Analyse in detail the financial performance of Aer Lingus

By
Introduction

Aer Lingus was founded on May 22, 1936. The name originated in Aer Loingeas, which
means air fleet. Only five days later, the first service was commenced. A De Havilland 84
Dragon flew from Baldonnel Airfield in Dublin to Bristol, England.

In 1940, Aer Lingus moved to a Dublin suburb, when a new airport had been completed
there. During WWII, only a new connection to Liverpool and an inland route to Shannon
were maintained, all other services were suspended.

Regular flights were re-introduced on November 9, 1945, with an inaugural flight to London.
One year later, Aer Lingus gained an exclusive transport right between Ireland and the UK in
exchange for giving BOAC and BEA a 40 % share in the airline. This transport right allowed
the Irish carrier to expand rapidly and new airplanes were purchased.

On January 1, 1960, Aer Lingus and Aerlínte Éireann merged to Aer Lingus – Irish
International Airlines. The extension “international” was dropped in 1974. Also in 1960, the
airline entered the jet age, when the first Boeing 720s was introduced to their fleet.

In 1969, the new Boeing 737 was purchased, so Aer Lingus could cope with the increasing
demand on the London – Dublin route. As the aircraft proved successful there, 737s were
soon used on the whole European route network.

In 1971, Aer Lingus even introduced two 747-100 and later a third one was added. All of
them served on transatlantic routes until they were phased out in 1995, after the Airbus A330
had taken over their job.

In 1984, the Irish airline formed a wholly-owned subsidiary, Aer Lingus Commuter, which
was supposed to serve inner-Irish destinations, for which no large jet planes were needed.

In the year of the events of 9/11, 2001, the Commuter was reintegrated into the main airline.
Like many other airlines, Aer Lingus severely suffered in the aftermath of the terror attacks.
Already being in trouble because of the competition with low-cost carriers like Ryanair, the
decrease in passenger numbers created heavy losses for Aer Lingus. They introduced cost-
cutting programs, and shifted their concentration from the British and American towards the
continental European market. By introducing a “no frills” concept they managed to gain
profits again. They now try to be both low-cost carrier and intercontinental airline. For
example in 2005, Dubai was added as a destination.

In October 2006, the airline was listed on the Dublin stock exchange. Within a few days,
Ryanair launched a takeover bid, which was rejected by Aer Lingus. Ryanair did, however,
purchase 26.2% of the airline and intends to further increase this share.

Their fleet consists of more than 30 Airbus planes with an average age of 5.2 years. In May
2007, two brand new Airbus 330s joined the airline. Aer Lingus serves more than 80
destinations in Europe and the USA and Dubai.
Report
To: Caroline Flynn

From: DT331/4 Aerlingus Group

Date: 1st December 2010

Subject: Analysis of the Financial Performance of Aerlingus

The purpose of this report is to assess the performance of Aerlingus as compared to Ryanair
and some of the Industry averages, under a number of specific parameters.

1. Growth

Revenue

(AL (11%)), (R 8.4%)

Aerlingus Revenue dropped by (11%) from 2008. It is a disappointing result but yet an
understandable one considering the collapse of the Irish economy. Ireland is experiencing
and economic recession with high unemployment and a loss of consumer confidences which
has contributed to a significant decline in the demand for air travel.

Ryanair’s revenue unlike Aerlingus has grown by 8.4%, this is a quite a remarkable
achievement considering the current climate and hike in oil prices. A few reasons for their
success could be;

• Their traffic grew by 15% to 59m passengers. This could be dues to many of their
competitors being forced to cut routes.
• They lowered their average fare by 8% to just € 40.
• They improved their industry leading passenger service with even better punctuality,
fewer lost bags and reduced cancellations.

Total Assets

(AL (17%)) (R, 1.4%)

Aer Lingus Total assets have fallen (17%) from 2008. This major fall in the total assets
would appear to have resulted in Current Asset (Deposits) which was reduced from €916m to
636m. This was a fall of €280m.

Not only has Ryanair total assets not decreased, they manage to increase them by 1.4%.
Although this is only a small increase, it is still quite amazing considering the economic
environment we are in.

Total Liabilities

(AL (24.4%)) (R 4.5)

Aer Lingus Total Liabilities fell by (22.4%) from 2008. One of the reasons for this could that
finance lease obligations drop from €104m in 2008 to €48m in 2009, which is over 50% of a
fall. The reason for this drop could be due to leases ending. Another reason for a drop is that
Trade Payables have drop from €415 in 2008 to €340m in 2009, which is a drop if €75m
which indicates that Aer Lingus are now paying their creditors faster than the year before.

Ryanair’s Total Liabilities again have stayed quite stable, with just a slight rise of 4.5%. This
could be due to the rise in Non-current maturities of debt which rose from €2,195,499 in 2009
to €1,899,694 in 2008 which is an increase of €295,805. This could indicate that Ryanair
have increased their borrowing improve their Company’s operations

Net Assets

(AL (7.6%)) (R (3.08%))

In 2009, Aer Lingus Net Assets dropped (7.6%) from 2008. This is largely due to the
retained earnings which dropped from (51m) to (188m), which a fall of (133m). In most
cases, companies retain their earnings in order to invest them into areas where the company
can create growth opportunities, such as buying new machinery or spending the money on
more research and development.
As Aerlingus retained earnings dropped so significantly, it could cause Aerlingus to make
major cutbacks which might prevent them with keeping up with technology.
Surprisingly in 2009 Ryanair’s Net assets dropped (3.08%) from 2008. This could be due to
the “available for sale financial assets” dropping from €93,150 in 2009 from €311,462 in
2008. This is a massive drop of (€218,312). However, this actual drop was to actually
acquire a further stake in Aer Lingus, at a cost of € 4.2 million bringing Ryanair’s total
holding in Aer Lingus to 29.8% (2008:29.3%).

Liquidity Ratios

Current Ratio

(AL 2009 1.65 to 1, 2008 1.35) (2009 1.84 to 1, 2008 1.53)

The current ratio is an indication of a company's ability to meet short-term debt obligations;
the higher the ratio, the more liquid the company is.

Aerlingus current ratio for 2008 was 1.35 to 1 which means that Aerlingus was not doing
very well in the short term, financially. However in 2009 it rose to 1.65 to 1. If Aer Lingus
could maintain this growth over the next year or two perhaps it could achieve a much
healthier ratio of 2 to 1. But it is clear from the growth of the current ratio that Aer Lingus
are starting to improve their short-term financial liabilities for what hopefully will lead to a
stronger future.

Again, Ryanair’s current ratio, improved from 1.54 to 1 in 2008 to 1.84 to 1 in 2009.

The increase in the current ratio is one to be expected considering Ryanair strength within the
airline Industry.

Acid Test Ratio, (Quick Ratio, Liquidity Ratio)

(AL 2009 1.63 to 1, 2008 1.35) (2009 1.87 to 1, 2008 1.53 to 1)

Ideally this figure should also be above 1 for the firm to be comfortable. This means
Aerlingus can meet all their liabilities without having to sell any of their stock. In 2008 the
acid test ration was 1.35 to 1 which made potential investors feel slightly insecure about their
firm’s ability to repay their debts. Although in 2009 the figures increased to 1.63 to 1. This
signifies that the security of Aerlingus is on the increase and hopefully on the way back to
becoming more profitable once again.

The results in Ryanair’s acid test ratio were once again on the increase. They went from
being 1.53 to 1(which is respectable result) to 1.87 to 1 in 2009.

It should be noted, that since the inventory figures are so in significant in Aerlingus and
Ryanair that Current Ratio and the Acid Test Ratio are broadly similar.

Trade Receivables Ratio (Trade Receivables Days)

(AL 23 days 2009, 24 days in 2008) (R 5days in 2009, 4 days in 2008)

Accounts Receivable Days measure how efficiently the company manages its accounts
receivables. As the accounts receivable days are between 23-24 days it would stands to
reason that the credit control in Aerlingus is running on a tight ship.

Although 23-24 days is a respectable time to receive payment, especially in the current
climate. Ryanair, once again shows them that it can be done better as their trade receivable
days are between 4-5 days which is almost 5 times less than that of Aer Lingus.

Trade Payables Ratio (Trade Payables Days)

(AL 164 days in 2009, 185 days in 2008) (R 21 days in 2009, and 31 days in 2008)

Accounts Payable Days measure how efficiently the company manages its accounts payables.
In 2009 it took on average 164 days to make their payments, which was a decrease from 2008
where it took on average 185 days. This might appear odd considering in 2008 they were
doing better financially. A possible reason for this was that suppliers provided longer credit
periods due to the fact that they felt more secure with Aerlingus financially.

Ryanair not only pay their debts within 30 days, but in 2009 they reduced their trade payables
to an amazing 21 days. This again is showing their competitors how strong they are.

Return on Capital Employed (ROCE or ROI)

(AL 2009 (6.3%), 2008 (1.5%)), (R 2009 (3.3%), 2008 9.2%) (Industry average 0.87%)
Return on Capital Employed ratio also indicates whether the company is earning sufficient
revenues and profits in order to make the best use of its capital assets. Unfortunately for
Aerlingus its ROCE has dropped from (1.5%) in 2008 to (6.3%) 2009. Aerlingus could look
at increasing its ROCE ratio by;

• Cutting costs so as to increase the Profit Margin ratio

• Buying raw material and other goods at cheaper costs

At first this result might seem a little unexpected from Ryanair as its ROCE dropped quite
significantly from 9.2% in 2008 to (3.3%) in 2009. But Ryanair’s PBIT dropped quite
considerably from €438,927 in 2008 to (€180,487) in 2009, which a decrease of (€619,414),
this can be connected to the hike in fuel and oil prices airport charges.

Although both Ryanair and Aerlingus have taken a drop in the ROCE the industry average
has just about stayed stable with an increase of 0.87%.

Asset turnover
(AL 0.94 times 2009, 1.05time 2008) (R 0.54 times 2009, 0.56 times 2008)

The asset turnover ratio simply compares the turnover with the assets that the business has
used to generate that turnover i.e. for every €1 of assets, the turnover is €x.

If we look at the results for Aerlingus we can see the result of 0.94 times for 2009 ... this
means that turnover is 0.94 times bigger than total assets. Another way of saying that is that
the Aerlingus was able to generate sales of 94 cent for every €1 of assets it owned and used
for the year ended 31 December 2009. For the year ended 31 December 2008, it was even
higher at 1.05 times.

The good news is Total Asset turnover ratio has only slight worsened over the two years.

In 2008 Ryanair’s asset turnover was 0.56 times, but in 2009 it dropped to by 0.02 times to
0.54 times. This could be considered consisted as Ryanair consider themselves a low cost
airline and results like these would be consistent with a company generating a lot of sales, but
to this they have to keep their costs down. This is exactly what Ryanair did, by dropping
their Average fare price by 8%.

Gross Profit Margin

The gross profit margin is a measurement of a company's manufacturing and distribution
efficiency during the production process. The gross profit tells an investor the percentage of
revenue / sales left after subtracting the cost of goods sold.

However in service industry the mark-up is more difficult to calculate, particularly for new
business owners. With most service businesses, the key variable cost associated with
delivering the service to your customers will be Aerlingus and their employees' time. In
computing proper mark-up for a service business, you must pay close attention to the time
spent to provide the service to customers, as well as to market prices of the services provided.

But if you look at the Financial Highlights on Aerlingus financial Statements then you will be
able to see some of the more important profitability indicators

For Example;

Unit cost, excluding fuel €cent/RPK went from €3.85 in 2009 to €3.80 in 2008 which was an
increase of 1.3%.

Unit cost, including fuel €cent/RPK went from €5.41 in 2009 to €5.60 which leads to a
decrease of (3.4%)

Passenger/ancillary revenue per RPK €cent/RPK, decreased from 7.4c 2009 to 8.0c in 2008
this is a decrease of (7.5%). This would be the most worrying trend, considering Airlines
rely hugely on ancillary revenue.

Passengers carried ‘000, increased in 2009 with 10,382 passengers from 10,001 passengers in
2008 which was an increase of 3.8%.

Revenue passenger kilometres (RPK) m, Decreased from 15,819 in 2009 to 16,277 I 2008,
this was a (2.8%).

Available seat kilometres (ASK) m, Decreased from 21,228 2009 to 22,370 in 2008 which is
a decrease of (5.1%)

The above results indicate that more people are travelling at lower fares, and that there are
fewer planes in the air and less miles being flown. This could only mean that Aerlingus is
moving more towards being a low cost airline.
Now if you look at the Financial Highlights on Ryanair’s financial Statements then you will
be able to see some of the important profitability indicators for them.

For Example;

Average Yield per Revenue Passenger Mile (“RPM”) (€) went from 0.060 in 2009 to 0.065 in
2008 this was a decrease of ~ 8%. This is still a very small decrease but if this trend was to
continue than Ryanair might have something to worry about.

Average Yield per Available Seat Miles (“ASM”) (€) went from 0.050in 2009 to 0.054 in
2008, this was a decrease of 8%.

Average Fuel Cost per U.S. Gallon (€) went from 2.351 in 2009 to 1.674 in 2008, this was an
increase of ~40%. This is obviously a result of the increase in fuel prices.

Cost per ASM (CASM) (€) went from 0.058 in 2009 to 0.051 in 2008. This was an increase
of 16%.

Average Booked Passenger Fare (€) went from 40.02 in 2009 to 43.70 in 2008. This was a
decrease of 9%. This could be attributed to the current recession.

Ancillary Revenue per Booked Passenger (€) went from 10.21 in 2009 to 9.58 in 2008. This
was an increase of 9.8%.

All in all Ryanair consistently prove that they are the stronger airline of the two, if not one of
the strongest in its sector.

Net Profit Margin

(AL 2009 (6.7%), 2008(1.48%)) (R 2009 (6.13%), 2008 16%)

The profit margin tells you how much profit a company makes for every €1 it generates in
revenue or sales. In 2009 Aerlingus made a loss (6.7%) net profit compared to the loss of
(1.48%) in 2008.
This is an increased loss of (5.22%) since 2008.

Where Ryanair’s net profit margin dropped from 16% in 2008 to a massive decrease of
(6.13%). This is a loss of (22.13%).

Both the results of Aerlingus and Ryanair are to be expected, considering the current
economic climate of the world and the hike in fuel and Oil prices.

Inventory Turnover

As it is impossible to calculate to Inventory Turnover of an Airline, I have decided to

calculate the Passenger Load Factor.

The passenger load factor (PLF) of an airline is a measure of how much of an airline's
passenger carrying capacity is used. As airlines frequently have heavy fixed costs and are
capital intensive, the efficiency with which assets are used is crucially important. This is an
important efficiency measure, but it unfortunately does not consider the pricing and the
profitability at which the capacity is sold. It also implicitly assumes that the airline's fleet is
fully utilised in terms of the number of kilometres flown.

In 2009 Aerlingus carry capacity increased from 74.5% in 2009 compared 72.8% in 2008.
This can only indicate that Aerlingus must be moving towards being a low fare airline.

In 2009 Ryanair’s carry capacity increased from 79% compared to 67% in 2008. This could
easily be a result of Ryanair’s reduction in fare prices and the fact that so many of their
competitors had to cut routes.

Inventory days

(AL 2009 0.32days, 2008 0.18 days) (R 2009 0.35 days, 2008 0.46 days)

The number of inventory days is also known as average inventory period and inventory
holding period.
As you can see from the above results that inventory days are minimal but this is a normal
result for an airline company. If the results were higher than the above results it is then you
would have to worry.

Investment Ratios

Earnings per Share (EPS)

(AL 2009 20.47c, 2008 24.6c) (R 2009 11c, 2008 25c)

EPS is the portion of a company's profit allocated to each outstanding share of common
stock. EPS serves as an indicator of a company's profitability.

In 2008 Aer Lingus EPS was 20.47c but in 2009 it increased to 24.6c which was an increase
of 4.6c. This should make investors happy, as they always want growing EPS.

In 2008 Ryanair’s EPS went from 25c to 11c in 2009. This is a drop of 14c. Unfortunately
capital from share issue has not performed well in 2009, which could give investors
something to worry about.

Earnings Yield
(AL 2009(38.43%), 2008 (13.52%)) (R 2009 (3.8%), 2008 8.9%)

Earnings yield is the inverse of the PE ratio, and is used in much the same way. It tells an
investor the same thing; it can be understood as the amount of earnings you buy with one
euro of stock. (When expressed as a percentage, the earnings yield is easy to interpret as
``cent of earnings per euro of investment.''). Although there was a significant decrease from
in Aerlingus from 2008 to 2009 of (24.91%) and in Ryanair from 2008 to 2009 of (12.7%)
the results of the ratio are irrelevant as they are in the negative.

Price Earnings Ratio (P/E ratio)

(AL 2009(0.026), 2008 (0.073)) (R 2009 (0.26), 2008 11) (Industry average 3.44)

The PE ratio measures a company’s earnings compared to the stock price. It helps tell if a
stock is undervalued or overvalued. In Aerlingus and Ryanair case the PE ratios are negative
which would indicate that these ratios are irrelevant. (Currently the Irish times doesn’t even
bother rating the PE ratio on Aerlingus and Ryanair)
It is interesting that according to Reuters that the industry average has increased by 3.44
times, as Ryanair who is considered one of the main airline competitors only had a PE ratio
of 0.26 times, it might lead me to think that these results are incorrect.

Investment Ratios

Capital Gearing Ratio

(AL 2009 44.6%, 2008 40%) (R 2009 51% 2008 47%)

In Aerlingus the debt to equity ratio funding has increased by 4.6% from 2008 to 2009. This
indicates that there are slight more reliant on external funding. In light of falling profits, the
gearing ratio demonstrates that Aerlingus is struggling.

Although Ryanair gearing ratio has also increase, this is more like a result of the extra planes
they bought during the year.

Dividend yield (AL 2009, 2008 0%) (R 2009, 2008 0%) (Industry Average 0.07%)

Neither the Dividend yield nor the Dividend Cover can be calculated for 2008 or 2009 as
no dividends were given in those years.

Interest Cover (AL 2009 1.37 times, 2008 0.51 times) (R 2009 3.3 times, 2008 33 times)

The interest coverage ratio has huge implications for bond and preferred stock investors in
particular. This financial ratio tells the investor the number of times the earnings before
interest and taxes can pay, or "cover", the interest payment the company makes on its debt.

The lower the ratio, the more the company is burdened by debt expense. So in 2008 when the
Interest Cover was only 0.51 and the fact that the interest coverage ratio was below 1
indicates the company is not generating sufficient revenues to satisfy interest expenses.
However in 2009 the interest coverage increased slightly to 1.37 times but unfortunately this
is still below 1.5 times which still indicates that the company might be struggling.
In 2008 Ryanair Interest cover was 33 times, however it dropped to 3.3 times in 2009.
Although this was a massive drop it is still above 1.5 times which indicates that the company
is doing better than fine.

Conclusion

It is obvious that in 2009 Aerlingus struggled. This is due to several factors such as the
economic recession and high unemployment. Also it didn’t help when the government
introduced a €10 tax on air travel and the hike in oil and fuel prices.

Aer Lingus entered 2009 with too much capacity and several long haul routes that were no
longer sustainable in the changed market environment which lead to them cutting some of
their routes and introducing shorter haul routes.

It is clear from the above results that Aerlingus going back to the core market has delivered
instant results.

It is apparent Aerlingus has struggled for 2008 and 2009, but hopefully changing its approach
to business i.e. becoming a no frills, low cost airline, it will hopefully return to profitable
state once again.

Ryanair on the other hand appears to be the better investment option per the ratios calculated
above.
Appendix
Figures for Aer Lingus

2009 2008

Current Year's sales 1,205,739

Last Year's sales 1,354,994

Current Year's assets 1,730,537

Last Year's assets 2,085,948

Current Year's liabilities 1,026,040

Last Year's liabilities 1,323,493

Current Year's equity 704,497

Last Year's equity 762,455

Total Non / Current Assets 1,730,537 2,085,948

Current Assets 749,585 1,076,817

Current Liabilities 459,313 796,098

Inventory 816 514

2009 2008

Trade Receivables 75,835 88,901

Sales 1,205,739 1,354,994

Trade Payables 340,710 415,838

PBIT (80,018) (20,012)

Net Operating Assets (NCA+CA-CL) / (1,730,537 - 459,313= 1,271,224)

Capital Employed (2,085,948- 796,098= 1,289,850)

Earnings after tax, after pref. dividend and after MI (130,081) (109,882)

Number of Ordinary Shareholders 3,882 3,528

Number of Ordinary Shares 534, 04 533,954

Market price per share 0.64 1.53

Long term Debt 566,727 527,395

Equity 704,497 762,455

Interest Charges ((22,098)-36,900= (58,998))

((22,018)-60,860= (82,878))

2009 2008

Credit Purchases (Working 1) 755,835 819,648

Credit Purchases (Workings 1)

These figures are based on the 4 highest purchase cost to Aerlingus.

Staff costs, pre net exceptional items 312,192 334,300

Depreciation and amortisation 82,674 71,865

Aircraft operating lease costs 55,845 51,270

Fuel and oil costs 331,657 401,341

Maintenance expenses 70,451 74,412

Airport charges 251,993 242,903

En-route charges 59,001 57,298

Distribution charges 45,458 49,421

Ground operations, catering and other operating costs101, 734 100,992

Other (gains)/losses – net (24,248) (8,796)

Total Credit purchase 755,835 819,648

Important pages to print out

1

45 – 50

86

90

Ratios for Aer Lingus

Growth (Revenue)

Def. (Current Year's sales - Last Year's sales) / (Last Year's sales) x 100 =

1,205,739 – 1,354,994 x 100 = (11%)

1,354,994

Growth (Total Assets)

Def. (Current Year's assets - Last Year's assets) / (Last Year's assets) x 100 =

1,730,537 – 2,085,948 x 100 = (17)%

2,085,948

Growth (Total Liabilities)

Def. (Current Year's liabilities - Last Year's liabilities) / (Last Year's liabilities) x 100 =

1,026,040 – 1,323,493 x 100 = (22.4%)

1,323,4930

Growth ( Net Assets )

Def. (Current Year's equity - Last Year's equity) / (Last Year's equity) x 100 =

704497 – 762,455 x 100 = (7.6)%

762,455

Liquidity Ratios

Current Ratio

Def. Current Assets

Current Liabilities

2009

749,585 = 1.63 to 1

459,313

2008

1,076,817 = 1.35 to 1

796,098

Acid Test Ratio, (Quick Ratio, Liquidity Ratio)

Def. Current Assets less Inventory

Current Liabilities

2009

749,585 – 816 = 1.63 to 1

459,313

2008
1,076,817 – 514 = 1.35 to 1

796,098

Trade Receivables Ratio (Trade Receivables Days)

Def. Trade Receivables * 365

Credit Sales 1

2009

75,835 x 365 = 23 days

1,205,739 1

2008

88,901 x 365 = 24 days

1,354,994 1

Trade Payables Ratio (Trade Payables Days)

Def, Trade Payables * 365

Credit Purchases 1

2009

340,710 x 365 = 164 days

755,835 1

2008

415,838 x 365 = 185 days

819,648 1

Efficiency Ratios / Profitability

Return on Capital Employed (ROCE or ROI)

Def. PBIT * 100

Net Operating Assets (NCA+CA-CL) 1

2009

(81,018) x 100 = (6.3%)

1,271,224 1

2008

(20,012) x 100 = (1.5%)

1,289,850 1

Asset turnover

Def. Sales

Capital Employed

2009

1,205,739 = 0.94 times

1,271,224

2008

1,354,994 = 1.05 time

1,289,850)

Gross Profit Margin

The gross profit margin is a measurement of a company's manufacturing and distribution efficiency
during the production process. The gross profit tells an investor the percentage of revenue / sales left
after subtracting the cost of goods sold.

However in service industry the mark-up is more difficult to calculate, particularly for new
business owners. With most service businesses, the key variable cost associated with
delivering the service to your customers will be Aerlingus and their employees' time. In
computing proper mark-up for a service business, you must pay close attention to the time
spent to provide the service to customers, as well as to market prices of the services provided.

But if you look at the Financial Highlights on Aerlingus financial Statements then you will be able to
see some of the more important profitability indicators

For Example;

Unit cost, excluding fuel €cent/RPK went from €3.85 in 2009 to €3.80 in 2008 which was an increase
of 1.3%.

Unit cost, including fuel €cent/RPK went from €5.41 in 2009 to €5.60 which leads to a decrease of
(3.4%)
Passenger/ancillary revenue per RPK €cent/RPK, decreased from 7.4c 2009 to 8.0c in 2008 this is a
decrease of (7.5%). This would be the most worrying trend, considering Airlines rely hugely on
ancillary revenue.

Passengers carried ‘000, increased in 2009 with 10,382 passengers from 10,001 passengers in 2008
which was an increase of 3.8%.

Revenue passenger kilometres (RPK) m, Decreased from 15,819 in 2009 to 16,277 I 2008, this was a
(2.8%).

Available seat kilometres (ASK) m, Decreased from 21,228 2009 to 22,370 in 2008 which is a
decrease of (5.1%)

The above results indicate that more people are travelling at lower fares, and that there are less planes
in the air and less miles being flown. This could only mean that Aerlingus is moving more towards
being a low cost airline.
Net Profit Margin

Def. Profit before interest and tax * 100

Sales 1

2009

(81,018) x 100 = (6.7%)

1,205,739 1

2008

(20,012) x 100 = (1.48%)

1,354,994 1

Inventory Turnover

As it is impossible to calculate to Inventory Turnover of an Airline, I have decided to calculate

the Passenger Load Factor.

Passenger Load Factor

Revenue passenger kilometres (RPK)

Available seat kilometres (ASK)

2009

15,819 = 74.5%

21,228

2008

16,277 = 72.8%

22,370

Inventory days
Def. Inventory * 365

COGS 1

2009

816 x 365 = 0.32 days

941,585 1

2008

514 x 365 = 0.18 days

1,020,532 1

Investment Ratios

Earnings per Share (EPS)

Earnings after tax, after pref. dividend and after MI

Number of Ordinary Shares

2009

(130,081) = (24.4cent)

534,040

2008

(109,882) = (20.5cent)

533,954

Earnings Yield
Def. EPS

Market price per share

2009

(24.6) = (38.43%)

0.64

2008

(20.7) = (13.52%)

1.53

Price Earnings Ratio (P/E ratio)

Def. Share Price

EPS

2009

0.64 = (0.026)

(24.6)

2008

1.53 = (0.073)

(20.7)

Investment Ratios
Capital Gearing Ratio

Def. Long term Debt

Long term Debt + Equity

2009

566,727 = 44.6%

(704,497 + 566,727)

2008

527,395 = 40%

(762,455 + 527,395)

Dividend yield

Def. Gross dividend per share

Market price per share

Dividend Cover

Def. EPS

Ordinary dividend per share

Neither the Dividend yield or the Dividend Cover can be calculated for 2008 or 2009 as no
dividends were given in those years. See pg 86 on financial statements 2009 and pg 83 in 2008.

Interest Cover

Def. PBIT
 Interest Charges

2009

(81,018) = 1.37 times

(58,998)

2008

(20,012) = 0.24 times

(82,878)

Ryanairs Figures

2009 2008
Current Year's sales 2941,965

Last Year's sales 2713,822

Current Year's assets 6,421,761

Last Year's assets 6,327,551

Current Year's liabilities 3,996,700

Last Year's liabilities 2,425,061

Current Year's equity 2,425,061

Last Year's equity 2,502,194

Total Non / Current Assets 6,387,862 6,327,551

Current Assets 2,543,077 2,387,122

Current Liabilities 1,379,191 1,557,150

Inventory 2,075 1,997

Trade Receivables 41,791 34,178

Sales 2,941,965 2,713,822

Trade Payables 132,671 129,289

PBIT (180,487) 438,927

Net Operating Assets (NCA+CA-CL) / 5,402,995 4,770,401

Capital Employed

Earnings after tax, after pref. dividend and after MI (169,173) 390,708

Market price per share 2.89 2.80

Long term Debt 2,583,610 2,268,207

2009 2008

Equity 2,425,061 2,502,194

Interest Charges (75,522-130,544) = (55,022)
(83,957-97,088) = (13,131)

Credit Purchases (Working 1) 2,253,819 1,503,642

Credit Purchases (Workings 1)

These figures are based on the 4nearest purchase cost to Ryanair in relation to Aer Lingus

Operating expenses

Staff costs (309,296) (285,343)

Depreciation (256,117) (175,949)

Fuel and oil (1,257,062) (791,327)

Maintenance, materials and repairs (66,811) (56,709)

Marketing and distribution costs (12,753) (17,168)

Aircraft rentals (78,209) (72,670)

Route charges (286,559) (259,280)

Airport and handling charges (443,387) (396,326)

Other (139,140) (121,970)

Total Credit Purchases 2,253,819 1,503,642

Ryanairs Ratios

Growth (Revenue)
Def. (Current Year's sales - Last Year's sales) / (Last Year's sales) x 100 =

2941,965 – 2713,822 x 100 = 8.4%

2713,822

Growth (Total Assets)

Def. (Current Year's assets - Last Year's assets) / (Last Year's assets) x 100 =

6,421,761 – 6,327,551 x 100 = 1.4%

6,327,551

Growth (Total Liabilities)

Def. (Current Year's liabilities - Last Year's liabilities) / (Last Year's liabilities) x 100 =

3,996,700 – 3,825,357 x 100 = 4.5%

3,825,357

Growth ( Net Assets )

Def. (Current Year's equity - Last Year's equity) / (Last Year's equity) x 100 =

2,425,061 – 2,502,194 x 100 = (3.08%)

2,502,194

Liquidity Ratios

Current Ratio
Def. Current Assets

Current Liabilities

2009

2,543,077 = 1.84

1,379,191

2008

2,387,122 = 1.53

1,557,150

Acid Test Ratio, (Quick Ratio, Liquidity Ratio)

Def. Current Assets less Inventory

Current Liabilities

2009

2,576,976 – 2,075= 1.87 to 1

1,378,766

2008

2,387,122 – 1,997 = 1.53 to 1

1,557,150

Trade Receivables Ratio (Trade Receivables Days)

Def. Trade Receivables * 365

 Credit Sales 1

2009

41,791 x 365 = 5.18 days

2,941,965 1

2008

34,178 x 365 = 4.5 day

2,713,822 1

Trade Payables Ratio ( Trade Payables Days)

Def, Trade Payables * 365

Credit Purchases 1

2009

132,671 x 365 = 21 days

2,253,819 1

2008

129,289 x 365 = 31 days

1,503,642 1

Efficiency Ratios / Profitability

Return on Capital Employed (ROCE or ROI)

Def. PBIT * 100

Net Operating Assets (NCA+CA-CL) 1

2009

(180,487) x 100 = (3.3%)

5,402,995 1

2008

438,927 x 100 = 9.2 %

4,770,401 1

Asset turnover

Def. Sales

Capital Employed

2009

2941,965 = 0.54 times

5,402,995

2008

2713,822 = 0.56 time

4,770,401

Gross Profit Margin

The gross profit margin is a measurement of a company's manufacturing and distribution efficiency
during the production process. The gross profit tells an investor the percentage of revenue / sales left
after subtracting the cost of goods sold.

However in service industry the mark-up is more difficult to calculate, particularly for new
business owners. With most service businesses, the key variable cost associated with
delivering the service to your customers will be Ryanair and their employees' time. In
computing proper mark-up for a service business, you must pay close attention to the time
spent to provide the service to customers, as well as to market prices of the services provided.

But if you look at the Financial Highlights on Ryanair’s financial Statements then you will be able to
see some of the more important profitability indicators

For Example;

Average Yield per Revenue Passenger Mile (“RPM”) (€ ) went from 0.060 in 2009 to 0.065
in 2008 this was a decrease of ~ 8%. This is still a very small decrease but if this trend was
to continue than Ryanair might have something to worry about.

Average Yield per Available Seat Miles (“ASM”) (€ ) went from 0.050in 2009 to 0.054 in
2008, this was a decrease of 8%.

Average Fuel Cost per U.S.Gallon (€ ) went from 2.351 in 2009 to 1.674 in 2008, this was an
increase of ~40%. This is obviously a result of the increase in fuel prices.

Cost per ASM (CASM) (€ ) went from 0.058 in 2009 to 0.051 in 2008. This was an increase
of 16%.

Average Booked Passenger Fare (€ ) went from 40.02 in 2009 to 43.70 in 2008. This was a
decrease of 9%. This could be attributed to the current recession.

Ancillary Revenue per Booked Passenger (€ ) went from 10.21 in 2009 to 9.58 in 2008. This
was an increase of 9.8%.
Net Profit Margin

Def. Profit before interest and tax * 100

Sales 1

2009

(180,487) x 100 = (6.13%)

2941,965 1

2008

438,927 x 100 = 16%

2713,822 1

Inventory Turnover

As it is impossible to calculate to Inventory Turnover of an Airline, I have decided to calculate

the Passenger Load Factor.

Passenger Load Factor

2009

79%

2008

67%

See page 34 on Ryanairs Financial Statements

Inventory days
Def. Inventory * 365

COGS 1

2009

2,075 x 365 = 0.35 days

2,132,028 1

2008

1,997 x 365 = 0.46 days

1,576,312 1

Investment Ratios
Earnings per Share (EPS)

Earnings after tax, after pref. dividend and after MI

Number of Ordinary Shares

2009

169,173 = 11 cent

1,476,521

2008

390,708 = 25 cent

1,512,011

Earnings Yield

Def. EPS

Market price per share

2009

(11) = (3.8%)

2.89

2008

25 = 8.9%

2.80

Price Earnings Ratio (P/E ratio)

Def. Share Price

EPS

2009

2.89 = (0.26)

(11)

2008

2.80 = 0.11

25
Investment Ratios

Capital Gearing Ratio

Def. Long term Debt

Long term Debt + Equity

2009

2,583,610 = 51 %

(2,425,061+ 2,583,610)

2008

2,268,207 = 47%

(2,502,194 + 2,268,207)

Dividend yield

Def. Gross dividend per share

Market price per share

Dividend Cover

Def. EPS

Ordinary dividend per share

Neither the Dividend yield or the Dividend Cover can be calculated for 2008 or 2009 as no
dividends were given in those years. See pg 76 for 2008 on financial statements 2009 and pg 163
in 2008.

Interest Cover
Def. PBIT

Interest Charges

2009

(180,487)= 3.3 times

(55,022)

2008

438,927 = 33 times

(13,131)

Industry Averages
Ref: http://www.reuters.com/sectors/industries/rankings?industryCode=60&view=sales

Roce 0.87

Operating Margin (0.27)

Growth Rate over 3 years 0.44

Dividend Yield 0.07

P/E 3.44

References
Aer Lingus Annual Reports 2009, 2008

Ryanair Annual Reports 2009, 2008

Reuters.com

Iata.com

http://www.airlinefinancials.com/uploads/Year_2009_Airline_Summary_and_Comparison.p
df

www.datamonitor.com