Reference no: EM132645203
Case study
EasyJet is a popular low cost airline. It is based in London Luton Airport and provides cheap 'no-frills' flights to a wide range of European destinations. Since the company was launched by Sir Stelios Haji-Ioannou in 1995 it has grown from strength to strength. Some of the key business highlights for 2012 were as follows:
- Record profit before tax of £129 million, up 56 per cent from £83 million in 2011.
- Passenger numbers rose by 11.5 per cent to 33 million.
- Passenger revenues increased by 5.9 per cent or £2.13 per seat, driven by strong summer trading.
- Additional revenues improved significantly in all areas, rising by 34 per cent or £0.86 per seat.
- Unit costs excluding fuel fell by 1.5 per cent or £0.42 per seat from £28.78 to £28.36.
- Unit fuel costs increased by 33 per cent to £2.48 per seat.
- 58 new routes and 11 new destinations were launched, expanding the network to 262 routes and 74 airports in 21 countries.
- The fleet grew to 122 aircraft with an average of 2.2 year, making it one of the most modern and environmentally friendly fleets in Europe.
- The balance sheet remains strong with cash of £861 million and gearing at 31 per cent.
The table below shows some financial information for easyJet extracted from the income statement and balance sheet in 2012.
2012 (£) 2011 (£)
Revenue 1,619.70 1,314.40
Profit 117.8 66.2
Capital employed 1,614.60 1,215.30
Net assets 982.90 863.40
Current assets 1,087.20 890.90
Current liabilities 509 414.50
QUESTIONS
1. Evaluate Jet Easy using the relevant ratios and explain the findings and significance of the ratios to Jet Easy top management.
2. Summarise Jet Easy financial position from data given.