Critical Analysis of an Airline Company: Financial Performance and Position

I. Rationale

I.    Rationale
The aims of the unit are to explain the main principles involved in the production of financial statements and provide techniques for the analysis and critical appraisal of corporate financial reporting. The first 2 Intended Learning Outcomes will be assessed through this assignment
II.    The learning outcomes being assessed
1    demonstrate an awareness of the general principles of financial accounting and financial management and also the limitations of accounting data for the valuation of assets and evaluation of performance
analyse accounting and other forms of financial data and produce reasoned evaluations of financial status and performance

 

III.   Overview of assignment
This is an individual assessment.
IAG (International Airlines Group) Profile: (http://www.iairgroup.com/phoenix.zhtml?c=240949&p=aboutoverview)
International Airlines Group is one of the world's largest airline groups with 533 aircraft flying to 274 destinations and carrying almost 95 million passengers each year. It is the third largest group in Europe and the sixth largest in the world, based on revenue.
Formed in January 2011, IAG is the parent company of Aer Lingus, British Airways, Iberia and Vueling. It is a Spanish registered company with shares traded on the London Stock Exchange and Spanish Stock Exchanges. The corporate head office for IAG is in London, UK.

IAG combines leading airlines in Ireland, the UK and Spain, enabling them to enhance their presence in the aviation market while retaining their individual brands and current operations. The airlines' customers benefit from a larger combined network for both passengers and cargo and a greater ability to invest in new products and services through improved financial robustness.The airline industry is moving gradually towards consolidation though some regulatory restrictions still prevail. IAG's mission is to play its full role in future industry consolidation both on a regional and global scale.

Assignment requirements
IAG would like to acquire another airline for the Group in the next 3 years. You are asked to present a critical analysis of an airline of your choosing for the Board’s consideration.  Your analysis should be presented to the Board as a Report using the latest two annual reports of British Airways (GROUP), for comparison, and your chosen airline. The Report must address the following:

Critically analyse the financial performance and position of the Companies from the Board’s perspective. You are expected to select and calculate exactly 10 ratios of your choice over each of the three-year periods for this purpose. Explain, with reasons, if the airline you have chosen to analyse and compare with British Airways is a worthy prospective investment for the Group. If your in-depth analysis leads you to conclude it is not, you will not be penalised for your choice, but will be expected to advise the Board accordingly. Please site all relevant sources of the data used in the analysis. Use graphs and tables wherever necessary to enhance the presentation of the report.                                                            

 

What counts towards the word limits?
•    Footnotes, except where these are used ONLY to give references to your sources. The use of footnotes to expand upon points you have made in the body of your report will count towards the word limit.
•    Appendices - except where these merely reproduce material from your sources / ratio calculations / tables / graphs / diagrams
•    Any additional explanation of terms / glossaries etc. WILL count towards the word limit.
•    Any tables pasted as picture (.jpeg for example) will be reviewed by the marker and word count added to the main body of the text.

What does not count towards the word limit?
•    Appendices exceptions noted above.
•    Brief quotes – about 5 lines is the maximum acceptable for each quote, and you should not have more than 6 quotes in your essay.  You don’t need to include any at all if you don’t want to.  If you do use quotes, it is important that you have a good reason for including it – the quote must be properly introduced and you must make some comments on each one.