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Executive Summary

Australian economy is very fluctuating and it has been observed through analysis. For measuring the existing strength of the Australian economy fundamental analysis of economy has been done. For doing this two approaches are taken like top down approach and other is bottom up approach. By the help of these two approaches current GDP arte and Interest rate of the nation could be observed. Aviation sector has been chosen as an industry analysis. For doing analysis Virgin Airline and Qantas Airline has been chosen for financial data. At the end of the paper overall summary of the paper has been made.

Table of Content

• Executive Summary
• Financial Market Analysis
• Introduction
• Top Down Analysis of the Overall Market
• Bottom up Analysis
• Summary and Conclusion of the Overall Report
• References

Financial Market Analysis

Introduction

Aviation industry is one of fruitful industries of Australia. Through this overall paper fundamental analysis of aviation industry could be observed. In this case two famous airline companies of Australia have been chosen for the analysis purpose. These organizations are Virgin Australia Holding Limited and Qantas Airline. After observing the financial market of Australia it could be said that aviation sector is playing crucial role in the case of overall economy of the Australia (Barwick, 1963). According to the researchers; airline sector has lots of strength and potential; it can play a vital role in the case of economic environment of the business process. By the help of this overall fundamental analysis a specific knowledge over the Australian economy and importance of airline sector in this economy could be observed. Two types of analyses have been made in this case for justifying the output. First one is the top down analysis and second analysis is the bottom up analysis. In the case of top down analysis overall economic environment of Australia has been focused. In this case impact of this economy on the overall performance of the industry has been judged. Through this overall paper current interest rate in the aviation industry could be understood. Through gross margin of the nation can help to understand the overall growth in the aviation sector. On the other hand bottom up analysis has been done for comparing two aviation companies and their financial conditions. Different types of analyses have been made for understanding the overall fundamental matters of the business organizations. In this case current ratio, debt equity ratio and other different analyses have been focused for measuring the strength and financial sustainability. At the end of the paper a summary of the overall report has been made by which overall elements could be justified and observed.

Top Down Analysis of the Overall Market

Australian Market is one of the fruitful business sectors for the other global business organizations. Various Multinational organizations want to penetrate in this market by observing the value and strength. The paper is mainly showcasing that various sources and resources are there which can be used as the business process for Australia. According to various researchers and observers Australia is mainly based on the mining sector and agricultural outcomes. An economy can be performed through various types of business functionalities. Except mining and agricultural sectors, Australia has good prospect in retail sector and construction sector. According to the market report these industries have been able to run their service with good valuation and prospect (Burton, 1969).

First phase of the top down approach is to showcase the overall economic condition of Australia. The mentioned picture showcases the GDP rate of the Australia. After having analysis it could be said that Australian economy has been increased by 2.5% from last few years.  Report stated that economy is mainly based on the overall mining sector and mining investment has been increased. Report and analysis showcased that prime economic backbone of Australia was the mining sector, but now different other sectors also get some privilege to support the economy (Button and Hensher, 2005).  Though there are many other sectors present like retail, aviation, construction etc, but still these sectors couldn’t support or change the economy till 2013. This trend has been changed due to the superior functionalities and effectiveness of other business sectors.

After studying the overall economic conditions of the nation, it could be said that during the end of 2014 the growth of economy was reduced. This was happened due to the growing less interest in the case of mining business. The paper is showcasing how different other business sectors help to boost up the Australian economy. Australian economy is now not only depended on the mining sector, retail sector and aviation sector play an important role in the case of overall economy (Demand for Australian domestic aviation services, 1986). At past economy was depended on the agricultural sectors, this business has been volatile due to the diversified weather and climate change. At this present moment dwelling investment has been increased due to the good lifestyle of the people. For this reason this real estate sectors some positive share in the overall Australian economy.  According to various business analytics income level of the people have been increased and due to this reason lifestyle of the people have been changed.

The paper is mainly showcasing the aviation industry. Aviation or airline sector is one of the fruitful sectors of the world. Each and every airline company has been running their services smoothly in the Australian market. By the help of this report overall impact of Australian Economy on the aviation sector could be understood.

Airline sector is one of the booming sectors of Australia. Various airline organizations are working in this market platform. Lots of ups and downs could be found in this market due to the economic changes and fluctuations (Kriesler, 1997). At the initial phase airline sector got huge profits, existing airline companies could be able to acquire huge cash reserve but now a days this profitability margin has been decreased due to many new entrants. On the other hand many airline organizations have decreased their flight fare for increasing the number of passengers.  This is a normal picture taken from internet which showcases the profitability downfall of different airline companies. In this case data and evidence has been taken from 2013 to 2015. Four airline companies of Australia have been chosen for showcasing this evidence. Among these four companies Tiger Air has faced highest losses; still this company is one of the popular airline brands among the customers. Though airline organizations have been faced multiple challenges, still these companies and their management stated that airline sector now is in a stagnant zone but it will definitely go higher by the time. Economy or GDP of a nation is also depended on the overall employment rate in the nation. It has been obtained from an ethical sources that airline sector of Australia has improved the overall employment rate of the nation. Major contribution of airline sector to the economy has mentioned below in a table format;

Economical activities	2012	2014
Contribution to the national or domestic economy	$27.5billion	$31.2billion
Employment activities whether indirectly or directly	283,000	306,700
Overall household income	$13.2 billion	$14.7billiom
Mean wages of the airport employees or operators	$82,000	$87,000

 

Through the above mentioned table overall economic valuation of the Australian Airline industry could be observed.  Three year span has been selected for showcasing this evidence. Data has been collected from 2012 to 2014 on the basis of different segments. Through this analysis it could be stated that impact of airline industry on the economy has been increasing day by day. Now the economy of Australia is partially depended on the turn- over of airline sector. For this reason Australian government has focused more on this sector so that a fruitful outcome in the business process could be observed or understood. The paper is mainly showcasing the aviation sector and its importance in the case of Australian economy. During the time of Australian aviation industry analysis it could be said that Australian economy has lots of hope and future due to the airline sector (Williams, 1967).

Supply chain management is also paying an essential part of the business process. After observing the overall airline industry of Australia, it could be said that Australian government has lots of hope and expectations from the airline sector. For maintaining different operations of airline, management of the airline organizations must need different elements. After the support of government, management of those organizations could be able to import or purchase all those products from different parts of the world, they can also use domestic services. Promotion or brand factor is also playing an essential factor for the business process. Lots of promotional initiatives are taken by the airline management for enhancing the brand value of the business operations. Customers could be able to get proper value based service by paying very lesser amount of fare. It has been found that management of airline organizations has taken lots of initiatives to minimize the risk in the business and maximize the profit. Through the discussion overall impact of economy in the aviation sector of Australia could be observed. On the other hand importance of aviation sector for the Australian economy also has been observed.

Australia is the nation which has huge business strength and fruitfulness. By maintaining a smooth operational activity in different business sectors, economic condition of the nation could be improved. Economic condition of the nation can be determined by the help of GDP rate and value. According to the report current GDP rate of this nation is $1.62 trillion. After having the report of 2014 the GDP rate was $6.41 trillion and in 2013 the rate was $9.31 trillion. Through these data set performance or productivity decrease in the business process could be observed. Overall economic performance of the nation has been gradually decreasing. This has been done due to the mining oriented economic performance. For this reason Australian government must have to shift to other business sector for enhancing the GDP.

Currency value of Australia also has been decreasing by the year. The picture showcases the valuation drop of the Australian currency. In this case data has been gathered from 2012 to 2016. At this present moment currency value of 1 AUD is equal to $.75 US Dollars.

According to the report current interest rate of Australia is 4.86%. Through this analysis overall understanding of the matter could be observed. This is a top down analysis which showcases the current financial or economic condition of Australia as well as this paper highlights the overall growth and valuation of currency in this case.

Bottom Up Analysis

In the above section of the paper top down analysis has been made for showcasing the overall economic condition of the nation. Different types of analyses have been considered in this case for observing the overall matter. For analyzing the overall matter Virgin Australia holding Limited and Qantas Airline has been chosen for the analysis purpose. By the help of this analysis process overall financial stability comparison could be observed and understood. In this case different data set has been taken from 2013 to 2015. This data set helps to justify the financial comparison in these years. Liquidity ratio, solvency ratio etc have been judged for the analysis purpose. Qantas and Virgin both have huge fame and reputation in the domestic market as well as in the international market.

Profitability Ratio:

Profitability ratio must have to be focused by an organization for observing the overall profit margin gained by an organization in the business process. In this case profitability margin of these selected two airline organizations have been considered. Financial information is gathered from two organizations virgin airline and Qantas airline. For doing the profitability ratio net profit margin of the business organization has been considered. Analysis of net profit margin analysis has been represented in the followings section.

Net Profit Margin:

Net Profit Margin = (Net Profit / Net Sales) * 100
	2013	2014	2015
Virgin	-2.46	-8.26	-2.35
Qantas	0.03	-18.76	3.59

 

Net profit margin can be transformed as the overall profitability margin gained by an organization. In this case net profit margin of Virgin and Qantas has been obtained from the financial year if 2013 to financial year 2015. On the basis of above graph it could be said that Virgin Airline is ahead of Qantas as Qantas has a stable profit margin whereas profit margin of Qantas Airline has been fluctuating. In the year of 2013 net profit of Virgin was -2.46% and in that year Qantas made 0.03%. In 2014 profit margin of both Qantas and Virgin went down. Net profit of Virgin was -8.26% and Qantas made -18.76%. In the last considered last financial year Virgin moved up to -2.35% whereas Qantas Airline could be able to increase their profit margin up to 3.59%. Through the analysis of net profit margin it could be said that both Qantas Airline and Virgin Airline faced multiple problems at the time of achieving net profit margin. On the basis of these two organizational analyses it could be said that Australian Airline Company have been facing multiple problems regarding their net profit margin.

Gross Profit Margin:

Gross Profit Margin = (Gross Profit / Net Sales) * 100
	2013	2014	2015
Virgin	71.8	71.9	74.7
Qantas	54.6	49.8	54

 

The table and graph represents the overall gross profit margin of the airline companies like Virgin Holding and Qantas Airline. On the basis of gross profit margin it could be said that Virgin Airline is staying ahead of Qantas Airline. In the year of 2013 Virgin made the total gross profit of 71.8% and Qantas secured 54.6%. Virgin made slight increase in the next financial year and reached to 71.9%. In 2014 Qantas lost their existing position and went down to 49.8%. Gross profit margin of Virgin was 74.7% in 2015 and in 2015 Qantas made 54%. Through this analysis of gross profit margin overall sustainability in the business sector as per profitability could be measured. Gross profits of both Virgin and Qantas have been showcased in this paper. On the basis of that parameter it could be said that Virgin Holding Limited is secured compared to Qantas Airline, but Qantas also tries hard to achieve that kind of success.

Liquidity Ratio:

Each and every business organization must have to focus on the liquidity ratio for measuring their internal financial strength. Each business organization must hold a cash reserve in the business process; this cash strength helps the management to execute the business functionality. For measuring the liquidity ratio management must have to focus on the current ratio. In this case current ratio of both Qantas Airline and Virgin Holdings has been considered for getting suitable outcome over this issue or matter.

Current Ratio:

Current Ratio = (Current Assets / Current Liabilities)*100
	2013	2014	2015
Virgin	0.54	0.64	0.69
Qantas	0.82	0.66	0.68

 

The above mentioned table and graph showcases the cash reserve strength of both airline organizations of Australia Qantas Airline and Virgin Holding. Through this analysis cash belonging of these two organizations can be understood. Each organization has some liabilities and significant asset. For getting the value of current ratio, current asset and current liability of an organization must have to be judged or considered. This current ratio also reduces the risk factors from the market platform. Through this process stability factor for both Qantas and Virgin can be understood or observed.  After viewing the peaks of the graph it could be said that Qantas is stable compared to Virgin, but the stability quotient of Qantas is very fluctuating whereas virgin could be able to maintain a stable flow in the business process. In the year of 2013 current ratio of Virgin Holding was 0.54 times and Qantas had 0.82 times. In 2014 this figure has slightly changed for Qantas like current ratio was .66 times and Virgin possessed .64times. In the last financial year 2015 current ratio of Virgin was .69times and current ratio of Qantas dropped to .68times.

Solvency Ratio:

Solvency ratio also showcases the sustainability or stability in the business process. This solvency ratio can be calculated through the relationship between total debt of the company and total equity of the business. For this reason debt-equity ratio has been calculated.

Debt-Equity Ratio:

Debt Equity = (Total Debt / Total Equity + Total Debt)*100
	2013	2014	2015
Virgin	1.46	1.52	2.16
Qantas	0.88	1.84	1.39

 

By the help of above mentioned table and graph overall debt-equity analysis of the Qantas and Virgin holding could be observed. On the basis of this above mentioned graph it could be stated that Virgin Airline is in a risky sector as it has a continuous growth in the case of debt equity ratio. On the other hand Qantas has a fluctuating debt equity ratio. Virgin had 1.46% debt equity ratio whereas Qantas had 0.88%. In 2014 this ratio of Virgin was increased up to 1.52% and it went 2.16% in the financial year of 2015. On the other hand in 2014 Qantas made 1.84% debt-equity ratio, but after this year management could be able to reduce this value up to 1.39%. Through this discussion it could be said that Virgin Holding must have to focus on this value.

Efficiency ratio:

Efficiency ratio is mainly judged for measuring the organizational performance or productivity. In this case inventory turn-over of Qantas and Virgin has been considered for making the overall analysis. Through this process overall strength of the business organization could be observed.

Inventory Turnover = (Cost of Goods Sold / Inventory)
	2013	2014	2015
Virgin	50.38	36.68	30.87
Qantas	19.51	22.33	22.36

 

This data set showcases the inventory turnover rate of the business organization. After having the overall turnover rate it could be said that efficiency of Virgin Holding is far better than Qantas Airline. Efficiency rate of Virgin is very high, but if year wise analysis is done then it can be said that Qantas is in a good direction. Qantas gradually increases its efficiency rate whereas efficiency rate of Virgin has been going down.

Summary and Conclusion of the Overall Report

The overall paper is describing the fundamental analysis of the Australian economy. For measuring the strength and opportunities in Australian market, Aviation sector has been chosen for the analysis purpose. For doing the analysis, financial data of Qantas airline and Virgin Airline has been taken under consideration. After having the top down analysis it could be said that Australian government must have to focus on the alternative business options for enhancing the GDP rate of the nation. On the other hand impact of airline industry on the economy also has been judged, through this it could be said that Airline industry can change the overall future of the Australian economy. By the help of bottom up analysis overall financial performance comparison between Virgin Holding and Qantas Airline could be observed properly.  Through this discussion it could be said that though the overall market is fluctuating still it can lead good turn over.

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