An analysis of the financial situation of British Airways Case Study

An analysis of the financial situation of British Airways - Case Study Example In the introduction part of the report, an overview about the business of the company, its evolution, organization structure etc, have been described. All the calculations performed are supported by graphical representations apart from the comments in order to give a clearer picture about the company's financial performance and management efficiency. The capital structure of the company is also discussed as part of the report.This report looks at the financial situation of British Airways Plc amidst the threats and challenges in its external environment. In doing so, this paper will utilize three different financial analysis techniques. First, the current performance of the company will be compared with its historical financial data in a trend analysis. In order to simplify the analyses, the six year period of 2001-2006 will be considered. Second, a financial ratio analysis will also be conducted in order to ascertain the profitability, working capital or efficiency, liquidity, and f inancial leverage of the company. Recognizing that the financial analysis will be maximized by more data, it uses 2005 as a comparative year for 2006. Lastly, this paper will also compare the financial data and ratios of British Airways Plc, its key competitors, and industry through a benchmarking analysis. The report concludes with the identification of the airline's financial strengths and weakness. BACKGROUND TO THE STUDY The British airline is rapidly evolving due to external environmental forces. The industry has been faced with a dismal outlook with the onset of economic downturn in the world led by the business cycle in the United States (Sorensen 2006). Furthermore, the emergence of low cost carriers in the European airline industry is a living example of how the strategic directions of business organizations are strongly affected by the changes, trends, and developments and their external environment. It is apparent that the European airline industry has progressed from being dominated by large, business class air