8,642 = 4.7 1,846 Total Debt to Asset Ratio Total Debt________ Total Assets (Liabilities + Equity) 8,587 = 0.8 11,369  8,564 = 0.8 10,677  8,642 = 0.8 10,488 Long term Debt to asset Ratio Long term Debt Total Assets 4,904 = 0.4 11,369  4,824 = 0.5 10,677  4,500 = 0.4 10,488 (McConnell & Servaes 1995). Table 4.1: Efficiency Ratios: Scandinavian Airlines     2011 2010 2009 Asset Turnover Turnover___ Capital employed  41,412 = 1.7 24,629  41,070 = 1.5 26,956  44,918 = 1.9 23,162 Debtor Turnover End Year Trade Receivables X365 Turnover   4,789 - 934x365 41,412 = 34 days  5,020 - 839x365 28,370 = 54 days 7,511-1058x365 44,918 = 52 days (Ahn et al. 2006). Table 4.2: Efficiency Ratios: British Airways     2011 2010 2009 Asset Turnover Turnover___ Capital employed  9,987 = 1.3 7339  7,994 = 1.2 6,668  8,992 = 1.5 6079 Debtor Turnover End Year Trade Receivables X365 Turnover   460x365 9,987 = 17 days  499x365 7,994 = 23 days 530x365 8,992 = 22 days (Ahn et al. 2006). Table 5.1 Horizontal Analysis: Scandinavian Airlines SAS Group consolidated balance sheet For the period of 31st Dec   Base year as 2009 ASSETS, MSEK 2011 2010 2009 2011 2010 2009 Fixed assets           Intangible assets 1,693 1,414 1,296 131% 109% 100% Tangible fixed assets         Land and buildings 491 375 439 112% 85% 100% Aircraft 11,866 12,652 13,087 91% 97% 100% Spare engines and spare parts 1,367 1,393 1,299 105% 107% 100% Workshop and aircraft servicing equipment 76 90 161 47% 56% 100% Other equipment and vehicles 123 130 192 64% 68% 100% Investment in progress 66 118 158 42% 75% 100% Prepayments relating to tangible fixed assets 155 24 238 65% 10% 100%   14,144 14,782 15,574 91% 95% 100% Financial fixed assets         Equity in affiliated companies 317 294 358 89% 82% 100% Other holdings of securities 23 23 234 10% 10% 100% Pension funds, net 11,355 10,512 10,286 110% 102% 100% Deferred tax asset 1,340 1,187 1,159 116% 102% 100% Other long-term receivables 1,011 2,379 729 139% 326% 100%   14,046 14,395 12,766 110% 113% 100% Total fixed assets 29,883 30,591 29,636 101% 103% 100%           Current assets         Expendable spare parts and inventories 705 678 758 93% 89% 100%           Current receivables         Accounts receivable 1,275 1,277 1,581 81% 81% 100% Receivables from affiliated companies 6 3 92 7% 3% 100% Other receivables 2,574 2,901 4,780 54% 61% 100% Prepaid expenses and accrued income 934 839 1,058 88% 79% 100%   4,789 5,020 7,511 64% 67% 100% Short-term investments 2,842 3,281 3,691 77% 89% 100% Cash and bank balances 966 1,762 498 194% 354% 100% Assets held for sale 0 493 401 0% 123% 100% Total current assets 9,302 11,234 12,859 72% 87% 100% TOTAL ASSETS 39,185 41,825 42,495 92% 98% 100%           SHAREHOLDERS’ EQUITY AND LIABILITIES, MSEK         Shareholders’ equity         Share capital 6,612 6,612 6168 107% 107% 100% Other contributed capital 337 337 170 198% 198% 100% Reserves 309 627 279 111% 225% 100% Retained earnings 5,175 6,862 4772 108% 144% 100% Total shareholders’ equity attributable to Parent Company owners 12,433 14,438 11389 109% 127% 100% Non-controlling interests 0 0 0     Total shareholders’ equity 12,433 14,438 11389 109% 127% 100%           Long-term liabilities         Subordinated loans 1,019 974 919 111% 106% 100% Bond loans 2,809 1,503 0 0% 0% 0% Other loans 6,179 6,866 6809 91% 101% 100% Deferred tax liability 2,154 2,303 2832 76% 81% 100% Other provisions 1,673 2,143 2131 79% 101% 100% Other liabilities 55 143 378 15% 38% 100%   13,889 13,932 13069 106% 107% 100% Current liabilities         Current portion of long-term loans 2,309 1,383 5742 40% 24% 100% Short-term loans 997 1,073 907 110% 118% 100% Prepayments from customers 24 16 13 185% 123% 100% Accounts payable 1,540 1,749 1738 89% 101% 100% Tax payable 18 22 27 67% 81% 100% Unearned transportation revenue 3,453 3,598 3227 107% 111% 100% Current portion of other provisions 428 657 852 50% 77% 100% Other liabilities 1,160 2,070 2110 55% 98% 100% Accrued expenses and prepaid income 2,934 2,755 3264 90% 84% 100% Liabilities attributable to assets held for sale 0 132 157 0% 84% 100%   12,863 13,455 18037 71% 75% 100% TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 39,185 41,825 42495   92% 98% 100%     Consolidated Statement of Income   For Periods Ending 31st Dec   Base year as2009   2011 2010 2009   2011 2010 2009 Revenue 41,412 41,070 44,918 92% 91% 100% Payroll expenses (13,092) (13,894) (17,998) 73% 77% 100% Other operating expenses (23,741) (25,115) (25,912) 92% 97% 100% Leasing costs for aircraft (1,560) (1,815) (2,319) 67% 78% 100% Depreciation, amortization and impairment (2,413) (1,885) (1,845) 131% 102% 100% Share of income in affiliated companies 28 12 (258) -11% -5% 100% Income from the sale of shares in subsidiaries and affiliated companies - (73) 429 0% -17% 100% Income from the sale of aircraft and buildings 12 (239) (97) -12% 246% 100% Operating income 646 (1,939) (3,082) -21% 63% 100%           Income from other holdings of securities (1,469) (263) - 0% 0% 0% Financial income 224 174 304 74% 57% 100% Financial expenses (1,030) (1,041) (645) 160% 161% 100% Income before tax (1,629) (3,069) (3,423) 48% 90% 100%           Tax (58) 851 803 -7% 106% 100% Net income for the year (1,687) (2,218) (2,620)   64% 85% 100% Source: SAS Annual Reports and Accounts 2009-2011 Table 5.2 Horizontal Analysis: British Airways Consolidated Balance Sheet For thr Period 31st Dec Base year as 2009 £ million 2011 2010 2009   2011 2010 2009 Non-current assets             Property, plant and equipment:         Fleet 5765 5739 5,996 96% 96% 100% Property 856 920 971 88% 95% 100% Equipment 207 245 266 78% 92% 100%   6828 6904 7,233 94% 95% 100% Intangibles:         Goodwill 40 40 40 100% 100% 100% Landing rights 242 202 205 118% 99% 100% Emissions Allowances 12 0 - 0% 0% 0% Software 53 27 22 241% 123% 100%   347 269 267 130% 101% 100%           Investments in associates 232 197 209 111% 94% 100% Available-for-sale financial assets 39 76 65 60% 117% 100% Employee benefit assets 1100 483 340 324% 142% 100% Derivative financial instruments 6 27 3 200% 900% 100% Prepayments and accrued income 28 17 25 112% 68% 100% Total non-current assets 8580 7,973 8,142 105% 98% 100% Non-current assets held for sale 15 30 - 0% 0% 0% Current assets and receivables         Inventories 139 98 127 109% 77% 100% Trade receivables 460 499 530 87% 94% 100% Other current assets 273 289 268 102% 108% 100% Derivative financial instruments 73 74 40 183% 185% 100% Other current interest-bearing deposits 1259 928 979 129% 95% 100% Cash and cash equivalents 570 786 402 142% 196% 100%   1,829 1,714 1,381 132% 124% 100% Total current assets and receivables 2774 2,674 2,346 118% 114% 100% Total assets 11369 10,677 10,488 108% 102% 100% Shareholders’ equity         Issued share capital 290 288 288 101% 100% 100% Share premium 937 937 937 100% 100% 100% Investment in own shares 0 -4 (9) 0% 44% 100% Other reserves 1355 692 430 315% 161% 100% Total shareholders’ equity 2582 1,913 1,646 157% 116% 100% Non-controlling interests 200 200 200 100% 100% 100% Total equity 2782 2,113 1,846 151% 114% 100% Non-current liabilities         Interest-bearing long-term borrowings 3358 3446 3,074 109% 112% 100% Employee benefit obligations 232 208 191 121% 109% 100% Provisions for deferred tax 778 774 652 119% 119% 100% Other provisions 179 159 256 70% 62% 100% Derivative financial instruments 62 5 123 50% 4% 100% Other long-term liabilities 295 232 204 145% 114% 100% Total non-current liabilities 4904 4,824 4,500 109% 107% 100% Current liabilities         Current portion of long-term borrowings 385 556 689 56% 81% 100% Trade and other payables 3117 2910 2,796 111% 104% 100% Derivative financial instruments 21 12 471 4% 3% 100% Current tax payable 12 2 4 300% 50% 100% Short-term provisions 148 260 182 81% 143% 100% Total current liabilities 3683 3,740 4,142 89% 90% 100% Total equity and liabilities 11369 10,677 10,488   108% 102% 100%           Consolidated Income Statement For the Periods Ending   Base year as 2009   £ million 2011 2010 2009 2011 2010 2009 Traffic revenue   Passenger 8,721 6,980 7,836 111% 89% 100% Cargo 739 550 673 110% 82% 100%   9,460 7,530 8,509 111% 88% 100% Other revenue 527 464 483 109% 96% 100% Revenue 9,987 7,994 8,992 111% 89% 100% Employee costs 2,153 1,998 2,193 98% 91% 100% Restructuring 12 85 78 15% 109% 100% Depreciation, amortisation and impairment 683 732 694 98% 105% 100% Aircraft operating lease costs 73 69 73 100% 95% 100% Fuel and oil costs 3,246 2,372 2,969 109% 80% 100% Engineering and other aircraft costs 543 505 510 106% 99% 100% Landing fees and en-route charges 691 608 603 115% 101% 100% Handling charges, catering and other operating costs 1,052 997 1,021 103% 98% 100% Selling costs 436 290 369 118% 79% 100% Currency differences 13 (2) 117 11% -2% 100% Accommodation, ground equipment and IT costs 567 571 585 97% 98% 100% Total expenditure on operations 9,469 8,225 9,212 103% 89% 100% Operating (loss)/Profit 518 (231) (220) -235% 105% 100% Fuel derivative gains/(losses) (11) 15 (18) 61% -83% 100% Finance costs (161) (157) (182) 88% 86% 100% Finance income 32 20 95 34% 21% 100% Net financing expense relating to pensions 160 (116) (17) -941% 682% 100% Retranslation charges on currency borrowings 2 (14) (59) -3% 24% 100% (Loss)/profit on sale of property, plant and equipment and investments (3) (16) 8 -38% -200% 100% Share of post-tax (losses)/profits in associates accounted for using the equity method (6) (32) 4 -150% -800% 100% Revaluation of convertible bond derivative liability 169   0% 0% 0% Net charge relating to available-for-sale financial assets (21) (12) 175% 0% 100% (Loss)/ Profit before tax 679 (531) (401) -169% 132% 100% Tax (7) 106 43 -16% 247% 100% (Loss)/Profit after tax 672 (425) (358)   -188% 119% 100% Source: BA Annual Reports and Accounts 2009-2011 Table 6.1 Vertical Analysis: Scandinavian Airlines SAS Group consolidated balance sheet For the period of 31st Dec   Total Assets as the Base ASSETS, MSEK 2011 2010 2009 2011 2010 2009 Fixed assets           Intangible assets 1,693 1,414 1,296 4% 3% 3% Tangible fixed assets         Land and buildings 491 375 439 1% 1% 1% Aircraft 11,866 12,652 13,087 30% 30% 31% Spare engines and spare parts 1,367 1,393 1,299 3% 3% 3% Workshop and aircraft servicing equipment 76 90 161 0% 0% 0% Other equipment and vehicles 123 130 192 0% 0% 0% Investment in progress 66 118 158 0% 0% 0% Prepayments relating to tangible fixed assets 155 24 238 0% 0% 1%   14,144 14,782 15,574 36% 35% 37% Financial fixed assets         Equity in affiliated companies 317 294 358 1% 1% 1% Other holdings of securities 23 23 234 0% 0% 1% Pension funds, net 11,355 10,512 10,286 29% 25% 24% Deferred tax asset 1,340 1,187 1,159 3% 3% 3% Other long-term receivables 1,011 2,379 729 3% 6% 2%   14,046 14,395 12,766 36% 34% 30% Total fixed assets 29,883 30,591 29,636 76% 73% 70%           Current assets         Expendable spare parts and inventories 705 678 758 2% 2% 2%           Current receivables         Accounts receivable 1,275 1,277 1,581 3% 3% 4% Receivables from affiliated companies 6 3 92 0% 0% 0% Other receivables 2,574 2,901 4,780 7% 7% 11% Prepaid expenses and accrued income 934 839 1,058 2% 2% 2%   4,789 5,020 7,511 12% 12% 18% Short-term investments 2,842 3,281 3,691 7% 8% 9% Cash and bank balances 966 1,762 498 2% 4% 1% Assets held for sale 0 493 401 0% 1% 1% Total current assets 9,302 11,234 12,859 24% 27% 30% TOTAL ASSETS 39,185 41,825 42,495 100% 100% 100%           SHAREHOLDERS’ EQUITY AND LIABILITIES, MSEK         Shareholders’ equity         Share capital 6,612 6,612 6168 17% 16% 15% Other contributed capital 337 337 170 1% 1% 0% Reserves 309 627 279 1% 1% 1% Retained earnings 5,175 6,862 4772 13% 16% 11% Total shareholders’ equity attributable to Parent Company owners 12,433 14,438 11389 32% 35% 27% Non-controlling interests 0 0 0     Total shareholders’ equity 12,433 14,438 11389 32% 35% 27%           Long-term liabilities         Subordinated loans 1,019 974 919 3% 2% 2% Bond loans 2,809 1,503 0 7% 4% 0% Other loans 6,179 6,866 6809 16% 16% 16% Deferred tax liability 2,154 2,303 2832 5% 6% 7% Other provisions 1,673 2,143 2131 4% 5% 5% Other liabilities 55 143 378 0% 0% 1%   13,889 13,932 13069 35% 33% 31% Current liabilities         Current portion of long-term loans 2,309 1,383 5742 6% 3% 14% Short-term loans 997 1,073 907 3% 3% 2% Prepayments from customers 24 16 13 0% 0% 0% Accounts payable 1,540 1,749 1738 4% 4% 4% Tax payable 18 22 27 0% 0% 0% Unearned transportation revenue 3,453 3,598 3227 9% 9% 8% Current portion of other provisions 428 657 852 1% 2% 2% Other liabilities 1,160 2,070 2110 3% 5% 5% Accrued expenses and prepaid income 2,934 2,755 3264 7% 7% 8% Liabilities attributable to assets held for sale 0 132 157 0% 0% 0%   12,863 13,455 18037 33% 32% 42% TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 39,185 41,825 42495   100% 100% 100% Source: SAS Annual Reports and Accounts 2009-2011 Table 6.2 Vertical Analysis: British Airways Consolidated Balance Sheet For the Period 31st Dec Total Assets as Base £ million 2011 2010 2009   2011 2010 2009 Non-current assets             Property, plant and equipment:         Fleet 5765 5739 5,996 51% 54% 57% Property 856 920 971 8% 9% 9% Equipment 207 245 266 2% 2% 3%   6828 6904 7,233 60% 65% 69% Intangibles:         Goodwill 40 40 40 0% 0% 0% Landing rights 242 202 205 2% 2% 2% Emissions Allowances 12 0 - 0% 0% 0% Software 53 27 22 0% 0% 0%   347 269 267 3% 3% 3%           Investments in associates 232 197 209 2% 2% 2% Available-for-sale financial assets 39 76 65 0% 1% 1% Employee benefit assets 1100 483 340 10% 5% 3% Derivative financial instruments 6 27 3 0% 0% 0% Prepayments and accrued income 28 17 25 0% 0% 0% Total non-current assets 8580 7,973 8,142 75% 75% 78% Non-current assets held for sale 15 30 - 0% 0% 0% Current assets and receivables         Inventories 139 98 127 1% 1% 1% Trade receivables 460 499 530 4% 5% 5% Other current assets 273 289 268 2% 3% 3% Derivative financial instruments 73 74 40 1% 1% 0% Other current interest-bearing deposits 1259 928 979 11% 9% 9% Cash and cash equivalents 570 786 402 5% 7% 4%   1,829 1,714 1,381 16% 16% 13% Total current assets and receivables 2774 2,674 2,346 24% 25% 22% Total assets 11369 10,677 10,488 100% 100% 100% Shareholders’ equity     0% 0% 0% Issued share capital 290 288 288 3% 3% 3% Share premium 937 937 937 8% 9% 9% Investment in own shares 0 -4 (9) 0% 0% 0% Other reserves 1355 692 430 12% 6% 4% Total shareholders’ equity 2582 1,913 1,646 23% 18% 16% Non-controlling interests 200 200 200 2% 2% 2% Total equity 2782 2,113 1,846 24% 20% 18% Non-current liabilities         Interest-bearing long-term borrowings 3358 3446 3,074 30% 32% 29% Employee benefit obligations 232 208 191 2% 2% 2% Provisions for deferred tax 778 774 652 7% 7% 6% Other provisions 179 159 256 2% 1% 2% Derivative financial instruments 62 5 123 1% 0% 1% Other long-term liabilities 295 232 204 3% 2% 2% Total non-current liabilities 4904 4,824 4,500 43% 45% 43% Current liabilities         Current portion of long-term borrowings 385 556 689 3% 5% 7% Trade and other payables 3117 2910 2,796 27% 27% 27% Derivative financial instruments 21 12 471 0% 0% 4% Current tax payable 12 2 4 0% 0% 0% Short-term provisions 148 260 182 1% 2% 2% Total current liabilities 3683 3,740 4,142 32% 35% 39% Total equity and liabilities 11369 10,677 10,488   100% 100% 100% Source: BA Annual Reports and Accounts 2009-2011 Read More