FINANCIAL ANALYSIS FOR MANAGERS Harvard Case Solution & Analysis


Terms of Reference

Subject of Study

The scope of the study is to analyze the financial performance of airline companies. The airline companies have extracted several benefits as well as sustained certain adverse effects, being in the Euro zone with high competition and tough economic conditions. The analysis has been made for two companies, Air Berlin Plc. and Iberia Plc. The report will analyze the companies using the ratio analysis in both time series and cross-sectional (Industry) analysis model. Moreover, both the companies will be compared based on their performance. The analysis will specifically be made on financial performances over the years 2012, 2013, and 2014.

Names of Organizations

  • Air Berlin is an airline company headquartered in Berlin, Germany. Based on passenger traffic, it is the second largest airline in the country and the ninth largest in Europe. Air Berlin is a budget carrier.
  • Iberia is also an international airline company, founded on June 28, 1927 in Madrid, Spain. Iberia is a subsidiary company of International airlines group AIG. Iberia is a traditional national carrier.

Iberia (Intl Cons Airlines Group) Company Profile

The company has market capitalization of EUR 12.2 billion. The share price is EUR 5.75, while EPS and Div. Yield ratio are 0.82 and 0.23 respectively. Luis Gallego is the CEO of the company. The company had revenues of EUR 20170 million as of year 2014.

 Air Berlin Company Profile

The company has market capitalization of EUR 83.98 million. It has low market cap than the competitor company discussed above. Its shares have been trading at a price of EUR 0.72. Stefan Pichler is the CEO of the company. The EPS is -3.81 for the company. The company had revenues of EUR 4160 million in the year 2014.

Cross sectional analysis

The cross-sectional ratio analysis is being completed, based on limited data. Due to the limitation of data available, the analysis is made using the limited information provided through the yahoo finance site (Major Airlines, n.d).

Thus as per the analysis of the available information, it is an industry trend to have higher debt in the capital structure. The industry average is 174.52, while Iberia has the debt to equity ratio of 155.95, which is slightly better than industry average. Air Berlin has a negative debt to equity ratio due to the fact that its stockholder’s equity is in negative, since retained earnings is negative....................

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