Professional Documents
Culture Documents
Nationality : MYANMAR
Course : MBA
Term : 2016T3-AUGUST2016-FALL-M2-IPE-MBA-MA
Status : ACTIVE
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2. Introduction
In the current globalization trend, the transportation industries had played a big role due to time
concern by human. The airline industries have the solution for fast transportation. There are
many airlines in globally providing service across the world. May airline is one of the airline that
operating as carrier in its own country and internationally. May airline is a leading organization
in transportation industry in past (10) years and facing the stiff competition and global economy
slowdown. The result lead to implement new scheme of pricing strategy and better managing
cost to maintain market share in home country, Asia & Australia and South America market from
Hong Kong and Australia LCC (Low Cost Carrier). If we are aiming to growth the market share,
we should analysis our six present routes revenue for past five year. The past five years financial
performance for May Airline as shown in below table:
Base on the data, May airline doing very well in Asia and Europe market which generated the
total revenue 4287 mil compare to 3539 mil in year 2015. That contributed about 46 % of total
revenue (9399 mil) and increased by 21 % compare to previous year. This is the good
improvement of the May airline in year 2016. But May airline is losing the revenue in Home
country and Australia market to competitors who are LCC service provider.
In the nature of airline industry, the home country routes are producing the profit for airline
usually. But May airline faced intense competition from its competitor in domestic routes during
last five years. May airline has the largest domestic network which covered urban and rural
routes within home country. It should take this point to advantage and make an aggressive
pricing strategy to gain back the market share in future.
Australia & New Zealand routes are producing the loss in revenue by 0.2 % compare to years
2015. It mainly affected by LCC service provider from Australia & Hong Kong for medium haul
For long haul routes like Africa and South America market, we need to look for partnership with
local airline or other reputable airline (Emirate Airline) to gain back the market revenue and
maintain the network size since Africa has lowest grow rate in airline industry. By code sharing
practices, we can maintenance the present of our network and cut down the aircraft and operation
cost. We might able to lease our current fleet to our partner or utilize the aircraft at other new
routes like North Asia region which growing demand for strong business class.
B737-400 17
B737-800 (New Purchase) 26
B737-800 (Commercial Lease) 23
B777-200 15
B747-400 4
A330-300 (New Purchase) 14
A330-300 (Commercial Lease) 3
A380-800 6
Total 108
May Airline have a lot of medium and long haul aircraft with wide body type. May airline need
to increase the narrow body type aircraft in its fleet to accelerate the growth at short and medium
haul routes. May airline might consider eliminating the business class in home country routes
with more competitive seat fare to attract the local traveler and add in more destination to
utilization the aircraft.
May airline need to slate 3 or 4 number of A380-800 aircraft to leaser due to higher maintenance
cost and lack of demand from customer in long hauls route. From the reported data, Middle East
A. Trip Fuel,
C. Additional Fuel.
The trip fuel was calculated base on route distance and it difficult to reduce the consumption
significantly. But there is the way to improve is:
Contingency fuel consumption was around 5 % of trip fuel usage usually. It can reduce down to
3% by reducing the weight of equipment on the plane and improving on Zonal Drying system of
aircraft. According to International Aviation Transport Association (IATA)s report, we can save
up to 144 USD per year if we reduce the weight of one kg on the plane (IATA, 2004). Another
improvement on Zonal drying system can save around 29000 USD/ year/aircraft (IATA, 2004).
For home country ground handling, we need to maintain as our service and try to improve in
turnaround process, reducing in unit labour cost by better procedure or practices and try to
negotiate with other airline to use our service with reasonable price. The ground handling service
business is growing in the world and its worth over 80 USD billion per annual. If we can
negotiate with other airline to use our service, we can utilize our current manpower to do more
task with specific scope. This process will work both ways for cost cutting per units and earning
some revenue parallel. But we need to take very closely monitor the operation delay in the same
time. The operation delay might cause compensation payouts to company. The company needs to
initiate to improve better flight route plan with technology such as SkyTrack. The upgrading of
the airport equipment likes Sliding Carpet, Ramp Snake and Power Stow for baggage
loading/unloading. It can reduce down the manpower of crew member by up to 60% and better
efficiency.
For Oversea Airport ground handling, we should negotiate with individual airport authority to get
better deal without cutting service level. The outsourcing the ground handling service to airport
service provider will reduce the cost of own crew member with better pricing.
The Opportunities: Growing market demand in Asia and Middle East Market (Amadeus, 2012)
The project plan is to create new routes to North Asia region with 737-800 aircraft type with
premium economy and business class services which is growing demand in recent year. All
routes in this region are medium haul route which we can avoid the LCCs airline and make better
revenue per available seat per kilometer. The company need to analysis itself before doing some
investment in new sector.
SWOT analysis tool is the best way to know how May Airline can implement the project
successfully.
Strength: May Airline has bigger network size than competitor, experience in medium and long
haul routes with well trained crew.
Thread: Local airline Competitor, Political and new rule & regulation.
Base on SWOT analysis, May airline need to negotiate with aircraft manufacture for better
pricing or lease term to get the aircraft. Our biggest weakness is the financial investment for new
aircraft & modification work.
The state holder and creditor are always interesting about the NPV (Net Present Value) for any
investing in new project. NPV can be calculated in below formula:
NPV = Ct/(1+r)t Co
r = Discount rate
Project Implementation: May airline will allocate additional capacity generated by new 737
aircraft to expand several destinations in India and North Asia region. The new destination under
consideration is secondary cities in India and China. The north Asia region has sufficient demand
to expand the air routes according to CAPA focus report for Asia region and Chinese tourist
visiting rate increase by 35% according to Tourism Malaysia report.
Description Amount
Revenue
Economy Class (120 seats @ 247 29,640.0
USD) 0
Business Class (50 seats @ 750 37,500.0
USD) 0
23,000.0
First Class (10 seats @ 2300 USD)
0
Cargo (10% of total revenue) 9,014.00
Other Revenue (5 % of revenue) 4,507.00
103,661.
Total revenue
00
Project Review: Every process need to review after implementation of it procedure and make
necessary change to current procedure or reporting system for improvement.
2016 2015
As shown in the table above, May airline liquidity as increase (0.80) over last year but it
remained below the acceptable ratio 2:1. The quick ration is below benchmark value (1) as 0.77
which is below industries average. May Airline have a better position to meet its short-term
financial obligations in generally. But bear in mind that the ratio will increase dramatically by
new financing on aircraft or airport facilities.
2016 2015
The above table shows that we are improving the debt ration and gearing ratio at the same time.
The stable grow will improve the long term process for re-payment without putting in the
company in high risk.
2016 2015
The high expenses lead to lower the return on state holder asset ratio too. May airline is not
utilization enough to get back the revenue as per total asset. The company must implement the
new strategy to improve efficiency of manpower and maximize the asset usage to gain more
revenue in future.
EPS (Earning Per Share) is the best indicator of the current net income in limited time frame to
number of outstanding share of stock. The sign of negative EPS will not be a good sign to
convince our shareholder to put in more investment. The cost cutting strategy in operation
expenses will generate the better EPS on future.
Base on all analysis of the ratio, May airline has a long way to recover from the current
saturation. In order to get back to profitable airline, May airline must implements the company
restructure strategy step by step without compromising the current service level.
9. Brexit Infection
Base on current IATA data, the world most travelers from Europe and Asia. The recent
announcement of Brexit from UKs parliament will directly affect to EU aviation sector. EASA
set a common standard to follow in Europe aviation sector and total control of traffic rights and
access to routes for commercial air transport services (whether within or to and from the EU).
The departure of UK from EU would deprive European airline automatic access to UK market,
which is the most important for Europe revenue. As a third country service provider outside of
Europe, May airline might have would probably not change as a matter of the UK leaving the
EU. What could change though is the right to operate into the UK, at least if such right follows
from a horizontal agreement between the EU and the relevant third country. Should this be the
case, the UK's departure from the EU could potentially require the UK and the relevant third
country to negotiate a new bilateral agreement to ensure continued market access.
11. References
1. (Amadeus, 2012)
2. (CAPA, 2016)
3. (CAPA, 2016)
4. (IATA, 2004)
6. (Morrel, 2005)
7. (Brewer, n.d.)
2015 2016
3,908,16 5,825,95
Current Asset 9 2
7,153,99 7,279,09
Current Liabilities 2 8
0.55 0.80
Quick Ratio
5,572,18
CA- Inventory 597,005 7
7,153,99 7,279,09
Current Liabilities 2 8
0.08 0.77
Cash Ratio
2,148,47 3,870,62
Cash 8 2 3,870,622,000
7,153,99 7,279,09
Current Liabilities 2 8 1,290,207,333.33
0.30 0.53
1,379,96 1,596,15
Account Receivable x365 5 2
Sale (Assume Credit Sale)
13,286,6 24,548,1
(good based on
38 24 year)
(days) (days)
Financial Leverage
Ratios
Debt Ratio
15,274,2 17,803,0
Total Debt 20 22
17,412,2 21,855,1
Total Asset 11 53
0.88 0.81
8,120,22 10,523,9
Long Term Liabilities 8 24 control loan
2,137,99 4,052,13
Capital Employed 1 1 10,523,924,000
3,507,974,666.67
379.81 259.71
Profitability Ratio
(430,738 (1,168,8
Net Profit (Sale- Revenue) ) 39)
(3) (8)
(430,738 (1,168,8
Net Profit after tax ) 39)
2,137,99 4,052,13
Equity (Shareholder Fund) 1 1
(20.15) (28.85)
% %
3,342
Number of Share (Amount) ,156
(430,738 (1,168,8
Net Profit after tax ) 39)
1741221 2185515
Total Asset (NCA+CA) 1 3
(0.02) (0.05)
Airlines 108