British Airways Financial Analysis :: Case Study Analysis, solution

British Airways Financial AnalysisThe following pages comprise of a financial analysis of British Airways for the financial course ending March 31, 1999.British Airways is a well-established partnership and has enjoyed high profits for the majority of its existence. However, the most new-made accounts that have been published tell a different story of how the year has been.British Airways produced a pre-tax profit of 225 zillion. This is 355 million less than in 1998 which illustrates the decomposition in demand for British Airways services. Although this decline in profits of 61% seems unacceptable it was caused by a variety of abnormal expenses. For example the company spent 35 million on computer systems to ensure that they atomic number 18 year 2000 compliant. British Airways also entered the low cost agate line travel market during the year with the launch of Go, which is running at a loss as it tries to establish itself in a super competitive occupation environment.L ower fuel prices and the strength of the Pound benefited British Airways, and as a result the company stocked up on 45% of its fuel requirement for the next financial year. This also contributed to the communicate in profits for the year.Operating Profit Fell from 504 million in 1998 to 442 million in 1999. The return on capital employed or primary ratio was just 17.06%. This is a great deal littler than the 1998 figure of 61.2%. These figures both show that the business is achieving a return higher(prenominal) than that which could be achieved in a non-risk investment such as a high interest no access bank account which would scarcely give a return of 7 to 9%. British Airways has a working capital of 5.1, which shows that it has high solvency. Overall, although the firm has incurred a loss of 355 million in the financial year it is still a healthy business that shows promise of high profits in future years.