FINANCIAL ANALYSIS REPORT

Table of Contents
2

A Company Overview........................................................................................................4
2.1

Business model............................................................................................................5

2.1.1
2.2

Porter five forces analysis....................................................................................6

2.2.2

SWOT Analysis....................................................................................................7

Financial Analysis - Qantas................................................................................................8

Horizontal Analysis.....................................................................................................8

3.1.1

Income Statement.................................................................................................8

3.1.2

Statement of Financial Position.........................................................................10

3.1.3

Income Statement...............................................................................................11

Financial Analysis Virgin Australia...............................................................................13

4.1

Horizontal Analysis...................................................................................................13

4.1.1

Income Statement...............................................................................................13

4.1.2

Statement of Financial Position.........................................................................15

4.2

Social and economic environment...............................................................................6

2.2.1

3.1

Full service carrier (FSC) and low cost carrier (LCC) models............................5

Vertical Analysis........................................................................................................16

4.2.1

Income Statement...............................................................................................16

4.2.2

Statement of Financial Position.........................................................................17

Comparison between Qantas and Virgin..........................................................................19

5.1

Horizontal Analysis...................................................................................................19

5.1.1

Income Statement...............................................................................................19

5.1.2

Statement of Financial Position.........................................................................20

5.2

Vertical Analysis........................................................................................................21

5.2.1

Income Statement...............................................................................................21

5.2.2

Statement of Financial Position.........................................................................22

1

Key Ratios........................................................................................................................23
6.1

Return and Profitability.............................................................................................23

6.1.1

Net Profit Margin...............................................................................................23

6.1.2

Return on Equity................................................................................................24

6.1.3

EBITDAR Margin..............................................................................................24

6.2

Risk Ratios.................................................................................................................25

6.2.1

Current Ratio/Working Capital Ratio.................................................................25

6.2.2

Quick Ratio........................................................................................................25

6.2.3

Debt to Equity Ratio...........................................................................................26

Other Relevant Information.............................................................................................27

Conclusion and Recommendations..................................................................................28

References........................................................................................................................29

Appendix..........................................................................................................................30
A.1

Details of Qantas Groups Acquisitions and Milestones...........................................30

A.2

Financial Statements Qantas...................................................................................32

A.2.1

Income Statement...............................................................................................32

A.2.2

Statement of Financial Position.........................................................................33

A.3

Financial Statements Virgin Australia....................................................................34

A.3.1

Income Statement...............................................................................................34

A.3.2

Statement of Financial Position.........................................................................35

A.4

Formulas and Calculations........................................................................................36

A.4.1

Horizontal Analysis............................................................................................36

A.4.2

Vertical Analysis.................................................................................................36

A.4.3

Net Profit Margin...............................................................................................36

A.4.4

Return on Equity................................................................................................36

A.4.5

EBITDAR Margin..............................................................................................37

A.4.6

Current Ratio......................................................................................................38
2

A.4.7

Quick Ratio........................................................................................................38

A.4.8

Debt to Equity....................................................................................................38

1 A Company Overview
Founded in the Queensland outback in 1920, Qantas has grown to be Australia's largest
domestic and international airline. Registered originally as the Queensland and Northern
Territory Aerial Services Limited (QANTAS), Qantas is widely regarded as the world's
leading long distance airline and one of the strongest brands in Australia. Qantas have built its
sup-groups below: QantasLink, Q Catering, Qantas Freight, Express Ground Handling,
Qantas Holiday and Jetstar.

Q a n ta s
G ro u p

Qantas Link
Q Catering
Qantas Freight
Express Ground
Handling
Quantas Holiday
Jetstar

QantasLink

QantasLink operates over 2000 flights each week to 56 metropolitan, regional and
international destinations across Australia and to Port Moresby in Papua New Guinea.

Q Catering

Qantas Catering Group Limited is a wholly owned subsidiary that operates two catering
businesses - Q Catering and Snap Fresh. Q Catering has catering centres in four Australian
ports - Sydney, Melbourne, Brisbane and Perth.

Qantas Freight

Focused on providing excellence in airfreight services, Qantas Freight Enterprises is

Australia's largest independent airfreight services business employing over 1,300 people in
Australia and across the world.
Qantas Freight operates a network of 21 specialist cargo handling terminals in 15 major
gateway ports across Australia and in a dedicated terminal in Los Angeles. These terminals
handle freight for Qantas and Jetstar, as well as many other major carriers.

Express Ground Handling

A wholly owned subsidiary of Qantas Airways within the Qantas Airports and Catering
Group, provides comprehensive ground handling services to Jetstar and several regional
airlines.

Qantas Holiday

Part of the Jetset Travelworld Group wholesale suite, is one of Australia's leading travel
wholesalers. Qantas Holidays markets an extensive range of competitively priced products
and services covering the Qantas network, including partner airlines and codeshare services,
as well as packages for other airlines under the Viva! Holidays brand. In addition to
destination specific promotions, Qantas Holidays sells packages to a number of special events
in Australia, such as popular stage shows and sporting events.

Jetstar

The Jetstar Group is a value based, low fares network of airlines operating in the leisure and
value based markets offering all day, every day low fares.

1.1 Business model

1.1.1

Full service carrier (FSC) and low cost carrier (LCC) models

Using their dual complementary airlines, Qantas and Jetstar, the Group focuses on its main
business as transportation of passengers and is committed to maintaining their leading
position in operating long-haul international, and short-haul domestic and regional services.
There are two business models in the airline industry, namely the FSC and LCC models. FSC
model is essentially based on a differentiation strategy that bears much heavier overheads,
while LCC model based on the cost minimisation strategy by significantly cutting costs
through reducing their overheads (Alamdari and Fagan, 2005). Qantas airline (both domestic
and international) is operating based on the FSC model, while Jetstar is operating based on
LCC model as a direct competitor to the low cost Virgin Blue in Australia (Hunter, 2006).
5

Qantas Group also possesses a broader portfolio of businesses and investments, including
Qantas Loyalty and Qantas Freight, which creates assorted revenue streams and generates
more values for customers and investors as a result (Details please see Appendix A.1).

1.2 Social and economic environment

1.2.1

Porter five forces analysis

Industry Competitors

Qantas observes severe competition from Virgin Australia domestically and a number of low
cost airlines internationally such as China Southern Airline and Malaysia airline. Qantas must
always revitalise its product offerings in order to be competitive and sustainable amongst
other players.

Threat of new entrants

Extremely high fixed initial costs along with government regulatory requirements increase
the entry threshold for the air transportation industry. Therefore, the high barriers of entry and
the dominant powers of existing large players significantly reduce the number of new
entrants.

Threat of substitute products or services

Other forms of transportation like railways, buses, ships and personal transportation are direct
substitutes for those who are not concerned about travelling fast. Indirect substitutes such as
teleconferencing, online chatting and VoIP (Voice over IP) will increase the threat of
substitutes as they save time and money for customers who are travelling.

Bargaining power of customers

Buyers for Qantas consist of business travellers, leisure travellers, budget travellers, travel
agents, and many others. The expectations of the customer have grown over time as they
demand more value for every dollar spent. In addition, technology development also allows
firms and individuals to communicate with ease which strengthens the bargaining power of
customers.

Bargaining power of suppliers

The aircraft suppliers for Qantas are the only two largest aircraft manufacturers: Boeing and
Airbus. Fuel will be supplied by companies like Shell and BP. Hotels and catering service are
also provided to the customers as well as crew members in different destination of its
6

operations. In order to lower the cost, Qantas need to maintain a fairly good communication
with its suppliers to achieve the competitive edge.
1.2.2

SWOT Analysis

Qantas' strong dominance in Australian domestic market enables it to take advantage of the
local expertise to gain access to key markets as well as enhancing the quality of its services.
However, increased competition from the growing numbers of low cost and low fare airlines
could impact the group's market share especially in the Asian region.
F IGURE 2.2.2-1 SWAT ANALYSIS

OF

QANTAS

Strength
1. Strong support of Australian Government
2. One of the top and largest airlines operating in
Australia
3. Has been one of the historical airline operators in
the world
4. Has over 40 destinations domestically and
internationally
5. Good brand building exercises through advertising
and sponsorship

Weakness
1. Heavy concentration around the
Australia region
2. Costly and ineffective employee training
schedule

Opportunity
1. Due to the monopolistic nature of Qantas, it
reduces the chance of other airlines gaining
more market share in Australia
2. More potential international destinations in
Asia
3. Collaboration with international airlines

Threats
1. Increasing fuel prices
2. Rising Labor Costs
2. Increasing Competition in Australian
Market from new start ups

Based on the above SWOT analysis, it can be inferred that the strengths of Qantas make it a
well respected airline which infuses public confidence. Furthermore, its brand name gives
good selling prospects. However, due to the attribute of aviation industries, there are a lot of
challenges that contributes to the uncertainty of the financial performances.

2 Financial Analysis - Qantas

2.1 Horizontal Analysis
2.1.1

Income Statement

TABLE 3.1.1-1 HORIZONTAL ANALYSIS - I NCOME STATEMENT QANTAS

In 2009-2014 timeframe, Qantas has experienced a low rate of growth in Revenue and Other
Income of 1.2% on average per year. Its highest figure was reached in 2013 when it was
$15,902m. However in 2014 Annual Report it declined to $15,352m (-3.2% YoY 2013-2014).
Revenue and Other Income are highly affected for a decline in Other (-10.2% YoY average
2009-2014) and a low rate of growth in Net passenger revenue (2.9% YoY average 20092014). Other account includes Frequently Flyer marketing revenue (-38%) and Contract work
revenue (-48%).
Qantas Expenditure has an average rate of growth of 6.3%. Fuel Expense, as one of the most
important expenditures in airline companies, has grown for most of the years (4.8% YoY
average 2009-2014). In 2014 this company did an impairment review that had a high impact
in the Income Statement, this program cost the company $2,849m in expense.
8

The growth of Revenue and Other Income between 2009 and 2014 was 5.5%. Yet,
Expenditure has grown 33.3% in the same period. As a result the Statutory profit shows a
declining trend. In 2014 Qantas attained the highest losses among the years analysed in this
report.

2.1.2

Statement of Financial Position

TABLE 3.1.2-2 HORIZONTAL ANALYSIS-STATEMENT

OF

FINANCIAL POSITION Q ANTAS

10

Qantas assets have declined from $20,049m in 2009 to $17,318m in 2014 (-13.6%). This
event occurred due to the decrease in Property, Plant and Equipment (PPE) (-13.6%) and
Cash and cash equivalent (-17%). Major decrease in PPE account occurred in 2014 due to the
impairment review.
Liabilities have increased 1.2% from $14,284m in 2009 to $14,452m in 2014. An increase of
11.8% during 2014 in Revenue received in advance had a high impact in Qantas liabilities.
From 2009 to 2013, Qantas equity had no relatively large changes with an average of
$5,841m. However, in 2014, this company had recorded a high statutory loss that resulted a
50.9% decline in companys equity.
Vertical Analysis
2.1.3

Income Statement

TABLE 3.1.3-3 VERTICAL ANALYSIS - INCOME STATEMENT Q ANTAS

Net passenger revenue has always been the major source of income for Qantas while Fuel
expense has been one of the largest components among expenditures. In 2014 Fuel consisted
29.1% of Revenue.
11

Statement of Financial Position

TABLE 3.1.3-4 VERTICAL ANALYSIS -STATEMENT

OF

F INANCIAL P OSITION QANTAS

PPE has been the largest assets in Qantas Statement of Financial Position as they ranged
between 60.6% and 69% of the total assets. In addition, the company always tends to have a
12

significant proportion of assets in Cash and cash equivalents, this account ranged on average
16.9% in the past 6 years.
Qantas has used Bank Loans as its long term financing source. Interest-bearing liabilities
account is on average 36.2% of the Total Liabilities. Revenue received in advance is an
important source of short financing for this company.

3 Financial Analysis Virgin Australia

3.1 Horizontal Analysis
3.1.1

Income Statement

TABLE 4.1.1-5 HORIZONTAL ANALYSIS INCOME STATEMENT VIRGIN

The financial statements of Virgin Australia showed that there has been an increase in
Revenue and Income over the years. In 2014 the Revenue hits $4,307m, which is 63% higher
than it was in 2009. The average rate of growth for the timeframe is 10.5%.

13

Virgins Expenditure has also increased for the past 6 years. Fuel Expense increased
moderately as the crude oil price rose over the years (10.1% YoY average 2009-2014).
Given that Virgin is a large sized public corporation, it has rather volatile statutory profits (or
losses) during the last 6 years and there is no clear trend. However, in 2014 Virgin reached
the highest level of losses ($356m).

14

3.1.2

Statement of Financial Position

TABLE 4.1.2-6 HORIZONTAL ANALYSIS-STATEMENT

OF

FINANCIAL POSITION VIRGIN

15

Virgins Total Assets have increased from $3,367m in 2009 to $4,679m in 2014 (39%). This
remarkable increase is mainly due to the growth in Cash and cash equivalents (15.6%
average increase YoY), as well as the growth in Trade and other receivables (20.6% average
increase YoY).
Total Liabilities have increased 30.2% in the last 6 years, despite that the non-current
liabilities have remained stable (average rate of growth 1.2%). On the other hand, the current
liabilities increased from $1,159m in 2009 to $1,921m in 2014. This large increase is due to
the fact that Virgin refinanced a collateralised pool of aircrafts and entered into new bank
loans in the recent years.

3.2 Vertical Analysis

3.2.1

Income Statement

TABLE 4.2.1-7 VERTICAL ANALYSIS INCOME STATEMENT VIRGIN

Virgins relative Income statement compositions have not changed much in the past 6 years.
As expected, Fuel and Labour expenses have the highest proportion in Virgins Expenditure.
On average, 27.5% of the revenue is spent in Fuel expense and 22.8% is spent in Labour and
staff expense.
16

3.2.2

Statement of Financial Position

TABLE 4.2.2-8 VERTICAL ANALYSIS -STATEMENT

OF

F INANCIAL P OSITION VIRGIN

17

PPE as the most important assets in Virgin Statement of Financial Position, decreased from
78.6% in 2009 to 57.8% in 2014. Yet, Virgin increased the proportion of assets in Cash and
cash equivalents in 2014, this account had an average of 17.2% in the past 6 years.
Virgin uses Bank Loans as its long term financing source. Interest-bearing liabilities account
is on average 36.2% of the Total Liabilities. Revenue received in advance is an important
source of short financing for this company.

18

4 Comparison between Qantas and Virgin

4.1 Horizontal Analysis
4.1.1

Income Statement

TABLE 5.1.1-9 COMPARISON H ORIZONTAL ANALYSIS INCOME STATEMENT

Being in the aviation industry, Qantas and Virgin have both suffered the same problems such
as rising Fuel price, in the past years. Both companies have positive rates of growth in the
timeframe of 2009-2014. However Virgin has a higher average than Qantas (10.5% and 1.2%
respectively). Total Expense for both companies increased, nevertheless, Virgin has a higher
average in Total Expenditure as well as in Fuel Expense and Labour Expense. This could be
explained by Virgins increasing Revenue.

19

4.1.2

Statement of Financial Position

TABLE 5.1.2-10 COMPARISON H ORIZONTAL ANALYSIS STATEMENT OF FINANCIAL POSITION

In 2014, both companies performed an impairment review and it had a considerate impact in
PPE, with Qantas account decreased by 24.1% while Virgins declined by 11.8%. From the
numbers above it shows that Qantas and Virgin both use Revenue received in advance as a
short-term financing source. The comparison of the Statement of Financial Position reflects
that both companies experienced similar challenges in the past years.

20

4.2 Vertical Analysis

4.2.1

Income Statement

TABLE 5.2.1-11 COMPARISON VERTICAL ANALYSIS INCOME STATEMENT

Qantas and Virgin Australia have different market share proportions and the Vertical Analysis
comparison shows how close their performances are. On average, 50.3% of the Income was
expended in Fuel and Labour salaries (the difference between companies is non-existent).
Both companies have an increasing trend in the ratio of Operating Expenses/Revenue, this is
due to the increasing competition in the Australian Market.

21

4.2.2

Statement of Financial Position

TABLE 5.2.2-12 COMPARISON VERTICAL ANALYSIS STATEMENT OF FINANCIAL POSITION

The proportions in the Statement of Financial Position are pretty similar for both companies,
on average PPE is close to 65% of the Assets while Liabilities represent 75% of the creditside.

22

5 Key Ratios
Scarcity of resources is the primary drive for investors to determine the best alternative in
investing and various analysis can be performed by calculating the ratios, to measure the
return and risk of an investment.

5.1 Return and Profitability

This report will use the Net Profit Margin, Return on Assets (ROA), Return on Equity (ROE),
and EBITDAR margin to measure the profitability of Qantas and Virgin.
5.1.1

Net Profit Margin

Companies with good market position will have high Net Profit Margin and these companies
usually have a good cost control and small number of debt.
TABLE 6.1.1-13 NET P ROFIT MARGIN COMPARISON

The figures above demonstrate that the performance of Qantas has declined from year to year.
Based on CSI Market (www.csimarket.com) the average Net Profit Margin of 25 airline
companies in 2014 is 2.82%, which is above Qantas. Such a relatively low figure suggests
that the airline has high operating costs and the company operates in a highly competitive
market.
More specifically, the high operating costs were also due to the high debt to equity ratio,
leading to high spending on loans. Furthermore, the company's ability to control spending on
fuel is very limited. On top of that, operating in a competitive market makes it very difficult
for Qantas to raise flight fares.
In 2012, Qantas had a negative Net Profit Margin because of the restructuring of the
organization. It was problematic to work with the industrial union action, which forced the
company to stop operating its fleet. In 2014 the company had its assets restructured, which
led to assets impairment and added significant costs in its 2014 financial statements.
Overall, the performance of Qantas is better than Virgin Australian. The reason may be that
its brand name is stronger than Virgins, leading to a greater market share, and that Qantas
can manage its operating costs better than the competitor.
23

24

5.1.2

Return on Equity

Return on equity (ROE) shows the rate return on the capital invested by shareholders.
TABLE 6.1.2-14 RETURN

ON

EQUITY COMPARISON

Based on data taken from Capital IQ & Bloomberg summarized by Aswath Damodaran,
published at Damodaran Online, the industry average ROE currently is 3%. For Qantas the
ratio is far below the average and it means that investors would lose 61 cents for every dollar
invested.
As mentioned earlier, the restructuring of its assets resulted in large costs. However, these
costs can be a sign that the company is changing for the better. Despite that, the figures
suggest that both Qantas & Virgins ROE performance are getting worse and it could be a
sign that the business is not profitable.
5.1.3

EBITDAR Margin

EBITDAR measures how much actual return earned by the company from sales before the
deduction of interest, tax, depreciation, amortization and airplane lease expense. This ratio
will measure the performances of the companies regardless of differences in interest
expenses, tax burden and lease expenses.
TABLE 6.1.3-15 EBITDAR M ARGIN COMPARISON

As above stated, both companies showed a decreasing trend. It could suggest that the airline
industry is an unfavourable industry. However Qantas shows a more stable EBITDAR than
the competitor. That is an indicator that their management has a better understanding in daily
operation and maintaining their operational expenses.

25

5.2 Risk Ratios

5.2.1

Current Ratio/Working Capital Ratio

TABLE 6.2.1-16 CURRENT RATIO

COMPARISON

Since 2010, Qantas has had better ability to fulfil all the current liabilities. In 2014 the current
ratio for Qantas is 66%, which means their current assets only cover 66% their current
liabilities. For most companies this ratio target is 120%-170% but in air transportation
industry the average current ratio is about 70% (www.csimarket.com). Qantas and Virgin
both outperform the industry average from 2012.
Current liabilities generally arise from procurement of current assets such as inventories
which if sold would result in current assets such as accounts receivable or cash. Therefore,
current assets would at least be able to meet current liabilities (100% ratio). In an air
transportation service company like Qantas, current liabilities are also included as part of
long-term liabilities in the form of rent payable maturities of less than one year, which is
quite large and does not directly contribute to improving the current assets of the company.
Overall, companies need at least above the average ratio to be consider as a less risk company
for investing.
5.2.2

Quick Ratio

The quick ratio measures the company ability to cover all the current liabilities by its current
assets minus inventory. Transportation companies do not necessarily pile up their inventory
since they get the revenue from providing services to customers.
For the cash ratio, a high value indicates that too much capital is being tied up in the business,
whilst the acid test or quick ratio indicates the companys ability to repay immediate
commitments using cash or near-cash. It excludes inventory in order to show the immediate
solvency of the company.
TABLE 6.2.2-17 QUICK RATIO COMPARISON

26

The average quick ratio for the transportation industry is around 40%, which is lower than
both Qantas and Virgin. Qantas and Virgin both have a good ratio but Virgins is better. Both
companies current assets are mostly cash equivalents and accounts receivable that can be
used instantly to fulfil their current liabilities.
5.2.3

Debt to Equity Ratio

As a firm's debt-to-equity ratio increases, it becomes more risky. This is because if the
company is less likely to meet its debt obligations, it will lead to higher chances of
bankruptcy.
TABLE 6.2.3-18 DEBT

TO

EQUITY RATIO COMPARISON

Airline companies are technological and capital intensive companies with high DER. The
ratio of Qantas is larger, which indicates higher risk for the company, compared to Virgin
Australia. Qantas has a total debt of 5 times larger than its shareholders equity, and for
Virgin, 3.5 times.
There are two benchmarks that can be used for comparison. Based on the calculations of
Aswath Damodaran, the average ratio of 142 firms in this industry is 303%. Another
reference that can be used is based on CSI Market, which is 142%. Both companies have
higher risk than the industry average.

27

6 Other Relevant Information

To support Qantas' goal of delivering continuous return to investors, a well structured
administration system is crucial. Corporate governance is fundamental in ensuring the
creation, protection and enhancement of shareholder value. The Qantas Board of Directors,
currently consisted of nine Independent Non-Executive and Executive Directors, is
responsible in reviewing strategic direction of Qantas and monitoring application of strategy
by Management, which includes supervision of the integrity of the accounting and corporate
financial reporting systems.
The Board has a series of business principles and group policies, which include areas such as
health, environment, fair trading and safety, to promote ethical and responsible decision
making. For instance, Qantas's Employee Share Trading Policy provides guidelines that
prohibit certain nominated employees from dealing in Qantas shares to protect the Qantas
Group. Crisis management are also emphasized to ensure that Qantas can respond swiftly to,
and recover efficiently from unexpected economic shock.
With aviation sector being a high risk industry, risk management and internal control system
are practiced to support and fulfil corporate governance obligations. Audits and risk
management reviews are reported to the Board through the Audit Committee on quarterly
basis for verification. The other Board Committee responsible for oversight of risk-related
matters is the Safety, Health, Environment and Security Committee. This committee helps to
protect Qantas' reputation as one of the safest and most secure airline company in the world
and also monitor the group's operational safety system (QMS). Along with QMS, several
other policies and system have been implemented to identify and manage risks across the
Group.
According to Skytrax airline rating system, which classifies commercial airlines based on
their quality and service standards, on the scale of 1-5 star, Qantas was generously rewarded a
4 star for their overall performance. There were some customer reviews about lack of
communication from the company and technical faults, which are inevitable for any airline
company. That being said, majority of the reviews were positive and this displays Qantas'
consistency in maintaining good service quality and product for their customers.

28

7 Conclusion and Recommendations

The 2014 financial year was not a profitable year for Qantas. Despite a cost reduction of
$440m; the statutory loss after tax was $2.8b. From an investors perspective, these numbers
seem unappealing.
According to the business analysis and financial analysis in the earlier report, Qantas has had
a low growth of revenue below that of industry average and limited control over expenditures
over the recent years. This may be explained by the competitive nature of the industry and the
larger expenses such as fuel, aircraft leases, staff training and allowances. Qantas also has
relatively large risk ratios. Furthermore, similar performances of Qantas and Virgin may
suggest that the airline business is perhaps not a fruitful industry as an investment.
Nonetheless, investors should not base their decisions solely on the numbers. Qantas poses
advantages such as dual-brand, which covers both the high-end and low-end of the
Australian domestic market; it is positioned geographically within the Asia-Pacific region
where booming economies attract more international travellers. It also receives support by the
general Australian population as it is regarded to be the national flagship carrier. In addition,
the management of Qantas is aware of the industry challenges and has set in place clear
strategies and recovery plans for the future.
In conclusion, Qantas does have attributes that would attract certain investors depending on
their investment goals and strategies. However for the value investors, investing in an airline
company such as Qantas may not be the best decision for the reasons mentioned in this
report.

29

8 References

Qantas Company Information. Retrieved from:

http://www.qantas.com.au/travel/airlines/company/global/en
Qantas Annual Reports. Retrieved from:
http://www.qantas.com.au/travel/airlines/investors-annual-reports/global/en
Virgin Annual Reports. Retrieved from:
http://www.virginaustralia.com/au/en/about-us/company-overview/investorinformation/full-year-results/
Major Airlines Information. Retrieved from:
http://biz.yahoo.com/ic/ll/770tor.html
Airline Industry Ratios I. Retrieved from:
http://csimarket.com/Industry/industry_Profitability_Ratios.php?ind=1102
Airline Industry Ratios II. Retrieved from:
http://csimarket.com/Industry/industry_ManagementEffectiveness.php?ind=1102
Glakas, S. 15 Financial Ratios Every Investor Should Use (2011). Retrieved from:
http://www.investinganswers.com/education/ratio-analysis/15-financial-ratios-everyinvestor-should-use-3011
ABC News related to Qantas. Retrieved from:
http://www.abc.net.au/news/2012-08-23/qantas-profit-result/4217264, 28/9/2014
Airline Rating. Retrieved from:
http://www.airlinequality.com/
Schmidlin, N. The Art of Company Valuation and Financial Statement Analysis, A
Value Investors Guide with Real-life Case Study. Wiley

30

A Appendix
A.1 Details of Qantas Groups Acquisitions and Milestones
June 1992

Qantas purchased Australian Airlines (domestic carrier)

March 1993

British Airways purchased 25 per cent of Qantas

June 1995

Public Share Offer launched

July 1995

Privatisation of Qantas complete and shares listed on the Australian

Securities Exchange (ASX)

1998

Qantas increased its equity in Air Pacific to 46 per cent

October 2001

$450m share placement

November 2001

Qantas Group acquired Impulse Airlines (domestic carrier)

February 2002

Launch of Snap Fresh (catering facility)

September 2002

$720m JUMBO rights issue and share purchase plan

October 2002

Launch of Australian Airlines (international carrier)

December 2003

Star Track Express acquired by a joint venture between Qantas and

Australia Post

May 2004

Jetstar commenced operations in Australia

September 2004

British Airways sold its stake (18.25 per cent at the time) in Qantas

December 2004

Jetstar Asia, based in Singapore, commenced services

July 2006

Australian Airlines ceased operations (international carrier)

November 2006

Jetstar International commenced operations

September 2007

Qantas Frequent Flyer business segmented from Qantas Group

May 2008

Completed on market buy-back of 91m shares for $506m

July 2008

Qantas Holidays and Jetset Travelworld merged and formed the Jetset
Travelworld Group with Qantas Group as a 58 per cent shareholder. The
Jetset Travelworld Group is listed on the ASX

February 2009

$525m capital raising and share purchase plan

31

April 2009

New ownership structure for Jetstar Asia and Valuair announced 49 per
cent holding for Qantas Group (Newstar Investment)

June 2009

Jetstar replaced Qantas Jetconnect services in the New Zealand

Domestic market

September 2010

Jetset Travelworld Group merged with Stella Travel Services. Qantas

Group has a 29 per cent shareholding of Jetset Travelworld Limited

October 2010

Qantas Group investments in Australian air Express and Star Track

Express transferred to AUX Investments in exchange for a 50 per cent
shareholding in the entity

February 2011

Qantas Group acquired 100 per cent of the Network Aviation Group

August 2011

Qantas Group acquired 100 per cent of Wishlist Holdings

April 2012

Qantas operated Australias first commercial flights powered by

sustainable aviation fuel

July 2012

Jetstar Japan commenced operations

November 2012

Qantas Group acquired 100 per cent of Australian air Express and sold
its 50 per cent stake in Star Track Express

December 2012

Commenced on market buy-back of up to $100m

March 2013

Qantas and Emirates partnership commenced

August 2013

Qantas Group announced the sale of its wholly owned subsidiary Qantas
Defence Services (QDS) to Northrop Grumman Australia

32

A.2 Financial Statements Qantas

A.2.1 Income Statement

33

A.2.2 Statement of Financial Position

34

A.3 Financial Statements Virgin Australia

A.3.1 Income Statement

35

A.3.2 Statement of Financial Position

36

A.4 Formulas and Calculations

A.4.1 Horizontal Analysis
Change since base period=

Current year amountBase year amount

Base year amount

A.4.2 Vertical Analysis

Percentage of base amount =

Account amount on analysis

Base account amount

A.4.3 Net Profit Margin

Net Profit Margin=

Net Profit
Total Revenue

A.4.4 Return on Equity

Return on Equity=

Profit
Average Equity

37

A.4.5 EBITDAR Margin

EBITDAR Margin=

EBITDAR
Revenue

38

A.4.6 Current Ratio

Current Ratio =

Current Assets
Current Liabilities

A.4.7 Quick Ratio

Quick Ratio =

Current AssetsInventory
Current Liabilities

A.4.8 Debt to Equity

Debt Equity=

Total Liabilities
Total Equity

39