Qantas Airways Ltd: A case study for Financial Statement Analysis Peter Wells* and Anna Wright. 12 February 2004
Not to be used or cited without the permission of the authors *
Corresponding author: School of Accounting, University of Technology, Sydney, Broadway NSW 2007 Australia Tel: 61-2-9514 5295 Fax: 61-2-9514 5515 Email:
[email protected]
Abstract The objective of this paper is to present a case study that may be used as an integrative element in both undergraduate and postgraduate financial statement analysis courses. Qantas is the largest operator within Australian air transport industry, and given the changes within the industry over the past decade has been the subject of high levels of both media and regulatory scrutiny. Accordingly, the operations of the firm, together with strategies adopted to develop and maintain competitive advantage and enhance profitability are well documented and/or readily observable. The case includes consideration of the development of the air transport industry in Australia, with special emphasis given to the position of Qantas within the industry process. Importantly, this identifies the historical origins of many features of Qantas operations that are relevant to the determination of current and future firm performance. This forms the introduction to the core components of the analysis, being industry and strategy analysis, accounting analysis, financial analysis, forecasting and valuation.
Keywords:
Financial Statement Analysis
JEL Classification:
1.
Introduction
The paper presents a case study that may be used as an integrative element in both undergraduate and postgraduate financial statement analysis courses. It leads students progressively through a detailed evaluation of Qantas Airways Ltd (Qantas), and should be used in conjunction with an appropriate text to provide the relevant theoretical framework. The selection of Qantas as the focus for the case study was dictated by the profile of the company and the relative transparency of its strategies and operations. Qantas is the largest operator within Australian air transport industry1, and given the changes and events occurring within the industry over the past decade has been the subject of high levels of both media and regulatory scrutiny. It offers a relatively generic product (i.e., passenger air transportation) and operates in domestic markets where it is dominant and international markets that are more competitive. Within each of these markets the strategies adopted to develop and maintain competitive advantage, and enhance profitability, are readily observable. In combination this suggests a relatively high level of student awareness of Qantas activities in Australia. The outline of the case is as follows. Section 2 provides a brief consideration of the development of the air transport industry in Australia, with special emphasis given to the role of Qantas in this process. Importantly, this identifies the historical origins of many features of Qantas operations that are relevant to the determination of current and future firm performance. This provides the introduction to the core components of the analysis, being industry analysis (section 3), strategy analysis (section 4), accounting analysis (section 5), financial analysis (section 6) and concludes with forecasting and valuation (section 7).
1
As at 12 February 2004, the market capitalisation of Qantas was $6,541m.
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