Mas x airasia


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Mas x airasia

  1. 1. By : Group 5 MAS AIRLINES VS AIR ASIA
  2. 2. EXECUTIVE SUMMARY <ul><li>The purpose of this study is to evaluate the financial performance of two main airline operators in Malaysia namely Malaysia Airlines and Air Asia . The airline industry is a large and growing industry. In the past years, air travel has been growing by 6% a year and scheduled airlines carried more than 1 billion passengers in 2008. </li></ul><ul><li>Also in this study, both the companies’ challenges and prospective are discussed </li></ul><ul><li>Further discussed in this study is the financial analysis of both MAS Airlines and Air Asia on its profitability and liquidity ratios to evaluate the businesses’ performance. </li></ul><ul><li>Conclusion and recommendation on which company investors should invest in constructed using the ratios valuation are then deliberated in the final section of the report </li></ul>
  3. 3. BACKGROUND OF MALAYSIA AIRLINE INDUSTRY & COMPANIES (MAS AIRLINES & AIR ASIA) INDUSTRY MALAYSIA AIRLINES AIR ASIA <ul><li>Growing industry - more than 1 billion passengers in 2008. </li></ul><ul><li>Involves large capital requirements. </li></ul><ul><li>Two Key Players :- </li></ul><ul><li>- Malaysia Airlines </li></ul><ul><li>- Air Asia </li></ul><ul><li>(Other Player in the industry) </li></ul><ul><li>- Berjaya Air </li></ul><ul><li>All these three companies have different targeted customers, these three airline companies in Malaysia can co-exist with each other without eating over each other’s profit margin. </li></ul><ul><li>B egan in 1947 as Malayan Airways. </li></ul><ul><li>Southeast Asia’s largest airlines & One of the world’s premier international carriers. </li></ul><ul><li>Listed on the stock exchange of Bursa Malaysia </li></ul><ul><li>(Malaysian Airline System </li></ul><ul><li>Berhad) </li></ul><ul><li>&quot;World's Best Cabin Crew 2001 -2004&quot; & “No. 1Economy Class Onboard Excellence 2006”. </li></ul><ul><li>Route network that spans through more than 20 countries </li></ul><ul><li>Low-cost aviation through innovative solutions, efficient processes and a passionate approach to business </li></ul><ul><li>“ Now Everyone Can Fly” </li></ul><ul><li>(competitive edge in terms </li></ul><ul><li>of creating awareness of </li></ul><ul><li>the brand and budget </li></ul><ul><li>airline industry as a whole) </li></ul>
  4. 4. COMPANIES CHALLENGES & PROSPECTS MALAYSIA AIRLINES CHALLENGES PROSPECTS <ul><li>Financial loss of RM1.3 billion in 2005. </li></ul><ul><li>People crisis - rated poorly for employee related matters and staff morale was at an all-time low. </li></ul><ul><li>Airline slash staff and unprofitable routes and sell non-core assets. </li></ul><ul><li>Mounting operational costs - higher operating charges were attributable mainly to the amortization of foreign exchange losses and the abnormal hike in fuel prices in the fourth quarter of 2000. </li></ul><ul><li>I nitiate efforts to normalize its leverage and capital structure to bring MAS more in line with its competitors in the industry. </li></ul><ul><li>Attain world-class standard in terms of operational productivity, service levels and costs. Its focus is on improving quality and efficiency. </li></ul><ul><li>Reviewing the viability of the existing fare structure and routes; and the realigning and re-deploying of its aircraft capacity to markets that offer the greatest opportunities. </li></ul><ul><li>‘ Transformation Programme’, (1) Flying to win customers (2) Mastering operational excellence, (3) Financing and aligning our business on P & L , (4) Unleashing talents and capabilities, and (5) Winning coalitions. </li></ul>
  5. 5. COMPANIES CHALLENGES & PROSPECTS AIR ASIA CHALLENGES PROSPECTS <ul><li>Security of their networks - The internet is a public domain and as such is vulnerable to attacks from hackers and viruses </li></ul><ul><li>Local competitors in the various countries they are having affiliates or subsidiaries (government) </li></ul><ul><li>Constraints - government policies and airport pricing . Different localities and countries have different technological standards, and quality control policies. </li></ul><ul><li>Recession, credit crisis and A (H1N1) influenza – a drop in Airline passenger traffic., 3.5 % overall. </li></ul><ul><li>Well-rounded and managed business - offering a simple “no frills” service at fares that are on average significantly lower than those offered by traditional full-service airlines. </li></ul><ul><li>Gate of profitable opportunities - global exposition, venture into internet booking and ticketless services for their marketing processes, they would be open to electronic commerce business solutions for their enterprise. </li></ul><ul><li>The replacement of its aging Boeing B737 aircraft with the Airbus A320 aircraft - opportunity to stamp its dominance as the ASEAN airline. With its unmatched network connectivity, frequency and full-fledged Airbus operation along with its low cost operations and low-fare model, it will enjoy a substantial edge over its competitors. </li></ul>
  6. 6. FINANCIAL ANALYSIS (RATIOS) <ul><li>Calculation and comparison of ratios which derived from the information in companies’ financial analysis. </li></ul><ul><li>The level and historical trends of these ratios can be used to make inferences about a company’s financial conditions, its operations and attractiveness as investments. </li></ul><ul><li>LIQUIDITY Ratio </li></ul><ul><li>Gives a picture of a company’s short term financial situation/solvency </li></ul><ul><li>PROFITABILITY Ratio </li></ul><ul><li>Which uses margin analysis and shows the return on sales and capital employed (ROCE) </li></ul><ul><li>SOLVENCY Ratio </li></ul><ul><li>Gives a picture of a company’s ability to generate cash flow and pay its financial obligations </li></ul>
  7. 7. FINANCIAL ANALYSIS ( LIQUIDITY RATIOS) YEAR 2009 0.86 1.30 8.10 4.34 RATIOS MALAYSIA AIRLINES AIR ASIA 1. CURRENT Ratio : Current Assets Current Liabilities 4,733,130 5,504,240 2,220,972 1,709,688 <ul><li>Current ratio for Air Asia is higher than MAS Airlines. Air Asia has more ability to payback its short term liabilities with its short term assets. </li></ul>2. Acid-Test Ratio : Cash + Receivables Current Liabilities (2,664,859 + 1,395,889) 5,504,240 0.74 (746,312 + 721,028) 1,709,688 0.86 <ul><li>Short term liquidity for Air Asia is more than MAS Airlines. </li></ul>3. Receivable Turnover : Ratio Sales Average Net Receivables 11,309,855 1,395,889 3,132,901 721,082 <ul><li>MAS Airlines is more effective in extending credit as well as collecting debts. </li></ul>
  8. 8. FINANCIAL ANALYSIS ( SOLVENCY RATIOS) YEAR 2009 0.91 , 91% 0.77, 77% RATIOS MALAYSIA AIRLINES AIR ASIA 4. Debt to Total Assets Ratio : Total Debts Total Assets 7780080 8527676 8777400 11398420 <ul><li>Measure amount and proportion of debt within liability of firm. </li></ul><ul><li>High ratio = greater degree of outside financing to total assets. </li></ul><ul><li>High Rate ; High Risk </li></ul><ul><li>AIRASIA has a lower percentage asset that provided via debt. </li></ul>
  9. 9. FINANCIAL ANALYSIS ( PROFITABILITY RATIOS) YEAR 2009 0.04 0.16 5.78 4.44 1.33 0. 27 RATIOS MALAYSIA AIRLINES AIR ASIA 1. PROFIT MARGIN ON SALES : Net Income Net Sales 493,106 11,309,855 506,267 3,132,901 <ul><li>Air Asia is better than MAS Airlines in keeping its earnings of every dollar from sales, </li></ul>2. RETURN ON ASSETS : Net Income Assets 493,106 8,527,676 506, 267 11,398,420 <ul><li>MAS Airlines is more effective in its management of assets used to generate earnings. </li></ul>3. ASSET TURNOVER : Net Sales Assets 11,309,855 8,527,676 3,132,901 11,398,420 <ul><li>The amount of sales generated for every dollar/ringgit’s worth of assets ratio for MAS Airlines is better than Air Asia. </li></ul>
  10. 10. FINANCIAL ANALYSIS ( PROFITABILITY RATIOS) YEAR 2009 66.0 19.32 RATIOS MALAYSIA AIRLINES AIR ASIA 4. RETURN ON EQUITY : Net Income Shareholder’s Equity 493, 106 747,596 506, 267 2,621, 020 <ul><li>Profitability generated using the shareholders’ funds invested in MAS Airlines is better than Air Asia. </li></ul>5. EARNINGS PER SHARE 29.3 20.6 <ul><li>Net income earned from each share of common stock in MAS Airlines is higher than Air Asia. </li></ul>
  12. 12. CONCLUSION & RECOMMENDATION <ul><li>Both MAS Airlines and Air Asia future strategy are in line with the program to lower costs, keeping fares competitive, increasing revenue, and delivering five-star products and services. </li></ul><ul><li>Overall, MAS has performed well in the current year of 2009 and it has a good prospect in the Malaysian Airline Industry. These are evidenced by the results in LIQUIDITY, PROFITABILITY & SOLVENCY RATIOS of the company which is more favourable as compared to Air Asia and the Industry rate as a whole. Furthermore, MAS Airlines is a Government- linked company (GLC). For having such important connection with the government, MAS could take advantage in running its operations to be more effective and efficient . </li></ul><ul><li>Therefore, it is recommended that prospective investors should invest in MAS Airline to expect considerable returns. </li></ul>