Intercompany Analysis and Comparison in the Airline Industry in Europe According to Financial Reports between the Years 2012 and 2015

Bc. Adam Procházka, BSBA

Bachelor's thesis

Abstract:

The bachelor thesis is focused on intercompany comparison of airline companies including the low-cost and traditional airline sectors within the industry. These are Ryanair, EasyJet, Air France, Norwegian Air and British Airways. The analysis is based on a broad range of techniques commonly used in the matter of intercompany comparison. First, the unidimensional methods used are elaborated through the ratio analysis combined with results of vertical and horizontal analyses. The results are complemented by DuPont analysis providing a valuable insight into the airlines’ financial performance. Second, the multi-dimensional methods used consist of the multi-dimensional summation method, the rigorous deduction method, the scoring method, and the standardised multivariate and sophisticated standardised multivariate methods. In order to obtain the most accurate results, the thesis emphasises the last two multi-dimensional methods. The main objective of the thesis is to conduct a complex intercompany comparison that provides clear and comprehensive results. The results ought to reveal the best performing company, so-called the absolute winner. Moreover, the comparison should enable to determine whether low-cost carriers or traditional airlines scored better in the selected intercompany comparison criteria. Consequently, the thesis tests the following hypotheses. First, the best performing airline in overall will be Ryanair because the company will have substantially higher return on equity ratios, in all years by 3% and more, in comparison to the other airlines. Second, the traditional airlines will occupy the two best ranks in overall results of the standardised multivariate and sophisticated standardised multivariate methods.

Abstract:

The bachelor thesis is focused on intercompany comparison of airline companies including the low-cost and traditional airline sectors within the industry. These are Ryanair, EasyJet, Air France, Norwegian Air and British Airways. The analysis is based on a broad range of techniques commonly used in the matter of intercompany comparison. First, the unidimensional methods used are elaborated through the ratio analysis combined with results of vertical and horizontal analyses. The results are complemented by DuPont analysis providing a valuable insight into the airlines’ financial performance. Second, the multi-dimensional methods used consist of the multi-dimensional summation method, the rigorous deduction method, the scoring method, and the standardised multivariate and sophisticated standardised multivariate methods. In order to obtain the most accurate results, the thesis emphasises the last two multi-dimensional methods. The main objective of the thesis is to conduct a complex intercompany comparison that provides clear and comprehensive results. The results ought to reveal the best performing company, so-called the absolute winner. Moreover, the comparison should enable to determine whether low-cost carriers or traditional airlines scored better in the selected intercompany comparison criteria. Consequently, the thesis tests the following hypotheses. First, the best performing airline in overall will be Ryanair because the company will have substantially higher return on equity ratios, in all years by 3% and more, in comparison to the other airlines. Second, the traditional airlines will occupy the two best ranks in overall results of the standardised multivariate and sophisticated standardised multivariate methods.

Keywords

Intercompany comparison, Financial analysis, Airline industry, Low-cost carriers, Traditional airlines, Unidimensional methods, Multi-dimensional methods

Language used: English

Date on which the thesis was submitted / produced: 2. 5. 2017

Thesis defence

• Date of defence: 20. 6. 2017
• Supervisor: Ing. Eva Cipovová, Ph.D.
• Reader: MBA Jaromír Stemberg

University of Finance and Administration

Bachelor programme / field:
Economics and Management / Business Management and Corporate Finance & Bachelor of Science in Business Administration