Army Public College of

Management and Sciences

Project Report
Of
Economics

Submitted by: Saad Saleem

Roll # S-44015
Submitted to: Sir Tahir Naeem

Date of submission: 27 Dec. 2010

Introduction:
British Airways (BA) is the UK’s largest international
scheduled airline, operating international and domestic
scheduled and charter air services for the carriage of
passengers, freight and mail and the provision of ancillary
services. The airline flies to over 550 destinations globally
and is considered to be a leader in the industry.

Background:
In 1967 the government established a committee of inquiry
into Civil Aviation under Sir Ronald Edwards. The Edwards
Committee reported in 1969 with one of the
recommendations being the formation of a National Air
Holding Board to control finances and polices of the two
government-controlled airlines, the British Overseas Airways
Corporation (BOAC) and British European Airways
Corporation (BEA). The recommendation was enacted in
1971 with the passing of the Civil Aviation Act 1971 which
formed a British Airways Board to control all the activities of
the two airlines. British Airways (BA) was created in 1974,
when BOAC and BEA managements were combined under
the newly formed British Airways Board. Following two
years of fierce competition with British Caledonian, the
second-largest airline in Britain at the time, the Government
changed its aviation policy in 1976 so the carriers were no
longer permitted to compete on long-haul routes.

Type of business:
British Airways is “joint stock Company”, because it is
merger of two companies British Overseas Airways
Corporation (BOAC) and British European Airways
Corporation (BEA).

Analysis of British Airways

First of all I would like to mention that what I have done is
analyze the British Airways performance since 2007 and the
current year 2008.We will see some changes that occurred
whether it was in their return on asset, or Revenue, Current
ratio, Shareholder equity and other more. Bear in mind that
the number here are in £ million. Here I will be analyzing the
British Airways and showing you some diagram stating how
is British Airways financial condition.

Net Financial Cost:

Net financial Cost for the year 2007/08 was 175 million
compare with 168 million in year 2006/07.

Profit on sale of fixed assets:

Profit on the sale of fixed assets and investment for
the year was £14 million.
 Performance
Performance
for the three
for the three
months Change
months ended
ended June
June 30, 2008
30, 2007
Revenue 2,259 2059 6.1
Operating profit 35 176 -80.0
Profit before tax 37 124 -77.4
Profit after tax 27 90 -78.0
Net assets 1,955 1783 0.1
Basic earnings
per share 2 8.3 -80.6
Passenger 7.10 6.09 16.58
revenue

Total fixed asset 11336 8492 33.4

Total equity 3033 2465 23
shareholders
Total liability 8652 7890 9.6
Performance:
For the revenue there was small increase because, the ratio
of selling costs/revenue was falling, and this prevents them
in obtaining a great amount of revenues. Asset is so far in
good condition, British Airways is always on time to purchase
many Boeing Aero plan in order stay in a good financial
position, because the more asset the greater return of
money.
 Tool Analysis:
Current ratio:

Current asset/Current liability

(Year 2008) =11336/8652=1.31

(Year 2007)= 8492/7890= 1.07

As you can see there is increase in the current ratio, that

mean British Airways are more capable the company is of
paying its in addition to they will also be able to turn its
product into cash. But this may need time, because of the
challenges that they are facing now such as fuel and
terminal 5 and others. And increasing in current ration also
indicates that short-term liquidity has improved constantly
throughout the period.

Return on Assets (ROA):

Net Income/Average Total Assets
In our case we will take Profit after tax because Net income
mean income after deduction, and here tax is the expense
that is deducted.

Year 2008=27/11336=0.002
Year 2007=90/8492=0.010

Here in year 2008 the company is earning less money on

their less investment. The higher the ROA number, the
better, because the company is earning more money on less
investment.

Return on Equity (ROE):

Net Income/Total equity shareholder
Year 2008=27/3033=0.0089
Year 2007=90/2465=0.0365

British Airways here is less likely to be is capable of

generating cash internally.

Position:

British Airways is one of the largest airlines; especially after

some acquisition and opening subsidiaries this will lead it to
be one of the top leaders in the world capturing a huge
market, thus being 1st largest international airline. Off
course dedicating to deliver world-class service, whether in
business class or economy .And lastly will be the highest in
financial growth, either for profit or stockholder equity.

Conclusion & Recommendations:

British airways so far is doing its best in order to stay one of
the major player in the global airline, in which it is are being
more creative ,opened to alliances ,and acquisition. See in
order for them to be top player, they have and must be in
full potential to reach for any opportunity that is waiting for
them .Such as opening in new subsidiaries' to gain new
position in market. In which they will also concentrate on
business class passenger, offering them the best customer
package, leading them to gain huge revenues return. They
always watch out for ways to minimize their expenses and
get a value for their money and shareholder money. Doing
so, leads them to cost savings, and finally making them to
stay on the top competitive the desire to stay on top in an
increasingly competitive environment.
References:
1. http://www.britishairways.com/
2. http://www.business-sale.com/ba-has-bought-french-airline-lavion-
bsr-aquisitions-12592895A.html
3. http://www.fly.co.uk/news/heathrow-expansion-necessary-says-
british-airways-boss-198239.html
4. http://en.wikipedia.org/wiki/British_Airways
5. http://www.britishairways.com/travel/openskiesdif/public/en_gb
6. http://news.bbc.co.uk/2/hi/business/7256487.stm
7. http://edition.cnn.com/2008/BUSINESS/08/01/ba.profit.ap/index.html
8. http://edition.cnn.com/2007/TRAVEL/08/21/BT.openskies/index.html
9. http://www.highbeam.com/doc/1G1-141639845.html
10.http://www.bashares.com/