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I. Introduction Hello everyone. Today, I’m gonna talk about the financial performance from 2019 to 2021 of two airlines companies : Qantas and Alliance. This presentation contains four parts: Introduction, profitability and efficiency analysis, non-financial factors affecting invesment decision and lastly the conclusion. First, let’s look for two companies’ overview.
1. Qantas Qantas is Australia airline founded in Queensland in 1920. The company’s core business is transporting passengers and air freight by using two complementary airline brands - Qantas and Jetstar. Until now, Qantas has grown to be Australia's largest domestic and international airline. 2. Alliance Founded in 2002, Alliance Airlines is Australia’s major fly in, fly out air charter operator which delivers benefits flexible for both small and large resources industry clients. Leading the FIFO charter operator, Alliance provides regular charter services in Australia and New Zealand. Now, moving to the second part – Profitability and effieciency analysis. II. Companies’ financial ratio analysis Before analysing two companies’ financial performance, we need to collect the data. As you can see in the table, there are 14 ratios calculated from their financial report in three years: 2019, 2020 and 2021. QANTAS ALLIANCE Industry Average (Given) 2019 2020 2021 2019 2020 2021 Interest coverage ratio 4.62 -7.91 -6.32 12.88 15.87 19.17 6. Return on asset % 4.29 -9.68 -9.12 7.93 7.32 6.45 0. Return on equity % 24.11 -86.52 -169.25 13.92 11.96 11.18 -15. Return on invested capital (ROIC)% 15.36 -23.89 -23.21 15.54 12.60 10.07 0. Operating margin % 8.47 -16.86 -34.21 12.86 14.56 16.61 -7. Net profit margin % 4.68 -13.78 -29.12 8.22 9.04 10.98 -2. Quick ratio 0.42 0.56 0.41 0.89 2.16 1.31 0. Current ratio 0.46 0.60 0.45 1.77 2.97 2.61 1. Inventory turnover 39.72 37.98 24.40 5.54 5.60 4.26 22. Asset turnover 0.92 0.70 0.31 0.96 0.81 0.59 0. Working capital turnover -4.09 -3.48 -1.58 5.80 3.27 2.48 0. Debt to asset ratio % 0.34 0.43 0.46 0.20 0.14 0.30 0. Debt to equity ratio % 2.29 5.59 15.95 0.36 0.22 0.58 2. Long term debt to total assets % 0.28 0.36 0.38 0.19 0.11 0.29 0.
1. Analyse the “profitability” The Profitability ratios are financial metrics which is used to analyse a business’s ability in generating earnings from its sales and operations. To compare the profitability between 2 companies, we need to analyse three significant ratios including Return on assets, return on equity and operating margin ratio. a. Return on assets (ROA) Firstly, the return on assets (ROA) is used to analyse profitability since it compares business’s assets to the profits it produces over time, which indicates how the company generates profits by using its assets. Returnon assets = Net profit Average of total assets
2019 2020 2021 -15. -10. -5.
-9.68 -9. 7.93 (^) 7.
0.64 0.64 0.
The return on assets of Qantas and Alliance (%) from 2019 to 2021
Quatas Alliance Industry average Year Return on assets rate (%) As we can see in the figure, the percentage of Alliance’s return on assest slightly decreased while Qantas experienced a fluctuation which decrease between 2019 and 2020 but slightly rise between 2020 and 2021. This gap in 2021 indicates the more efficient of profits-making of Alliance than Qantas in the previous 3 years. b. Return on equity (ROE) Profitability ratio is also evaluated by return on equity, which is the percentage of net income relative to stockholders’ equity. Net profit Average of shareholders ' equity
2019 2020 2021 -35. -30. -25. -20. -15. -10. -5.
-13. -29. 8.22 9.^
-2.68 -2.68 -2.
Net profit margin of Qantas and Alliance (%) from 2019 to 2021
Quatas Alliance Industry average Year Net profit margin % As we can see in the line chart, throughout the 3 years, the propotion of net profit margin of Alliance totally dominated that of Qantas. Specifically, Alliance’s net profit margin kept slightly rising between 2020 and 2021. In constrast, the negative percentage of Qantas denoted the company’s failure in covering the cost it made.
2. Analyse the “Efficiency” Efficiency ratios are financial metrics used to analyse a company’s capability to effectively employ its resources to produce income (CFI 2022). Among several fomular used to determine the efficiency ratios of two companies, I choose inventory turnover ratio, assets turnover ratio and working capital turnover ratio. a. Inventory turnover The inventory turnover ratio is the number of times the goods of the company has sold out of stock in a given time period. It is calculated by dividing the cost of goods by average inventory for the same period. Cost of goods sold Average of total inventories
2019 2020 2021 0 5 10 15 20 25 30 35 40 (^45) 39.72 (^) 37.
5.54 5.6^ 4. 22.84 22.84 22.
The ratio of inventory turnover of Qantas and
Alliance from 2019 to 2021
Quatas Alliance Industry average Year Inventory turnover ratio In general, the line chart illustrated the same trend which both Qantas and Alliance shared downward movement from 2019 to 2021. Especially, a dramatical decrease of Alliance between 2020 and 2021 almost reach the 22.84 of the industry average ratio, but still much higher than 4.26 of Qantas. This means Alliance generated sales from its stock more efficient. b. Asset turnover ratio Next, assets turnover ratio is used to indicate how efficiently a company uses its assets to generate revenue. Revenue Average total assets
2019 2020 2021 -6. -4. -2.
-4.09 -3. -1.
0.37 0.37 0.
The ratio of working capital turnover of Alliance and Qantas
from 2019 to 2021
Quatas Alliance Industry average Year Working capital turnover ratio Alliance’s working capital turnover experiened 3.32 decrease from 2019 to 2021 compared to the 2.51 rise of Qantas expresses their opposite movement. Although Alliance is proved to be less efficient in generating revenue in 3-year period, it still more efficient than the Qantas and the industry average. III. Non-financial factors Based on the comparision in part II, all ratios reflect that profitability and efficiency of Alliacne is better than Qantas. Therefore, If I were an investor, I would put money into in Alliance. However, besides these financial metrics, other non-financial factors are important to be considered before investing.
1. Growth opportunities The first factor is company’s growth opportunities because it reflects the operation opportunities in making more profits. The fly in, fly out air charter operator industry is predicted to grow by $ 7.67 billion during 2021-2025 due to the increasing demand around the world. So, Alliance is expected to have rapid growth in the future that can bring profits to the investors. 2. Sustainability The second factor is the company’s sustainability because it is crucial for the long-term development. Its sustainability can help both company and investors earn more money by reducing business costs, more innovative strategies, an improved reputation, and more new customers who value environmental, social, and economic sustainability.
IV. Conclusion To sum up, my comparison in part 2 indicates the more profitability and efficiency of Alliance compared to Qantas. This demonstrates Alliance is doing better in the airline industry. Moreover, growth opportunities and sustainability are two non-financial factors that should be considerd when making investments. https://www.researchandmarkets.com/reports/4894544/global-air-charter-services-market-2021- 2025
