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financial performance of an airline of your choice

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Financial performance measures the outcome of the firm's operational activities in the financial aspects. For the present essay British Airways has been chosen in order to analyse the SWOT analysis on the financial performance of this entity. Furthermore, it has also focused on calculating the different ratios that measures the financial performance of the company in the airline industry.


British airways counts among the largest airlines bin the whole United Kingdom in terms of Fleet size which will carries large base of customers in the same flight. This airline was established with the cooperation provided by the government of the UK (Dženopoljac, Janoševic and Bontis, 2016). This airline managed to segment their whole firm into two divisions with the financial support enjoyed by this entity in order to get competitive advantage over its rivals who are operating in the same stream. The British airways will later on after its establishment get the support of four different companies to enhance its financial and the operational base. The companies which were merged in the British airways includes British Overseas airways, British European Airways, Cambrian airways and North-east airways. This merger will showcase the ability of the current entity who got financial and the personnel support from all these organizations. The airport hubs currently are under this business is Gatwick and Heath row which are famous airports of the London.

Ratio analysis





Net sales




Operating profit




Net profit




Operating profit ratio

OP/Net sales*100



Net profit ratio

Net profit/Net sales*100



Table 1: Calculation of Profitability

Profitability ratios-

 Financial management focuses on the assessing the income statement that support them in managing the net income or profit that earned by the airline company through executing their activities and operation within the industry. It has been assessed that the total expenditure incurred by the entity reduces or lower the business profit. There are numerous of the categories within the profitability ratio that are enumerated as follows-

Operating profit-

Net profit-

Financial issues (Weaknesses)

There are various issues discovered by this ratio analysis which is given as below:

  • Royalties and security deposit paid by an entity to the government of the United kingdom which reduces their final profit.

Strengths of British airways on the basis of Profitability ratios

  • The higher gross profit shows the higher generation of sales and the revenue generated by an entity over the years.
  • Additional services provided to facilitate tourists to feel comfortable while taking the services of these airlines.
  • The higher sales will show the higher customers base achieved by an entity which raises their sales level and enhances the brand image of the business.


  • Reducing the overall prices of the airline fare will cut down their customer base


The key opportunity for the firm is that it must engage in expanding their operations in the different markets.

Liquidity ratios




Current assets




Current liabilities








Quick asset

current assets-inventories



Current ratio

Current assets/Current liabilities



Quick ratio

Quick asset/current liabilities



Liquidity ratio- 

The liquidity of an entity showcases the storage of monetary value for the long time period so that it may easily return the short term obligations of the company.

Current ratio- 

The current assets are measure in quotient with the current liabilities incurred within the airline company. From the above calculation the current ratio is decreasing over the year that showcase that airline is unable to meet their duty and responsibilities (Fact Sheets, 2017).

Quick ratio- 

It is the ratio in which the management focuses on analyzing the quick ratio through eliminating the inventory amount so that it would easily convert into the cash. From the calculated table quick ratio is decreasing that do not meet the future obligations in terms related with quick liabilities.

Financial issues (Weaknesses)

  • Deficient currency
  • Fleet size of carriers within the British Airways act as the key weakness.
  • Current assets is reducing current liabilities.

Strengths of BA in terms of Liquidity ratios

  • Cash is available to meet the survival goals of the British Airways
  • Another strength is company


  • Increasing current liabilities act a threat for the firm as it increases the debt that need to be overcome.


  • British Airways has adequate financial amount that act as opportunity for firm to invest in the new services with the aviation industry.


Solvency ratio












Debt to equity




Solvency ratio- 

This ratio has prepared by an entity in order to assess it internal capabilities in relation to the external market obligations in form of debt obligations (British Airways Plc. 2017). The capital of British airways need to be compare with the long term debt incurred in the same entity.

Financial issues

Debt imposition blocks the current equity

The capital structure is inclined towards downward position with a heavy pressure of debts hold by an entity in the same entity.


Lower equity will decrease the burden of paying dividend

Equalizes the capital structure by utilising the current shareholders


Higher interest paid on debt will reduce the profitability


Profit can be maximized by reduces the debt and equity in equal proportion

Efficiency ratios




Total assets




Net sales












Fixed asset








Asset turnover ratio

Total assets/Net sales



Fixed asset turnover

Fixed asset/Net sales



Inventory turnover




Efficiency ratios-

The capabilities of the business enterprise are assessed on the basis of assets currently hold by an entity in reducing the liabilities (British Airways Plc, 2017). The efficiency of the firm are assessed in relation to the external complexities faces by an individual.

Asset turnover-

This ratio is used to evaluate the assets held by an entity in achieving higher amount of sales and the revenue. British airways can enhance their current level of sales by using their aircraft in transporting passengers. The ratio has increases that shows that an enterprise has applied efforts in promoting their airline services by marketing their services.

Fixed asset turnover-

The non-current asset has contributed in generation of higher amount of sales and the revenue. The fleet size held by an entity are used in producing higher sales and the brand image of this entity help in boosting the existing level of sales. The ratio is increases that shows the ability of the firm.

Inventory turnover- 

The uses of inventory frequently in generating higher level of sales and the revenue will enhance the efficiency of the inventories. The British airways is utilising their luxury and comfortness of their aircraft in getting customer satisfaction.


Highly efficient assets in form of aircraft

Financial support of government

Financial issues

Lack of marketing services in attracting customers

Traditional aircraft practices

Royalty given to the government


Less competitive spirit as expenses borne by government


Higher support of customers









Total assets





EBIT/Total assets



This ratio analyses the returns generated by an individual by utilising all their assets over a particular year. This ratio is increasing which shows that an entity has produces higher returns by using accurately all their assets.

Compound growth

CAGR of the British airways is around 3.7% which is compounded on various factors such as revenue and the employee factor. This is a collaborative rate which considers all the rates of the multiple periods. This rate is forecasting rate which helps in analyzing the existing fields of business operations.


It can be concluded from the above project that the current financial performance of British airlines is strong enough but still require further improvement. The weaknesses in form of financial issues will help an organization to curtail negative aspects by using positive things.


  • Dobrzykowski, D. D., McFadden, K. L. and Vonderembse, M. A., 2016. Examining pathways to safety and financial performance in hospitals: A study of lean in professional service operations. Journal of Operations Management. 42. pp.39-51.
  • Kim, K. Y., Atwater, L., Patel, P. C. and Smither, J. W., 2016. Multisource feedback, human capital, and the financial performance of organizations.Journal of Applied Psychology. 101(11). p.1569.
  • Dženopoljac, V., Janoševic, S. and Bontis, N., 2016. Intellectual capital and financial performance in the Serbian ICT industry. Journal of Intellectual Capital. 17(2). pp.373-396.
  • Isaksson, L. E. and Woodside, A. G., 2016. Modeling firm heterogeneity in corporate social performance and financial performance. Journal of Business Research. 69(9). pp.3285-3314.
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