Qantas Essay

Qantas Airways is an Australian based flight path and is a subset of the Qantas separate. It is a public-listed accompany in the ASX (Australian Securities Ex transport). The purpose of this look is to provide breeding of the Qantas grouping foc use on its positiveness, efficiency and liquidity for the last 3 years. This research paper too examines the financial analysis and provides new(prenominal) relevant information to support in the evaluation of the company. 1 Company Profile1.1 accountQantas is the fields second oldest air hose. It was founded in the Queensland outback in 1920 and has been in continuous ope balancen since that date. Qantas is Australias largest domestic and foreignist airline and is prize as one of the worlds leading keen-sighted remoteness carriers. The name comes from the initial letters of the words in the original registered style Queensland and marriageern Territory Aerial Services Limited. 1.2 Qantas root word Strategy synthetic rubbe r remains Qantas first operable priority and they be act to maintaining the maculation as the leading Australian domestic carrier and one of the worlds premier sustainable long-haul airlines by dint of the doubled airline brands Qantas and Jetstar. Qantas labour to maintain client loyalty by delivering exceptional experiences through with(predicate) these dual brands, in conjunction with Qantas normal Flyer. The operating strategy is complimented with a c areful approach to smashing management as they seek to deliver sustainable, long terms return to the shareholders. The Qantas separate strategic priorities are illustrated be measly. 41.3 Qantas OverviewQantas is Australias largest full service airline carrying 28 one thousand million passengers in 2011/2013 on 5,050 flights per week in Australia, upstart Zealand, Asia, North and South America, Africa and Europe. It is a conception member of the oneworld alliance. Qantas is a single integrated airlines providing air line transportation through its two Qantas brands Qantas and QantasLink Main MarketsQantas main grocerys are domestic and international barter to and from Australia. Qantas, a wholly-owned group of subsidiaries including QantasLink and Network Aviation, services 57 metropolitan and componental regular passenger transport speechs across Australia and Port Moresby in Papua New Guinea, as well as 19 dedicated fly-in-fly-out charter destinations. 2011/2012 passenger Distribution passenger RevenueAustralia domestic 78% 51% multinational 22% 49%CustomersQantas carries business and leisure passengers crossingQantas offers passengers a bounty mesh topology output on its extensive domestic and international network and through it oneworld membership, accessing 24 bilateral codeshare agreements (excluding Jetstar and Jetstar Asia with whom Qantas also has codeshare agreements), over 870 destination and 550 lounges. Passengers also have the opportunity to earn and redeem frequent v izor points across its global network. Qantas is foc utilise on both business and leisure livelers by offering a one or two categorise product on domestic routes and a two, three or four class product for international services. 51.4 Jetstar OverviewJetstar commences opeproportionns in May 2004. It is the Qantas Groups low fares airline and the largest low speak to carrier in the Asia Pacific region. Jetstar comprises of Jetstar Domestic, Jetstar International and holdings in Singapore-based Jetstar Asia, Vietnam-based Jetstar Pacific and Jetstar Japan. In 2011/2012, its operations carried 18.7 million passengers to over50 destinations in Australia, New Zealand, Asia and the Asia Pacific. Jetstar also recently proclaimed its intention to invest in a new airline, Jetstar Hong Kong, with China east Airlines in 2013. Main MarketsJetstars main markets are domestic and international traffic to and from Australia. Pan-Asian expansion has strengthened through Jetstar Asia, Jetstar Pac ific and Jetstar Japan. New Zealand operations encompass both trans-Tasman and domestic New Zealand markets. 2011/2012 Passenger Distribution Passenger RevenueAustralia domestic 57% 51%International 43% 49%CustomersJetstar foc utilise on providing consistently low fares to predominantly leisure travellers. ProductJetstar offers domestic and international passengers a measure out based product with the flexibleness to select additional operations in analogy to seating, entertainment, catering, baggage and superior seating on long haul. Jetstars continual focus on leading online technology has enabled to a greater extent innovative ways to book, check-in and board. 61.5 FleetQantas Group operates pass bys comprises of Boeing 737-800, A330-200, A380-800 Boeing 787 Dreamliner, Bombardier Q400 and Boeing 717. Over the next 10 years, the Qantas Group has committed capital investment worth US$23 billion in more fuel efficient, next generation aircrafts such as A380-800, Boeing 787 Drea mliner and Airbus A320 neo. 1.6 incorporated and Social ResponsibilitiesThe Qantas Foundation was established as a chari hold over cuss in 2008. It forms part of the Qantas Groups commitment to operating in a sustainable and socially responsible manner. The Qantas Foundation focus on two key areas Initiative that provide an immediate experience for those in need (Changing lives) Experiences and opportunities that empower the next generation of Australians to make a exit in community (Empowering change) To deliver this vision, the Qantas Group leverage off the various resources of theQantas Group from their employees, diverse network of suppliers and partnerships, and the use of their own airline. An another(prenominal) possible action that the Qantas Group took on is aiming for a world class performance by protecting the environment for the generations. They aim to reduce their carbon footprint through several proven measures such as Aircraft weight reduction initiatives ef fectual ground power units in lieu of jet fuel control auxiliary power units Using GPS-based navigation technology to improve operational efficiency Investing in a fuel efficient fleet such as Airbus A380 and Boeing 787 Facilitating a sustainable aviation fuel intentness in Australia On ground, together with their partners, innovative projects and partnerships were set to achieve this goal. unmatchable example is the Clean Up Australia campaign started since 1996, the Qantas Group have been a key corporate partner for the Clean Up Australia Foundation. Key Successes1. retained a descending(prenominal) trend on electrical energy, water and waste-to-landfill consumption since 2006, condescension operational evolution. 2. Reduced environment impact between 2005 and 2011Reduced electricity consumption by 8%Reduced water consumption by 19%Reduced waste-to-landfill by 21%3. Maintained a downward trend on jet fuel emission intensity 72. Key StrategiesThe Qantas Group has a broad portfolio and a clearly outlined strategy with the following core goals Build on the Groups domestic businesses through a clear focus on the customer Strengthened Jetstars presence across Asia to capture the full benefits of the regions low-cost leisure travel boom. Continue to expand Qantas Frequent Flyer by adding new partners and increasing ways for members to earn and eliminate points. most of the changes seen were introducing a new tablet-based in-flight entertainment system called Q Streaming that certain outstanding feedback from passengers. New order for 10 Fokker 100 aircraft were placed to open Qantas reach into Western Australias mining centres as part of the Groups fly-in-fly-out strategy. Jetstars focus in the domestic market remained on building upcapacity on core leisure routes with current fleet such as the A320 aircraft, adding almost 16,000 extra seats during the year. Qantas Group also expanded alliance with American airlines, attracting consumers from the America regions. 82.1 rise Analysis on the Qantas GroupSTRENGTHStrong partnership with other alliance through its oneworld membership accessing 24 bilateral codeshare agreements over 870 destination and 550 lounges. Passengers also have the opportunity to earn and redeem frequent flyer points across its global network which attracts consumer to choose the Qantas Airways over other airlines. fail and fly in to many destinations such as Australia (Domestic), New Zealand, Asia, North and South America, Africa and Europe making Qantas Airways the ideal airline to consumers. WEAKNESSQantas do not have many control routes and depend heavily on its other airline partners. For example to get across to destinations such as Europe, the Middle East and North Africa, consumers have to transit at Dubai and change airlines to the Emirates to get to their final destination. This turns away consumers who prefer to fly in direct to the country. OPPORTUNITYQantas subsidiary Jetstar announced its intention to invest in a new airline Jetstar Hong Kong, in partnership with China Eastern Airlines this year. This expands the ready business into the Chinese market. THREATThe global fuel monetary value extend affects the airline manufacturing. With spicyer fuel prices, the airlines operating cost incr puffs. To compensate, airline raise ticket prices to generate more tax which in turn, turn away consumers and force them to look at other airline that provides competitive or even debase prices. Introduction of more low cost carriers from established airlines such as Scoot, a subsidiary airline of the Singapore Airline. 93. balances3.1 Profitability Ratio (%)Profitability ratio is used to measure a companys ability to generate revenue in relation to gross revenue, pluss and rightfulness (i.e. often the sum of monies invested). It also shows how impelling the company is being managed to stay profitable. Some commonly used profitability ratios include return on equity, retur n on investment, return on total assets, gross and net profit tolerances and return on capital employed. Profitability ratios provide investors guidance in their assessment of the companys financial health and performance. For example, return on investment indicates whether the company is generating liberal profits for its shareholders. Net profit margin declined by 0.52% in 2012 eon an increase of 0.53% occurred in 2011 as seen in submit 1. It is slightly note than the industry add ups of 1.737% by 0.377%. The decline in net profit margin may be attributed to rising fuel costs, fall in freight, tours and travel revenue. In 2012, Qantas incurred restructuring costs of AUD376 million compared to nil in 2011, which is in relation to their initiative to reduce costs and improve business in the international segment. The other ratios such as Return on assets (ROA) and return on equity also declined to 2.12% and 3.38% respectively in 2012.Profitability Year/Ratio 2010 2011 2012 in tentness add upsReturn on total assets (ROA)1.76%2.28%2.12%2.630%Return on equity2.88%4.26%3.38%5.290%Net profit margin1.35%1.88%1.36%1.737%103.2 EfficiencyEfficiency ratios are used to show how well a company uses its assets and liabilities efficiently to be able to earn significant amount of profits. Examples of efficiency ratios include asset overthrow, fund turnover, receivables turnover and payables turnover. Qantas may be considered as efficient in utilizing its resources to generate revenue, with asset turnover showing an increase to 252 eld in 2012 compared to 245 days in 2011. Generally the broad(prenominal)er a companys asset turnover, it means the assets have been used more efficiently. From table 2, the fare of days taken for creditors to be paid fell to 45.41 days in 2011, however a modest increase of 1.45 days was experienced in 2012. Compared to industry averages, Qantas took a longer time to pay their creditors. On the other hand, number of days debtors took to pay was shortened by 2.09 days in 2012 while there was an improvement of 1.62 days in 2011. However the receivables turnover is a little higher at 19.83 days compared to industry averages of 18.45 days. parentage turnover shows the frequency a companys inventory is change and replaced over a period. A high turnover indicates strong sales while a low turnover may imply inadequate sales and hence excess inventory. Inventory turnover fell to 9.39 days in 2012 compared to 9.72 days in 2011. However the ratio is higher than industry average of 8.52 days. Table 2Efficiency Year/days 2010 2011 2012 Industry averagesDays payable50.4345.4146.8643.90Days receivable23.5421.9219.8318.45Days inventory9.199.729.398.52addition turnover234245252284.70113.3 fluidnessLiquidity ratio measures the companys ability to pay its short term liabilities when due. It is calculated by dividing bills and other liquid assets by the short term borrowings and current liabilities. This ordain show the number of times the short term obligations are cover by the hard currency and liquid assets. The short term obligations are considered full covered and the company is in good financial health if the value is greater than 1. The higher the liquidity ratio, the higher the capability the company possesses to fulfil its current liabilities. Examples of liquidity ratio include current ratio and wide awake ratio. Current ratio for Qantas was 0.90 in 2011 and 0.77 in 2012, near industry average of 0.81. In comparison to arrant(a) Australia Holdings Ltd whose current ratio is 0.65 in 2011 and 2012 (See table 4), Qantas appears more stable though the values of its current ratio are less than 1 for both years. brisk ratio also cognise as the acid-test ratio focuses on the most liquid assets, leaving inventory out which may be hard to turn into cash in a timely manner. In the case of Qantas, the quick ratio was 0.71 in 2012, 0.14 drop from 0.85 in 2011, while industry average is 0.75. As compa red to pure whose quick ratio was 0.61 in 2012, the company seems to be in a stronger position to fall in its short term commitments. Table 3Liquidity Year/Ratio 2010 2011 2012 Industry averagesCurrent ratio0.930.900.770.81Quick ratio0.880.850.710.7512Table 4 Growth Profitability and Financial Ratios for Virgin Australia Holdings Limited Liquidity/Financial Health 2010-06 2011-06 2012-06Current Ratio0.760.650.65Quick Ratio0.750.620.61Financial Leverage4.154.154.3Debt/Equity2.33.213.96Source 2013 Morningstar, Inc.133.4 power train Ratio cogwheel ratio compares owners equity or capital to borrowings. Gearing is a measure of financial leverage showing the extent to which a companys activities or operations are funded by owners currency against borrowed funds. A high gearing ratio indicates that a company is using debt to pay for its operations and may risk inability to meet repayments in an economic downturn. The situation could be made worse where rates shanghai upwards suddenly . Lenders are generally concerned about excessively high gearing ratio that may put their loans at risk for non-repayment. Some examples ofgearing ratio are debt equity ratio and net touch cover. For Qantas, the gearing ratio increased to 111.21% in 2012 compared to 98.05% in 2011.This means the company used debt instead of equity to fund its continuing operations. However, this ratio is lower that industry average of 130.547%. Net interest cover ratio refers to the ease a company pays interest expenses on outstanding debt. The lower the ratio, the more the company is burdened by debt expense. The companys ability to meet interest payments may be doubtful when the ratio is 1.5 or lower. In Qantas case, the net interest cover ratio dropped sharply to 1.54 in 2012 against 3.96 in 2011. This ratio of 1.54 is close to the threshold of 1.5 and is indicative that Qantas may face cash flow problems and inability to meet interest expenses should rates increase suddenly. Table 5Gearing Year /days 2010 2011 2012 Industry averagesNet use up cover ratio4.163.961.542.35Gross Gearing (D/E)95.600%98.050%111.210%130.547%143.5 Investment ratioA shareholder can analyse the financial information available to determine if the investment in a company is of value and quality. The price/earnings ratio is the best known investment valuation indicators and used widely by investment professionals and investors. Generally the stock with a high price earnings ratio indicates that investors expect higher earnings growth in the future. The price earnings ratio for Qantas was 12.23 in 2012, 15.90 in 2011 and 29.14 in 2010. A sharp decline of 13.24 was recorded in 2011 due to market confidence in this stock prior to 2011. However the industry average is 12.25 which may suggest that investors may be less likely to