Financial Performance Evaluation And Strategic Analysis Of May Airlines

Analysis of Revenue Generated from Different Routes

Question :

What is the Managerial Accounting ?

The report mainly evaluates the financial performance of May airlines from 2015 to 2016 and depicts the significance of the overall strategy, which is been used by the company. Furthermore, the report mainly analyses the overall revenue, which is been collected from the six different routes maintained by May airlines. In addition, relative analysis on the discontinuation of the low profit generating routes if depicted in the report, which might reduce the competency level of the airlines. Relative valuation of the capital budgeting on decision-making and changes in management on accounting and ethical guidance of management are electively evaluated.  

                                              Table 1: Stating the revenue generated from routes of May Airlines

                                                                (Source: As depicted in the case study)

With the help of table 1, the overall percentage change in the revenue generated from different route could be evaluated. Moreover, the maximum deduction in revenue was mainly seen in the African division where the revenue has turned zero, while the same amount of capital is being employed. In addition, the second major decline in revenue was mainly portrayed from Home country where due to intense competition the company was able to face sever loss in revenue. Lastly, the revenue degradation was faced from the Australian and New Zealand division where the revenue from operations declined from the competition portrayed from low fair airbus.  Barrett (2016) mentioned airlines companies with the help of low carrier planes are able to improve their competitiveness and generate higher revenue from same operations. In addition, Cheong, Kim and Kim (2013) stated that decline in overall oil prices have mainly supported the overall income generation capacity as decline from $107 to $45 mainly reduced its overall expenditure.

The overall decline in the overall revenue generation capability of May Airlines from the revenue losing routes affected its profit yielding capacity. In addition, the decline in revenue mainly stated that more expenses are being conducted, while the demand for the services is not adequate to generate required cash.

                                                   Figure 1: Stating the change in revenue from 2012 to 2016

                                                                  (Source: as depicted in the case study)

Figure 1, mainly states the decline in revenue, which was attained by the company from its operations. In addition, in 2014 relative decline in revenue of 18.1% could be seen, which is due to high-end expenses incurred by the company to maintain its operations.  Furthermore, from 2015 to 2016 the overall decline in net profit of 7.7% was identified, which mainly states the declining revenue from the three revenue-losing routes. The revenue in 2016 mainly increased to 15,121,204 from 13,756,411 in 2015, while its overall expenses also increased. However, the revenue loosing routes increase the revenue might have help the company attain profitability in operations and get positive revenue in 2016.

Currently, the overall availability then passenger’s seats improved from 51,223,973 to 59,931,781, which mainly state the increased implementation of capital deployed by the company. This increment in the overall capital deployments is not supported with the overall revenue generating routes and hampering profitability of the company. The increment in passenger services mainly increased the expenditure of the company in 2016, while the reduction in revenue from routes declined the overall profitability and hampered capital reserve of the company. Dhingra and Sampson (2016) mentioned that non-maintenance of expenses mainly reduce the capability of the company to increase profits and declining its dividend payout. On the other hand, Grant (2016) argued that without the use of adequate strategies companies are not able to reduce their expenses and improve their net profit margin.

Decline in Overall Revenue Generation Capability

The strategic decision of discontinuing the revenue losing routes is a drastic move as it might hamper the company’s competitiveness level. The reduction in market share could be seen if the company moves forward with the decision of discontinuation. Mainly the operations in Africa, home country and Australian division of the company has declined due to the increasing competition from other companies. This increased competition could be curbed from adequate strategies, while discontinuation might hamper its market share. Grint (2016) mentioned that airline companies might use effective strategies like low deployment of capital and airbus carriers, which might help in reducing expenses and increase its profitability.

Moreover, relative strategies could be adopted by the management of May Airlines and discard the opinion of discontinuation of operations. This decision might hamper the growth as from the evaluation revue streams from  Home and Australian division has declined of mere 5 and 2 percent, which could be improved if adequate strategies are implemented, while decline in African decision could be improved by utilising relevant cost reducing strategies. Kapturski (2016) stated that due to the declining fuel costs airline companies are able to provide competitive pricing on their tickets, which in turn hep in improving their market share. Relative strategies could be used by the management of May Airlines for continuing their operations in revenue losing routes.

Critically analysing the decision of management:

Relative decisions regarding the discontinuation of Home and Australian division might mainly reduce the revenue by 1906.7 and 1514.3. This reduction in revenue might also decrease the overall expenses of the company, which is additional benefit. However, the discontinuation of the operations might mainly hamper the overall revenues and reduce market share of the company. Notomista et al. (2016) argued that discontinuation is only conducted when there is no alternative presented to the company. However, O’Connell (2016) mentioned that adoption of strategies and implementing relevant experiments allows companies to identify method, which could be used in reducing its expenses. The discontinuation might only hamper operations of the company and reduce its revenue generation capacity.

Utilising low cost carriers for reducing expenses:

The management could consider using low cost carriers in their revenue losing routes, as it might help in decreasing the overall expenses incurred by the company to maintain the level of operations. Furthermore, this strategic move might need capital investment, which could be directed from revenue gaining routes. The implementation of low cost carriers might mainly help the company in reducing the expenses and improving the overall profits. In addition, the low cost carrier could enable May Airlines for increasing their competiveness in the market, as its competitors are using the same strategic move. Vasigh, Fleming and Humphreys (2014) cited that low pricing strategy could be utilised by the company to maintain high level of competiveness in the market and improve its overall net profit margin. On the other hand, Zeren and Ozkol (2016) argued that asset accumulation mainly require high-end investment, which might increase its debt and insolvency chances.

Increase in Availability of Passenger Seats

Discontinuation of single operations:

The May Airline could effectively discontinue the operations in African division, as the company is not making any kind of revenue from its operations. In addition, the discontinuation might mainly help in reducing the overall expenses, which could be redirected to other operations. In addition, during 2016 May Airlines has realised zero revenue from the African division, which mainly states nullified demand of company’s services in the regions. Thus, implementation of low cost carrier strategy could not help May Airlines in improving demand of their services in the African division. Zhao, Shang and Li (2012) stated that without continuous financial evaluation companies are not able to detect viability of different operations. Nevertheless, Dafir and Gajjala (2016) argued that companies for improving their overall market reach and share mainly conduct the decline in overall selling price.

Utilising plan:

The overall valuation of the effective utilising plans might mainly help the May Airlines to improve their overall profitability by improving their operational capability. In addition, the utilisation of low aircraft carriers and discontinuation of African decision might mainly help the company in improving its overall profitability. Moreover, the discontinuation of African division might mainly help in reducing the expenses and improve the overall condition of May Airlines. In addition, the augmentation of low aircraft services might help the company in  reducing its overall expenses in the revenue losing routes and generate high revenue. Moreover, after the successful implementation of the strategy in revenue losing routes, the company might implement it in revenue generating routes, which might increase its net profit margin. Vasigh, Fleming and Humphreys (2014) stated that utilising cost control measures mainly help airline companies to improve their overall profitability, which in turn help in improving their retimed income and cash reserves.  

The allocation of the financial ratios should be done for solving of various issues existing in the airlines, which it is presently facing. The process of earning high profit directly related to create value for the shareholders of the company and by offering them high returns. It has to be also observed that the increment in revenue of the company is only possible when the financial resources are made to full use in the Airlines. Hence, the Airlines Company should look forward in terms of attaining the maximum amount of profits possible. Hence, this is possible only when May Airlines decides to adapt to appropriate strategies for the company and avoids allocation of the available funds in the unnecessary overheads. The airlines company can look forward to allocate the necessary resources in the areas where it can attract increased number of passengers and thereby increase the profitability of the company. Therefore, May Airlines should make sure that it should not allocate excess financial resources in regions where the company is attracting less number of passengers (Cooper 2016).

Moreover, May Airlines needs to focus on areas where it will be able to generate more amounts of profits and in creating appropriate amount of the shareholders. The company should be involved in investing in acquiring of those passengers and be able to increase the sustainability in airline routes, which have been observed to experience losses. In addition to this the various types of loss making routes May Airlines has been seen in New Zealand, South America and Australia. The airlines should be able to attain the required efficiency in the mentioned routes (Grint 2016).

Discontinuation of Revenue Losing Routes

Once a project has been allocated the management team should begin with the process of capital budgeting and take up the decisions which are mainly related to reject or accept the project.  There have been several types of the factors observed which are directly related to influence the capital budgeting decision, some of them have been mentioned below as follows:

The aforementioned decisions can thus affect the several types of the decision which e directly related to take the important decision regarding the application of the capital techniques. In addition to this, the airline company can look forward to make increments in revenue and thereby reducing the cost of the company (Gunawardena et al. 2015).

Some of the factors affecting the decisions related to capital budgeting techniques are:

Market risk

The market risk takes into consideration the risk of the project which is observe to arise due to various types of the factors related to the macroeconomic issues such as rate of interest and inflation. It has been also observed that the market risk is also observed when the economy of the company is running weak.

Hence, it needs to be considered that a poor economy can be able to influence the demand of the project in terms of the application to the various types of different types of the steps, which can substantially affect the return result of the losses and the demand of product. It has to be also observed that Banks may become resistant while lending to other company, which is facing downturn. This directly results in increase in the cost of capital for the company, which has been assigned for the project. The inflation related to the economy is also seen to be affecting the real return. Therefore, the aforementioned factors are thus seen to increase the market risk of the project and intern affect the return of the project (Kaplan and Anderson 2013).

The tax exposure of the company: This is related to the payment of the debt, which is usually exempted from the purview of taxation. In case the rate of taxation is observed to be high and company is already in debts for financing of the project this will be adjusted while the payment of the income tax (Suki 2014).

Financial flexibility: This is evident when the company faces problem while raising of the capital. The company has maintained sufficient amount of cash flow hence the issue related to raisin of capital should not exist. In case of becoming debt ridden, then at the time of crisis it won’t be able to raise the required capital (Lee, Seo and Sharma 2013).

Working Capital: May Airlines should be able to understand the different types of viewpoints, which needed for assignment of the additional working capital. The consideration of the working capital is deemed from the alternative budget, which may be planned from the budget.

In addition to  this the company may look forward to finance the asset in two ways, the first is observed in terms of assignment of the budget in generation of a high revenue and in providing a high level of the assistance related to the service level given to the passengers of the Airline. The aspect is related to procuring long-term debts from the lenders which can enhance the claims of the creditors (Lu et al. 2012).

Critically Analyzing the Decision of Management

The decision taken by the management of the company related to credit of the various types of the decision related to external lenders has been done for reducing the credit acquired from them. The company should look forward to decrease the borrowing from the external lenders:

Some of the strategies are shown below as follows:

Increasing the sales and the profits: The Airline Company should focus on strategy to increase the profit margins for the company, this will help the company to pay its debts in the future (Torenbeek 2013)

Debt Restructuring: This approach will be able to increase the cash along with disposable income. Suppliers needs to be broaden terms which will facilitate in obtaining huge profit during bill payments and decrease the monthly payments of the company. In addition to this in case of high interest rate at the time of taking loan, restructuring may result in reduction of interest cost (Bazargan, M., 2016).

Budgeted Cash flow: The considerations made in this will be able to signify that the company will be able to recognise the investment projects, which should be taken into account. This analysis will affect decision of fixed investment. This will also state that adjustment in time is necessary for certain important expenditure (Wu 2016).

Encouraging employees to decrease excess overhead: The employees need to understand the problem, which they are facing at present and they themselves need to forward for help. In addition to this, the company should strive for better work force planning. The employees in the other hand should look forward to reduce the amount of the cost, which are spent for the different type of the overhead of the company (Belobaba, Odoni and Barnhart 2015).  

The managing director of the company needs to be aware of the various types of the budgetary attributes, which needs to be coordinating among the Group. This will result in new CEO to develop the fundamental skills in the area of financial management. It is also expected that the other business concerns can be asked for help in troubled situations. The Business Owners concerned are responsible for constantly evaluating the performance of May Airlines after making an analysis with the given historical details. On the other hand the company is also dependent on the industry competitors for successful alignment of attributes of business (Singh and Sushil 2013).

The tool discussed in this assignment is ratio analysis. The rationale behind considering this tool is for making the financial analysis, which is to be made for financial analysis in Brexit in UK. This plan will help in making a positive improvements based on the profitability, liquidity and the solvency related issues related to financial structuring of the organization. Moreover, it was constantly considered understanding the comparison with the help of ratios from one financial period to another in case of Brexit Decisions in UK. It primarily takes into consideration the conduction of comparative analysis in case of Brexit decisions based on the financial statement for a specified tenure and the changes allowed in the activities of the project. Moreover, it was constantly regarded that the considerations need to made for understanding of the ratio comparison from one financial period to another in case of Brexit. This is sole reason for taking into consideration of the various type accounting decision which are to be considered for accounting management. It has to be be thus observed this will be able to reveal the consideration of the different type of accounting tools which are reports for the future analysis. On the other hand, the adjustment as per the balance sheet and income statement will be helped by calculating the ratios. This will also include the non-recurring items and making adjustment in the stock in appropriate way (Cui et al. 2016).

Utilizing Low Cost Carriers for Reducing Expenses

Financial planning is seen to help in making strategic and planning of the financial resource identification. It obtains and develops the required amount of resources for attainment of the goals required to operate in proper course of business. In addition to this the financial planning obtained from the maintenance of the realistic budget assist Brexit decisions in UK. On the other hand the MD of the company is responsible for conducting appropriate planning of the given products and services in the future financial years (Yu 2012).

It has been also observed that the cash Flow Operations manages with major aspects of the financial data. In the given case, the main purpose is reliant on ensuring the availability of adequate cash for payment of bills. Hence, the business concerns should manage the budget for spending and earning for a certain time. Therefore it is the responsibility of the managers to consider the different aspects related to the plan initiation and sales projection (Psomas, Pantouvakis and Kafetzopoulos 2013).

This brings into account the various aspects required for bringing a change related to the ethical issues for developing the case of making activities related to Brexit decision-making. Due to this, the voters are able to vote favouring Brexit exit from European Union (EU). In other words the involvement of British and the European leaders are seen to be negotiating terms with Britain departure.  This shows that the British exit has laid a significant amount of impact on the British Economy in immigration policies. This will take into consideration the time aspect in revealing of the consequences related to the changes for future analysis purpose. Hence, the vote for the exit of Britain for leaving EU was due to the non legally bended theoretical aspects for alignment of the operational activities in an appropriate manner (Malina et al. 2012).

The changes related to the management accounting has been able to disclose the treaty on the EU in terms of the establishment of the various type the different types of the procedures which is required in case of withdrawing of the fees in the European Union, agreeing with the member state. Hence it was observed that the British signals for exit in representation of formal notifications in an effective way (Kaake et al. 2013).

The considerations of the member countries is concerned is related to the meet up of the summit in the scheduled time. In other terms the members present in the British officials are triggering the European Union Membership, these observations show Britain for making the negotiations in accessing the European conglomerates in the countries. In the year 2014, the company is observed to face serious growth pressure for the gaining of the populist right and for the purpose of British European Union Membership immigration policies. On teh other hand it has been also observed that, it has helped in mollifying the British European Union for the own party in the rising from the UK Independence, in case of holding the referendum during the time. This has revealed that the making the necessary changes in the Brexit modifications in the UK for the countries such as Wales, Northern Ireland and England. This is considered as the largest of the trading partners for the assignment of the necessary activities based in UK during recession (Ramasamy et al. 2013).

            In the given case, the uncertainty has been observed from alignment of the future relation of Britain with the EU.  Hence, it has been also observed that there is a high volatility in terms of the market conditions for the given consequences for a specified time. The prospects of Britain can further reveal the negotiation and the considerations in favour of EU. This has significantly assisted in terms of discouraging attributes for countries from exiting the EU (Brueckner, Lee, and Singer 2014).

In given case shows the serious concerns for the issues considering business based in United Kingdom. It is oserved as the reson for the production which is based   UK to be taken into safety standards. In other terms, the exit of UK considers as a selling in the European markets after application of small tariff rate, which is set for the safety standards. Hence, it needs to be considered the factors lending to the controversial achievements for European Union for viewing it as a free revolution movement for the countries based in (Europe Morrell 2013). 

Conclusion

The assignment is mainly related to the evaluation of the current financial position of May Airlines by the analysis of the routes. In addition to this revenue due to the loss in the routes such as in, the home country in Australian and Africa is important in understanding of the negative implications on the capital expenditure. The various type of the critical evaluation stated by the management of May airlines has effectively taken the decision based in form of different types of the other evaluations. Moreover, May Airline can take the decision to discontinue with the African division and look forward to adopt the budget based activity in other routes. It has been further observed that increasing revenue has been the main aim of the management, which can be achieved by the use of the low cost carrier planes in Home Division and Australia of May Airlines. The intention of the management has been seen in terms of taking the adequate decisions to make the necessary decisions. The involvement of the operations team has been able to make the considerable amount of the improvements, which is needed for the May Airlines to increase the market share and exposure, which may be used to strengthen the financial stability.

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