Financial Statement Analysis of Qantas FPO Airline
Common Size Income Statement Analysis

Year 2012 2011 2010
Revenue and other income
Net passenger revenue
Net freight revenue
Other income
Expenditure
Manpower and staff related
Fuel
Aircraft operating variable
Depreciation and amortization
Non-cancellable aircraft operating lease rentals
Ineffective and non-designated derivatives
Share of net profit of associates & jointly controlled entities
Other expenditure
Statutory (loss)/profit before income tax expense and net finance costs
Finance income
Finance costs
Net finance costs
Statutory (loss)/profit before income tax expense
Income tax benefit/(expense)
Statutory (loss)/ profit for the year
100%
79.5%
5%
15.6%
101.1%
24%
26.8%
19%
8.8%
3.5%
1.0%
-0.02%
18%
 
-1.1%
1.15%
-2.27%
-2.21%
-2.22%
0.67%
-1.55%
100%
80.9%
5.7%
13.5%
97.1%
24.8%
24.8%
18.6%
8.4%
3.8%
2.5%
-0.15%
16.5%
 
2.9%
1.3%
-2.5%
-2.19%
1.67%
-0.5%
1.67%
100%
79.4%
6%
14.6%
98.2%
24.7%
23.8%
19.4%
8.7%
3.8%
1.3%
0.03%
16.4%
 
1.83%
1.3%
-1.9%
-0.54%
1.3%
-0.45%
0.84%

 
Explanation of the common size income statement analysis
From the common size analysis undertaken, it is evident that numerous changes occurred during the three years under consideration. To start with, the year 2012 recorded a major increase in the expenditure incurred. As a matter of fact, the amount of expenditure surpassed the total amount of revenues from operations and other Incomes.
The loss recorded in the year 2012 was brought about by several factors mainly the increase in the fuel bill in comparison to the previous years. The increase in expenditure over the total revenue and income was also brought about by prolonged industrial unrest. The increased expenditure was also influenced by costs of transformation as the airline continued to address its legacy costs.
There is a general indication from the common size analysis that most of the items had almost a similar percentage with the previous years in relation to the revenue and other income. However, the year 2012 recorded a loss before income tax expense and net finance costs as compared to the previous two years which registered profits before income tax expense and net finance costs. Additionally, the year 2012 recorded a tax benefit owing to the inability of the airline to make profits during the year. This meant that there was a tax benefit allowed for the year.
There was a decrease in net passenger revenue in relation to total revenue and other income for the year 2012. This could have been due to the increase in the costs incurred in acquiring revenue from passengers such as fuel costs. The year 2011 had the highest percentage of net passenger revenue as a percentage of total revenue and other income compared to years 2012 and 2010. This could have been influenced by increase in the number of passengers as well as favorable fuel costs.
The year 2012 had a slight decrease in manpower and staff related expenditure as a percentage of total revenue and other income. This could have been due to the industrial strive during the year 2012. There was a general increase in other expenditure for the year 2012 in comparison to the previous years. This could have been attributed to expenses that were not related to revenue generation. Numerous disclosures for the company revealed that the airline the domestic market had an impressive profit during the year 2012.
Ratio Analysis                                                    

Ratio/Year 2012 2011
Liquidity ratios

  • Current ratio = current assets/current liabilities
  • Quick ratio = (cash & cash equivalents + short term investments + accounts receivable)/ current liabilities
 
0.90
 
0.73
 
0.93
 
0.78
Turnover ratios    
Solvency ratios

  • Current ratio = current assets /current liabilities
  • Quick ratio = (cash & cash equivalents + short term investments + accounts receivable)/ current liabilities
 
0.9
 
0.73
 
0.93
 
0.78
Profitability ratios

  • DuPont analysis = (Net profit/Revenue) * (Revenue/ Total assets) * (Total assets/ Equity) = Net profit margin * asset turnover * financial leverage
  • Return On Equity = Net Income after tax/ Shareholders’ equity
  • Net Profit margin = Profit (after tax)/ Revenue
 
 
 
0.0404
0.0405
0.0167
 
 
 
0.0184
0.0192
0.008
Evaluation of stock > value of common stock = per-share dividends/discount rate    

 
Analysis of the ratios
Current ratio measures the position of the company’s current assets to current liabilities. Higher ratio is preferred over smaller one. Although the current ratio was low, the airline is not badly off in comparison to the industry average. Nevertheless, the airline is in highly illiquid as the current assets cannot be able to pay current liabilities. Additionally, the quick ratio of the airline is extremely low. The airline cannot use its cash and cash equivalents as well as short term investments in paying current liabilities.
On carrying out the DuPont analysis on the airline, it is evident that there is a return on equity of 4% for the year 2012 and 1.8% for the year 2011. This means the return on equity is improving. Furthermore, the net profit margin for the airline improved in 2012 to 1.7% from 0.8% in 2011. These figures are good in terms of the industry average.
 

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