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The Impact of the Lehman Brothers bankruptcy

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Despite of the good net income earned in the twelvemonth 2007, AirAsia reported a net loss of RM 465.5 million in 3rd one-fourth of twelvemonth 2008. The economic recession is the chief perpetrator for this loss, whereas the bankruptcy of Lehman Brothers and the cut downing Malayan currency values are the major grounds doing the immense loss for the AirAsia.

Bankruptcy of Lehman Brother

Harmonizing to AirAsia ( Aviation Correspondent 2008 ) , the unexpected bankruptcy of Lehman Brothers forced AirAsia to neutralize its fuel hedge contracts and compose off derived functions held by Lehman Brothers, at a cost of RM 215 million – this is the first chief cause of the immense loss for AirAsia ‘s 3rd one-fourth, 2008.

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Reducing Malayan Currency Values

Harmonizing to Tony Fernandes ( Aviation Correpondent 2008 ) , as consequence of economic recession, AirAsia made a loss of RM 213 million due to the dropping value of Malayan currency, and it significantly rose up the abroad loans that AirAsia borrowed to purchase Airbus SAS planes – this is the 2nd chief cause of the immense loss for AirAsia ‘s 3rd one-fourth, 2008.

To convey back investors ‘ assurance, AirAsia successfully reported a RM 506 million net net income in the terminal of twelvemonth 2009. To hold an easier reappraisal on how the AirAsia did it, the undermentioned portion of the assignment focuses its analysis on the hard currency flows statement of the AirAsia on twelvemonth 2009.

Introduction of Cash Flow Statement

Harmonizing to Wild and Subramanyam ( 2003 ) , hard currency flows statement is a simpler reading and Reconstruction of concern minutess – it is simple to be understood due to its straight screening of the hard currency influxs and escapes in the concern. Since hard currency is high in its liquidness, hard currency flows statement is ever taken as a manner for the investors to analyze the liquidness of the concern. Normally, a hard currency flows statement shows three major activities take topographic point in the concern, viz. Operating activities, Investing activities, and Financing activities.

( I ) Operating Activities of AirAsia

On twelvemonth 2009, AirAsia did a good occupation, successfully converted its net hard currency used in operating activities ( for the group ) which valued with about RM 416,000,000 to net hard currency from operating activities ( for the group ) which valued at RM 783,619,000. This approximative RM1,199,000,000 increased in the net hard currency from operating activities was largely contributed by the undermentioned activities:

Increased belongings, works and equipment depreciation. From the undermentioned hard currency flow statement, the readers may detect that there is a important addition in belongings, works and equipment depreciation, whereas an approximative 29 % increased ( from twelvemonth 2008, RM 346,954,000 to twelvemonth 2009, RM 447,644,000 ) in twelvemonth 2009, compared to twelvemonth 2008.

Increased belongings, works and equipment write away. From the undermentioned hard currency flow statement, the readers may detect that there is a important addition in belongings, works and equipment write off, whereas an approximative 1238 % increased ( from twelvemonth 2008, RM 29,000 to twelvemonth 2009, RM 388,000 ) in twelvemonth 2009, compared to twelvemonth 2008.

Increased involvement disbursal. From the undermentioned hard currency flow statement, the readers may detect that there is a important addition in the involvement disbursal, whereas an approximative 25 % increased ( from twelvemonth 2008, RM 297,533,000 to twelvemonth 2009, RM 371,153,000 ) in twelvemonth 2009, compared to twelvemonth 2008.

( two ) Investing Activities of AirAsia

To cut down hard currency escapes, AirAsia reduced a batch in its investing activities – there is a about 31 % decreased in AirAsia ‘s 2009 investing, whereas the net hard currency used in puting activities was dropped from twelvemonth 2008, RM 2,601,928,000 to twelvemonth 2009, RM 1,777,468,000. This approximative RM824, 000,000 decreased in the net hard currency used in puting activities was largely contributed by the undermentioned activities:

Reducing investing in extra belongings, works and equipment. From the undermentioned hard currency flow statement, the readers may detect that there is a important lessening in the investing in extra belongings, works, and equipment, whereas an approximative 26 % reduced ( from twelvemonth 2008, RM 2,623,001,000 to twelvemonth 2009, RM 1,947,763,000 ) in twelvemonth 2009, compared to twelvemonth 2008.

Increasing in returns from disposal of belongings, works and equipment. From the undermentioned hard currency flow statement, the readers may detect that there is a important addition in the returns from disposals of belongings, works, and equipment, whereas an approximative 265 % increased ( from twelvemonth 2008, RM 50,043,000 to twelvemonth 2009, RM 182,538,000 ) in twelvemonth 2009, compared to twelvemonth 2008.

Significant cut off in long term refund. From the undermentioned hard currency flow statement, the readers may detect that there is a important cut off in long term refund in twelvemonth 2009, whereas the long term refund for the old twelvemonth was RM 48,197,000.

( three ) Financing Activities of AirAsia

Last, there is besides a important alterations in AirAsia ‘s funding activities, viz. there is a about 42 % decreased fiscal activities in twelvemonth 2009, compared to twelvemonth 2008. The following are the major alterations in funding activities:

Increasing returns from allocation of portions. From the undermentioned hard currency flow statement, the readers may detect that there is a important addition in the returns from allocation of portions, whereas an approximative 175 times increased ( from twelvemonth 2008, RM 2,882,000 to twelvemonth 2009, RM 509,217,000 ) in twelvemonth 2009, compared to twelvemonth 2008.

Reducing returns from adoptions. From the undermentioned hard currency flow statement, the readers may detect that there is a important lessening in the returns from adoptions, whereas an approximative 45 % decreased ( from twelvemonth 2008, RM 3,044,531,000 to twelvemonth 2009, RM 1,670,390,000 ) in twelvemonth 2009, compared to twelvemonth 2008.

Increasing refund of adoptions. From the undermentioned hard currency flow statement, the readers may detect that there is a important addition in the refund of adoptions, whereas an approximative 97 % increased ( from twelvemonth 2008, RM 300,780,000 to twelvemonth 2009, RM 593,131,000 ) in twelvemonth 2009, compared to twelvemonth 2008.

Increasing sedimentations pledged as securities. From the undermentioned hard currency flow statement, the readers may detect that there is a important addition in the sedimentations pledged as securities, whereas an approximative 1.5 times increased ( from twelvemonth 2008, RM 2,019,000 to twelvemonth 2009, RM 5,112,000 ) in twelvemonth 2009, compared to twelvemonth 2008.

Question 2 ( B ) . Based on your commentary about, explain based on your analysis of the hard currency flow statement whether you would see puting in the company or non.

Answer for Question 2 ( B ) : Investor ‘s sentiments on AirAsia Berhad.

From the analysis above, the author is really positive with AirAsia ‘s profitable hereafter, and therefore the author would see puting in the company. The undermentioned portion highlights the success activities in AirAsia which pulling the author ‘s assurance:

( I ) Operating Activities of AirAsia

Within a short period – approximate one twelvemonth, AirAsia successfully converted its loss to net income, through the important gross increased from the increasing rider place gross revenues, aircraft runing lease income, travel and tour operations, and other gross such as excess charge for extra luggage, luggage handling fees, cargo and cancellation, certification fees cut downing stock lists on-hand.

As a low-priced air hose with the motto of Now Everyone Can Fly, AirAsia is seeking best to supply lower and lower monetary value air tickets with best services to air hose riders. The increasing rider place gross revenues proved that the immense investing spent on Airbus SAS planes is worthy and therefore the investors are more assurance on the determinations made by the managers, even thought there was crisis in the old twelvemonth.

( two ) Investing Activities of AirAsia

Besides, due to the bad experiences in the old twelvemonth, AirAsia becomes more careful in its investment activities. It started cut downing the investing in extra belongings, works and equipment at the same clip to the full use the current assets on-hand. Furthermore, there is besides a important cut-off in long term refund, where save AirAsia for approximative RM 48,000,000 investing disbursals.

Although there is an extra hard currency flow from operating activities, AirAsia is going more cautiousness on every investment activity it involves.

( three ) Financing Activities of AirAsia

Sing the funding activities of AirAsia, the author would wish to foreground about the important lessening in the returns from adoptions. Since AirAsia is deriving quiet a batch in its operating activities, cut downing in adoptions can be considered as a good determination due to it cut down the hazards faced by the concern.

Presently, AirAsia ‘s adoptions are secured by Assignment of rights under contract with Airbus over each aircraft, Assignment of insurance of each aircraft, Assignment of airframe and engine guarantees of each aircraft. Therefore, cut downing the dependances on adoptions is a good determination for AirAsia to retain the assurance of the investors.

Alternatively of depending on borrowing from foreigners, AirAsia is now more depending on the fiscal beginning from allocation of portions. Through this alteration, AirAsia may cut down the hazards it face and makes its stockholders become more committed with the determinations made by the concern.

In decision, the author will see puting in AirAsia due to its smart determinations on its operating, puting and funding activities. Besides, as promised by AirAsia, the author believes that the cut downing monetary value provided by AirAsia will successfully convey in more and more gross for the concern.

Cite this The Impact of the Lehman Brothers bankruptcy

The Impact of the Lehman Brothers bankruptcy. (2016, Nov 15). Retrieved from https://graduateway.com/the-impact-of-the-lehman-brothers-bankruptcy/

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