Post on 22-Nov-2014
Running head: RYANAIR 1
Ryanair: Europe’s Discount Airline
Patrick O’Keefe
Peru State College
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Ryanair: Europe’s Discount Airline
Using financial management techniques the purpose of this research paper is to provide
an overview of Ryanair Holding, Plc. After analyzing the information from different resources,
this research paper provides analytical data which typically assist executives to make many
decisions required to effectively manage of business and to develop impending financial plans
for the future requires reliable and pertinent information on the financial performance and
financial position of the firm. Financial analysis is an essential element in all businesses and can
be a harbinger of financial problems if the analysis forecasts serious cash flow difficulties or
provides evidence of poor performance.
Financial management techniques in today’s business
The main objective of financial management is maximizing shareholders’ wealth. All
companies need sound financing to grow and sufficient cash flow to acquire the resources to
necessary to operate. Finance traditionally has concerned itself with the best use of funds for
investment and financing of internal organizational activities (Petrova & Sinclair, 2006).
Financial management concerns the effective decisions used by executives to manage a
company’s finances that provide acceptable returns to shareholders or business owners.
Managing a firm’s cash and credit resources requires expertise, time and money in a particular
way, to achieve a specific set of managerial objectives. These financial objectives typically
govern the decisions to be made with respect to a firm’s strategy and positioning a portion of
which importantly includes financial strategies and outcomes.
A company’s major objective is maximizing the wealth of its shareholders, but other
objectives should be satisfied at the same time, like managerial objectives, short-term objectives,
external stakeholder objectives, as well as non-financial objectives. All companies need
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machines, staff, and working capital to exist and grow in the market, which is one reason
financial managers consider investment strategies. In order to understand an organization’s
direction it is necessary to answer questions with respect to the external environment of the
company using both financial and external environmental analysis.
Determining the current environment, capacity for change, financial strength and other
factors requires the use of such analytical tools as an external environmental scan sometimes
referred to as Poltical, Economic, Social and Technological (PEST) scan and a Strengths,
Weaknesses, Opportunities and Threats (SWOT) assessment which can help to analysis the
company’s existing situation. The rule of thumb is that long-term funds and short-term assets
should finance long-term assets by short-term funds. Short-term finance is usually cheaper than
long-term finance. This is largely due to the risks underwritten by creditors.
About Ryanair
The Irish company, Ryanair, is a low-fare airline company in Europe. Started in 1985,
Ryanair went public in 1997 with an Initial Public Offering (IPO) when it floated Ryanair
Holdings, PLC on the Dublin and on the New York (NASDAQ) Stock exchanges. In 1997,
executives stated goals were for the Ryanair to become Europe’s largest airline by 2005, eight
years from the IPO. Ryanair currently operates 950 routes across 11 European countries and in
the North African country of Morrocco. The company offers daily services on routes in these
countries. By 1999, Ryanair had become the biggest passenger carrier on the Dublin-London
route. However, compared with other large airlines, Ryanair was limited to operations on
European continental routes. At the time of the case. Ryanair lacks links with other continents
(“Annual Report”, 2000).
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Besides route availability, the actual flight schedule is a major factor in gaining passenger
traffic and is important to maximize the available flying time for aircraft, as money is generated
by flights in the air, not by idled planes sitting on the ground. Thus passenger capacity, number
of flights, availability and convenience of scheduled departures and arrivals are an airline’s most
significant intangible asset. Employees who serve the airline from flight crews to ground crews
and from ticketing agents to baggage handlers are critical in quick turns of aircraft to keep planes
flying and thus generating revenue. The most tangible assets, of course, is the aircraft. Ryanair
has a fleet of 200 Boeing 737-800 aircraft (“Annual Report”, 2009).
Over the past ten years, Ryanair has increased its annual traffic from under 700,000 to
over 15 million passengers. In accomplishing this passenger traffic growth, Ryanair changed the
face of air travel, broke higher fare cartels, rocked airport monopolies and made it possible for
millions to travel at deeply discounted prices. “A first mover competitive advantage could
explain why the most successful airlines seem to be able to maintain … market leadership”
(Malighetti, Paleari & Redondi, 2009, p. 196) such as Southwest Airlines and JetBlue in the US
and by Ryanair and Easyjet in Europe.
Ryanair provide unique services with low price. Like Southwest Airlines, Ryanair uses a
version of open seating, where in when seats are not booked, customers may sit in any open seat
in the cabin. However, like Southwest Airlines. Ryanair’s in-flight services are strictly limited.
For example, customers have to for drinks or food. One complaint about airlines in general is
the gernal policy of overbooking flights. Ryanair, like its industry counterparts, frequently
receives complaints from customers about overbooked flights.
Ryanair has committed itself to safe operations and has put in place extensive safety
training programs to ensure the recruitment of suitably qualified pilots and maintenance
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personnel. In addition, the company is also committed to the operation and maintenance of its
aircraft in accordance with the highest European Aviation Industry Standards, which are closely
monitored by the Irish Aviation Authority.
In year 2000, Ryanair launched Europe’s largest travel website at www.ryanair.com,
which within three months of its launch was taking over 50,000 bookings per week, by offering
unbelievably low airfares. The passenger acceptance of this website enabled Ryanair to reduce
travel agent commission. The result is that Ryanair has outperformed rivals in terms of increased
passenger traffic and share price (Gill, 2010).
Ryanair is well positioned in European market to implement its low cost strategy. After
the full EU air transport deregulation in 1997, Ryanair was free to set up new routes to
Continental Europe. The airline entering these market offered airfares, which were more than
50% lower than the cheapest fares then provided by the flag carrier airlines. The European
airline sector is dominated by high-cost, long-haul national carriers like British Airways,
Lufthansa, and KLM. These airlines control 50-60% of market share, but are beginning to lose
the bottom end of the market to low cost carrier like Ryanair.
Competition
Ryanair now has a number of low-cost competitors. In 2004, approximately 60 new low-
cost airlines were formed. Although traditionally a full-service airline, Aer Lingus moved to a
low-fares strategy from 2002, leading to a much more intense competition with Ryanair on Irish
routes.
Airlines which attempt to compete directly with Ryanair are treated harshly, with Ryanair
reducing fares to significantly undercut their competitors. In response to MyTravelLite, who
started to compete with Ryanair on the Birmingham to Dublin route in 2003, Ryanair set up
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competing flights on some of MyTravelLite's routes until they pulled out. Go was another airline
which attempted to offer services from Ryanair's hub at Dublin to Glasgow and Edinburgh in
Scotland. A fierce battle ensued, which ended with Go withdrawing its service from Dublin.[73]
In September 2004, Ryanair's biggest competitor, EasyJet, announced routes to the
Republic of Ireland for the first time, beginning with the Cork to London Gatwick route. Until
then, easyJet had never competed directly with Ryanair on its home ground. Easyjet announced
in July 2006, that it was withdrawing its Gatwick-Cork, Gatwick-Shannon and Gatwick-Knock
services; within two weeks, Ryanair also announced it would withdraw its own service on the
Gatwick-Knock and Luton-Shannon routes.
Ryanair has asked the high court to investigate why it has been refused permission to fly
from Knock to Dublin. This route was won by CityJet, which was unable to operate the service.
The runner up, Aer Arann, started flights, a move Ryanair criticizes on the basis that not
initiating an additional tender process was unlawful.
Financial Situation
The major revenues of Ryanair gain from the tickets sold during the year. That is the
only different with the tangible stock value. Once the tickets are sold, the company gets the
revenues from the operation. The company receives the cash and books the income on its ledger.
The company uses cash to pay the relevant cost, like staff wages, fuel and oil cost, marketing and
distribution cost as well as other operating expenses. The rest of the revenues are retained profit
as the capital of company. If the profit grows, the company share price will increase
accordingly. Once the share price increased, the shareholders enjoy a return on investment, more
and more investors will have more interest in the company. Therefore, the company achieves the
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source of finance. After that, Ryanair must consider shareholders when investing for grwth
potential to expand the company.
In 2009, Ryanair company’s operation revenues were $4.02 billion an increase of than
2001). It includes net cash inflow from operating activities: 125417. This should thank for the
contribution of the sales team. Ryanair insists to offer lower airfares in European countries and
try to increase sales continuously. Increased revenue is one of the major sources of finance.
The strength of the performance is highlighted by the fact that the groups’ cash on hand is
equivalent to 53.6% of annual turnover. This figure is a little bit high according to their sale
growth. They should invest the cash flow to generate more return. However, there is a special
reason that they have to maintain a deposit US$500,000 with the guarantor bank for as long as
the bank gave its guarantee.
The operating expenses during the year are Ђ 229740; Net cash inflow from operating
activities is 12304; profit and loss account is 112758. As the growth of the profit during the
year, EPS increased by 17% to 35.16 and is based on 164,759,808 shares, which represent the
weighted average number of ordinary shares outstanding during the year. We can see the profit
is increasing; the capital of the company is increasing. Because the market is growing, Ryanair
should think about where they should invest and how. i.e. Invest new aircraft, improve quality of
service or setup new routes.
Ryanair announced a new investment program with a US$2billion order for up to 45 new
Boeing 737-800 series aircraft. Continued strong cash flows generated from trading operations
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combined with the proceeds of the London offering and the receipt of debt financing for the first
of the Boeing 737-800 next generation aircraft, has allowed the group to increase its cash on
hand by 74m. Before Ryanair makes decision about buying what type of aircraft, the two
alternatives would be mutually exclusive, in that the choice of one will exclude the other. The
company may use NPV and IRR to calculate which one may give more return.
Ratio Analysis
Ratios are a common method of analyzing financial management. Financial ratios refer
to the use of simple ratios, which are calculated from the figures of financial statements in order
to measure certain aspects of a firm’s financial condition. A set of financial ratios conducted on
Ryanair is located in Appendix D.
Ratios make comparisons with:
The performance of the business in previous years
The budgeted or planned performance in the current years
The performance of similar business
The ratios make easier to make better decision. However, there are some limitations in ratio
analysis. For instance, since ratios are constructed from accounting data, if we do comparison
within two different firms, their accounting policies (i.e. depreciation charge, the accounting
years) could lead to the inaccurate illustration.
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The Net Profit Ratio was dramatically increased by 15% during the year 2001 and 2002. Even
though their expenses cost had increased by a certain percentages in different items and because
of their low fares system. They still gained a high return in net profit when compared to 2001.
The reason of this was that the rise of sales and the interest received. These revenues gave the
company a good return that could cover the expenses and other additional costs. The increase in
profitability reflects the positive impact of the growth in passenger’s volume because of the
increase in seat capacity on existing routes and the launch of new seven European routes during
the year.
In the Return On Capital Employed Ratio the amount of money that the investors can get back
after investing in the company, the ratio decreased to 28% in that year. The explanation of this
figure was because their company needed to consider the contract that with Boeing worth US$2
billion by ordering for up to 45 aircraft in the coming years, in order to succeed the expansion of
our company.
Asset Turnover Ratio is a measure of productivity as much as profitability. Within 2001 and
2002, the ratio dropped from 1.56 to 1.04, it meant that more assets were to be used to generate
every unit of sales .The reason was because their introduction on new fleet of 22 aircraft on our
network of 27 routes in request to increase the level of passengers and the low fares system.
According to the Current Asset Ratio, the company had a well cover of their current liabilities
under current assets. Even though in Acid Test Ratio, which we examined that by excluding the
inventories, their current assets also covered the liabilities by 1.14 in 2001, and 1.60 in 2002. It
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increased by 46%. From the current assets, cash was the major inflows to their company in the
past two years. Especially in 2002, there was an increase in cash from 892160 TO 12742400.
Move to the cash flows statement. Cash is King. Company fail, not because of their insufficient
profits, but because they have run out of cash to pay their liabilities. Cash and bank balances
should be kept to a minimum, as they earn nothing for the company, but make sure you have
enough cash to pay employees and creditors. Cash generated from operating activities grew up
for 25.6 million. This increase was due to the increase of sales and profits and the add back of
the non-cash items primarily depreciation charge since they had a new aircraft during the year.
The cash flows was from trading operations combined with the proceeds of the London offering
and the receipt of debt financing for the first Boeing 737-800 next generation aircraft, has
allowed the group to increase the cash on hands despite having to pay advance deposits to
Boeing. The performance is highlighted by the fact that the cash on hand is equivalent to
53.6%of annual turnover.
The next ratio is Gearing which means how reliable of the company on the financial institutions
when raising the finance. Even though the ratio was slightly increased by 2 %, the company still
in a low-geared situation in these two years. The interest coverage was good since Ryanair only
needs to pay interest once a year and they could pay 4.4 times in 2001 and 6.6 times in 2002.
The Earning Per Share (EPS) considers the profits that could be paid to each ordinary
shareholder. The increase in profit resulted in the increase in EPS. This also stated that the
increase in the value of shareholders as the company’s profit and traffic has grown.
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After finishing the ratio analysis, Ryanair is financially healthy. Ryanair, in comparison with
other major airline companies and industrial averages, Is above average in sales over 2009, but
below industry averages in net income (See Appendix C). The industry ratios suggest that
Ryanair’s performance is good, but could improve.
Other non-financial considerations
Ryanair has a bad reputation for over booking and early check-in time. On the other way, every
company has limitation. For airline companies, these problems are normal. Ryanair changed
their booking system last Christmas and the new system is more accurate and working well.
Company said that they would not only improve the hardware but also the staff. There are a
group of new staffs now is trained by American Airline.
Conclusion
After reading the research paper, hopefully you have an understanding of airline finance.
Ryanair is a new member of airline companies (started from 1985). It is young and healthy.
Based on Europe and has a strong relationship with America, there are many areas that it can
improve and expand to. Ryanair is developing speed like a flying superman, going up and away.
It is the kind of company we should put money in.
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References
Creaton, Siobhán (2007). Ryanair: The full story of the controversial low-cost airline. London,
UK, Aurum Press.
Creaton, Siobhán (2004). Ryanair: How a Small Irish Airline Conquered Europe. London:
Aurum Press.
Gill, Rob (2010, July 23). Airlines handle the turbulence. Travel Trade Gazette UK & Ireland,
2922, p. 16.
Malighetti, P., Paleari,s. & Redondi, R. (2009, July).Pricing strategies of low-cost airlines: The
Ryanair case study. Journal of Air Transport Management, 15(4), 195-203. doi:
10.1016/j.jairtraman.2008.09.017.
McCormick, T. (2010, October). Understanding costs using the value chain a Ryanair
example. Accountancy Ireland, 42(5) 28-30.
Yahoo! Finance (2010). Retrieved November 15, 2010 from
APPENDICES
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Running head: RYANAIR 14
Appendix A
Report Date 03/31/2010 03/31/2009 03/31/2008 03/31/2007 03/31/2006Currency EUR EUR EUR EUR EURAudit Status Not Qualified Not Qualified Not Qualified Not Qualified Not QualifiedConsolidated Yes Yes Yes Yes YesScale Thousands Thousands Thousands Thousands Thousands
Aircraft, cost - - - 3,344,908 2,870,085Accumulated depreciation - aircraft - - - (486,682) (350,577)Aircraft, net - - - 2,858,226 2,519,508Hangar & buildings, cost - - - 23,037 13,265Accumulated depreciation - hangar & buildings - - - (4,359) (3,674)Hangar & buildings, net - - - 18,678 9,591Plant & equipment, cost - - - 9,954 6,540Accumulated depreciation - plant & equipment - - - (5,846) (4,876)Plant & equipment, net - - - 4,108 1,664Fixtures & fittings, cost - - - 13,247 11,773Accumulated depreciation - fixtures & fittings - - - (10,910) (9,923)Fixtures & fittings, net - - - 2,337 1,850Motor vehicles, cost - - - 1,609 981Accumulated depreciation - motor vehicles - - - (905) (606)Motor vehicles, net - - - 704 375Property, plant & equipment, cost 5,151,100 4,296,526 4,206,174 3,392,755 2,902,644Accumulated depreciation - property, plant & equipment (836,900) (651,702) (624,048) (508,702) (369,656)Property, plant & equipment 4,314,200 3,644,824 3,582,126 2,884,053 2,532,988Intangible assets 46,800 46,841 46,841 46,841 46,841Available for sale financial assets 116,200 93,150 311,462 406,075 -Derivative financial instruments 22,800 59,970 - - 763Total non-current assets 4,500,000 3,844,785 3,940,429 3,336,969 2,580,592Consumables - - - 2,420 3,422Inventories 2,500 2,075 1,997 2,420 3,422Prepayments 74,100 67,185 121,555 39,253 14,643Interest receivable 6,500 5,244 10,014 9,028 9,076Refundable deposits - 15,801 34,104 24,088 -Value added tax recoverable - 2,823 3,907 5,338 5,734Other assets 80,600 91,053 169,580 77,707 29,453Current tax - - 1,585 - -
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Trade receivables, gross 44,400 41,928 34,315 23,600 30,362Provision for impairment - trade receivables (100) (137) (137) (188) (453)Trade receivables 44,300 41,791 34,178 23,412 29,909Derivative financial instruments 122,600 129,962 10,228 52,736 18,872Restricted cash 67,800 291,601 292,431 258,808 204,040Financial assets: cash more than 3 months 1,267,700 403,401 406,274 592,774 328,927Cash & cash equivalents 1,477,900 1,583,194 1,470,849 1,346,419 1,439,004Total current assets 3,063,400 2,543,077 2,387,122 2,354,276 2,053,627Total assets 7,563,400 6,387,862 6,327,551 5,691,245 4,634,219Trade payables 154,000 132,671 129,289 54,801 79,283Accruals 260,300 226,322 283,374 207,311 109,681Taxation 282,300 231,877 230,970 193,887 111,291Unearned revenue 545,600 447,516 405,005 405,938 349,642Accrued expenses & other liabilities 1,088,200 905,715 919,349 807,136 570,614Current maturities of debt 265,500 202,941 366,801 178,918 153,311Current tax 900 425 - 20,822 15,247Derivative financial instruments 41,000 137,439 141,711 56,053 27,417Total current liabilities 1,549,600 1,379,191 1,557,150 1,117,730 845,872Provisions 102,900 71,964 42,790 28,719 16,722Derivative financial instruments 35,400 54,074 75,685 58,666 81,897Deferred tax 199,600 155,524 148,088 151,032 127,260Other creditors 136,600 106,549 101,950 112,177 46,066Non-current maturities of debt 2,690,700 2,195,499 1,899,694 1,683,148 1,524,417Total non-current liabilities 3,165,200 2,583,610 2,268,207 2,033,742 1,796,362Issued share capital 9,400 9,354 9,465 9,822 9,790Share premium account 631,900 617,426 592,761 607,433 596,231Capital redemption reserve 500 493 23,432 - -Retained earnings (accumulated deficit) 2,083,500 1,777,727 2,000,422 1,905,211 1,467,623Other reserves 123,300 20,061 (123,886) 17,307 (81,659)Shareholders' equity 2,848,600 2,425,061 2,502,194 2,539,773 1,991,985Total liabilities & shareholders' equity 7,563,400 6,387,862 6,327,551 5,691,245 4,634,219
Running head: RYANAIR 16
Appendix B
Balance Sheet
AssetsCash and Short Term Investments 2,745.6 1,986.6 1,877.12 1,939.19 1,767.93
Cash & Equivalents
Short Term Investments
Total Receivables, Net 50.8 65.66 82.2 61.87 44.72
Accounts Receivable - Trade, Net
Accounts Receivable - Trade, Gross
Provision for Doubtful Accounts
Receivables - Other
Total Inventory 2.5 2.08 2.0 2.42 3.42
Prepaid Expenses 74.1 67.19 121.56 94.24 14.64
Other Current Assets, Total 190.4 421.56 304.24 311.54 222.91
Total Current Assets 3,063.4 2,543.08 2,387.12 2,409.27 2,053.63
Property/Plant/Equipment, Total - Net 4,314.2 3,644.82 3,582.13 2,901.51 2,532.99
Goodwill, Net 0.0 0.0 0.0 0.0 0.0
Intangibles, Net 46.8 46.84 46.84 46.84 46.84
Long Term Investments 116.2 93.15 311.46 406.08 0.0
Note Receivable - Long Term 0.0 0.0 0.0 0.0 0.0
Other Long Term Assets, Total 22.8 59.97 0.0 0.0 0.76
Other Assets, Total 0.0 0.0 0.0 0.0 0.0
Total Assets 7,563.4 6,387.86 6,327.55 5,763.69 4,634.22
Liabilities and Shareholders' Equity
Accounts Payable 154.0 132.67 129.29 127.24 79.28
Payable/Accrued 0.0 0.0 0.0 0.0 0.0
Accrued Expenses 260.3 226.32 283.37 207.31 109.68
Notes Payable/Short Term Debt 0.0 0.0 0.0 0.0 0.0
Current Port. of LT Debt/Capital Leases 265.5 202.94 366.8 178.92 153.31
Other Current Liabilities, Total 869.8 817.26 777.69 676.7 503.6
Total Current Liabilities 1,549.6 1,379.19 1,557.15 1,190.17 845.87Total Long Term Debt 2,690.7 2,195.5 1,899.69 1,683.15 1,524.42
Long Term Debt
Deferred Income Tax 199.6 155.52 148.09 151.03 127.26
Minority Interest 0.0 0.0 0.0 0.0 0.0
Other Liabilities, Total 274.9 232.59 220.43 199.56 144.69
Total Liabilities 4,714.8 3,962.8 3,825.36 3,223.91 2,642.23
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Redeemable Preferred Stock 0.0 0.0 0.0 0.0 0.0
Preferred Stock - Non Redeemable, Net 0.0 0.0 0.0 0.0 0.0
Common Stock 9.4 9.35 9.47 9.82 9.79
Additional Paid-In Capital 631.9 617.43 615.82 607.43 596.23
Retained Earnings (Accumulated
Deficit)
2,207.3 1,798.28 1,876.91 1,922.52 1,385.96
Other Equity, Total 0.0 0.0 0.0 0.0 0.0
Total Equity 2,848.6 2,425.06 2,502.19 2,539.77 1,991.99
Total Liabilities & Shareholders’
Equity
7,563.4 6,387.86 6,327.55 5,763.69 4,634.22
Total Common Shares Outstanding 1,478.94 1,473.36 1,490.8 1,547.03 1,542.03
Total Preferred Shares Outstanding 0.0 0.0 0.0 0.0 0.0
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Appendix C
Statement of Cash Flows
2010 2009 2008 2007 2006
Period End Date 03/31/2010 03/31/2009 03/31/2008 03/31/2007 03/31/2006
Period Length 12 Months 12 Months 12 Months 12 Months 12 Months
Stmt Source 20-F 20-F 20-F 20-F 20-F
Stmt Source Date 07/20/2010 07/29/2009 07/31/2008 07/31/2008 07/31/2008
Stmt Update Type Updated Updated Updated Reclassified Restated
Net Income/Starting Line 341.0 -180.49 438.93 451.04 338.89
Depreciation/Depletion 235.4 256.12 175.95 143.5 124.41
Amortization 0.0 0.0 0.0 0.0 0.0Non-Cash Items 47.1 245.31 104.41 15.84 11.59
Unusual Items
Other Non-Cash Items
Changes in Working Capital 248.0 92.19 -15.39 290.46 135.69
Accounts Receivable
Inventories
Other Assets
Accounts Payable
Taxes Payable
Other Liabilities
Other Operating Cash Flow
Cash from Operating Activities 871.5 413.13 703.9 900.84 610.57Capital Expenditures -997.8 -702.02 -937.12 -525.96 -546.23
Purchase of Fixed Assets
Other Investing Cash Flow Items,
Total
-551.3 313.68 244.81 -663.04 208.94
Sale of Fixed Assets
Purchase of Investments
Other Investing Cash Flow
Cash from Investing Activities -1,549.1 -388.33 -692.31 -1,188.99 -337.29Financing Cash Flow Items 0.0 0.0 0.0 0.0 0.0
Other Financing Cash Flow
Total Cash Dividends Paid 0.0 0.0 0.0 0.0 0.0
Issuance (Retirement) of Stock, Net 14.5 -44.4 -291.59 11.23 30.59
Issuance (Retirement) of Debt, Net 557.8 131.95 404.43 184.34 262.87
Cash from Financing Activities 572.3 87.55 112.84 195.57 293.46
Foreign Exchange Effects 0.0 0.0 0.0 0.0 0.0
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Net Change in Cash -105.3 112.35 124.43 -92.59 566.75
Net Cash - Beginning Balance 1,583.2 1,470.85 1,346.42 1,439.0 872.26
Net Cash - Ending Balance 1,477.9 1,583.19 1,470.85 1,346.42 1,439.0
Running head: RYANAIR 20
Appendix D
Key Financial Ratios
Price Ratio Company Industry Average S&PCurrent P/E 18.7 21.5 21.3
Debt/Equity Ratio .99 .77 1.4Current Ratio 2.3 1.2 1.4Quick Ratio 2.3 1.1 .09
Return on Equity (ROE) 11.8 15.2 25.4Return on Assets (ROA) 4.8 4.1 8.0
Receivable Turnover 71.1 39.8 17.0Inventory Turnover 820.5 206 10.8
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Appendix D
SWOT Analysis
Strengths Weaknesses
Low cost leader
Innovative cost reductions
First mover advantage
Robust route network
Strong fleet operaitons
Declining profitability
Volatile customer relations
Dependence on Michael O’Leary
Antagonistic relationships with competitors
Unfunded employee post-retirement benefits
Opportunities Threats
Growth
Continued cost reduction
EU Expansion
Increased tourism and destinations
Global Recession
Ireland national debt problem
Increased competition
New entrants of low cost competitors
Availability of alternative transportation
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Appendices:
Net Profit Ratio:
In 2001,
54822/233736*100%=23%
In 2002,
112758/298124*100%=38%
Return On capital Employed:
In 2001,
56736/149385*100%=38%
In 2002,
68410/287752*100%`=28%
Asset Turnover:
In 2001,
233736/149385=1.56
In 2002,
298124/287752=1.04
Current Assets Ratio:
In 2001,
88979/71877=1:1
In 2002,
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197879/115319=2:1
Acid-Test Ratio:
In 2001,
(88979-6638)/71877=1:1
In 2002,
(197879-13021)/115319=1:1
Total Gearing:
In 2001,
14834/(134551+14834)*100%=10%
In 2002,
34760/(252992+34760)*100%=12%
Equity Gearing:
In 2001,
14834/134551*100%=11%
In 2002,
34760/252992*100% =13%
Interest Cover:
In 2001,
63017/(1087+13388)=4.4times
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In 2002,
76662/(239+11368)=6.6times