Comparative study on growth and financial

performance of British Airways and Spirits Airlines

Introduction;
BA is one of the largest airlines companies in UK. Recently company
has acquired the Aer Lingus which is one of the Irish career giant. It
also take over the company to surpass the companies like Virgin
Airlines and air Etihad. Whereas, Spirit Airlines, Inc. is an American
ultra-low-cost carrier. Spirit Operates schedule flights throughout the
United States and in the Caribbean and Latin America.
Objectives of the study;
1) To understand current and future evolvement of the airline
industry.
2) To study the financial performance of the two company.
3) To analysis of growth and trend performance of the two company.
KEY PERFORMANCE RATIOS;
1. Net profit margin = Net Profit/Revenue
2. Operating Margin = Operating income/ Net sales
3. Return on assets = Net income/ total assets
4. Return on equity = Net income / Shareholder’s equity

DATA ANALYSIS AND INTERPRETATION

Comparison of Financial Ratio;
description British Airways Spirits Airways

Current ratio 1.11 1.04

Quick Ratio 0.31 0.64
Inventory turnover 1.12 4.79

Financial pie diagram

of the two companies

current ratio quick ratio inevtory tuenover

Interpretation;
In the above Financial Ratios of the year 2019, we can see that The
British Airways Current Ratio is higher than the spirits airways (1.11
and 1.04). While in the description of Quick Ratio the ratio of British
Airways is lesser than Spirits Airways (0.31 and 0.64).
In the last inventory turnover, the Ratios of Spirits Airways is double
higher than the British Airways (1.12 and 4.79).
According to the pie Diagram of the two companies, we can see that
the Current Ratio profit is much larger than the Quick ratios in 1/3 of
the total Ratios. But there is no Inventory turnover both the company
does not take much importance in the cost of goods sold.
So, the Spirits Airways is highly more profitable than the British
Airways as shown in the table above.
Working Capital Ratios;
Description British Airways Spirits Airways
Inventory turnover 280 84
Receivable turnover 14 39
Payable turnover 58 72
Operating Cycle 294 123
Cash Cycle 236 51

In

Inventory Receivable Payable Operating cycle Cash Cycle

the above Working Capital Ratio days, of Spirits Airways, the

inventory turnover ratios is 84 days for the year 2018, while for BA
ratios is 280, The receivable ratios days of spirits airways is 39 days
and BA is 14 days, Payable turnover is 72 and 58, operating cycle is
123and 294, and Cash Cycle is 51 and 326.
The Operating cycle of the two companies is leading in the year 2018
as compare with the others turnover ratios. Receivable turnover is the
least one among the turnover ratios. We can also see that inventory
and cash cycle have the same ratios in the chart Diagram.
So in order to Balance the turnover ratio between two companies we
should try to increase the payable and receivable turnover ratio and
lesser the operating cycle.