Background of British Airways
British Airways (BA) was formed in 1972. The initial approach of the company was to manage two national airline companies named “British Overseas Airways Corporations” and “British European Airways”. BA is an international airline that is headquartered in London. The company is providing its services in above 400 destinations in different parts of the world. The company creates alliances with code share, franchises and other joint ventures.
The vision of the company is to become the most accepted airline in the world. To accomplish their vision British Airways always tries to control its cost to become financially strong. The company invests in best human capital, high revenue generation products and diversified network to achieve its objective of leading the industry. The revenue generation facilities of the company are international destination and fleet size .
Dividend Plans and Policy
British Airways recommend payments of Final dividend. Sometimes the company does not pay dividends to its shareholders. The intention is to utilize the amount in profitable projects that could generate substantial revenues for the company. The business sense enables board of directors to invest more in the new projects rather than distributing the amount. The company always declares the dividend but the payment of the dividend depends on its upcoming projects or new investment plans for the next year. The operating profit of the company was 708 million Euros in 2013. However, it was 233 million Euros in 2012 that indicates the increase in profitability of the company in 2013. The policy of the company is to achieve the goal of expansion .
The company declared the dividend in 2013 for the year 2012 but did not give it to the shareholders. The reason for the retention of dividend is the plan for purchasing some non-current assets and expansion of business in other parts of the world. The company believes in generating more profits by investing in less risky projects. The goodwill of the company will increase with the action of utilizing the available resources to increase the business of the company .
British Airways believe in expansion and makes plans to fulfill the goal. The company continued to expanding their consumer base in other countries. Another expansion is launched in South Africa. BA is also expanding the range of its products including airport and fleet. The company also maintained its plan of expanding its network in the financial year 2013. The company has also planned to create capacity at the airports for reducing the delays. The expansion is planned to compete effectively in the competitive market of Europe. The objective for the expansion is to provide efficient services to the clients .
The expansion of aircrafts and airports will allow others to invest in the company. The company has to spread the pool of profits to ensure its effectiveness in the global market. The aim of the company is to become the leading corporation in the industry and allow potential business to allies with it. The alliance and combined strategy will allow them to lead the competitive market .
The future prospect of the company is to improve its operational activities in favor of the organization. The Group of the company is has debt that required to be refinanced. The Group is committed to utilize its cash reserves to compete in the financing market. The future plan of the company is to lead in the country. The company invested more in Olympic 2012 and Paralympics games to promote its brand. The company continued the plan of reducing the cost by controlling their variable cost. The new aircrafts purchased by the company could be helpful in increasing efficiency of fuel for 140 million Euros per year by 2015. The liquidity position of BA is strong as it had 1.9 billion Euros of cash and cash equivalents in 2013. The debt of the company was 2 billion in 2013 .
Financial Position of British Airways
The financial position of the company is strong due to its revenue generation techniques in the competitive market. BA has potential to cover the damages caused by the fall in the global economy. The financial risks faced by the company are credit risk, capital risk and market risk. The company efficiently manages these risks by delegating the responsibilities to the upper management. The risk management controls the operations with defined parameters. BA cash flows and profitability indicates the company is moving with ongoing concern. The Group consists of strategic allies so the company has strong financial position in the market. The company has variety of resources including cash reserves and cash equivalent to mitigate the risks that are likely to hit the profitability. The revenue generation strategies, acquiring different aircrafts and allies lead the company to overcome any hazardous situation in future .
The policy adopted by the company in 2013 support the evidence that the company is trying to increase its assets and decrease its long term liabilities to show the going concern approach. The total assets of the company were 13,296 million Euros in 2012 but it rose to 14,031 in 2013. It shows that the company has increased net assets in the given period. The long term obligation of the company was 5,578 that decreased up to 4,849 in the next year. It could be conclude that the company is paying off its obligations time to time by its operational activities and cost reduction techniques. The liquidity position of the company also indicates that the company is decreasing its obligations and purchasing more assets to increase its credibility in the market .
It could be seen in the above chart that the performance of the company increased in the period of 2012-2013. The company remains on the policy to increase its revenue generation assets and utilize various resources to cut off the additional variable cost that occur due to lack of efficiency. BA had fulfilled the objective of increasing potential assets and decreased it burden of long term liabilities to achieve its goal of expansion .
Financial Resources of British Airways
The available resources that could be utilized to overcome the hazardous situations are important for the company to make reserves (Gibson, 2010). The companies’ makes reserves of these assets utilize them in future to cover up the risks that might be faced in future times. The company has cash and cash equivalent reserve of 562 million Euros that could be utilized for purchasing new machinery and equipment. Another thing that could be noticed that the company had increased its cash reserves from 419 million Euros in the period of one year. It indicates that the company has potential to hold the cash for different purposes such as a purchase of assets.
The risk management team of the company could further strengthen the position of the company by utilizing its resources and allocating the amount for the upcoming risky situations that could be foreseen by them. It could be revealed by the financial statements that the company is efficiently performing in generating potential revenues.
Comparison of Profitability for Two Years
The net profit of the company was 84 million Euros in 2012. It had increased significantly in the year 2013. The reason for the increasing profitability is control over the cost and expenses. The change in revenue is less than the change in the net profit that shows that the company is efficiently utilizing its resources to lower the cost and expenditures. The company made a commitment that it will try to reduce the cost as much as it acquires different assets to compete in the financial market. The company has potential non-current assets reserve to apply cost efficiency in its productive functions.
British Airways started their efforts to lead in the industry and made significance changes that could be seen in the above chart. The increasing revenues and profitability are indicating that the company has made tremendous and extra effort in one year. It could be concluded that if the company remain committed to move within the same speed, it will be able to achieve its goal in few years.
List of References
British Airways Plc. (2013). Annual Report 2013. London: British Airways Plc.
British Airways Plc. (2013, March 20). BA Annual Report and Accounts-Company Announcement. Retrieved from http://announce.ft.com/Detail/?DocKey=1323-11899505-50OAQ2CHI3KON97SBHQAGANF0O
Burghouwt, D. G. (2012). Airline Network Development in Europe and its Implications for Airport Planning. Farnham: Asghate Publishing Ltd.
Gibson, C. (2010). Financial Reporting and Analysis: Using Financial Accounting Information. Mason: Cengage Learning.
Palmer, A. (2012). Introduction to Marketing: Theory and Practice. Oxford: Oxford University Press.
Visser, G., & Ferreira, S. (2013). Tourism and Crisis. London: Routledge.