QANTAS 2015 v 2013-2014 results
Company Overview – 320 words
Qantas was founded in 1920 and has grown to be Australia’s largest domestic and international airline. The key market is the transport of airline passengers both domestic and internationally however, the group has expanded to include Qantas freight, Jetstar and Qantas frequent flyer. Qantas holds a market share of 65% through its Qantas and Jetstar operations.
The company has successful duel branding strategy between Qantas and Jetstar. Qantas offering a full cost service and Jetstar, the low cost carrier airline which has driven significant growth over recent years including its international ...view middle of the document...
Investors in Qantas bonds enjoy stronger returns than bonds from similarly rated corporates in the Australian market, whilst maintaining an investment grade exposure.
Current Market - 350words – 167 words
Qantas has certainly been on shaky ground over the last few years with a record deficit in 2013 however, a major turnaround has happened and the Group reported a profit in 2015.
In 2011, Qantas presented a strategic plan to grow the business and turn the profitability to a positive result, refer Reference 1. Qantas retired the older planes and replaced with smaller capacity per planes, but longer operating ranges with lower operating costs. This in turn had a major impact on the costs, the major impact was the cost per available seat kilometre fell. The other cost reduction comes from external factors, which is the decline in fuel costs and the repeal of the carbon tax. From these savings Qantas proved to make great cost savings and obviously had an impact, reflecting in the 2015 financial result.
In February 2014 the Qantas share price was $1.16, in 2015 it was $3.45. Joyce (The current CEO) has taken a long-term view on strategies and this is reflected in the share price.
Profitability – 388 words
Profitability is an important measurement in all business, measuring current and past profitability and projecting future profitability (via budgeting or forecasting) is vital for the success of the business. The three components to measuring profitability is Sales, Assets and Equity.
Profitability is measured by the income statement (also known as profit and loss statement). It is measured with income and expenses. Income is money generated from the activities of the business however, money coming into the business from activities like borrowing money do not create income. This is simply a cash transaction between the business and the lender to generate cash for operating the business or buying assets. Expenses are the cost of resources used up or consumed by the activities of the business. The components for the analysis with Qantas based on 2014 v 2013 are Gross Profit Margin, Net Profit Margin, Rate of Equity, Rate of Investment and Rate of Assets.
Gross Profit Margin (GPM) is calculated by Revenue - Cost of Goods Sold / Revenue. In 2013 GPM is 2% and in 2014 is -3%. GPM is used and measured to benchmark against other industry competitors, showing a negative result is the outcome of expenses exceeding the revenue amount. In 2014, expenses are $M15,792 and revenue is $M15,352 (Refer Appendix 1, pg.3). In 2013 GPM showed a 2% GPM, in this instance revenue is higher than expenses, $M15,902 v $M15,530 respectively (Refer Appendix 2, pg.7) To avoid a negative GPM costs must be cut to obtain the achieved level of GPM, alternatively revenue needs to increase or a combination of both. Air New Zealand had a GPM of 8.64% which is much higher than the 2013 Qantas result (Refer Appendix 3, pg.2).
Net Profit Margin (NPM) is Net...