Qantas’ financial performance has been very successful in recent years with the business recovering strongly from GFC and a large decrease in revenue to ear 377 million in 2010. The effective financial performance has been the result of effective profitability, liquidity, efficiency, return on capital, good solvency and growth including the establishment of a new airline (jet star). Financial management of Qantas
The financial management of Qantas refers to the proper management of capital and funds in order to achieve the goals of the business.
The financial management of Qantas has been very successful as it is one of the few profitable airlines in the world that does not receive government assistance. The airline industry in which Qantas operates in is highly competitive and dynamic industry which is characterised by fluctuating sales, a high margin of expenses. Evidence to Qantas’ effective management could be there net profit of 2008 being 1. billion, their ability to respond to unavoidable decreases in revenue like the Global financial crisis, terrorist attacks, rise in fuel prices etc also shows there flexibility and adversibility in effectively keeping the profit levels at above 100 million.
Qantas’ management is focused on maximising return to shareholder (dividends) since they were privatised in 1995 Profitability Profitability refers to the revenue left over after expenses have been payed; Qantas’ in relation to this have been very successful.
Although many external factors have led to fluctuations: * Increase of %30 in 2008 * decrease of %87 in 2009 * Increase of %300 in 2010 Qantas’ has managed to keep there profitability to a maximum through their use of revenue controls and cost controls. Cost controls refers to ways in which a business can control and work to reduce costs, strategies related to cost controls are could be: * Bulk buying * Reducing fixed business costs ( salaries, rent, lease payments, electricity * Budgets * Cost centres
Revenue controls refer to maximising revenue in order to increase profitability by undergoing a sales mix managers can determine what products are successful and which products are less successful. Another strategy is Pricing policy which refers to discounting selling price, it may lead to an increase in sales but not necessarily an increase in profit. Conclusively Qantas’ financial management within profit has been very successful reaching levels up to 1. 3 billion in net profit and return on owners equity being in between %8 and %12 in recent years shows that this has been properly managed.
Liquidity Liquidity refers to a business’ ability to pay expenses as they fall due. Qantas’ has relatively good liquidity although they do operate in a high cost environment ( in which most airlines operate on a negative working capital position) . Qantas’ liquidity has fluctuated between the last few years but in 2010 has been there most successful year when they reached a liquidity ratio of 0. 93:1, Other airlines which Qantas’ competes with have current ratios of 1. 4:1 and 1. 1:1. Qantas’ has achieved such good ratios through their use of effective strategies.
Some of these include: Controlling current liabilities and assets, Leasing of aircraft, buildings, plant, and equipment. By doing this Qantas has freed cash that can be used elsewhere in the business. Another strategy is there option to begin to sell and lease back the airline terminals that they own. By monitoring there working capital (liquidity) they are able to maximise their future financial performance by gaining a furthering understanding of their cost/revenue controls in order to create a margin of safety for creditors.
Solvency/Gearing. Solvency/Gearing refers to a business’ ability to continue its operations in the long term and is a measure of it financial stability. Rather than using the traditional debt to equity ratio airlines use a more complex ratio to show a clearer position of gearing. Simply, gearing is the ratio of the amount of debt finance in relation to the amount of equity finance. Qantas’ downfall in sales/gearing in 2009 due to the GFC. This year Qantas’ decided not to pay dividends and instead took the retained profits and spent the capital on new aircraft and renewal within the business in order to increase revenue. Efficiency
Efficiency refers to a business’ ability maximise output (customer service) by minimising cost of operations and time required to complete required tasks. This ratio measures total expenses as a proportion of total revenue. It decreased slightly from %99 to %98 this year but is substantially strong like other airline (singapore airline %99). One of the main startegies qantas has undertaken to be effefctive with increaseing there efficiecny would be there use of RSF (revenue seat factor) which is used as a key indicator of efficiency. It measures the percentage of total passenger capacity actually utilised by paying passengers.
Other startegies include: Investment in it systems + eccomerce More efficiecnt aircraft (-25% fuel) Restructuring of catering and engineering. By using strategies like Fuel hedging in order to turn a variable cost into a fixed cost means that qantas can lock in a certain price for fuel (via contract) and save money if the price of fuel increases. Qantas’ future in efficiency looks to be very promising as an increase in use of E commerce, more efficient planes, and improved economies of scale all work in favour to ensure qantas’ ability to complete there day to day task’s with minimal use of revenue.
Conclusion Conclusively, i believe that the financial performance of qantas’ in all aspects of financial managment have been successful enough to see increases in profitabilty, decreases in costs and stabilisation in liquidty, RSF, solvency and efficiency throughout recent years. This can all be seen in stats and information included in this report. With this proper financial managment in place changes/issues/and events like enviromental issues, terrorism, increase’s in fuel prices etc. can all be overcome with minimal damage to the business’ revenue, reputation and amounts of profit.
Cite this Qantas Business Report
Qantas Business Report. (2017, Mar 24). Retrieved from https://graduateway.com/qantas-business-report/