Financial Comparison of Ryanair and British Airways

4206 Words Jan 4th, 2013 17 Pages
Financial comparison of Ryanair and British Airways
Aviation Finance 12CVC062
Balázs Baumgartner (B015926)

10/12/2012

Table of Contents
Review of Ryanair’s and British Airway’s current financial situation ........................................................ 2 Liquidity ..................................................................................................................................................... 2 Performance and earning .......................................................................................................................... 3 Solvency..................................................................................................................................................... 3
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Such rate suggests for the banks and suppliers that the company is low risk for investment and has high liquidity, but also proposes that the cash is being accumulated to finance future aircraft orders or other investments. The fact that the cash reserves has grown with €1.2bn in the last two years also underpins these assumptions.(Morrell 2007)

2

British Airways has a low current ratio of 0.7531. It points out the problem that BA cannot finance its current assets from its current liabilities. Thus, it can be assumed that the short term debts are financed through the more expensive long term loans. The company’s cash reserves are £1.7bn, which is considerably lower in comparison to Ryanair’s reserves. This can result in higher interest rates as the airline is not considered as a safe investment for lenders. According to Moody’s credit rating company BA’s credit ratings were B1 and BB in 2011. Also being a legacy airline BA works with more third party suppliers like travel agents and these issues can mean that the pay-outs are delayed. It is important to note that Ryanair and the low-cost business model do not use travel agents.

Performance and earning
The operating margin gives an indication of management efficiency in controlling costs and increasing revenues as

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