Financial Analysis of Morrisons Plc

Financial Analysis of Morrisons Plc

Project description

write this report in accordance with the two essays  below;  Balfour Beaty plc and Easjet plc. Please analyse Morrisons plc as detailed as those two uploaded essays. Please read the additional

requirement i uploaded carefully, every point must be complied. EPS must be analysed, writer needs to go to FSTE website to capture stock graph and analyse. Please use open-source references

that everyone can download(need to be checked by uni).

Financial Analysis
Red words are important.
Write this report with simple but appropriate vocabularies.
Given company: Morrisons Plc , 5 years financial statement can be found on this website.
Rival company that needs to be compared in the report: Sainsbury’s
The module will be assessed by means of an approximately 9000 word report analysing a listed UK company.  The report should provide an analysis of the company’s strategic (use 5-forces,

PESTEL, SWOT), financial statement  and stock market performance over the last five years.  All of analysis should be critical rather than describing. The report should be addressed to a potential

investor in the company’s shares and should include your recommendation to that investor as to the desirability of investing (or not) in the short, medium or long term.
In order to satisfactorily complete the assessment, you will need to conduct in depth research into your allocated company, the industry in which it operates and its competitors.
The framework adopted for evaluating the performance of a company focuses on three interrelated aspects of a firm’s performance:
1.     Its strategic direction
2.    Its financial statement performance
3.    Its stock market performance
The key elements of the analysis to be undertaken are summarized below:
Assessing strategic direction    Financial statement analysis    Stock market assessment
Company     Identify and assess corporate and business unit strategies, management resource, product market positions, etc.    Assessment of the current, past and future outcomes

to company’s strategies – sales, profitability, cash flow, etc.    Understand market assessment and rating of the company.
Industry    Evaluate competitive forces and relative strengths and strategies of competitors. Review key industry drivers and likely future pattern of industry development    Make

comparisons with other companies operating in the same or similar product markets.    Compare company’s rating to other companies in the same sector. Review performance of sector

against overall market.
Broad context    Assess key PEST (or PESTEL) change agents    Assess the performance of companies in general and evaluate opportunities for fund raising (debt and equity), likely tax and

interest rate changes, etc.    Identify movements in overall stock market and likely future pattern of share prices.

Use all kind of useful ratios below to analyse financial statement:
1.    Liquidiy ratios: Current/working capital ratio, Acid test/quick/liquidity ratio
2.    Gearing ratios: capital gearing ratio, Debt/Equity ratio, Interest cover ratio
3.    Activity ratios: inventories(stock) turnover period ratio, Collection period for receivables ratio(Debtor Days), payment period for payables ratio(creditor days)
4.    Profitability ratios: e.g. ROCE, ROE/Return on shareholders’ funds ratio, net profit margin, Asset turnover, Gross profit margin
5.    Shareholder (or investment ratios)

Brief Structure:
Introduction
–    Who and what, company history
Strategic Analysis
–    Broad environment – e.g. PEST
–    Industry – industry environment and competitors
–    Company – strategic operations
Financial Statement Analysis
–    Raw data- Income statement, Balance sheet, Cash flow
–    Ratio Analysis
Stock Market Analysis
–    Share price performance
–    Stock market indicators
Conclusion
–    Future prospects
–    Good/bad investment?

The report should contain reference to the following:

1.         Brief company history(at least 250 words).

2.         Review and analysis of company’s sector (past, present and future) and the company’s standing within that sector, identifying its main competitors.

3.         Review and analysis of company strategy, with regard to, for example pricing policies, product range, market position, etc., in comparison with that of its competitors.

4.         Comments on company management/board of directors; for example, relevant experience, mix of skills, age, etc.

5.         Financial and stock market analysis of company over (for example) the last five years, including

a)         Analysis of financial statements, making comparisons with competitors and/or sector averages.
b)         Analysis of share price performance and evaluation of stock market indices (price-earnings ratios, dividend yield, etc.) in comparison with competitors, sector and market averages.
c)         Identification of problems of comparison caused by particular accounting policies/treatments (for example, capitalisation of interest, etc.).
d)         Identification of any new accounting policies/treatments which may impact on future profitability.
e)         Evaluation of potential future performance.

6.         A conclusion which should draw together your findings in order to make a recommendation to an investor’s as to where to buy, sell or hold the shares.

The report must be word processed or typed.  Calculations (for example, ratios) should be contained in tables in the report and will not count towards the word limit.  Appendices and footnotes

will not count towards the approximately 9000 word limit.  All sources of information should be identified in the report.  A full bibliography containing all references (books, newspaper reports

with dates, company reports, market research reports, etc.) must be included with the report and will not be included in the wordcount.

Easyjet Business Report

1. Introduction

Easyjet plc is one of the largest airlines which focus on low-cost European point-to-point short-haul airlines (Easyjet 2013). The company is listed on  the ‘‘London Stock Exchange’’ (floated on

05/11/2000) and it has successfully become a member of the ‘‘FTSE 100 Index’’ (March 2013) (Easyjet 2010, News 2013).

EasyJet was established in 1995 by Sir Stelios Haji-Ioannou, as a member of the Easy Group conglomerate. The company started up with only 2 used Boeing 737-200 aircraft and 2 routes: London

Luton to Glasgow and to Edinburgh (http://en.wikipedia.org/wiki/EasyJet). EasyJet plc has 2 subsidiaries, which are easyJet (100%, since 1995) and easyJet Switzerland (49%, since Mar-1998)

(http://centreforaviation.com/profiles/airline-groups/easyjet-plc).  EasyJet borrows its business model from United States carrier Southwest Airlines (http://en.wikipedia.org/wiki/EasyJet). As

Easyjet claimed in 2013annual report, its major strategic business model is ‘‘making travel easy and affordable and drives growth and returns for shareholders’’(Easyjet 2013). For the sake of

keeping low operating costs, Easyjet takes several cost-cutting methods, which include selling direct flight ticket, not providing food service on board, and using their crafts more efficiently

(Easyjet 2013). On the other hand, these measures also enable lower ticket price for customers(Easyjet 2013).

On the basis of low-cost business belief, Easyjet plc is constantly growing. Throughout the years, acquisitions were seen as an effective approach of EasyJet’s rapid expansion (BBC 2007, BBC

2002). Early as in March 1998, EasyJet purchased 40% stakes of Swiss charter airline TEA Basle for three million Swiss Francs. From then, purchasing rival airlines were significant but more common

affairs in Easyjet’s history. On 16 May 2002, EasyJet announced its acquisition plan of London Stansted-based Go (with price of £374 million). The acquisition of Go almost doubled the number of

aircraft in the EasyJet plc. After that, on 25 October 2007 EasyJet announced another acquisition plan: buy the Bland Group, entirely (http://en.wikipedia.org/wiki/EasyJet). Out of the public

expectation, the deal was just over £100 million. This acquisition makes Easyjet expand operations of at Gatwick, and also a new base at Manchester Airport (BBC 2007, Easyjet 2007, Easyjet

2007, 2008).

The Easyjet airline, along with its subsidiary airline EasyJet Switzerland, now operates over 210 aircrafts, most of them are Airbus A319, and 22 bases across Europe(Easyjet 2009, Easyjet 2013).

The largest one is Gatwick. By 2013, Easyjet operates on 633 routes across more than 30 countries with over 200 Airbus aircrafts(Easyjet 2013). EasyJet airline carried over 60 million passengers

and became the second-largest low-cost carrier in Europe, just a single step behind Ryanair (over 79 million passengers) in last year(Ryanair 2013). According to the latest annual report, Easyjet

may open a base in Naples in 2014(Easyjet 2013). As the forecasts, this new base has the capacity of transporting 360,000 passengers during the first year(Easyjet 2013).

The purpose of this report is to overall analyze company more systematically, so as to provide investment helpful advices. The reminder of this report proceeds as follows. Strategic

performances will be analyzed in the next section. Section 3 is financial statement analysis. Section 4 is stock market analysis. Finally, section 5 concludes the report.

2. Strategic Analysis

2.1 Broad environment analysis- PESTEL analysis
The external environment analysis is prove to be a substantial way to understand competitive advantage of a company and thus to guide decision making process for long and short term

(Sutton 1988). PESTEL is a useful framework to analysis a industry from a macro perspective, including ‘Politics, Economics, Social, Technological, Environment and Legal’ (Shaw 2004, Thomas

2007). These factors are not mutually exclusive, especially airline industry cannot develop under only one heading.

2.1.1 Political factors
It contains 4 key factors: “Open Skies” policy, state aid, OPEC rules and terrorist Threats. Generally, the political environment is relatively ideal for Easyjet. Not only the policy of the European

Union is stable, but also it encourages the carriers to expand and improve their service. The “Open Skies” policy is such a good example. With this policy, Easyjet got more space to develop its

business through intensive competition in European Market (Scharpenseel 2001).
Sometimes, political environment affect an airline indirectly. Political organisations like the OPEC pose decisions on oil output quantity and global distribution chain to control oil price.  This,

undoubtedly, leads to fluctuation on fuel costs whcih may affect Easyjet revenues. On the other hand, threats from a terrorist attack in Europe will affect airline companies ‘commercial

interests, including EasyJet. In short term, fewer passengers fly either on a domestic or international basis flight. In the medium term, it will increase defence costs. Therefore, these make

revenue decrease.
In short, the main stream of political and legal environment of Easyjet is positive.

2.1.2 Economic factors
The economic factors are relates to world economy and interest rates. The economic recession in 2009 had 2 impacts on Europe. Firstly, because of the credit crisis, airplane companies are

becoming more difficult to finance new aircrafts(Reals 2009). If there is no enough new aircrafts, airline company cannot operate sufficiently. Therefore, revenues fell dramatically. As IATA

director general Giovanni Bisignani says, 2009 is a ‘‘very difficult year for airlines’’(Reals 2009). Secondly, in firms have to fire employees order to cut costs, it makes more redundancies and

people spend less on leisure activities, such as travelling. Instead, they use their money into the private sector, such as investment

(http://continentalairlinetickets.blogspot.co.uk/2012/01/how-recession-has-affected-airline.html). Interest rate impacts the airline industry positively or negatively. If the government increases

money supply in market by reducing tax, interest rate or by increasing government spending, it impacts airline industry positively. On the other hand, if government tight monetary policy and

increase tax rate, airline industry sees contracting its revenue. Currency fluctuation can also be an important economic factor since it may change the cost of fuel. Moreover, the migration

trend within the European region can be seen as positive factor because it benefits the airline’s revenues.
In short, the economic impact on full-service is bigger than low-cost airlines. Revenue of low-cost airlines remain unchanged or growth.

2.1.3 Social factors
The social factors have been well perceived by Easyjet.  It contains 5 aspects: lifestyle, aging population, increasing demand for business, travelling and international study exchanges students

and unemployment rate. Air travelling is nowadays a common lifestyle among the population. Change the way of lifestyle makes people can spend not too much money for entertainment and

enjoy life. The social environment is largely characterized by demographic trends, especially the ageing population, which is sensitive to the price of the service. The increasing aging population

is a social development trend. It represents an opportunity to airline industry. It forces the industry to adapt its services and products in order to attract growing, mature consumers; and the

government has to build more travel links and better infrastructures. There are a large number of well-educated people, such as international study exchanges students and business travelers;

they will make surge income for airline industry. In particular, as the international tourism market expands, the airplane may share more from the larger cake.  Meanwhile, unemployment rate is

connected tightly with airline industry. If the rate is high, more people will not choose travel outside; by contrast, if the rate is low, people have enough money to travel around.

2.1.4 Technological factors
In terms of technology, the internet and remote communication technology could reduce business travel, but they have quite limited influence in leisure travels. Technology such as online

booking and seat reservation become very powerful tools which lead to Easyjet’s success and it’s likely to be even more important in the future. Furthermore, improvement in aircraft

technology and maximize utilization of aircraft make it easier to maintain low fare levels. All these benefit EasyJet.

2.1.5 Environmental factors
For the environmental aspect, air transportation certainly brings environmental impact such as emissions, noise pollution. As the EU will very likely impose increasingly strict law on environment

to cope with climate change, new taxes are can be a future threat. As a low-profit airline, Easyjet is more sensitive to this issue. However, it has already started to adopt necessary measures to

control environmental impacts.

2.1.6 Legal factors
At present, the legal aspect has still shown negative effect on the airline’s activity, such as passenger rights, airline deregulation act, competition laws in aviation industry, and regulations

about carbon emission level. These regulations affect Easyjet’s policies; they could increase costs and seriously threaten its revenue result

Analyzing the macro-environment of Easyjet with the PESTEL analysis revealed a number of important implications. As far as political and legal factors are concerned the liberalization of the

airline industries provides Easyjet with a lot of opportunities but they will increase fuel costs at the same time. State aid to national flag carriers poses a problem since this provides these

carriers with a competitive advantage. Also the increased rights of passengers travelling in Europe could result in additional expenses for compensation.

2.2 Airline industry analysis
Airline industry consists of legacy airlines (like Lufthansa) and low-cost airlines (like Easyjet). A legacy airline is defined as ‘‘an airline that focuses on providing a wide range of pre-flight and

onboard services, including different service classes’’ (Reichmuth 2008). A low-cost carrier is an airline with lower fares and fewer services (http://thelawdictionary.org/budget-airline). Air travel

market growth slowed in last year but performed better when global economy is at the trough. In 2012, 3.12 billion people and 47 million metric tons of cargo were transported safely by air

transportation. It made $2.2 trillion in economic activity— about 3.5% of global GDP and the industry made $7.6 billion profit. On revenues of $638 billion, that’s a 1.2% net profit margin(IATA

2013). There were 680 VAT- and/or PAYE-based enterprises engaged in passenger air transport(Statistics 2011). According to 2011 statistics, most of these enterprises are small ones, with 46.3%

having turnovers below £100,000. In comparison, 16.2% of all enterprises had turnovers over £5m, and 27.2% had turnovers of over £1m (Figure 1).

Figure 1Enterprise Turnover
In more detail, passenger traffic grew 5.3% in 2012. In the past 20 years, air travel grew 2.5 times as global GDP, higher than former years which growth is 1.8 times that of global GDP growth

(IATA 2013). The airline industry in 2012 has several characteristics:

The first one is economy travel growth rate is higher than that of business travel. Among travellers, the number of international passengers travelling in premium-class seats rose 4.8%, compared

with 2011 growth of 5.5%. However, economy travel had greater expansion (5.8%), higher than that in the 2011.It has a close relationship with world trade growth and business confidence

trended (Figure 2) .

Figure 2 Growth in passenger numbers
The second one is the high fuel costs in 2012. The industry’s fuel bill rose as Brent crude oil prices increased, which leads to near 33% cost rise-up.

The last one is the lowest rate in aviation’s history. The global hull-loss rate per million flights is 0.2 (Figure 3).

Figure 3 Jet hull-loss rate
Generally, the market segmentation and profit division in the European airline industry is quite clear. Low-cost carriers occupy the main part of short-haul market and profit while the large

legacy carriers dominate the long-haul traffic. In order to analysis the European airline industry more effectively, Porter’s five forces framework will be used.

2.3 Porter’s five forces analysis
These forces are: ‘‘threat of entry, threat of substitutes, power of buyers, power of suppliers and extent of rivalry’’(Gerry Johnson, Kevan Scholes et al. 2007). The full forces analysis can be seen

in the Appendix.

2.3.1 Threat of new entrants
Threat of new entrants relates to ‘‘the extent of ease associated with entering into an industry and competing with current market players’’ ((Hitt 2005). The threat of new entrants is low for

Easyjet, since the entry barriers are quite high:  availability of airport slots, economies of scale, capital requirements etc. To specific, availability of airport slots may be the first and foremost

significant barrier for new airlines. Obviously, the volume of an airport to serve is fixed or quite limited until its next expansion. Therefore, the slots for aircrafts and airlines are relatively fixed

and left no space for new entrants into the market. Another barrier for new entrants is economics of scale. The existing European airline companies not only have stable custom, but also with

lower unit cost through massive production.  Both of these can be hardly achieved by new entrants. Even if new entrants are powerful enough to provide sufficient capital for aircrafts, facilities,

inventories and other activities, another barrier may be still significant enough to impede the entry. That is how to employ qualified workforce in a short time period. Because of these barriers,

although European Commission has legislated regulations to avoid monopoly, according to above reasons, new entrants are difficult to entry airline industry.

2.3.2 Threat of substitutes
Substitutes’ services for airline industry in general and Easyjet in particular include railway networks, sea transports, coach transport, private jets, as well as, videoconferencing. Although from

statistics, any railway service with distance further than 400km shows no advantage in ticket price compared with short-haul airline, they still have price advantages in short-distance travel

(Sørensen 2005). Private jets are still too luxury for common customs and thus with no threat to short-haul airlines like Easyjet. As mentioned before, the use of videoconferencing influence

business travelers more and does not affect the leisure travel segments which are main business of short-haul airlines. Low-cost airlines will be less affected by videoconferencing because the

business travelers only constitute a very small part of Easyjet’s passengers than they will do with full airlines. Therefore, the threat of substitutes is medium.

2.3.3 Buyer power
For airline industry, buyers are passengers. Bargaining power is the ability to influence the setting of prices. The development of Internet has made prices of air travel more transparent and

along with the liberalizations in this market has helped lower down prices of air travel. The globalization makes more and more people to travel overseas.  Meanwhile, it shows growing demand

on airplane and less bargaining power of buyers. Further, because undifferentiated product provided by airline companies, customers have less spaces to choose the better one. In a mature

market, the prices are set by the relationship between supply and demand. Prices reach their balance, named the Pareto-optimal point, where the most buyers accept a price that still left some

profit space for the provider. In sum, the factor of bargaining power of buyers is not a high threat to Easyjet.

2.3.4 Supplier power
Suppliers have high bargaining power in airline industry not only because there are only 2 commercial passenger aircraft manufacturers:  Boeing and Airbus. Each low cost carrier company has to

choose the most suitable aircraft type. Fuel suppliers also have high bargaining powers. Airlines need fuel supply and there are no more economical suitable alternatives currently. Aviation bio-

fuels are more expensive than traditional fuels. If the fuel price increases, all airline companies’ financial performance will be influenced seriously because fuel costs are airline’s second largest

expenses. What is more, switching costs are associated with the change of aircraft suppliers. The cost is high since the work force needs continuous training and compensation for breach of

contract. Consequently, these three reasons make supplier power a high threat factor to Easyjet.

2.3.5 Competitive rivalry
Competitive rivalry is considerably high in the low cost carrier market, main low cost carrier companies in Europe are: Ryanair, Virgin Express, Bmibaby and Easyjet. There are a couple of airlines

and several route alternatives for the customers’ consideration at many circumstances. Therefore, companies are competing in all-dimensions of service, provide predatory pricing and

Frequent-flyer programs and offer lower fare price to attract more customers. These actions contributed to the fierce competition. When routes overlaying occur, the customer is the one that

benefits from the price war but low cost airline company do not gain much from this, including Easyjet, despite it is the largest intra-UK and fifth largest intra-European low cost carrier

(http://stirmedia.bokee.com/1415635.html).

To conclude Potter’s five forces analysis, it can be found that, the strongest forces in low cost airline industry are the power of suppliers and the competition of existing firms. Suppliers are

strong forces because planes are so costly to make and only two main aircraft manufactures. If the suppliers changed the terms (such as higher profit margins) by even a small amount it could

mean a significant loss for the firm, because the firm have to sustain the low fare to the public and bear the loss alone. The rivalry of existing players is so high that any new entrant is unlikely to

survive in the market without enough capital. Buyers have a medium to weak force because of the development of Internet, low switching costs and substitutes are undifferentiated. Other

forces seem to have a weak threat to Easyjet, since it is still costly and time consuming for new entrants to overcome barriers of entry in these respects.

2.4 Company analysis
Easyjet’s competitors at its primary airports are traditional long-haul carriers with less advanced aircraft, lower utilization efficiency but higher fares. With the scope of low cost carrier, Irish

airline Ryanair, another leading low-cost airline, is the key competitor in the European market. It is the largest foreign airline company in the UK market.
Because of the different goals of Easyjet and Ryanair, most of their strategies are different.

Easyjet make efforts to achieve their goals by four aspects:
1, Build better network connection
•    building up a more reasonable plan of slots in main airports
•    regularly reviews its route portfolio to optimise returns
•    establish better connections/transportation interchanges in European city-to-city market. For instance, establish EasyBus (bus service connecting pick-up points and the airports) in

London.
2, Maintain low cost advantage
•    optimise service procedure to avoid flight delay as much as possible, thus to reduce potential extra costs.
•    Use ‘Easyjet turn’ programme, it can maintain asset utilization
•    Use ‘Easyjet lean’ programme, it can make use of its systematic advantage against the legacy airlines
•    New fleet arrangements:  It has 2 aircraft types (Airbus A319 and A320); the increasing number of more efficient aircrafts will increase Easyjet’s transport capacity and get seat cost

savings.

3, Drive demand, improve unit revenue
•    Establish ‘europe by Easyjet’ campaign, it reduces per seat marketing costs by television advertising.
•    Establish ‘generation Easyjet’ campaign, it increases brand awareness of Easyjet.

4, Discipline use of capital
•    Close41 routes: It can optimise revenues
•    Driving returns for shareholders

In contrast, Ryanair use different strategies to compete with Easyjet:
1, Frequent Point-to-Point Flights on Short-Haul Routes
•    Choose local airports. Ryanair try to make sure on-time departures, faster turnaround times and reduce the need of unnecessary frills.

2, Reduce Operating Costs
•    Aircraft equipment costs: Focus on operating a single aircraft type (Boeing 737-800s).
•    Personnel costs: Productivity-based payment, pilots and flight attendants works fixing maximum hours under regulations.
•    airport access and handling costs: Negotiate with large airports to use their facilities; local airports to lower their slot requirements; introduced a checked-bag fee

3, Improvement of Ancillary Services
•    accommodation services
•    travel insurance
•    car rental services
•    bus and rail tickets services

These two companies also have two identical strategies(Easyjet 2013, Ryanair 2013):
1, Commitment to Safety and Quality Maintenance
•    Safety is the primary priority
2, Taking Advantage of the Internet
•    Online booking system: More convenient and reduce labour costs
•    Check-in on the Internet: It can reduce waiting time at airports, and reduce handling costs.

From the strategies comparisons of two companies, it can be seen that, Easyjet has advantages against Ryanair in following aspects:
1, Selection of airport locations. Easyjet uses main airports in the cities. This may attract more consumers who are sensitive to airport facility and service quality.

2,Consumer service:
•    Airport convenience. Easyjet provides bus service to pick up passengers to airports (Insider 2010). However, Ryanair does not have this service.
•    Easyjet has cheaper luggage fees and more luggage weight allowance. Easyjet charges £2 less (£18 vs £20) than Ryanair on each bag, while baggage limit is 5kg more (20kg vs 15kg).

3, IT system: Easyjet has better website functions.  They made easy online booking process first and have gained ground with business flyers(Young 2014). Customers can buy tickets either from

websites or mobile devices, the modern can attract more customers. In this regars, Easyjet is Ryanair’s benchmark.

Conclude above, Ryanair’s strategies still remained outdated because it still regards flying a maximum of travellers as its sole solution to have business model and disregard value-added

services like social media, business clientele and even customer service(Easyjet 2013). Easyjet’s strategies aimed at margins and sustainable growth. It does not give up business travel market.

Also, Easyjet took better care of its customers through humane services. Besides, it value its reputation and populist image: the ash-cloud avoidance system can be seen as the best example and

innovation in such respect (Easyjet 2013). For Easyjet, they know that lowest costs are not enough; low cost carrier also needs reputation and customer service. It is hardly for Ryanair to be

woke up and catch up in the next 2 years. For today, Easyjet wins.

3. Financial Statement Analysis

3.1, Income sheet analysis

Figure 4 Easyjet revenue

Figure 5 Ryanair revenue
Total revenue of Easyjet and Ryanair experience an upward trend in last 5 years (Figure 4). In 2013, Easyjet total revenue is 4258 million, 123 million higher than Ryaniair in the same year and 404

million higher than that in2012, growth rate is 10.5%.Compared with 2009, the total revenue growth in 2013 is 59.66%. 2013 has seen Easyjet’s rapidly raised revenue. It is because Ryanair

modified their operating strategy: reduced routes and closure of Madrid base in order to make full use of returned flights (increased the load factor by 0.6% as a result), hence to reduce cost.

This modification is proved to be successful: it generated strong yields in the year. As seen from Figure 6, passenger revenues experienced a 17.4% increase from 2011 and remains constant at

about 98.5% of total revenue from 2012. Increased ticket prices contribute the largest part of revenue improvement, together with other annualizing charges introduced in the last year. By

contrast, ancillary revenue had a sharp decrease in 2012 and has kept percentage at about 1.6% from then (Figure 6). It is because although commissions from travel insurance, car hire decreased,

they were partly offset by improved on-board sales. However, Ryanair has stable ancillary revenues percentage (around 20% of total revenues) and passenger revenue percentages (around 80%

of total revenue) during past 5 years (Figure 6). In 2013, the ancillary revenues rised by 20%, 5% higher than the increase in passenger numbers(Ryanair 2013). That it because of Ryanair adopted a

combination of strategies of improving product and rolling out of reserved seating through the network. Ryanair regards enhance ancillary revenues as an efficient way to reduce airports and

handling costs.
Easyjet revenue of total revenue        Ryanair revenue of total revenue
Sep30 2009 % of total    Sep30 2010 % of total    Sep30 2011 % of total    Sep30 2012 %  of total    Sep30 2013 % of total            Mar31 2009 % of total

Mar31 2010 % of total    Mar31 2011 % of total    Mar31 2012 % of total    Mar31 2013 % of total
Passenger Revenue    80.65%    80.79%    79.17%    98.44%    98.50%        Passenger Revenue    79.67%    77.79%    77.91%    79.81%    78.21%
Ancillary Revenue     19.35%    19.21%    20.83%    1.56%    1.50%        Ancillary Revenue     20.33%    22.21%    22.09%    20.19%    21.79%
Figure 6 percentage of revenues
Fuel cost, Airports and ground handling cost, crew cost, maintenance cost are main costs in an airline companies. As we can see from the chart, all costs of Easyjet gradually increased with

years, except fuel costs. Total fuel cost of Easyjet saw a significant drop in 2010 (9.17%lower than 2009) (Figure 8) because the rising price of crude oil, the cost of fuel rocketed up from

$595/tone to $688/tone. However, thanks to matured higher cost hedges, the effective price for fuel decreased dramatically from $951/tone to $732. Also, when take into consideration the

effective currency exchange rate (reduced from 1.78/£ to 1.64/£), the cost of fuel dropped from £445 per/tone compared to £536 in 2009. In 2011, influenced by increasing price for jet fuel, fuel

cost went up to 917 million (Figure 8). Easyjet’s hedging activities outweigh this fluctuation to large extent, and the average cost of fuel only experienced a slight increase by $86 to $818/tone

(in sterling terms this figure was £63 to £508/tone). In total, increase costs was £184 million, with £100 million (£1.59 per seat) spent on rising fuel price.

Easyjet Percentage change
2009-2010     2010-2011     2011-2012     2012-2013     2009-2013
Revenue change    11.47%    16.11%    11.65%    10.48%    59.66%
Net profit change    70.42%    85.95%    13.33%    56.08%    460.56%
Fuel change    -9.17%    25.10%    25.30%    2.87%    46.47%
Airports and ground handling change    9.23%    14.66%    3.47%    12.88%    46.27%
Crew change    9.45%    21.13%    6.14%    5.09%    47.88%
Maintance change    9.26%    1.13%    13.41%    4.43%    30.86%
Figure 7 Easyjet percentage change

Figure 8 Easyjet main costs
For Ryanair, oil costs sustain a straight line increase during last 5 years, except in 2010 (Figure 9). There are 2 reasons for increase: the first one is unpredictable oil price fluctuation driven by

regular demands and sudden disruptions in supply (Ryanair 2013). Another reason is exchange risks. The proportion of fuel on total operating costs continuously went up from 45% compared with

42.9% in 2012 (increased by 2.1% to 1595 million). This can been seen as a result of combined effects of fuel price down (13%) and longer flown time (Ryanair 2013).
Figure 9 Ryanair main costs
Easyjet’s net profits margin shows a straight increase trend in these 5 years, from 2.67% to 9.35% (Figure 10).In 2013, net profits margin is 2.73% higher than 2012. In 2013, Easyjet realized net

profit 398 million, 143million higher than that in 2012,growth rate is 56.08% (Figure 7). The reason of increased net profit is that profit before tax increased 161millions, tax increased

18million.Profit before tax increases is because operating profits increased 166millions,growth rate is 50.2% (Table 1). The increasing operating profits are due to the increasing total revenues

and operating costs and taxes. However, Ryanair had a significant net profit margin growth (15.97%) in 2010 and a decline -1.1% in 2013 (Figure 10).That is because of the increasing fuel price,

costs growing faster than revenues. The decrease in operating profit of Ryanair was primarily due to average fares declines for 4% and total operating expenses increase for 8%, offset by strong

ancillary revenue
Figure 10 Net profit margin

Table 1Easyjet income sheet extraction
Easyjet income sheet extraction
2009 (?millions)    2010 (?millions)    2011 (?millions)    2012 (?millions)    2013 (?millions)
Revenue    2667    2973    3452    3854    4258
Operating profit    60    174    269    331    497
Profit before tax    55    154    248    317    478
Profit for the year    71    121    225    255    398

Both Ryanair and Easyjet keep basic earnings per share increasing in past 5 years. Easyjet reached the peak in 2013(101.3 pence), 38.8% higher than last years. Profit increased by 56.1% (after tax,

£255 million to £398 million) although a 3.7% reduction was seen in the weighted average number of ordinary shares (Easyjet 2013). Ryanair’s EPS did not change too much after 2012, only 5.35%

higher than last year (Figure 11).

Figure 11 Earnings per share
The ROCE describes the abilities of firms that profits can be generated in long-term period (Atrill; and McLaney 2008). The ROCE of Easyjet and Ryanair in past 5 years shows an upward trend and

reaches a top of 17.4% and 10.1% in 2013 (Table 1).Easyjet had an improvement of 6.1 percentage points from the prior year driven by the increase in profit as average adjusted capital employed

remained broadly in line with the prior year. However, the ROCE of Ryanair grows slowly during 5 years due to the credit risk and liquidity constraints. The most significant growth is in 2012, is

2.57%.
Table 2 Ratios
Easyjet Ratios        Ryanair ratios
2009    2010    2011    2012    2013            2009    2010    2011    2012    2013
Return on Capital Employed                ( ROCE)    3.60%    6.90%    9.80%    11.30%    17.40%        Return on Capital Employed                ( ROCE)    5.97%    6.58%    7.26%    9.82%    10.10%
ROCE growth     –    3.30%    2.90%    1.50%    6.10%        ROCE growth     –    0.61%    0.68%    2.57%    0.27%
Return on Equity (ROE)/Return on shareholders’ funds    5.50%    8.60%    12.70%    14.60%    19.73%        Return on Equity (ROE)/Return on shareholders’ funds    6.87%    11.58%    12.91%

16.95%    17.40%
ROE growth        3.10%    4.10%    1.90%    5.13%        ROE growth        18.45%    1.33%    4.04%    0.45%

ROE of Easyjet grows fast by the years, especially an increase in 2013, 5.13% higher than 2012. By contrast, ROE of Ryanair grows slowly in recent years, only 0.45% higher than 2012 (Table 2). It

is due to the 1.6% increasing profit after taxation and 1% decline in equity.

3.2, Balance sheet analysis

Figure 12 Easyjet financial position review

Figure 13 Ryanair financial position review
As we can see from the Figure 12, total assets of Easyjet show a gradually upward trend. However, total assets met a slightly increase in 2011. It is because non-current assets increased

significantly in 2011. Property plant and equipment increased 243 million due to the strategy of acquire ten A320 family aircraft, and advance payments under the new aircraft order announced

in 2011 (Easyjet 2011). After 2011, total assets of Easyjet tend to be stable at around 4300 million. Compare with Ryanair, total assets keep stable at around 7500 million from 2011 to 2012

(Figure 13). However, it experienced 80 million decreases in 2012 (Table 3). The Company‘s cash and cash equivalents decreased 1209 million at June 30, 2013 as compared with June 30, 2012 (Table

4). This decrease was because Ryanair opened new routes, purchase new aircrafts  in 2013 and these all require a large amount of cash (Ryanair 2013).
Table 3 Ryanair total assets
2009    2010    2011    2012    2013
Ryanair total assets(million)    5928    6729    7589    7509    7572

Table 4 Ryanair chsh and cash equivalents
2009    2010    2011    2012    2013
Ryanair Cash and cash equivalents    1469    1314    1789    2259    1049.8

Figure 14 Easyjet liabilities

Figure 15 Ryanair liabilities
Total liabilities of Easyjet reach a peak in 2011 of 2764 million, and then dropped back to around 2500 million in 2013 (Figure 14). The variation trend of non-current liabilities is similar to the total

liabilities. It reached the top of 1587 million in 2013 because financing new aircrafts and liabilities of leased aircraft maintenance costs under operating leases during the term of the lease(Easyjet

2013). Current liabilities keep increase in these 5 years because of the increasing bank loans have to meet the needs of operations. Bank loans, the variable rate interest are linked to LIBOR, and

enforce Easyjet to mortgage the aircraft to the lender to provide security (Easyjet 2011). From the Ryanair’s chart, trend of current liabilities and non-current liabilities are similar. They met

significant increases in 2011 (Figure 15). The reason is the firm use ‘‘borrowings, cash and cash equivalents and liquid investments’’ to finance operations(Easyjet 2011). It is the Company’s policy.

From the point of liabilities, Easyjet and Ryanair have a similarity:  their insurance costs for certain third-party liabilities all rocketed up after 9.11 terrorist attacks.

Figure 16 Net assets change
From the Figure 16, it can be seen that, the net assets of Ryanair has levelled off, keep stable at around 2700 million. Whereas the trend of Easyjet is on the rise, end up at 2017 million, 223 million

higher than that in 2012. It is attributes to the profit after tax offset the dividend payments and reverse movement hedging reserves(Easyjet 2013).

Figure 17 Gearing ratio
Gearing ratio is used by Easyjet as the principal method to manage capital risk to shareholder’s equity. Its gearing ratio saw a downward trend through 5 years (Figure 17). It decreased

significantly to 7% (2012: 29%) in 2013. This was a result of the significantly improved cash flow performance, proceeds from sale and leasebacks and the release of restricted cash in the period

(Easyjet 2013). Low gearing can provide scope to increase borrowing when potentially profitable projects are available to the company. By contrast, gearing ratio of Ryanair sustain stable in

past 5 years, around 52.54% (Figure 17). Company with high gearing ratio is not so easier to borrow more cheaply than low gearing company.
Figure 18 Total debt ratio
What is more, from 2009 to 2013, total debt ratio of Easyjet shows a decline trend (Figure 18). All of Easyjet’s debt is asset-related, reflecting the capital intensive nature of the airline industry.

Total liabilities of Easyjet experienced an increases in 2011(2764 million), then go down to 2395 million so as to hold the line with that in 2009.Because of the increasing assets and decreasing

debt, the debt ratio shows a decreasing trend, from 64.4% in 2009 to 54.29% in 2013.The lower the ratio, the lower the degree of leverage, and consequently, financial risk is low. Both amounts of

short and long term borrowing got the peak in 2011, for 155,1145million respectively. These capitals were drawn down to finance the acquisition of aircraft that have been mortgaged to the

lender to provide security(Easyjet 2011). As we can see from the Figure 18, Ryanair experienced a fluctuated trend in debt ratio and ended up with the similar data in 2009 (around 63%).

3.3, Cash flow sheet analysis

Figure 19 Easyjet cash flow chart
Table 5 Easyjet cash flow table
Easyjet activities cash flow (?millions)    2009    2010    2011    2012    2013
Net operating activities     134    363    424    261    616
Net investing activities    430    482    478    389    416
Net financing activities    440    233    246    309    197

Easyjet is a cash generator. From the Figure 19 and Table 5, it can be seen that, Easyjet’s net cash from operating activities dropped in 2012 to 261 million and then went up to 616 million in

2013. The decline in 2012 is due to the fact that no large loan and lease activities during the year, and mortgage loans on aircraft purchasing were completely repaid (Easyjet 2012).  After that,

the increasing net cash flow is accumulated by growth in unit and prepaid forward bookings.Net cash from financing activities saw a dramatically decline in 2012 and then climbed to 197 million

in 2013. Easyjet presently finances its fleet through ‘‘sale strategies, leaseback transactions, internal resources, cash flow and bank borrowing’’(Easyjet 2013). But in future, it is likely to have

new debt, sale or other financing forms, which may include the aircrafts sale or public debt offers(Easyjet 2013). Net cash flow induced by investing activities remains stable in these 5 years,

around 400 million.

Figure 20 Ryanair cash flow chart
Table 6 Ryanair cash flow chart
Ryanair activities cash flow (?millions)    2009    2010    2011    2012    2013
Net operating activities     383.4    774.8    693.5    850.9    865.9
Net investing activities    360.3    1377.1    418.1    154.6    1541.0
Net financing activities    81.2    508.8    210.0    129.2    566.3

For the Ryanair, cash flow from operating activities shows slightly fluctuates during 5 years, while cash flow from financing activities and investing activities all experienced great changes in the

same time period (Figure 20). The slight change of operating activities was due to the increase of revenues and capital. However, Ryanair’s cash from financing activities keep decline since 2010.

This fact is due to expenditures of Ryanair’s share buy-back program and repayments of long-term borrowings have offset long-term borrowings(Ryanair 2010). Cash flow from investing activities

dropped dramatically to 1377 million in 2010 and another decrease in 2013 are all because capital expenditures of Boeing 737-800 aircrafts through Ex-Im Bank-guaranteed financing (Ryanair

2013).

To conclude these two companies’ financial similarity and individuality, it can be seen that, although Ryanair have a strong performance in recent years, its financial trend in future will grow

slower than Easyjet. This pridiction is attributed to Easyjet’s advisable strategies:
•Have a good development environment in many major destination markets
•The successful introduction of allocated seating across the Easyjet network which drove incremental revenue without impacting on-time performance or unit costs;
•Routes and bases introduced in previous financial years maturing and driving up overall returns
•Maintaining Easyjet’s cost advantage driven by both the Easyjet lean programme and the scale advantages from increasing the proportion of the larger A320 aircraft in the fleet.

4. Stock Market Analysis

Figure 21 Easyjet stock price (01/03/2009-30/04/2014)
The general trend of Easyjet stock is upward (Figure 21). This trend can be spitted into 3 parts: it move smoothly during 2009 to October 2012; and then witness an increase to the August 2013;

the last part experienced a decline period (August 2013-October 2013) and climbed to around 1750p and sustain this price in recent times. The following are the reasons for Easyjet stock

increase during October 2012 to August 2013: first one, comprehensive factors of high revenue, increasing destination markets, efficient cost controls, high volume trading after Olympics had

made Easyjet to give high returns(Sparkes; and Dunkley 2012). In addition, its pre-tax profit increased 20 million in 2012.  And analyst at Oriel Securities gave a strong confidence to the public

that, they think shares of Easyjet in 2012 are cheap, they predicted these shares will keep increasing which supported by solid incomes. Second, it is because the increasing number of flights and

summer bookings from Britain to Malaga and Alicante in Spain and Faro in Portugal(Telegragh 2012). The stock price experienced a short period decline in 2013 was due to the fluctuations of fuel

costs. Stocks climbed to new high prices in 2014 because Easyjet use a combination of tight cost controls and more customers willing to pay extra money to choose their seats, these 2 reasons

made Easyjet profits increase(Ficenec 2014).

Figure 22 Easyjet&FTSE 100&industry data
As we can see from the Figure 22, general stock price volatility of Easyjet correspond to FTSE 100 and industry level from 2009 to 2013. After that, Easyjet stock price grows much higher than

the FTSE 100 and industry average level. The reasons are: firstly, numbers of passengers grow strong since 2013. Secondly, there less extreme weather during 2013 so as to save much costs to

de-ice aircrafts and runways. Thirdly, Easyjet adopts new strategies of   collecting seating fees and the option to switch flights(Ficenec 2014).

Figure 23 Easyjet & Ryanair & FTSE 100
Figure 23 shows the stock price movements between Easyjet, Ryanair and FTSE 100 from Mar 2009 to Apr 2014. It can be seen that three lines trends are similar between 2009 and first half of

2012. Then, FTSE 100 keep stable in following year, while Easyjet stock prices increases more dramatic than Ryanair’s.  This phenomenon is caused by a combination of reasons: As an increased

demand for flights in Europe, Easyjet’s net profit surged 56% in the year compared with the firm’s performance in former years. Then, Easyjet returned that 308 million dividend payments to

shareholders, it makes Easyjet’s share price surged. Ryanair was forced to concede their management loopholes and promise to improve customer service and reduce unnecessary costs (SBS

2013). In addition, Easyjet stock increased dramatically due to the strategy of cut its losses and allocated seating across its routes. In order to attract more business travellers, Easyjet allows

passengers to change their flights 2 hours before scheduled departure time (Guardian 2014).

Figure 24 P/E ratio
Figure 24 illustrates the P/E ratio of Easyjet and Ryanair change in recent 5 years. Within the same industry, higher P/E ratio means higher potential earnings growth in the future for a company

(Quinn 2014). Similarly, higher P/E ratio means company took risky investments in the past (Wilkinson 2013). These two companies had highest ratio in 2009. Then, declined and reached the

bottom P/E ratio in 2011, 6.6 for Easyjet and 12.3 for Ryanair. The median P/E ratio for 5 years of Easyjet and Ryanair is 12.82 and 19.66 respectively. As shareholder hopes to receive the price as

he pay as soon as possible. Therefore, when the P/E ratio is positive, lower P/E ratio stocks are more attractive than higher P/E ratio stocks (http://www.gurufocus.com/term/pe/ESYJY/P

%252FE%2BRatio/easyJet%2BPLC). On the one hand, the lower ratio, the shorter payback period, the lesser risky, then generally speaking, the higher the investment value. On the other hand,

higher ratio means longer payback period, more uncertain factors and more risky.

Figure 25 Easyjet annual dividends
From the Figure 25, we can see that Easyjet did not pay dividends until 2011.The dividend payments saw an increase trend from 2011 to 2013. The 104.8% increase in 2012 was due to 11% rise in

total revenue and 38% rise in pre-tax profits to £317 billion. Dividends’ growth rate slow down to 55.8% in 2013 because the pressure of ‘fuel costs, exchange rates, higher airport charges and a

more normal level of operational disruption’(Lampung 2012). To compare with Easyjet, Ryanair did not pay any dividend in past 5 years.

In short, dividends which Easyjet paid show investors strong signals of financial confidence in the future. According to Lampung (2013), Easyjet’s cash cash flow is quite strong in recent years and

the current dividend policy will make investors get more and more special dividends (Lampung 2012).

5. Conclusion

According to this report, it has shown how well Easyjet has done and will do. Easyjet is the second largest budget airline in Europe. It uses low-cost prices and high security commitments to

appeal travelling passengers and business consumers. According to the above analysis, we can conclude Easyjet from 4 aspects:

Firstly, key strengths include brand awareness, which supplemented by improved customer satisfaction; rapid turnaround times, which makes Easyjet to have fewer gates and other airport

infrastructure than full-service airlines; strong cost control, which uses more efficient aircrafts, high seat densities; punctuality, which contributed to ‘easyJet turn’ program; strong financial

performances: both total revenues and profit margin showed straight increase trend in past 5 years. In detail, compared with 2009, the total revenue growth in 2013 is 59.66%. Net profits margin

increased from 2.67% to 9.35% during past 5 years. Total assets of Easyjet show a gradually upward trend. Total liabilities of Easyjet keep stable at around 2500 million in recent years. The

strong cash flow performance and dividend payments also shows that Easyjet is a worthy investment company.

Secondly, it also has several weaknesses. Because of the lower operating margins, the airline company is highly sensitive to new policy from the government, especial with respect to new taxes

or charges. (Easyjet 2014). Since Easyjet’s cost per seat is around 50% higher than Ryanair’s, so it is not likely to win this Irish airline company purely on ticket price (IATA 2013). What is more,

compare to the main legacy airlines, low-cost airlines may still suffer from a brand disadvantage.

Thirdly, Easyjet still faces opportunities. The whole airline industry is developing fast and the expansion of low cost airlines has been predicted that their European market share will expand to

25% by 2020. Benign economic environment, improving consumer confidence and increasing leisure activities would lead to traffic demand and support the profit surge

(http://finance.yahoo.com/news/airline-industry-stock-outlook-dec-201501855.html?&session-id=6fddd981755552e952bc94f32844e14a). Therefore, IATA predicts Easyjet’s net profit margin in

2014 to be 2.2%(IATA 2013). And they believe that the growth will continue to the next year, achieving an accumulating profit up to $3.1 billion(Zacks.com 2013). Based on these estimates, IATA

claimed that the low-cost airlines will the main force of air transportation for travels within the Europe in the next decade (IATA 2013). In recent years, number of business travellers has

increasing gradually. In cater to the increasing business travellers, Easyjet adopts a series of measures: flexible fares which allows passenger free date changes and allocated seating plan(CAPA

2013). In addition, high demand for travels from European countries enforces airline companies to make changes.

Fourthly, as a low-cost carrier, Easyjet has to deal with threats. The first one is competitive low-cost carrier market environment. In this market, low cost carrier competitors offer similar

services; their prices can be comprised conveniently on the Internet. There are also alternatives and cheap modes of transport, such as coach companies Eurolines, rail companies Eurostar. The

second threat is natural disasters. It may lead to long delay time, flight cancellations, and economic losses to the airline companies. The third threat is terrorism. It can cause psychological

shock and make people fear of taking a plane. The last threat is fuel and travel taxes. The increasing oil prices will increase costs and the increasing travel tax will affect the firms’ ability to offer

low fares for customers.

From what has been discussed above, Easyjet has proven his earning power and successful management. Therefore, I think Easyjet is a good investment and it will be profitable in a long term.

And I suggest investors to buy Easyjet stocks and hold them for a long time.

6, Appendix
Appendix 1, PESTEL Analysis
Political factors
FACTOR    DESCRIPTION    EFFECT
1    “Open Skies” policy    It is an international policy that plays a major role in the international aviation industry to create a benign market environment for the whole airline

industry. The policy’s objectives are: ‘‘(1)to liberalize the rules for international aviation markets and minimize government intervention as it applies to passenger, all-cargo, and combination air

transportation as well as scheduled and charter services; (2)to adjust the regime under which military and other state-based flights may be permitted’’ (http://en.wikipedia.org/wiki/Open_skies).

Increase Easyjet’s markets and revenues

2    State aid    (1)Strict regulation to prevent the government from using state subsidies to support flag airline companies(2004)(Sørensen 2005).
(2)New guidelines to support aviation business (2014).    Ensure fair competition between flag carriers and low-cost airlines and in regional airports and major hubs(business 2014). Therefore, the

whole revenue increased.
3    OPEC rules    OPEC is an intergovernmental organization; its duty is to ‘‘coordinate the policies of the oil-producing countries. The goal is to secure a steady income to the

member states and to secure supply of oil to consumers’’ (http://en.wikipedia.org/wiki/OPEC). The increasing oil prices caused public think that, OPEC will raise their production quotas—to

reduce stress on prices. Now, exploration of alternative energy sources has became their top priority (http://wealthcycles.com/blog/2011/06/09/opec-is-in-control-of-the-oil-prices).
May increase Easyjet’s fuel costs
4    Threats from a terrorist attack in Europe are increasing    The ‘‘2013 EU Terrorism Situation and Trend Report’’ describes that terrorism threats remain strong and varied in Europe. At the

same time, more and more radicalised EU citizens travelled to regions of conflict to engage in terrorist activities (https://www.europol.europa.eu/content/rise-terrorist-attacks-europe-2012).
(1)In short term, fewer passengers fly either on a domestic or international basis flight.
(2)In the medium term, increase spending on defence dramatically,while immediate cuts in interest rates are on the cards.
Therefore, these make revenue decrease.

Economic factors
FACTOR    DESCRIPTION    EFFECT
1    The world economy    (1)The airline industry has a close relationship with world economy and its cycles.
(2)Low cost airlines are less sensitive to the world economy.    The economic impact on full-service is bigger than low-cost airlines. Revenue of low-cost airlines remain unchanged or growth.
2    Interest rates    European Central Bank can change the interbank interest rate to affect consumption, known as monetary policy. Interest decrease, consumer’s disposable income

increase. Use a regression analysis to verify whether the interest rate has an effect on airline industry(Weber 1970).
No linear relationship between interest rate and passenger traffic. Therefore, if company do not raise ticket price, there will no effect on revenue, but this will increase firm’s cost.

Social factors
FACTOR    DESCRIPTION    EFFECT
1    Aging population    With growing affluence, cheaper airfares and an ageing population, lots of elderly people choose air travel. Tourism officials claim that elderly people tend to be

travel more.     Potential markets, increase revenue to the airline industry
2    Student international study exchanges    It is a program in which students from a secondary school or university study abroad. Student exchange programs may involve

international travel.    Increase revenue to the airline industry
3    Increase in demand for business travelling    According to a survey published by the GTMC, business travel is set to go to from “strength to strength” in 2014 as confidence continues

to grow. Now, the people are becoming more optimistic, the overall economic outlook is positive. Confidence has a big impact on business behaviour and this attitude shift should deliver

increased demand for business travel(Newcombe 2014)
It is a key target market, make a surge income.
4    Air travelling is nowadays a common lifestyle among the population    Change the way of lifestyle makes people can spend not too much money for entertainment and enjoy life.

It is also an opportunity for airline firms increase their revenues.
5    Unemployment  rate    If the rate is high, more people will not choose travel outside; by contrast, if the rate is low, people have enough money to travel around.     The

unemployment rate is a significant factor to the profits of airline industry.

Technological factors
FACTOR    DESCRIPTION    EFFECT
1    The internet    Buy tickets online    Convenient and fast, help to increase profits
2    Videoconferencing    It allows two or above locations to communicate by simultaneous video and audio(Lerablog.org 2013). It became the best way to reduce the carbon

footprint of enterprises and protect the environment, helps to create a significant ROI and to boost productivity(Avaya 2010).
Decrease the revenues
3    Adoption of aircraft with more efficient engines     British engineering company Rolls-Royce are producing more fuel-efficient engineswhichdescribed as the world’s most efficient

engine, up to 6%more efficient than its latest model(Young 2014).
Decrease fuel costs

Environmental factors
FACTOR    DESCRIPTION    EFFECT
1    Noise pollution controls     Aircraft noise is unnecessary sounds produced by plane. The 2003 White Paper, outlined the ‘‘measures required to tackle the noise problem, highlighting in

particular: the need to promote low noise engine and airframe research and technology; complete integration of the International Civil Aviation Organisation guidelines on noise control;

implement EU directive 2002/49/EC regarding noise mapping; widen the use of economic instruments such as differential landing charges and amend and strengthen existing domestic

legislation’’ (http://www.politics.co.uk/reference/aviation-noise). Meanwhile, they put more effort on new technologies to reduce noise. Through various explorations and practices, aircraft

manufacturers have reduced the noise generated by aircrafts when they flying (http://www.avjobs.com/history/airlines-and-the-environment.asp).
Increasing technology costs
2    Energy consumption controls    Fuel costs are the second largest expense for airline industry, exceeded only by labour. Airlines have increased fuel efficiency by:
•    ‘‘investing in new, environmentally efficient aircraft and engines;
•    lowering cruising speeds;
•    using computer systems to determine optimum fuel loads and to select altitudes and routes that minimize fuel burn;
•    using flight simulators rather than real aircraft for pilot training;
•    holding aircraft at gates, with engines shut down, when weather or other problems delay takeoff, when appropriate;
•    using only one engine to taxi;
•    Keeping aircraft exteriors clean to minimize aerodynamic drag’’ (http://www.avjobs.com/history/airlines-and-the-environment.asp).
It is a opportunity for Easyjet
3    Responsibility for the industry in the climate change    Because of more people are conscious with climate change, most of passengers are counting their carbon footprint. The airlines

adopted “green flying” to responsive to environmentalists. What is more, the social responsibility initiatives are becoming more public and more under scrutiny because consumers are

supervising firms’ corporate social responsibility. Airline companies have to focus their efforts on fuel efficiency. Because of efficient engines, airline firms will use less fuel and emit less carbon

dioxide (http://www.avjobs.com/history/airlines-and-the-environment.asp).
Increase their revenues in the future.
Legal factors
FACTOR    DESCRIPTION    EFFECT
1    Passenger rights in the EU    The enactment of Regulation 261/2004 has laid down rules on assistance and information for stranded passengers. If passengers are denied boarding or

flight is cancelled under certain circumstances, passenger have a right to compensation (http://www.the-eu-and-me.org.uk/whats-in-it-for-me/travel-working/air-passenger-rights) (Commission

2013).
Increase related costs
2    Airline Deregulation Act    This law (1978) intended to ‘‘remove government control over fares, routes and market entry (of new airlines) from commercial aviation. The Civil Aeronautics

Board’s powers of regulation were phased out, eventually allowing passengers to be exposed to market forces in the airline industry. The Act, however, did not remove or diminish the regulatory

powers of the Federal Aviation Administration (FAA) over all aspects of air safety’’ (http://en.wikipedia.org/wiki/Airline_Deregulation_Act).

3    Competition laws in aviation industry    European Union (EU) Aviation Antitrust Law: if there is an occurrence of discrimination, the EU has the authority and power to control any

aid to a particular business (Farkas 2011).
It is a barrier that might affect Easyjet.
4    Regulations about Carbon emission level    Aviation emissions law (2008) says the EU has imposed a ‘‘cap’’ to supervise CO2 emissions which planes released when they arriving at or

departing from EU airports (http://ec.europa.eu/clima/policies/transport/aviation/index_en.htm). However, EU freezes airlines carbon emissions law, because of the government are looking into

ways of encouraging airlines to cut their emissions(Harvey 2012)
Increase costs

Appendix 2, PORTER’s five force analysis

The threat of entry–low
•    Availability of airport slots
It is a significant barrier; the best slots in major airports are occupied by national airlines, new entrants have no opportunities compete with them.
•    Government regulation
In order to improve the airline slots monopoly, the European Commission has legislated regulations to maintain constant growth in the EU, ‘‘establish neutral, transparent non-discriminatory

rules’’ to facilitate competition and new competitors to enter the EU market (Commission 1993).
•    Economics of scale
It is the biggest entry barrier into airline industry, because of the cost advantage are linked tightly with business expansion (Azar 2010). If incumbents’ production scale are large, new entrants

will pay much more capital to catch up with them and have to bear higher unit cost if they want to reach large scale (Gerry Johnson, Kevan Scholes et al. 2007). According to established

economies of scale, market participants in airline industry such as Easyjet “as the quantity of a product produced during a given period increases, the cost of manufacturing each unit

declines”(Hoskisson 2008).
•    Capital requirements
The airline industry is a capital-concentrated business; it needs huge number of expensive equipments and facilities. This is a huge range of expensive equipment and facilities. In order to

establish an airline company, it needs good reputation to lease aircraft or purchase. So the beginning input cost is very high. In addition, the potential entrants should absorb the losses of

months or years and advertising costs, as well as working capital (http://stirmedia.bokee.com/1415635.html).

The threat of substitutes–medium
•    Railway service
High-speed trains in Europe such as the TGV and Eurostar are linkages between major European cities, their prices are lower than air travel. so railway services may replace the air travel

(Sørensen 2005). Being a low-cost airline, Easyjet’s fares vary little with rail tickets prices. Therefore, railway services will not be a threat to Easyjet.

On the other hand, services provided by railway can be a threat as they offer several advantages than planes. For example, it is easy to access to a railway station because of the fact that they

are near the city centre; this advantage makes it more convenient and time- saving for customers. Another advantage of railway is that customers can enjoy the scenery when they in the train;

the disadvantage is that speed of railway journeys are slow.
•    Coach service
It is suitable for short distances and do not mentions time consumption because coach travelling has many stops(Sørensen 2005).
•    Private jet service
It means an aircraft designed and owned for small group of people, is the embodiment of the owners ‘status. Emergence of private jets are not threatens to the budget airline.
•    Videoconferencing
The development of technological such as videoconferencing may reduce face-to-face meetings so as to reduce the use of flight travelling. There was no man research on the impact of

videoconferencing in European, but there was a study made on Norwegian market in 2004(Denstadli 2004).Although the science and technology grow rapidly, the rate of substitution has not

increased dramatically. Videoconferencing will used by businessmen mainly and leisure travel will not be affected because the purposes of them are different. It should be the evidence that,

low-cost airlines will be less affected by videoconferencing because the business travellers only constitute a very small part of Easyjet’s passengers than they will do with full airlines.

Buyer power—medium to low
•    Development of internet
It increases consumer’s bargaining power. It has made it much more easily for consumer to find the cheapest ticket price between lots of airlines, either by browsing the airlines’ websites or

searching price comparison sites such as ‘‘Orbitz and Travelocity’’ (Sørensen 2005). They can choose out of a lot of offers. Internet allows price and value comparison very easy and fast.
•    Undifferentiated product
Almost all airlines tend to converge on similar competencies for differentiation. From time to time, airlines seek new competitive advantages, such as greater leg room, in-flight entertainment,

on-ground services etc in order to differentiate themselves and ease price competition.
•    switching costs—low
Switching costs are costs that customers will pay when they switch from one firm to another (http://www.wisegeek.com/what-are-switching-costs.htm). The airline industry is mainly

constituted of two types of consumers (https://sites.google.com/site/admn703ai/the-team). Firstly, they are individual travellers. They take plane for personal purpose. In this group, most

people have the experience of buying a plane. The other type of customers is travel agency.  This buyer group works as a middle man between the airlines and the flyers. In order to give their

customers the best flight experiences, they work with multiple airline companies.

Customer demand is huge, and they will choose suitable flights and company, so the switching costs between airline firms are low. There may be having some loyalty to specific firms, but no

effect on switching costs. Each customer needs lots of relevant information to the flight (https://sites.google.com/site/admn703ai/the-team). They need to know more details, such as what will

be provided during the journey, how long the flight will take and how safe that flight will promise. Each airline has a specialty. The service provided is different. Some carriers aim at costs, while

some others aim at offer better best facilities to passengers, etc.

Supplier power—high
•    Aircraft manufacture
There are 2 commercial passenger aircraft manufacturers:  Boeing and Airbus. There are very few suppliers in the aircrafts manufacturing industry due to the high capital needed. Because of the

nature of this industry is limited, these aircraft suppliers’ greater power in setting prices. Therefore, the bargaining power of suppliers is very high.

The number of aircrafts of Easyjet has increased from only 2 to 217 in recent 19 years, over 200 aircrafts of them are Airbus, the rest are aircrafts of Boeing, which is quite a huge amount of

money for Easyjet (Easyjet 2013). And in order to expand its market, they prepared to increase their Airbus aircrafts. At the Paris Air Show, Easyjet has announced to buy 135 new airbus

aircrafts. The order contains ‘‘35 of the current-generation A320s and 100 of the new, more fuel-efficient A320neos’’(Easyjet 2013).The company also has rights to buy ‘‘A320neos’’ (Easyjet 2013).

The suppliers will get lots of benefits from Easyjet deal. The aircraft manufacture will have more power because they can determine aircraft prices, as well as maintenance costs. Thus, bargaining

power of Airbus is high and it is low for Boneing.
•    Fuel suppliers
According to the ATA, fuel is the second largest expense in airline companies (http://www.investopedia.com/features/industryhandbook/airline.asp). To be goods, fuel’s price is determined by

market forces and the existing geopolitical factors (http://bcs.solano.edu/workarea/mgarnier/MGMT%2050/Southwest%20Porters%20-%20Brief%202.pdf). High cost of fuel is a threat to the

company’s profits. In the last year, 35% of the Easyjet revenue has to pay the fuel costs(Easyjet 2013). The increasing fuel prices influences financial performance. Total price of fuel is directly

related to oil costs, Easyjet control this by using efficient planes and through hedging(Easyjet 2013).
•    Switching cost
(1) Pilot retraining costs occupy the most of airline company’s expenses. Switching cost from one supplier to another is very high as all and staffs, including mechanics and pilots have to be

retrained(M. Michel Allé 2004). Moreover, “airline pilots have a strong bargaining power in the airline industry”(Palepu 2007), because highly qualified and experienced pilots are scarce resources

(http://www.slideshare.net/SusanthaKumara2/report-28965571).
(2) Most carrier firms sign long-term contracts with their manufacture suppliers. Because planes are such high capital assets,if airline firms don’t switch supplier companies, they will get more

favourable credit terms.

Competitive rivalry–high
•    The low cost carrier market is highly competitive
(1)Irish airline company Ryanair, main routes: ‘‘Dublin, UK, Spain, France, Italy, Brussels. Strategy: low fares, no frills’’ (http://www.123helpme.com/ryanair-airline-view.asp?id=167200).
(2)Virgin Express, main routes: ‘‘Brussels, Shannon, Ireland. Strategy: focus on Brussels, attempts to grow in France’’ (http://www.123helpme.com/ryanair-airline-view.asp?id=167200).
(3)Bmibaby, main routes: ‘‘UK, Ireland, Spain, France, Italy and Szech Republic Strategy: serving domestic European and Amerian’’ (http://www.123helpme.com/ryanair-airline-view.asp?id=167200).
(4)Easyjet, main routes: ‘‘UK, Portugal &Spain, France’’ (http://www.123helpme.com/ryanair-airline-view.asp?id=167200). Strategy: ‘‘building competitive advantages of a strong network and

market positions, efficient low-cost model’’ (Easyjet 2013).

Those of these low-cost carriers have similar size and power, and they all pay a lot of capital in non-current assets such as licenses (http://www.123helpme.com/ryanair-airline-view.asp?

id=167200). So the rivalry is stronger. Among them, Easyjet is the ‘‘largest intra-United Kingdom and fifth largest intra-European airline’’ in terms of passengers carried

(http://prezi.com/1nux14jqpmq1/easyjet/). It shows its strong strength when compared with the competitors.
•    Predatory pricing
According to the definition, predatory pricing is of selling a product at low prices temporarily, in order to drive competitors out or prevent new firms from entering the market

(http://economics.about.com/od/economicsglossary/g/predatory.htm).When the new entrants fail the pricing rival, the incumbent will increase its price back to the previous level. Pompeo

(2004) mentioned that predatory pricing in airline industry is often made by full-service carrier when a new low –cost airline firm enters a market or a specific route. All actions which legacy

carrier made are aim at squeezing the latter out of the present market.
•    Frequent-flyer programs(Sørensen 2005)
Frequent-flyer programs are defined as airlines offer free travel or other gifts for customers when they gather frequent flyer miles accordingly (IATA 2012). These programs are the ‘‘biggest and

most successful innovative marketing program in the airline industry’’(Browne, Toh et al. 1995). It is a typical win-to-win model. For the airlines, revenues have being increased, improving

customers’ recognition and loyalty; for the customers, they can receive ‘bonus flight, bonus points, free hotel accommodation or other gifts’ (Sørensen 2005, Evert R. de Boer 2012).What is more,

customers prefer a certain airline rather than a cheaper flight because they can receive bonus while their company pays for the flight ticket. These benefits can explain why a large number of

customers, particularly the business travellers have being attractive by these programs of a particular airline firm.

Appendix 3, SWOT analysis

Strength
•    Brand awareness
As a famous low-cost carrier, Easyjet has put a lot of effort on improving its brand perception in recent years. Now, it has good brand awareness, especially in the UK, and now spread to other

countries. This achievement is based on good customer satisfaction (like on-time performance) (CAPA 2013). Meanwhile, the brand name Easyjet and brand colour are very easy to remember.

Hence, the brand recall is much higher than any other low-cost carrier (http://www.mbaskool.com/brandguide/airlines/5134-easyjet.html).
•    Fly to main airports
Because of its flight destinations have covered the whole of Europe, which makes it being a very attractive low-cost airline company option.
•    Rapid turnaround times
Turnaround times means the time ‘‘between the aircraft arriving at the gate and departure’’(Easyjet 2006). During the turnaround period, the plane staff will get ready for the next flight. They

should finish safety checks, cleaning the aircraft cabin and even refuelling. By implementing this requirement, when face the same number of passengers, Easyjet require less gates than other

airlines (Easyjet 2006).
•    Strong cost base
Easyjet has high asset utilisation; higher numbers of seat per aircraft; higher load factors; lower overhead costs. However, its key legacy carrier competitors operates with older, less efficient

aircraft (Easyjet 2013).
•    Punctuality
Easyjet remains the leading level of on-time performance in its industry. It use the ‘Easyjet turn’ programme, it deleted several unnecessary processes  and requires staff on plane and ground

handling partners to simplify their  operation (Easyjet 2013).

Weakness
•    Its low operating margin led to Easyjet is highly sensitive to any new tax or fees. (http://www.mbaskool.com/brandguide/airlines/5134-easyjet.html).
•    Cost base is a bit higher  that of Ryanair (Easyjet 2013).
Easyjet’s unit costs are lower than most competitors, except Ryanair. Each seat cost of Ryanair is almost 50% lower than Easyjet’s, so it is difficult to compete with this Irish airline company

(http://centreforaviation.com/analysis/easyjet-swot-analysis—is-stelios-strength-weakness-opportunity-and-threat-all-in-one-96290).
•    Brand competes with legacy airline companies
Easyjet’s brand may be stronger than many low-cost carrier rivals, but relative to the main legacy airlines, the whole low-cost airlines are still under a brand inferior position. In order to enhance

competitiveness, Easyjet makes efforts to improve its performance punctuality and provide additional services such as allocation of seats and re – ticketing flexibility. To the extent, prices will

continue to be a key dimension of competition (CAPA 2013).

Opportunity
•    Low cost carrier market is growing.
Despite the uncertain future, aviation industry is booming. It is estimated that European market share will be expanded to 25% in 2020. Low-cost airlines will be leading market share in the airline

industry in the next ten years.
•    Advanced new technology.
It is an opportunity for Easyjet to improve its IT business model.
•    Business passengers(Easyjet 2013)
In 2011, Easyjet had 18% business travellers and it aims to increase 2%-6% in next three to five years (CAPA 2013).
•    The increasing demand of travelling to Europe due to market volatility

Threat
•    Highly competitive market environment
In the low fare flights market, similar services are provided by competitors and customers can compare prices easily on the Internet. In addition, there are some other alternatives, such as

coach service and rail services. People prefer them because their stations are in the city centre, unlike airports are always far away from city. And some individuals can use private cars.
•    Natural disasters
It may cause long delay time, even flight cancellations. For example, a large number of delays were caused by the volcanic ash cloud over Europe in April 2010 (Davies 2010). Easyjet offered

compensations or refunds to customers and the company lost about 200 dollars in a day.
•    Terrorism
It can cause psychological shock and make people fear of taking a plane (BBC 2011). For example, ‘anti-police riots’ were happen on 6th August 2011 in Tottenham (BBC 2011).
•     Price changes in fuel and travel taxes
The higher oil prices, the higher costs for Easyjet and the higher ticket price consumers will pay. There is a high possible that fuel costs will increase each year in the world. Moreover, the

increasing travel taxes may affect the firms’ bearing capacity to provide low fares for customers.

Appendix 4, Companies’ comparison

(1)Goal comparison
Company    Goals
Easyjet    Makes travel easy, affordableand drives growth and returns forshareholders
Ryanair    Stable the position of  Europe‘s biggest scheduled passenger airline (Ryanair 2013)
(2)Strategy comparison
Strategy differences:
Easyjet    Ryanair
1    Build strong number 1 and2 network positions    Frequent Flights on Short distance Routes
2    Maintain low cost advantage    Low operating costs
3    Drive demand, improve unit revenue    Enhancement of operating results through ancillary services.
4    Disciplined use of capital    ——-

Strategy Similarity:
Easyjet    Ryanair
1    Commitment to Safety and Quality Maintenance
2    Taking Advantage of the Internet

Appendix 5, Figures

Enterprise turnover for the airline industry (source: IATA)

Growth in international premium and economy passenger numbers (source: IATA)

Jet hull-loss rate per million sectors, 2002-2012(source: IATA)

Easyjet total revenue

Ryanair total revenue

Easyjet & Ryanairtotal revenues comparison
Easyjet revenue of total revenue         Ryanair revenue of total revenue
2009(?millions)    2010(?millions)    2011(?millions)    2012(?millions)    2013(?millions)              2009 (?millions)    2010 (?millions)    2011 (?millions)    2012 (?millions)

2013 (?millions)
Passenger Revenue    2151    2402    2733    3794    4194         Passenger Revenue    2175    2066    2494    2922    3231
Ancillary Revenue     516    571    719    60    64         Ancillary Revenue     555    589    707    739    900
Total Revenue     2667    2973    3452    3854    4258         Total Revenue     2730    2656    3201    3661    4132
Sep30 2009 % of total    Sep30 2010 % of total    Sep30 2011 % of total    Sep30 2012 %  of total    Sep30 2013 % of total              Mar31 2009 % of total

Mar31 2010 % of total    Mar31 2011 % of total    Mar31 2012 % of total    Mar31 2013 % of total
Passenger Revenue    80.65%    80.79%    79.17%    98.44%    98.50%         Passenger Revenue    79.67%    77.79%    77.91%    79.81%    78.21%
Ancillary Revenue     19.35%    19.21%    20.83%    1.56%    1.50%         Ancillary Revenue     20.33%    22.21%    22.09%    20.19%    21.79%
Easyjet percentage change
Easyjet Percentage change
2009-2010     2010-2011     2011-2012     2012-2013     2009-2013
Revenue change    11.47%    16.11%    11.65%    10.48%    59.66%
Net profit change    70.42%    85.95%    13.33%    56.08%    460.56%
Fuel change    -9.17%    25.10%    25.30%    2.87%    46.47%
Airports and ground handling change    9.23%    14.66%    3.47%    12.88%    46.27%
Crew change    9.45%    21.13%    6.14%    5.09%    47.88%
Maintance change    9.26%    1.13%    13.41%    4.43%    30.86%

Net profit margin

Easyjet main costs

Ryanair main costs

EPS for Easyjet & Ryanair

Ratios comparison
Easyjet Ratios        Ryanair ratios
2009    2010    2011    2012    2013            2009    2010    2011    2012    2013
Profitability Ratios                            Profitability Ratios
Return on Capital Employed                ( ROCE)    3.60%    6.90%    9.80%    11.30%    17.40%        Return on Capital Employed                ( ROCE)    -0.96%    6.58%    7.25%    9.83%    10.09%
ROCE growth     –    3.30%    2.90%    1.50%    6.10%        ROCE growth     –    7.54%    0.68%    2.57%    0.27%
Return on Equity (ROE)/Return on shareholders’ funds    5.50%    8.60%    12.70%    14.60%    19.73%        Return on Equity (ROE)/Return on shareholders’ funds    6.87%    11.58%    12.91%

16.95%    17.40%
ROE growth        3.10%    4.10%    1.90%    5.13%        ROE growth        18.45%    1.33%    4.04%    0.45%
Net profit margin    2.67%    4.07%    6.52%    6.62%    9.35%        Net profit margin    -5.75%    10.22%    10.32%    12.76%    11.66%
Net profit margin change         1.40%    2.45%    0.10%    2.73%        Net profit margin change         4.47%    0.10%    2.44%    -1.10%
Asset turnover    79.00%    77.00%    81.00%    88.00%    98.00%        Asset turnover    46.00%    43.00%    45.00%    50.00%    54.00%

Liquidity Ratios                            Liquidity Ratios
Current/working capital ratio    139.55%    142.25%    147.66%    104.98%    105.00%        Current/working capital ratio    184.52%    197.75%    189.39%    213.54%    196.91%
Acid test quick/ liquidity ratio    94.00%    99.00%    111.00%    64.00%    98.00%        Acid test quick/ liquidity ratio    156.00%    188.00%    161.00%    195.00%    188.00%

Management/ Activity Ratios                            Management/ Activity Ratios
Collection period for Receivables (Debtor Days)    21.62    9.45    8.88    11.74    8.06        Collection period for Receivables (Debtor Days)    5.19    5.41    5.09

4.28    4.19
Payment period for Payables (Creditor Days)    13.86    10.30    10.32    11.29    11.35        Payment period for Payables (Creditor Days)    17.00    21.74    17.52    17.84    12.12

Risk/ Gearing Ratios    2009    2010    2011    2012    2013        Risk/ Gearing Ratios    2009    2010    2011    2012    2013
Capital gearing    37.60%    31.80%    28.00%    29.00%    7.00%        Capital gearing    50.02%    51.27%    56.14%    52.86%    52.42%
Debt/Equity Ratio    77.00%    72.00%    67.00%    46.00%    29.00%        Debt/Equity Ratio    95.00%    99.00%    116.00%    103.00%    99.00%

Easyjet financial position review

Ryanair financial position review

Net assets change of Easyjet & Ryanair

Easyjet liabilities

Net assets change of Easyjet & Ryanair

Gearing ratio of Easyjet & Ryanair

Total debt ratio of Easyjet & Ryanair

Easyjet net cash flow chart

Ryanair net cash flow chart

Easyjet stock change from 2009 to2014

Easyjet & FTSE100 & industry stock change

Easyjet & Ryanair &ftse100 stock change

P/E ratio of Easyjet &Ryanair

Easyjet annual dividends

Easyjet income statement (Easyjet 2013) (source: FAME database)
Easyjet PLC
Profit & Loss account (mil GBP)
30/09/2009    30/09/2010    30/09/2011    30/09/2012    30/09/2013
Turnover    2667    2973    3452    3854    4258
National Turnover        1423    1594    1761    1971
Overseas Turnover        1550    1858    2093    2288
Cost of Sales
Exceptional Items pre GP
Other Income pre GP
Gross Profit
Administration Expenses    2618    2793    3183    3523    3761
Other Operating Income/Costs pre OP
Exceptional Items pre OP
Operating Profit    60    174    269    331    497
Other Income
Total Other Income & Int. Received    23    7    10    11    5
Exceptional Items
Profit (Loss) on Sale of Operations
Costs of Reorganisation
Profit (Loss) on Disposal
Other Exceptional Items
Profit (Loss) before Interest paid    83    181    279    342    502
Interest Received    23    7    10    11    5
Interest Paid    -28    -27    -31    -25    -24
Paid to Bank        -20    -20    -20    -9
Paid on Hire Purchase
Paid on Leasing        -2.9    -5    -5    -5
Other Interest Paid        -3.5    -6        -10
Net Interest    -5.4    -19.6    -21    -14    -19
Profit (Loss) before Tax    54.7    154    248    317    478
Taxation    16.5    -32.7    -23    -62    -80
Profit (Loss) after Tax    71.2    121.3    225    255    398
Extraordinary Items
Minority Interests
Profit (Loss) for Period    71.2    121.3    225    255    398
Dividends                -196    -85
Retained Profit(Loss)    71.2    121.3    225    59    313

Depreciation    55.4    72.5    83    97    102
Depreciation Owned Assets    52    68.4    77    90    95
Depreciation Other Assets    3.4    4.1    6    7    7
Impairment Tangibles
Audit Fee    0.3    0.3    0.3    0.4    0.4
Non-Audit Fee    0.1    0.1            0.3
Tax Advice
Non-Tax Advisory Services    0.1    0.1            0.3
Other Auditors Services
Non-Audit Fees paid to Other Auditors
Total Amortization and Impairment    4.4    6.2    7    8    10
Amortisation    4.4    6.2    7    8    10
Impairment
Total Operating Lease Rentals    127.8    102.8    106    94    104
Hire of Plant & Machinery        102.8    106    94    104
Land & Building or Property Rents & Other
Research & Development
Foreign Exchange Gains/Losses
Remuneration    342.9    366.9    432    476    517
Wages & Salaries    279.2    299.7    350    379    399
Social Security Costs    33.8    39.2    48    53    64
Pension Costs    22.5    23.2    28    32    36
Other Staff Costs    7.4    4.8    6    12    18
Directors’ Remuneration    2.6    3.5    2.9    3.5    10.9
Directors’ Fees    1.5    3.2    1.8    1.1    1.1
Pension Contribution    0.1    0.0    0.0    0.0    0.1
Other Emoluments    1.0    0.3    1.1    2.4    9.8
Highest Paid Director    1.7    2.6    1.6    2.0    6.4
EBITDA    119.9    252.3    359    436    609
Number of Employees    6478    6887    7724    8206    8343

Easyjet balance sheet (Easyjet 2013) (source: FAME database)
Easyjet PLC
Balance sheet (mil GBP)
30/09/2009    30/09/2010    30/09/2011    30/09/2012    30/09/2013
Fixed Assets
Tangible Assets    1612.2    1928.1    2149    2395    2280
Land & Buildings    5.4    4.7    4    10    0
Freehold Land
Leasehold Land    5.4    4.7    4    10
Fixtures & Fittings    0    0    0    0    0
Plant & Vehicles    1593.8    1913.6    2134    2377    2259
Plant
Vehicles    1593.8    1913.6    2134    2377    2259
Other Fixed Assets    13    9.8    11    8    21
Intangible Assets    447.1    452.2    451    456    467
Investments    131.5    107.3    131    117    217
Fixed Assets    2190.8    2487.6    2731    2968    2964

Current Assets
Stock & W.I.P.
Stock
W.I.P.
Finished Goods
Trade Debtors    155.5    73.7    92    120    92
Bank & Deposits    1099.2    1195    1490    1013    1237
Other Current Assets    86.3    120.4    73    121    102
Group Loans (asset)    0    0    0    0    0
Directors Loans (asset)    0    0    0    0    0
Other Debtors    27.3    43.9    27    39    38
Prepayments    59    76.5    46    82    64
Deferred Taxation
Investments    141.2    125.8    83    73    17
Current Assets    1482.2    1514.9    1738    1327    1448

Current Liabilities
Trade Creditors    -99.2    -79.2    -90    -109    -117
Short Term Loans & Overdrafts    -117.6    -127.4    -155    -129    -87
Bank Overdrafts    -113.8    -121.8    -146    -120    -78
Group Loans (short t.)    0    0    0    0    0
Director Loans (short t.)    0    0    0    0    0
Hire Purch. & Leas. (short t.)    -3.8    -5.6    -9    -9    -9
Hire Purchase (short t.)
Leasing (short t.)    -3.8    -5.6    -9    -9    -9
Other Short Term Loans    0    0    0    0    0
Total Other Current Liabilities    -845.4    -858    -932    -1026    -1175
Corporation Tax    -57.7    -27.5    -9    -29    -58
Dividends    0    0    0    0    0
Accruals & Def. Inc. (short t.)    -255.8    -328.2    -280    -338    -351
Social Securities & V.A.T.    -7.8    -9.2    -13    -13    -14
Other Current Liabilities    -524.1    -493.1    -630    -646    -752
Current Liabilities    -1062.2    -1064.6    -1177    -1264    -1379

Net Current Assets (Liab.)    420    450.3    561    63    69
Net Tangible Assets (Liab.)    2163.7    2485.7    2841    2575    2566
Working Capital    56.3    -5.5    2    11    -25
Total Assets    3673    4002.5    4469    4295    4412
Total Assets less Cur. Liab.    2610.8    2937.9    3292    3031    3033

Long Term Liabilities
Long Term Debt    -1003    -1084.6    -1145    -828    -592
Group Loans (long t.)    0    0    0    0    0
Director Loans (long t.)    0    0    0    0    0
Hire Purch. & Leas. (long t.)    -106.1    -149.4    -212    -196    -186
Hire Purchase (long t.)
Leasing (long t.)    -106.1    -149.4    -212    -196    -186
Preference Shares
Other Long Term Loans    -896.9    -935.2    -933    -632    -406
Total Other Long Term Liab.    -55.2    -60.6    -86    -70    -109
Accruals & Def. Inc. (long t.)    -52.6    -56.6    -59    -46    -68
Other Long Term Liab.    -2.6    -4    -27    -24    -41
Provisions for Other Liab.    -245.3    -292    -356    -339    -315
Deferred Tax    -76.7    -147.9    -179    -198    -144
Other Provisions    -168.6    -144.1    -177    -141    -171
Pension Liabilities
Balance sheet Minorities
Long Term Liabilities    -1303.5    -1437.2    -1587    -1237    -1016

Net assets    1307.3    1500.7    1705    1794    2017

Shareholders Funds
Issued Capital    106    107.3    108    108    108
Ordinary Shares
Preference Shares
Other Shares
Total Reserves    1201.3    1393.4    1597    1686    1909
Share Premium Account    642.5    651.6    654    656    657
Revaluation Reserves    0    0    0    0    0
Profit (Loss) Account    583.1    706.2    928    987    1306
Other Reserves    -24.3    35.6    15    43    -54
Shareholders Funds    1307.3    1500.7    1705    1794    2017

Easyjet cash flow sheet (Easyjet 2013)(source: FAME database)
Easyjet PLC
Cash Flow statement (mil GBP)
30/09/2009    30/09/2010    30/09/2011    30/09/2012    30/09/2013
Net Cash In (Out)flow Operat. Activ.    134.5    364.8    449    344    788
Net Cash In (Out)flow Ret. on Invest.        12.7    -23    -9    -22
Taxation        -14.1    -2    -28    -65
Net Cash Out (In)flow Investing Activ.    -430    -482    -478    -389    -416
Capital Expenditure & Financ. Invest.
Acquisition & Disposal
Equity Dividends Paid                -46    -85
Management of Liquid Resources
Net Cash Out(In)flow from Financing    440.2    232.8    246    -309    197
Increase(Decrease) Cash & Equiv.    144.7    114.2    192    -437    397

Ryanair income statement (Ryanair 2013) (source: FAME database)
Ryanair PLC
Profit & Loss account(mil GBP)
31/03/2009    31/03/2010    31/03/2011    31/03/2012    31/03/2013
Turnover    2,730,241    2,658,521    3,204,344    3,662,659    4,135,671
National Turnover              331,161    323,033    399,087
Overseas Turnover              2,873,183    3,339,626    3,736,584
Cost of Sales
Exceptional Items pre GP
Other Income pre GP
Gross Profit
Administration Expenses    -2,644,276    -2,300,771    -2,773,331    -3,092,679    -3,527,514
Other Operating Income/Costs pre OP
Exceptional Items pre OP
Operating Profit    85,965    357,749    431,013    569,981    608,157
Other Income    -202,400    -11,121    -530    12,264
Total Other Income & Int. Received    -132,313    9,787    23,484    49,223    27,097
Exceptional Items
Profit (Loss) on Sale of Operations
Costs of Reorganisation
Profit (Loss) on Disposal
Other Exceptional Items
Profit (Loss) before Interest paid    -46,349    367,536    454,497    619,203    635,254
Interest Received    70,087    20,908    24,014    36,959    27,097
Interest Paid    -121,149    -64,148    -82,901    -91,103    -84,085
Paid to Bank         -63,703    -82,812
Paid on Hire Purchase
Paid on Leasing
Other Interest Paid         -445    -88
Net Interest    -51,062    -43,240    -58,887    -54,145    -56,988
Profit (Loss) before Tax    -167,498    303,389    371,596    528,100    551,169
Taxation    10,500    -31,762    -40,876    -60,569    -69,097
Profit (Loss) after Tax    -156,998    271,626    330,720    467,531    482,072
Extraordinary Items
Minority Interests
Profit (Loss) for Period    -156,998    271,626    330,720    467,531    482,072
Dividends              -441,431         -416,192
Retained Profit(Loss)    -156,998    271,626    -110,711    467,531    65,879

Depreciation    237,685    209,436    245,171    257,960    279,099
Depreciation Owned Assets    226,271    195,112    229,985    245,529    263,518
Depreciation Other Assets    11,414    14,324    15,185    12,431    15,581
Impairment Tangibles
Audit Fee    478    445    353    334    423
Non-Audit Fee    239    267    353    334    254
Tax Advice    231    267    353    334    254
Non-Tax Advisory Services    8
Other Auditors Services
Non-Audit Fees paid to Other Auditors
Total Amortization and Impairment
Amortisation
Impairment
Total Operating Lease Rentals    72,581    84,967    84,048    75,669    83,154
Hire of Plant & Machinery         84,967
Land & Building or Property Rents & Other
Research & Development
Foreign Exchange Gains/Losses
Remuneration    287,037    298,050    332,044    346,226    368,857
Wages & Salaries    264,462    276,342    310,767    329,541    349,127
Social Security Costs    16,780    15,570    15,980    15,100    15,581
Pension Costs    2,309    1,779    2,384    2,169    2,456
Other Staff Costs    3,487    4,360    2,913    -584    1,694
Directors’ Remuneration    1,253    801    1,236    1,360    1,397
Directors’ Fees    220    534    530    701    711
Pension Contribution         89    88
Other Emoluments    1,033    178    618    659    686
Highest Paid Director    996              1,085    1,101
EBITDA    323,650    567,186    676,183    827,940    887,256
Number of Employees    6,369    7,032    8,063    8,438    9,059

Ryanair balance sheet (Ryanair 2013) (source: FAME database)
Ryanair PLC
Balance sheet (mil GBP)
31/03/2009    31/03/2010    31/03/2011    31/03/2012    31/03/2013
Fixed Assets
Tangible Assets    3,382,517    3,838,356    4,355,771    4,108,999    4,154,555
Land & Buildings    29,202    26,958    31,342    27,865    36,496
Freehold Land
Leasehold Land
Fixtures & Fittings    5,008    3,826    4,944    4,589    3,895
Plant & Vehicles    3,348,307    3,807,572    4,319,486    4,076,546    4,114,163
Plant    4,961    3,648    3,796    3,087    3,302
Vehicles    3,343,346    3,803,924    4,315,690    4,073,459    4,110,861
Other Fixed Assets    0    0    0    0    0
Intangible Assets    43,470    41,638    41,318    39,044    39,629
Investments    142,100    123,669    121,747    127,645    191,626
Fixed Assets    3,568,087    4,003,662    4,518,836    4,275,689    4,385,810

Current Assets
Stock & W.I.P.    1,926    2,224    2,384    2,336    2,286
Stock    1,926    2,224    2,384    2,336    2,286
W.I.P.    0    0    0    0    0
Finished Goods
Trade Debtors    38,783    39,414    44,673    42,965    47,504
Bank & Deposits    2,114,241    1,314,892    1,790,707    2,932,997    3,013,688
Other Current Assets              441    7,759
Group Loans (asset)    0    0    0    0    0
Directors Loans (asset)    0    0    0    0    0
Other Debtors    0    0    0    0    0
Prepayments
Deferred Taxation              441    7,759
Investments    205,109    1,368,986    1,232,033    247,615    123,460
Current Assets    2,360,059    2,725,515    3,070,237    3,233,672    3,186,940

Current Liabilities
Trade Creditors    -123,123    -137,014    -133,135    -151,172    -117,110
Short Term Loans & Overdrafts    -188,336    -236,216    -297,259    -307,349    -338,627
Bank Overdrafts    -188,336    -236,216    -297,259    -307,349    -338,627
Group Loans (short t.)    0    0    0    0    0
Director Loans (short t.)    0    0    0    0    0
Hire Purch. & Leas. (short t.)    0    0    0    0    0
Hire Purchase (short t.)
Leasing (short t.)
Other Short Term Loans    0    0    0    0    0
Total Other Current Liabilities    -968,476    -1,005,453    -1,191,598    -1,055,699    -1,163,052
Corporation Tax    -394    -801    0    0    -254
Dividends    0    0    0    0    0
Accruals & Def. Inc. (short t.)    0    -231,590    -241,198    -272,810    -365,470
Social Securities & V.A.T.    0    -251,163    -163,506    -190,883    -212,965
Other Current Liabilities    -968,081    -521,900    -786,894    -592,006    -584,363
Current Liabilities    -1,279,935    -1,378,683    -1,621,992    -1,514,219    -1,618,788

Net Current Assets (Liab.)    1,080,125    1,346,832    1,448,245    1,719,453    1,568,151
Net Tangible Assets (Liab.)    4,604,742    5,308,856    5,925,763    5,956,097    5,914,332
Working Capital    -82,414    -95,376    -86,079    -105,870    -67,319
Total Assets    5,928,147    6,729,178    7,589,073    7,509,361    7,572,750
Total Assets less Cur. Liab.    4,648,212    5,350,494    5,967,081    5,995,141    5,953,961
-3,668,184    -4,194,771    -4,981,190    -4,750,645    -4,801,579
Long Term Liabilities
Long Term Debt    -2,037,496    -2,393,923    -2,924,654    -2,717,085    -2,623,662
Group Loans (long t.)    0    0    0    0    0
Director Loans (long t.)    0    0    0    0    0
Hire Purch. & Leas. (long t.)    0    0    0    0    0
Hire Purchase (long t.)
Leasing (long t.)
Preference Shares
Other Long Term Loans    -2,037,496    -2,393,923    -2,924,654    -2,717,085    -2,623,662
Total Other Long Term Liab.    -149,063    -153,029    -119,098    -166,773    -150,642
Accruals & Def. Inc. (long t.)    0    0    0    0    0
Other Long Term Liab.    -149,063    -153,029    -119,098    -166,773    -150,642
Provisions for Other Liab.    -201,690    -269,135    -315,446    -352,567    -408,486
Deferred Tax    -144,331    -177,585    -236,342    -266,469    -293,409
Other Provisions    -57,359    -91,550    -79,104    -86,098    -115,077
Pension Liabilities    -9,426
Balance sheet Minorities
Long Term Liabilities    -2,388,249    -2,816,087    -3,359,198    -3,236,425    -3,182,790

Net assets    2,259,963    2,534,407    2,607,883    2,758,716    2,771,171

Shareholders Funds
Issued Capital    8,681    8,363    8,387    7,759    7,790
Ordinary Shares
Preference Shares
Other Shares
Total Reserves    2,241,856    2,526,044    2,599,496    2,750,957    2,763,380
Share Premium Account    572,992    562,203    582,070    555,965    582,415
Revaluation Reserves    0    0    0    0    0
Profit (Loss) Account    1,649,789    1,853,696    1,737,117    2,002,357    2,048,021
Other Reserves    19,075    110,145    280,308    192,635    132,944
Shareholders Funds    2,250,537    2,534,407    2,607,883    2,758,716    2,771,171

Ryanair cash flow sheet (Ryanair 2013)(source: FAME database)
Ryanair PLC
Cash Flow statement(mil GBP)
31/03/2009    31/03/2010    31/03/2011    31/03/2012    31/03/2013
Net Cash In(Out)flow Operat. Activ.    383,402    775,376    695,959    861,645    888,949
Net Cash In(Out)flow Ret. on Invest.              3,443    918    -423
Taxation              -5,209    -11,346    -21,847
Net Cash Out(In)flow Investing Activ.    -360,387    -1,378,239    -418,476    -154,676    -1,542,409
Capital Expenditure & Financ. Invest.
Acquisition & Disposal
Equity Dividends Paid              -441,431         -416,192
Management of Liquid Resources
Net Cash Out(In)flow from Financing    81,245    509,177    651,640    -129,230    -150,642
Increase(Decrease) Cash & Equiv.    104,260    -93,686    485,927    567,311    -1,242,564

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