British Airways Plc.

LSE
Transportation sector (Aviation) 29/05/2010
British Airways is a FTSE 100 global airline. It has a fleet size of 245 aircraft flying to 148 destinations worldwide. 87.1% of
revenue comes from their passenger service and 7.5% from their air cargo business (03/09).
Symbol: CEO: CFO: Exchange: Auditors: Ernst and
BAY Willie Walsh Kieth Williams LSE FTSE100
Young
Financial Analysis based on the PRELIMINARY RESULTS for the financial year ending March 31st 2010
Market Capitalisation: Outstanding shares: Share Price: ѳ Brackets denote previous years results
(28/5/10) £ 2.321b (28/5/10) 1.154b (28/5/10) 201.2p ѳ Red denotes current years industry average
Corporate and Industry Outlook EPS: -32.6p (61.9p) Operating Profit Margin: -2.45% (10%)

Profitability
The future of the air transportation industry is rather secure. At an DPS: 0p (5p) Pre-tax profit margin: -4.45% (10.5%)

Investment
industry level demand will only increase in the future as the world Dividend Payout: -3.98% (8.29%)
N/A (8.1%) Post-tax profit margin:
strives for increased mobility. However, when analysing the firms
Dividend Yield: N/A (2.49%) R/Capital Employed: -4.47% (14.6%)
future, it is important to stress how competitive the passenger
transport industry is becoming. With lots of new low cost airlines, NCFPS: 11.5p (26.2p) R/Equity -19.39% (22.26%)
allowing firms and families to reduce expenditure, a premium priced P/E ratio: -6.17x (3.25x) Current Ratio: 52.13% (68.55%)
company such as BA may struggle. In my view, BA is becoming Acid test Ratio:

Liquidity
49.31% (66.09%)
increasingly unprofitable as competition increase and labour/ general
costs increase. Attractive at around 150p.

Key FINANCIAL Changes

SELL Inventory turnover (days):
Trade receivable days:
Trade payable days:
N/A
21.51 (24.42)
N/A
1.) Increased costs (↑17%) means BA struggled to break even. This is likely to be the same next year. Net Debt/Equity ratio: 1.45 (63.4)
2.) BA's already weak liquidity position is damaged by falling CA and increasing CL, is now becoming very serious. Income gearing: N/A (19.93%)

Gearing
3.) Dangerous gearing stance, falling equity due to slashed reserves (↓77%) plus rapidly increasing debt (↑11.7%). Interest Cover: N/A (5.02)
4.) With increasing loans comes increasing interest obligations. Meager future profits may struggle to cover these.
5.) 2008 EPS of 61.9p or 31% shows that BA can be profitable. However would this ever return and if so, when?
Key Non-Financial Notes:
1.) BA has been experiencing increasing pressures from their heavily unionised workforce to increase wage pay and/or job perks. Such pressures will only reduce the competitiveness of BA
as any consessions will effectively 'mortgage' their future with increased labour costs.
2.) With ever decreasing competitiveness due labour cost factors, natural factors (volcano in Iceland 2010), fuel price increases, price sensitivity increasing amongst consumers; it
leads to a rather poor outlook for BA.
3.) BA has had a testing year, with both currency exchange movements and oil price changes working against them. An optimistic view of their future would take into account that BA has
successfully ran over the past few years, even when they could not match other airlines for price. BA holds a degree of monopoly power in this respect.
Disclaimer: All analysis expressed within this report was undertaken for educational purposes and therefore it cannot be relied upon for any real life decision making. SF-research nor the analyst will be liable for any
losses caused to capital as a result of using this research.