BUSINESS – COMPARATIVE ANALYSIS OF THE PROFITABILITY OF ETIHAD AIRWAYS IN 2013 AND 2014
Introduction
This proposal will discuss the research topic, questions, and objectives. It will also include the methodology of the research, and the work plan which is designed to guide and track the organization of the research.
Research Question and Objectives
Comparative analysis of the profitability of Etihad Airways in 2013 and 2014 using profit margin ratio and working capital ratio;
Purpose and Significance
Etihad Airways is considered to be the fastest growing carrier in the history of commercial aviation . From that, we were motivated to prepare a comparative analysis of the profitability of Etihad Airways between 2013 and 2014. The research is expected to add value to the audience. The projected audience is the company management who aim to improve the profitability and the efficiency of the company, as the research is expected to give a recommendation to enhance the financial performance. Etihad Airways is owned by the Abu Dhabi Government hence, the government might be interested in exploring a tailored and readymade comparative analysis of profitability. Moreover, most successful companies study other companies’ financial statements and ratios before signing any contract with them to evaluate the company’s performance and profitability. Therefore, the research paper might be a valuable source of information for other airlines, especially those interested in signing a partnership deal with Etihad in the future.
Industry
The aviation sector was chosen for this research because it is a large component of the economy of the United Arab Emirates. The aviation sector is growing rapidly in the UAE and it contributes 15% to the Gross Domestic Product of the UAE. The aviation sector is expected to grow even higher by 2020 contributing $53 billion to the health of the UAE economy. As a result, about 750,000 million jobs will be vacant to job seekers. The strengths of the aviation sector are empowered by the national carriers of the UAE. The UAE has five carriers - Air Arabia, FlyDubai, Routine Jet, Emiratis airline, and Etihad Airways. In 2016 Emirates and Etihad were ranked amongst the top ten carries around the world. Another main contributor to the growth of the aviation sector is the strategic geographic location of the UAE which makes it an interesting hub for travellers and carriers. In 2017, Abu Dhabi will open the new terminal which is expected to deal with 26 million passengers.
Organization
Etihad Airways was established in 2003 as a regional airline and it grew rapidly to become an international carrier. In 2016, Etihad ranked the second best carrier in the UAE and the third best carrier in the Middle East. It is the national airline of the UAE, owned by the Abu Dhabi government. Etihad Airways is nevertheless considered as being in the private sector.
Etihad Airways has two main functions. The first function is related to transporting passengers between countries offering them different type of packages. The second function is transporting cargo internationally. Etihad Airways launched its operations with a capital of half a billion dirham. In 2015, Etihad reached total annual revenue of $9.02 billion and net profit of $103 million. In addition, during 2015 Etihad Airways handled 17.6 million passengers
Learning Outcomes
Corporate Finance - BUS 4183
CLO 4- Recommend strategies to improve financial performance using financial analysis.
This learning outcome is relevant because it is directly connected to the research question. We need to analyze the financial performance utilizing the financial ratios. This research will include analysis of profit margin ratio and working capital ratio which serve directly the research question. The financial ratios help us compare numerical data between different years to analyze the overall performance of the company. It also enables us to recommend improvement in the weak areas and enhance the strengths to boost them even stronger. Hence, this learning outcome is extremely relevant to the research question.
IFRS-BUS 4143
CLO 1- Interpret the relevance of IFRS in the current financial reporting environment.
The accounting standards vary from country to country as countries around the world tend to use their own financial standards, which create complication for international business. For instance, the income statement figures under GAAP could be interrupted differently under Japanese standards. Therefore, IFRS was established to regulate the financial reporting standard around the world. Etihad Airways is an international company and it has a lot of branches around the world. Therefore Etihad must follow international standards in reporting their financial statement. We will calculate the ratios utilizing the financial statement produced by Etihad Airways. Therefore, it was important to interpret the relevance of IFRS to the financial reporting environment on Etihad.
CLO 4- Recommend managerial decisions using differential analysis.
Differential analyses guide the managers to make decisions related to the cost effectiveness and revenue. The differential analysis is a tool, which helps the manager avoid any decision that might jeopardize the business profitability. The research will include a comparative analysis of profitability; therefore it was necessary to add this learning outcome to the research. For instance, one of the research objectives is to give recommendation and by using differential analysis, we will be able to recommend managerial decisions.
Methodology
The research will include some qualitative and quantitative data. The quantitative data will enable me to explore opinions and thoughts in details. It will also give a deep understanding to analyze the problem more effectively. The interviews will provide me with qualitative data, which will enhance my research positively. Therefore, we will be interviewing about the work of four managers at Etihad Airways. The research will include some secondary data too. The secondary data will play a significant role in this research. The focus will be on the financial statements that were published online through the annual report of Etihad Airways.
This report will also enrich the research with some numerical data and facts. Other secondary data will be collected from trusted sources such as books, government websites and official journals. Those sources will present a good background about the topics and will help me in writing a useful research with valuable information.
Time Scale
Limitations
Some managers might not wish to disclose information because of confidentiality and the nature of information.
Conclusions
Etihad Airways is one of the fastest growing carriers in the history of commercial aviation. The performance of Etihad Airways is contributing to the UAE Economy. Therefore, this research paper will be conducted through analysis of the profitability of Etihad Airways in 2013 and 2014 using profit margin ratio and working capital ratio. This research will enable me to gain better understanding of the Etihad Airways performance by analyzing their financial ratios.
References
Corporate profile. (2017). Retrieved Jan 15, 2017, from etihad: http://www.etihad.com/en-us/about-us/corporate-profile/
Berman, C. (n.d). Retrieved Jan 21, 2017, from smallbusiness.chron: http://smallbusiness.chron.com/examples-differential-analysis-accounting-81985.html
Dumont, C. (n.d). International Financial Reporting Standards. Retrieved Jan 20, 2017, from investopedia: http://www.investopedia.com/articles/fundamental-analysis/12/international-financial-reporting-standards.asp
Fares, S. (2016, Oct 01). Best aircraft carrier in the world 2016. Retrieved Jan 20, 2017, from shammil: http://sh3.me/VE4
Flight International. (2003, Dec 02). Dubai 2003 - Filling the gulf. Retrieved Jan 18, 2017, from flightglobal: https://www.flightglobal.com/news/articles/dubai-2003-filling-the-gulf-174515/
N.G. (2015, Sept 27). Aviation industry contributes 15 per cent to UAE’s GDP. Retrieved Jan 19, 2017, from AMEinfo: http://ameinfo.com/transportation/aviation-industry-contributes-15-per-cent-to-uaes-gdp/
N.G. (2016, April 27). Net profit of US$ 103 million for 2015. Retrieved Jan 21, 2017, from etihad: http://www.etihad.com/en-us/about-us/etihad-news/archive/2016/usd-103-million-net-profit-for-2015/
Rahman, F. (2016, March 08). Abu Dhabi’s Midfield Terminal will meet new deadline. Retrieved Jan 21, 2017, from gulfnew: http://gulfnews.com/business/aviation/abu-dhabi-s-midfield-terminal-will-meet-new-deadline-1.1686584
WAM. (2014, May 08). Aviation sector is a strategic pillar for the UAE economy: Mohammed bin Rashid. Retrieved Jan 22, 2017, from WAM: http://www.wam.ae/en/news/economics/1395242992233.html
