Financial Planning Analysis of Vietnam Airlines

Raisul Islam (Rsm)Lecturer, School of Business

Dibyajyoti Sarker071 368 030

Khondker Faheem Kamal101 0205 530

Ashraful Adib102 0090 530

2012

North South UniversityBachelor of Business Administration

LETTER OF TRANSMITTAL

Date: 2.1.2013

Mr. Raisul IslamCourse Instructor, FIN340.3

North South University

Subject: Submission of the Term Paper.

Dear Sir,

Enclosed is a copy of the term paper submitted as part of the requirements for the FIN340 course in the semester of Fall 2012. We had incorporated most of the strategies that we learnt in class for financial planning analysis and have prepared this report accordingly, which offers succinct explanations of the entire process that we had followed.

The data used in this report are taken from Biman Airlines archive and its website. It was indeed an enlightening experience for us in preparing this report from scratch, which gave us an essence of financial planning analysis. It also enabled us to learn to work as a team, and to become a team player.

If you have any questions and/or comments regarding our work, please contact us any time. Thank you for giving us this course work which made the entire course very creative and enjoyable.

Yours Sincerely,

Dibyajyoti Sarker - 071 368 030

Khondker Faheem Kamal - 101 0205 530

Ashraful Adib - 102 0090 530

TITLE

JUROR

PRESENTERS

VENUE

ACKNOWLEDGEMENT

We are grateful to our course instructor Mr. Raisul Islam who has taught us with great erudition from the very beginning of the semester and has acted as a compass, guiding us all through the way. His passion has effectively kindled an active interest in our minds toward finance.

Executive Summary

Vietnam Airlines is a new consumer airline in its formative stages. The management of Vietnam

is experienced in airline start-ups. Although initially Vietnam airlines made a loss but in the year

four it has a decent profit of around TK 194 crores.

Our research and projections indicate that air travel to and from Dhaka is sufficient to provide a

new carrier with excellent revenues in its first full year of operations, utilizing four aircraft and

selected short-haul routes. The Vietnam plan has the potential for a more rapid ramp-up than

was other airlines due to the nature of the routes and the demand for travel currently in the

targeted markets served.

The first year of formative operations will burn cash until revenue can commence. This is due to

the organizational and regulatory obligations of a new air carrier. Investment activity is needed

to handle the expenses of this phase of the business.

Table of Contents1.1 Objectives………………………………………………………………………………………………………………… 011.2 Mission……………………………………………………………………………………………………………………. 011.3 Key to success…………………………………………………………………………………………………………. 01

2.1 Company Ownership………………………………………………………………………………………………… 02

3.1 Service Description…………………………………………………………………………………………………… 02

3.2 Competitive Comparison………………………………………………………………………………………….. 03

3.3 Technology……………………………………………………………………………………………………………….. 04

3.4 Future Services…………………………………………………………………………………………………………. 05

4.1 Market Segmentation……………………………………………………………………………………… 06

4.2 Service Business Analysis…………………………………………………………………………………. 07

4.2.1 Distributing a Service…………………………………………………………………………..08

4.2.2 Competition and Buying Patterns…………………………………………………………. 09

4.2.3 Business Participants………………………………………………………………………….. 10

5.1 Marketing Strategy…………………………………………………………………………………………. 11

5.1.1 Distribution Strategy………………………………………………………………………….. 11

5.1.2 Promotion Strategy……………………………………………………………………………. 11

5.1.3 Sales Strategy……………………………………………………………………………………. 12

5.1.4 Sales Forecast…………………………………………………………………………………….12

6.1 Important Assumptions…………………………………………………………………………………… 13

Financial Statements of Vietnam Airlines………………………………………………………………………… 15

Ratios…………………………………………………………………………………………………………………………….. 19

Appendix………………………………………………………………………………………………………………………… 23

1.1 Objectives

The Company has the following objectives:.

To initiate revenue service on or before the end of year one.

To achieve net operating profits within the four years of flight operations,

1.2 Mission

Vietnam Airlines has a mission to provide safe, efficient, low-cost consumer air travel service.

Our service will emphasize safety as its highest priority. We will operate the newest and best

maintained aircraft available. We will never skimp on maintenance in any fashion whatsoever.

We will strive to operate our flights on time. We will provide friendly and courteous "no frill"

service.

1.3 Keys to Success

The keys to success are:

Obtaining the required governmental approvals.

Securing financing.

Experienced management.

Marketing; either dealing with channel problems and barriers to entry; or solving problems

with major advertising and promotion budgets.

Product quality. Always with safety foremost.

Services delivered on time, costs controlled, marketing budgets managed. There is a

temptation to fix on growth at the expense of profits. Also, rapid growth will be curtailed in

order to keep maintenance standards both strict and measurable.

Cost control.

Company Summary

Vietnam Airlines is wholly owned subsidiary of the parent company and is formed

in the year 2012.it will be situated in the capital, Dhaka, Bangladesh. The chairman of

Vietnam is. Mr. Gaziul Haque. Mr. Haque has extensive experience in consumer

aviation. His bio as well as the backgrounds of all the members of Vietnam’s

management team is enclosed herein.

2.1 Company Ownership

Vietnam Airlines will issue 201,700,000 shares of common stock. The stock price for each share

is TK 100.The rest is money is raised by taking bank loan.

Services

The following sections describe the description of service, competitive comparison, technology,

fulfillment, and future services.

3.1 Service Description

Vietnam is in the business of providing low-cost, "discount" air travel to selected destinations

from the Bangladesh. The service approach is "no frills" with emphasis on safe, courteous

handling of domestic regional passenger travel.

All consumer surveys still indicate that the air travel customer's preference is for "low fares."

However, he or she is not willing to compromise on issues of safety or on-time performance.

Customers will however, settle for lower levels of in-flight service in order to reduce the cost of

travel.

Vietnam provides precisely the level of service today's air travel passenger demands.

3.2 Competitive Comparison

The primary competition in the Bangladesh market is Biman Airlines. Biman Airlines accounts

for 83% of the air travel volume in this market. This is as high a single market dominance that

exists in any Bangladesh market..

Vietnam feels that we can obtain a significant portion of this business. Our costs will be lower

than Biman Airlines. Biman Airlines is already in financial difficulty and having a net loss.

Operation of a single type of aircraft will have significant cost, maintenance, and training

expense reduction. Other airlines must maintain "system-wide" load factors and utilization,

while Vietnam will operate profitably within our "niche" market. This will serve as a barrier to

entry from other competitors once we are entrenched. It is unlikely that larger airlines will not

be able to compete with our low fares nor will they have the desire as they focus on more

profitable "long-haul" routes with larger airplanes.

Vietnam will utilize its flight crews significantly more than its competition. Flight crew utilization

will be 60% above industry average. Both pilots and flight attendants will be deployed an

average of 85 hours per month vs. an industry average of 50-60 hours.

All aircraft will be configured to a single coach seating capacity of 165 seats. This will maximize

revenue on short-haul flights. 700 series will be the only aircraft operated by the company. We

will eliminate the need to cross-train employees. We will also reduce the requirements for parts

inventories.

Our state-of-the-art reservations system will save time, allow us to employ fewer

reservationists, and save training costs for new reservation personnel. The reservations system

is discussed further in the "Technology" section of this plan.

3.3 Technology

All equipment and systems that will be utilized by Vietnam have been carefully and diligently

evaluated. Management feels that it is an advantage to be starting an airline today vs. using

many of the systems that burden even the largest domestic carriers with extra cost due to

outmoded technology. The technological advantages to management's choices are outlined

below:

Airplane advantages:

The 700 series aircraft are both newer and more reliable that the DC 10's used by Biman

Airlines, for example. Many of Biman Airlines problems have been caused by using aircraft that

often are more than 20 years old. It is the position of Vietnam management that the cheapest

"over-all" operational costs are achieved by optimized "in air time". This becomes both a

reliability and service standard for the operation of our airline. Vietnam’s air travel customers

will both feel safe flying Vietnam and will arrive at their destination on time.

Finally, management is well acquainted with all facets of operation of the 700 series from prior

experience at Private Jet. Such experience was completely satisfactory.

Reservations advantages:

The reservations system that Vietnam will use has three main advantages that all contribute to

cost savings: 1) Speed, 2) Learning Curve, and 3) Integration. Since today's PC's operate so much

faster than earlier versions Vietnam 's reservationists will be able to complete a typical

reservation procedure up to 75% faster than industry averages. Most reservations will be

completed in two minutes or less (as opposed to the frequent 8 to 10 minutes that almost

everyone has experienced from time to time). The system simply searches and retrieves data so

much faster. The result is not only higher levels of customer satisfaction but also substantial

savings in communications cost to Vietnam.

3.4 Future Services

Service will be one-class with all aircraft configured for a seating capacity of 165. Travel will be

ticketless. Reservations will be handled predominately by our own reservation system. A snack

of soft drinks and peanuts will be included in the fare structure. Seating will be open with no

reserved seats. No frequent flyer or travel incentives will be offered.

Market Analysis Summary

Vietnam’s management decision to do just that is based upon extensive research compiled

from The Department of Transportation O & D report data. This data provides a reliable source

(based upon a compilation of actual airline arrivals and departures) of origination and

destination demand by passenger, by day. The key measure of demand between any two given

points in the grid is called "PDEW." That is "passengers departed each way." The PDEW

compiles a total number of passengers on all carriers between two points, on average, each

day. This total is irrespective of final destination.

The only real threat would be another new entry. So the opportunity may best be described as

one ready and waiting for the first entrant who arrives with a well conceived plan, sufficient

industry experience, and with the required capitalization.

4.1 Market Segmentation

The airline industry is dominated by the major carriers. It is an industry characterized by

merger, acquisition, and consolidation. Like so many other industries it has quickly evolved into

an industry that has room only for major players and smaller "specialty" or "niche" participants.

There are two specialty segments that have characteristically been exploited by new entrants.

One is the "price" niche and the other is the "route" niche. One focuses on charging less, the

other on providing either the only service between two given points (the "commuter" or

"feeder" concept) or else superior or more convenient or less costly service between two

heavily traveled destinations.

In today's marketplace the "price" positioning, in and of it, is no longer a sufficient concept on

which to build an airline. Since de-regulation the flying public has been inundated with low

fares. Low fares have become an expectation, not a promise. Thus, the true market segment

opportunities today have become a COMBINATION of service mix, price, and route selection.

The more critical decision has become one of deciding on service mix and price in conjunction

with LENGTH of route. The specialty carrier is now relegated to either "short-haul" or "long-

haul" concentration. There is room for a long-haul carrier who efficiently serves limited routes

with only the equipment designed to serve those routes and, conversely, there is room for a

short-haul carrier to take advantage of similar economies available with new technology and

the proper equipment. Vietnam feels that the likelihood of competition from major carriers is

less likely in the short-haul segment.

Short-haul carriers also may operate efficiently out of a single hub. This enables consolidation

of services and economies of down-sized scale. At the same time, the revenues available from

short hauls are comparatively higher than long hauls on a per-passenger-mile basis.

Short haul revenues are simultaneously high enough to build a substantial business in the

hundred million dollar multiple ranges.

Thus Vietnam may be said to target the short-haul, single hub, discount fare market segment.

This is a new segment defined by the demands of today's traveler.

4.2 Service Business Analysis

The Federal Government de-regulated the airline industry in 1978. Prior to that time the

government virtually guaranteed the profitability of the airline industry, at the expense of the

consumer. Routes were restricted. Fares were fixed. Costs got out of control. Today some of the

major carriers still continue to operate at less than optimum efficiency. This has spawned the

success of various "discount" carriers, most notably Southwest, ValuJet, and the new U2

planned by UAL.

The low cost carriers have proven that they can operate profitably, can garner market share,

and have even spawned an increase in travel by luring those who would previously have

traveled by bus, rail, or automobile or who would not have traveled at all.

Many major airlines today are experiencing significant losses. The management of Vietnam

feels that these losses can be traced directly to the high cost of labor, operational inefficiency,

and poor management. Management further believes that the major carriers cannot profitably

compete against start-up carriers with limited and specific market focus and lower over-all cost

structures.

In retrospect, de-regulation has succeeded in providing air travelers with better service but has

not necessarily provided service at a lower price. In the recent times of financial trouble many

airlines have complained of an under supply of air travelers, when in fact there is an under

supply of affordable seats. It is Vietnam’s goal to provide these affordable seats while

maintaining a profitable airline.

4.2.1 Distributing a Service

Sales of airline tickets have historically been either direct from the airline itself or through

various travel agents. Modern computer technology and communications capability are

changing the mix dramatically. Travel agents once accounted for 80% of ticket sales. This

channel of distribution has been one of very high cost to the airlines. Travel agent commissions

at one time became the highest individual cost item to an airline. Perks and incentives

amounted to coercion and bribery. The airlines found themselves held hostage. Not until Delta

boldly announced that commissions to travel agents would be held to 10% did the situation

begin to change.

The physical cost of printing and distributing tickets is also substantial. Travel agents estimate

that it costs them an average of $30 in total cost to originate an airline ticket. Many of them

have begun to add their own service fees to the actual cost of a ticket.

Available technology has now afforded the opportunity both to sell one's own tickets and to

eliminate the physical ticket altogether. The critical element for both strategies to be successful

for an airline is simply to create the demand for travel on one's airline. If the airline makes it

desirable for the consumer to want to fly it then it is just as easy to order tickets directly from

the airline as it is from any other source. Vietnam will have fifty of its own reservations agents

available via an 800 number (the service will be 24 hours from an available pool of 90 agents in

total). In addition, we will have an Internet site where schedules are available and customers

can book their own reservations and buy tickets via credit card.

Vietnam expects to sell as much as 90% of its air travel "direct" and "ticketless." Even so, we

have budgeted 30% of sales as subject to agent's commission.

"Ticketless" travel has an additional advantage since Vietnam will not wait 30 days for

collection of clearinghouse funds from other airlines on combined-carrier tickets. Also, it is not

expected to be a competitive disadvantage for Vietnam 's passengers to connect to other

airlines. They will want to fly Vietnam to available destinations to save money even if they

need to buy a paper ticket on another airline. Vietnam flights will be listed in all available flight

information systems.

4.2.2 Competition and Buying Patterns

The most critical factor for Vietnam or any new airline to overcome is the issue of brand

awareness and name recognition. Customers prefer to fly with carriers they know and trust.

There is little doubt that Vietnam will need to spend heavily and frequently to advertise and

promote its product. The needed amounts are budgeted in this plan. The advantage is that local

media can be utilized which is more cost effective on a per-impression basis. It can also be

highly targeted. It has been proven in the past that market share can be achieved for a new

airline.

Critical in today's environment is safety. Consumers will switch for lower costs, but not at the

expense of a perception of a safety risk, or not at the expense of expected on-time

performance. Vietnam’s media executions will emphasize these two main themes.

In the Bangladesh market, Vietnam expects to appeal to a mix of business oriented travelers

and personal travelers. One issue is whether or not "frequent flier miles" are needed to

compete and sell tickets. Management feels they are not. Industries estimates show that as

many as 10% of occupied seats on domestic flights are currently "no revenue" as a result of

redemption of premiums earned. It is also very expensive for an airline to administer its

frequent flyer program. Vietnam feels that there cost advantage will outweigh the lack of

"incentive" rewards. We expect that casual and personal travelers don't fly often enough for

"points" to be significant.

At the same time Vietnam will initiate a concerted sales effort directly to all major corporations

in the Bangladesh market. We hope to have business travel mandated by these corporations on

a cost basis alone.

4.2.3 Business Participants

The major air carriers in the Bangladesh are not the focus of this plan. They are not viewed as

competition to a single hub, short-haul, low cost entrant. The following three airlines are

worthy of study. Biman Airlines, United Airways and Reagent are one to learn from and avoid

similar pitfalls.

United Airways is the model for operating a safe and successful discount carrier. Even though

United Airways has the lowest cost per ASM in the airline industry for short-haul carriers they

have never experienced a fatal crash in more than 25 years of operation.

Reagent remains the financial model for a start-up airline. The return to initial investors and

early shareholders has been outstanding. However, operations have been marginal and growth

was too fast.

Biman Airways is the model for classically mismanaged labor cost within the airline industry.

Biman Airways controls an 86% market share in Bangladesh.

Vietnam management has studied extensively the history of the above three airlines. All three

have grown to substantial revenue size amidst the major airlines. None of the three existed in

the not-too-distant past. Vietnam has taken the best parts of each growth story, heeded the

alarms and cautions, and learned from the outright mistakes. The result is the plan for Vietnam

Airlines, the airline for today's marketplace.

Strategy and Implementation Summary

Vietnam 's market presence will be achieved by relying on the strategy of identifying and

serving a specialized niche market well.

Media executions will utilize local media, which is highly targeted and cost effective on a

cost-per-impression basis.

Air operations will be centralized and cost effective.

Reservations will be centralized and cost effective.

Marketing will be media generated to the leisure market and combined media/direct sales

generated to corporate accounts.

5.1 Marketing Strategy

Marketing is targeted locally. The advantage of a local and highly identifiable market is that

media selections can be limited in scope. There is no need for a national media program to

launch Vietnam. The most effective media is expected to be outdoor billboards.

Other media will be local spot TV on highly visible programs such as local news and sports.

Newspapers and other print will not be used.

5.1.1 Distribution Strategy

In addition to other marketing programs outlined the company will also market via the World

Wide Web. We will establish our own website with reservation, purchase, and payment

capability.

5.1.2 Promotion Strategy

Promotion will be primarily outdoor advertising, radio and TV targeted.

In addition the company will employ a public relations firm for both consumer and financial

purposes.

5.1.3 Sales Strategy

In order to attract the Dhaka business traveler without the use of frequent flyer miles, the

company will make direct sales contacts with the travel departments of Dhaka based

corporations and businesses. It is expected that our cost structure will be attractive to these

businesses. We expect business travel to amount to at least 50% of our over-all revenue.

The sales personnel and salaries required to execute the direct sales strategy are included in

these projections.

5.1.4 Sales Forecast

The company is forecasting very encouraging annual sales in year one of flight operations.

The year two numbers are based upon adding more flights and more airplanes to the routes

already served. This will enable us to maximize profits within the market we have created

without incurring the additional expense of opening new markets. It also allows for more

controlled growth and eliminates the risks, early on, of the loss of control of operational

procedures that can occur either with de-centralization or growth that is too rapid.

The basis of the sales projections illustrated in the table below has been outlined in the

"Market Analysis" section of this plan.

The company has also prepared five-year projections that are based upon expanded service to

additional market areas. This five year plan is a part of our due diligence package. Direct costs

of sales are not included here but are instead reflected as a revenue discount in the projected

P&L statement. These sales costs consist of travel agent commissions, credit card discounts,

and federal excise taxes.

Financial Plan

Adequate financing is essential for a start-up airline. Our strategy remains a "seed" to "bridge"

to "IPO" progression. This has served as a successful model for airline starts in the past. Because

of the amount of capital required to start an airline management feels it is restricted to this

funding path. Once four to six airplanes are up and flying the company can continue to operate

profitably for an indefinite period of time in the event additional capital becomes unavailable

on attractive terms.

6.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the

following table. They key underlying assumptions are:

We assume a slow-growth economy, without major recession.

We assume of course that there are no unforeseen changes in technology to make

products immediately obsolete.

We assume access to equity capital and financing sufficient to maintain our financial plan

as shown in the tables.

Fixed assets Tk (in crors)

Boeing 737-300 1,100.00

Boeing 737-300 1,200.00

Boeing 737-200 1,311.00

Boeing 757 1,500.00

Total fixed asset 5,111

Depreciation (19.31%) (987)

Net fixed asset 4124

Manpower required for Vietnam Airlines Ltd -

Employee Level Permanent Contractual Casual Total

Employee Level Permanent Contractual

Casual Total

MD & CEO 0 1 0 1

Executive Director 2 2 0 4Cockpit Crew 60 20 0 80General manager & Equivalent

6 1 0 7

Manager/Asst. manager/officer &

200 25 0 225

EquivalentStaff 300 50 0 350Total 568 99 0 667

Financial Statements of Vietnam Airlines

Forecasted Profit & Loss account for Vietnam Airlines

Year 1in crores

Year 2in crores

Year 3in crores

Year 4in crores

IncomeSales Turnover 721 1130 972 0Excise Duty 0 0 0 0Net Sales 721 1130 972 0Other Income 34 39 107 1766Stock Adjustments 0 0 0 0Total Income 755 1169 1079 1766

ExpenditureRaw Materials 0 0 0 0Power & Fuel Cost 98 186 5 3Employee Cost 335 470 384 143Other Manufacturing Expenses 96 247 419 66Selling and Admin Expenses 152 294 0 0Miscellaneous Expenses 108 113 557 1100Preoperative Exp Capitalised 0 0 0 0Total Expenses 789 1310 1365 1312

Operating Profit -68 -180 -393 -1312PBDIT -34 -141 -286 454Interest 203 170 162 68PBDT -237 -311 -448 386Depreciation 268 279 287 194Other Written Off 53 46 41 0Profit Before Tax -558 -636 -776 192Extra-ordinary items -7 0 -3 0PBT (Post Extra-ord Items) -565 -636 -779 192Tax 145 -64 65 -751

Reported Net Profit -709 -574 -844 194

Forecasted Cash Flow for Vietnam AirlinesYear 1

in croresYear 2

in croresYear 3

in croresYear 4

in crores

Net Profit Before Tax -564 -636 -777 352Net Cash From Operating Activities 750 -2165 -610 182Net Cash (used in)/from Investing Activities -494 1885 652 -212Net Cash (used in)/from Financing Activities 0 0 0 0Net (decrease)/increase In Cash and Cash Equivalents 256 -280 41 -31Opening Cash & Cash Equivalents 65 321 40 81Closing Cash & Cash Equivalents 321 40 81 51

Forecasted Balance Sheet for Vietnam Airlines

Year 1in crores

Year 2in crores

Year 3in crores

Year 4in crores

Sources Of FundsTotal Share Capital 2017 2017 2017 2017Equity Share Capital 2017 2017 2017 2017Share Application Money 0 0 0 0Preference Share Capital 0 0 0 0Reserves -783 -1356 -2201 -1256Revaluation Reserves 0 0 0 0Networth 1234 661 -184 761Secured Loans 1354 1050 760 0Unsecured Loans 0 2639 3280 90Total Debt 1354 3689 4040 90

Total Liabilities2588 4350 3856 851

Application Of Funds 0 0 0 0Fixed Assets 5111 5214 5264 1258Less: Accum. Depreciation 987 1267 1554 600Net Fixed Assets 4124 3947 3710 658Capital Work in Progress 0 0 0 0Investments 2 350 0 268Inventories 78 73 75 0Sundry Debtors 715 286 345 187Cash and Bank Balance 289 28 81 51Total Current Assets 1082 387 501 238Loans and Advances 197 235 479 40Fixed Deposits 31 13 0 0Total CA, Loans & Advances 1310 635 980 278Deffered Credit 0 0 0 0

Current Liabilities 3280 968 1176 341Provisions 10 10 11 12Total CL & Provisions 3290 978 1187 353Net Current Assets -1980 -343 -207 -75Miscellaneous Expenses 442 395 354 0

2588 4349 3857 851

Total AssetsYear-1 Year-2 Year-3 Year-4 Industry Average

Liquidity Ratio:Current Ratio 0.33 0.39 0.42 0.7 1.6559Quick Ratio 0.31 0.32 0.36 0.7 1.5774Net Working Capital -2198 -586 -675 -103 126Working Capital Requirement -2497 -619 -767 -166 255

Activity Ratio:Total Asset Turnover 0.28 0.26 0.25 0 0.4401

Profitability ratio:Operating Profit Margin -0.09 -0.16 -0.4 0 0.2417Net Profit Margin -0.05 -0.12 -0.29 0 0.0046Return on Equity -0.35 -0.28 -0.42 0.1 -0.0044Return on Asset -0.27 -0.13 -0.22 0.23 -0.0074

Debt Management ratio:Debt/Equity Ratio 1.28 2.16 1.91 0.42 0.3443Times Interest Earned -0.17 -0.83 -1.77 6.68 -0.3795

Year-1 Year-2 Year-3 Year-40

0.10.20.30.40.50.60.70.8

Current Ratio

Current Ratio

in year 1 current ratio was 0.33 which increased to 0.70 times over 3 years however it is still bellow the industry average.

Year-1 Year-2 Year-3 Year-40

0.2

0.4

0.6

0.8

Quick Ratio

Quick Ratio

In year 1 company's Quick Ratio was 0.31 times which increased to 0.70 times over 3 years. However it is still bellow industry average.

Year-1

Year-2

Year-3

Year-4

-3000-2500-2000-1500-1000

-5000

Working Capital Requirement

Working Capital Requirement

From year 1 to year 4 the company had an increasing Working Capital Requirement trend but it is still bellow the industry average.

Year-1

Year-2

Year-3

Year-4

-2500-2000-1500-1000

-5000

Net Working Capital

Net Working Capi-tal

From year 1 to year 4 the company had an increasing net working capital trend. But it is still bellow the industry average.

Year-1

Year-2

Year-3

Year-4

-0.35-0.3

-0.25-0.2

-0.15-0.1

-0.050

Net Profit Margin

Net Profit Margin

From year 1 to year 4 the company had an increasing Net Profit Margin trend. However it is still bellow the industry average.

Year-1

Year-2

Year-3

Year-4

-0.5-0.4-0.3-0.2-0.1

00.10.2

Return on Equity

Return on Equity

From year 1 to year 4 the company had a decreasimg Return On Equity trend. However it is above the industry average. Because the ROE increased in year 4.

Year-1 Year-2 Year-3 Year-4

-0.3-0.2-0.1

00.10.20.3

Return on Asset

Return on Asset

From year 1 to year 4 the company had an increasing Return On Asset trend. However it is above the industry average. Because the ROA increased in year 4.

Year-1

Year-2

Year-3

Year-4

00.5

11.5

22.5

Debt/Equity Ratio

Debt/Equity Ratio

Companys Debt to Equity Ratio increased from year 1 to year 2 but decreased in year 3 which again decreased in year 4 and it is bellow the industry average.

Year-1 Year-2 Year-3 Year-4-4-202468

Times Interest Earned

Times Interest Earned

Companys Times Interest Earned decreased from year 1 to year 2 which again decreased in year 3 however it increased in year 4 and it is above the industry average.

Year-1 Year-2 Year-3 Year-40

0.050.1

0.150.2

0.250.3

Total Asset Turnover

Total Asset Turnover

From year 1 to year 4 the company had a decreasing Total Asset Turnover trend. But it is still bellow the industry average.

Year-1 Year-2 Year-3 Year-4

-0.45-0.4

-0.35-0.3

-0.25-0.2

-0.15-0.1

-0.050

Operating Profit Margin

Operating Profit Margin

From year 1 to year 4 the company had an increasing Operating Profit Margin trend. However it is still bellow the industry average.

Appendix

FormulasCurrent Ratio Current Asset

Current Liabilities

Quick Ratio Current Asset - InventoryCurrent Liabilities

Net Working Capital Current Assets - Current Liabilities

Debt Ratio total debt x 100 %total asset

Times Interest Earned EBITInterest Expense

Working Capital Requirement[Accounts Receivable + Inventory + Prepaid Expenses]

–[Accounts Payable + Accruals]

Total Asset Turnover Ratio SalesTotal Assets

Operating Profit Margin EBIT x 100%Sales

Net Profit Margin Net Profit x 100%Sales

Return on Asset Net Profit x 100%Total Assets

Return on Equity Net Profit x 100%Total Equity

Debt/Equity Total DebtTotal Equity

Balance Sheet for Biman Airlines

ASSETSNon-current assets 23,266,690,547Fixed assets less cumulative depreciation 17,212,053,288Capital work in progress 22,369,916Investment in shares 9,180,000Intangible assets 5,556,167,338Deferred expenditure 466,920,004Current assets 16,706,123,116Stores & spares 2,047,719,458Sundry debtors 2,555,573,222Advances, deposits & payments 10,338,128,756Tax deducted at source 46,772,475Accrued interest on FDR 26,905,789Cash & cash equivalent 1,691,023,417Total Assets 39,972,813,663EQUITY & LIABILITIESEquity 20,387,881,595Share capital 700Equity of govt. 20,824,095,801Retained earnings -436,214,906LIABILITIESNon-current liabilities 14,776,120,896Long-term loans 12,782,261,443Deferred loans 1,993,859,453Current liabilities & provisions 4,808,811,172Accounts payable & accruals 4,276,116,586Unearned transportation revenue 5,326,694,586Provision for taxation --- Total Liabilities 19,584,932,068Total Equity & Liabilities 39,972,813,663

Profit & Loss account for Biman Airlines

IncomeOperating revenue 29136061492Non-operating revenue 300179418Total income 29436240910ExpensesOperating expenses 30047588921Interest expense 145050000Non-operating expenses 44964903Total expenses 30237603824Net profit/loss before tax -801362914Income tax 0Net profit/loss after tax -801362914Accumulated profit/loss brought forwarded 214889803Prior year adjustments 150258205Accumulated profit/loss transferred to balance sheet -436214906

Profit & Loss account for United Airlines

Sales (A) Ticket Sales Less: Travel TaxLess: Emberkation Fee 289483248Add: Cargo SalesLess: Operating Expenses: (B) 139066249Aircraft Fuel 83130374Air Craft Maintainance 9287663Air Naviagation Charge & Aeronautical Bill & others 6025445Catering Expenses 4267768Flying Allowance 2273304Aircraft Insurance 14855965Depreciation for Air Craft & Spare Parts 15472886Overflying Charge 3752844Gross Profit: C (A-B) 150416999

Less: Administrative Exp. 144082756General and Administrative Expenses 129476020Selling Expenses 10096566Financial Expenses 4510170Add. Other Income 10649490Net Profit before Tax 16983733Provision for Tax @ 37.5% 6368900Net Profit After Tax 10614833

Balance Sheet for United Airlines

FIXED ASSETS 1580123467Fixed Deposit 100,000,000

CURRENT ASSETS (A) 436,738,044Advance and Deposits 27,378,881Accruad Interest 15,211,707Stores and Spares 3,025,245Accounts Receivable (Travel Agents) 63,545,903Cash and Bank Balances 327,576,308

CURRENT LIABILITIES (B) 202,889,454Accounts Payable 75,057,286Unearned Revenue 36,937,938Provision for Tax 9,468,479Short Term Loan 81,425,751

NET CURRENT ASSETS (A-B) 233,848,590TOTAL NET ASSETS: 1,913,972,057

FINANCED BY SHARE HOLDERS EQUITY: 1,015,780,799Share Capital 1000000000Retained Earnings 15,780,799

Term Loan (Secured) 104,264,015Share Holders Loan Account 225,838,500Phoenix Air Craft Leasing Pte Ltd. 568,088,743TOTAL EQUITY & LIABILITIES : 1,913,972,057

Biman UnitedIndustry Average

Liquidity Ratio:

Current Ratio 1.159211832.15259115

4 1.6559015Quick Ratio 1.01712377 2.13768035 1.5774021Net Working Capital 2294500772 233848590 1.264E+09Working Capital Requirement 603477355 -93727718 254874819

Activity Ratio:

Total Asset Turnover 0.728896940.15124737

4 0.4400722

Profitability ratio:

Operating Profit Margin -0.03626360.51960519

3 0.2416708

Net Profit Margin -0.02750420.03666821

2 0.004582

Return on Equity -0.01944490.01061483

3 -0.004415

Return on Asset -0.02004770.00526304

5-

0.0073923

Debt Management ratio:

Debt/Equity Ratio 0.358539470.33010251

5 0.344321

Times Interest Earned -5.52473574.76565251

4-

0.3795416