In this report, an effort has been made to conduct a financial and operational analysis of the airport and determine the state of operations and financial health of the company. The analysis will be done with the help of various financial ratios of the airport and detailed analysis of the key performance indicators of the airport. The conclusion drawn from the results of the analysis of the financial and operational indicators will enable suggestions and recommendations to the company.
Heathrow airport is one of the major airports in all of United Kingdom. It is in fact the world’s second busiest airport. In addition to this it is the busiest airport in all of Europe.
The financial analysis will comprise of study of various type of ratios the results of which will have a direct implication with respect to the financial and non-financial performance of the airport (Wensveen, 2018). For being able to lead within any industry an entity is supposed to have a very strong financial performance base.
CURRENT RATIO |
||
|
2015 |
2016 |
CURRENT ASSETS |
1020 |
1118 |
CURRENT LIABILITIES |
1476 |
1594 |
CURRENT RATIO |
0.69 |
0.70 |
The current ratio demonstrates the relationship between the current assets and current liabilities of an entity. It establishes the ability of an entity to pay of its short term liabilities with the help of its current assets like cash and cash equivalents. It can be easily deciphered that the current ratio of the company is very low. It is not a good performance indicator as it implies that the entity might become incapable to pay its short term debt in the near future due to non-availability of current or liquid assets (Madavan caes et al., 2016).
DEBT EQUITY RATIO |
||
|
2015 |
2016 |
TOTAL LIABILITIES |
14165 |
14739 |
EQUITY |
2484 |
1760 |
DEBT EQUITY RATIO |
5.70 |
8.37 |
The debt equity ratio demonstrates the liquidity position of an entity. It projects the results of the relationship between the total liabilities of the entity and the total stake holder’s equity of the entity. In this case it can be easily seen that the debt-equity ratio of the company has already reached a high risk degree and despite of that the ratio further increases which suggests that the entity is heavily levered. The entity’s ability to pay back its liabilities via the funds of the stakeholders is reducing at year on year basis. The equity shareholder funds have reduced significantly over the period of one year which is a very poor indicator for the solvency position of any entity (Flouris & Oswald, 2016).
DEBT ASSET RATIO |
||
|
2015 |
2016 |
TOTAL LIABILITIES |
14165 |
14739 |
TOTAL ASSETS |
16649 |
16499 |
DEBT ASSET RATIO |
0.85 |
0.89 |
This ratio gives the relationship between the total liabilities and the total assets of the company. It determines the ability of the entity to pay of its liabilities by using its assets. In the given case it can be easily seen that the total assets of the company has reduced and the total liabilities have increased. This situation has resulted in worsening of the liquidity ratio of the company. The reducing support from the assets in respect of paying back of the liabilities of the company will result in incapability on the part of the company to pay its liabilities on time in the near future (Flouris & Oswald, 2016).
RETURN ON EQUITY |
||
|
2015 |
2016 |
NET INCOME |
776 |
48 |
SHAREHOLDERS EQUITY |
2484 |
1760 |
RETURN ON EQUITY |
31% |
3% |
This ratio determines the relationship between the net profit earned by the company and the total stakeholder’s equity. It implies that how much profit the company is giving out as return in respect of the amount invested by the shareholders in the company. In the given case it can be noticed that the company’s return on equity has reduced drastically over the period of one year. The net profits along with the equity have fallen significantly. This is an indication that the company is unable to create value for the shareholders. The company must endeavour to increase its profitability to increase its return on equity (Flouris & Oswald, 2016).
The analysis will reflect the present position of the operational efficiency and effectiveness of the airport and the remedial steps that can be taken in case of scope of improvement or deviation from the standard set by the industry itself and its competitors.
The SWOT analysis will enable the process of obtaining the insights which are vital for the prediction of future viability of the operations of the airport within the industry. Such analysis is beneficial for the company itself ass it will help it to analysis its weaknesses and take correctives steps along with giving it the opportunity to objectively further strengthen its strength points (Jackson, 2016). This enables any entity to get a competitive advantage over its competitors in the industry and also to perform better in order to increase the value creation for its stakeholders (Turney, 2017).
STRENGTHS:
WEAKNESSES:
OPPORTUNITIES’:
THREATS:
After conducting a detailed analysis of the financial, operational and SWOT analysis with respect to the Heathrow airport and studying the implications of the results obtained some suggestions and recommendations are made in respect of its operations.
References
Albers, S., Baum, H., Auerbach, S., & Delfmann, W. (2017). Strategic Management in the Aviation Industry. Routledge.
Davis, T., & Davis, L. (2017). Commercial Aviation Cyber Security: Current State and Essential Reading. SAE International.
Eriksson, S., & Steenhuis, H. J. (Eds.). (2015). The global commercial aviation industry. Routledge.
Flouris, T. G., & Oswald, S. L. (2016). Designing and executing strategy in aviation management. Routledge.
Jackson, S. (2016). Systems engineering for commercial aircraft. Routledge.
Liao, M. Y. (2015). Safety Culture in commercial aviation: Differences in perspective between Chinese and Western pilots. Safety science, 79, 193-205.
Madavan, N., Heidmann, J., Bowman, C., Kascak, P., Jankovsky, A., & Jansen, R. (2016, April). A nasa perspective on electric propulsion technologies for commercial aviation. In Workshop on Technology Roadmap for Large Electric Machines (pp. 5-6).
Patankar, M. S., & Taylor, J. C. (2017). Risk management and error reduction in aviation maintenance. Routledge.
Skeete, A., Mobin, M., & Salmon, C. (2015, January). Aviation technical publication content management system selection using integrated fuzzy-grey MCDM method. In IIE Annual Conference. Proceedings (p. 86). Institute of Industrial and Systems Engineers (IISE).
Stolzer, A. J. (2017). Safety management systems in aviation. Routledge.
Turney, M. A. (2017). Tapping diverse talent in aviation: Culture, gender, and diversity. Routledge.
Wensveen, J. (2018). Air transportation: A management perspective. Routledge.
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