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The Airline of the Future? – A Business & Financial Appraisal of Airblue For A Three Year Period From July 2007 to June 2009

ACCA OXFORD BROOKES DEGREE PARTNERSHIP – RESEARCH & ANALYSIS PROJECT

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The Airline of the Future? – A Financial & Business Appraisal of Airblue - 2

Table of Contents

Project Objectives & Overall Research Approach ..................................................... 3

Information Gathering................................................................................................... 6

Results, Analysis, Conclusions & Recommendations............................................... 6

Results, Analysis, Conclusions & Recommendations............................................... 9

Bibliography ................................................................................................................ 29

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The Airline of the Future? – A Financial & Business Appraisal of Airblue - 3 Part 1 Project Objectives & Overall Research Approach The commercial airline industry has been the centre of attention for political, business and academic pundits for quite some time now. While the first decade of the previous century came with the invention of the aircraft and the commencement of air travel thus giving birth to an industry, the first decade of this century brought with it the attack on the twin towers at the World Trade Centre in New York City in September of 2001, political chaos, the threat of terrorism, heightened security around airports, cut throat competition (from no frills airlines) pushing down air fares and profitability, record high fuel prices (peaking at $147 a barrel) and recently, atmospheric disturbances in the form of volcanic ash clouds over Northern Europe and the United Kingdom causing disruption of thousands of flights and cause an estimated $17 billion in revenue loss to the industry. All this plus, loads of strikes and civil commotion over pay, security and job concerns have been there to greet the industry into the 21st Century. Globally, the aviation industry is undergoing a wave of consolidation with significant mergers and acquisitions being reported as many airlines in the West opt for business combinations as the perceived synergies are said to be enormous. The threat from no frills airlines is also enormous with the Virgin Group backed Air Asia a significant competitor in the Asian region. In this respect, it can be argued that the airline industry is undergoing certain systematic changes that warrant a survival strategy with only the fittest surviving the downturn. Unfortunately, as can be inferred from the above, the first decade of this century has proved troublesome for the airline industry. This has important implications for investors as making investment decisions regarding the airline sector in view of a high risk industrial outlook make any potential investor uneasy from day zero. To add to this, the airline industry has a terrible survival record with many upstarts perishing within their infancy which further precludes investment in this sector. What fascinates me then, as an avid aircraft lover and of all things to do with aeronautics, is what will be the future of the airline industry going forward. Surely, investors cannot continue to pump money into the old established airlines that have become “white elephants” or “too big to fail” nor can new investors be readily willing to invest in new upstarts that follow the same old business model which as we know has failed time and lost its resilience to changing times which calls for a new appreciation of risk, return and the business model itself for the airline of the future. Indeed, my concern is what business model would the airline of the future need to follow for it to attract investor confidence?

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former Chairman and Managing Director of Pakistan International Airlines (the national carrier).com/AccaGlobeExtended EMAIL :. a politician.com/HaTiFDaR .The Airline of the Future? – A Financial & Business Appraisal of Airblue . Abu Dhabi. one can make suggest changes etc that would make it more adaptable for other airlines to follow and hence. By all accounts it is now the largest private airline in Pakistan having established itself as a key player on the local sector as well as garnering significant market share internationally within a short period of time. although registered as a public company. The airline.https://www.e. Research Questions 1. Islamabad & Peshawar and various cities in Pakistan with Dubai. and Mr.com FACEBOOK:. would be a prototype of one such solution to the airline of the future. I would be able to make enough inferences as to whether the business model of the company can be attributed to be the success behind its financial and business success. a leading conglomerate in Pakistan. other airlines fared over the same period? PROVIDED BY :. Fortunately.facebook. Tariq Mehmood Chaudhary) who has a strong background in IT and software from his Silicon Valley experience and his family interests. Has the airline been financially successful from an investor perspective? 2. Undertake a financial analysis of the airline. the airline plans to embark on an ambitious growth strategy which includes a fleet up gradation and expansion plan as well as an increase in the number of destinations it flies to along with weekly flights (Annual Report. The airline operates 156 local and international flights linking Karachi with Lahore. is closely held with a majority stake held by a Pakistani expatriate (Mr. if it has indeed been successful? 3.facebook. The other major shareholding comprises of JS Group. former advisor to the Prime Minister on aviation and presently the chief operating officer of the airline (Annual Report. 2009). 2009). How have competitors to the business model of Airblue i.https://www.com/groups/accaglobeextended PAGE:.https://www. I sought an airline which had been established post 9/11 and had been able to stem the storm over the past decade. my search for such an airline started from my native Pakistan and ended there only. It is my belief that by conducting a business and financial analysis of such an airline over the past three years. Going forward. Building on the same. What business decisions have allowed it to achieve this financial success. hence using it as a proxy for analysis.MUHAMMAD HATIF SAJJAD DAR GROUP :. 2009).hatifdar@yahoo. Shahid Khaqan Abbasi. Airblue Limited (airblue) was incorporated as a public company in 2003 with the aim to provide commercial air travel services for the Pakistani market covering local as well as international destinations.4 For this purpose. Sharjah & Manchester and boasts revenues of over PKR 10 Billion (Annual Report.facebook.

https://www.The Airline of the Future? – A Financial & Business Appraisal of Airblue . 3.https://www. PROVIDED BY :.hatifdar@yahoo.MUHAMMAD HATIF SAJJAD DAR GROUP :.com/AccaGlobeExtended EMAIL :.5 4. Conclude & recommend further improvements for the sake of standardization and adaptability.facebook.facebook.com/groups/accaglobeextended PAGE:. Use the information generated above and test it through a business appraisal of the airline & check results of the analysis against other airlines 4.https://www. conduct a financial analysis. In light of the objectives.com FACEBOOK:.com/HaTiFDaR .facebook. What further improvements would one suggest to the business model to make it more efficient and adaptable for other airlines? Overall Research Approach 1. Set objectives 2.

Financial information basically refers to the audited financial statements / annual report of the company.https://www. financial information and business information. that is. online. Pakistan International Airlines. The world wide web is a wealth of information.com/groups/accaglobeextended PAGE:. after necessary clearance from his supervisor / senior manager.my next step was to take my search in the 21st century.hatifdar@yahoo. Bear in mind.The Airline of the Future? – A Financial & Business Appraisal of Airblue . The manner of meetings was more inclined towards an informal chat over tea or a soft drink. My first stop.facebook.com/AccaGlobeExtended EMAIL :.https://www. The next stop was to another senior colleague at a local investment bank covering large syndications. the State Bank of Pakistan. With that spirit in mind.facebook. I focused my attention to some field research next and a visit to few travelling agents and a long drive to the Karachi International Airport to speak with an Airblue staff member (a distant relative) and officials of the civil aviation authority (who I am glad were willing to help me despite their hectic schedules) allowed me to gain a better perspective about the airline and the industry as a whole. was a friend at a foreign bank dealing with big corporate clients and.facebook. I did not design a proper questionnaire nor were these formal interviews. fortunately. I think this cultural approach served me well because I was able to get up close and personal with many of these individuals and extracted more from them than what I would have if I would have stuck to a more formal approach. the research online contributed a significant amount to my stock of information.https://www. while business information is more tilted towards company strategy. during my information gathering process.com FACEBOOK:. I set in motion. The websites of Airblue. allowed me to take a brief information memorandum on the airline industry as well as other research materials. PROVIDED BY :. the typical setting of a meet in this part of the world where informality serves better although one should not lose track of professionalism. Having gathered the financial information (secondary source) and having made sense of it / added to it through interaction with other individuals (primary source). the Economist newspaper. International Association of Travel Agents. the enormity of the task nor its difficulty deterred me. information about it was always going to be hard to get. I understood that there were two types of information that I was looking for.com/HaTiFDaR . Bloomberg. the Daily Dawn Newspaper. However. After clearance from his compliance officer and a company official. I was provided with financial statements of the airline for the years 2008 & 2009. covering Airblue’s account as well. performance vides the industry and competitors etc. Sometime back he had told me about working on aircraft acquisition syndication and was fortunate enough for he.MUHAMMAD HATIF SAJJAD DAR GROUP :. Having decided what I required. a sea that has no bed.6 PART II Information Gathering & Choice of Business & Financial Analysis Techniques By virtue of Airblue being an unlisted public company.

https://www.com/groups/accaglobeextended PAGE:. were chosen: Financial Analysis – Analysis Over Time & Against Competitors Covering Key Areas of Sales.hatifdar@yahoo. Cost Structure. It is also deemed appropriate to mention here that the use of the mosaic theory helped me all along the way (Schweser. turning this information and processing it was going to be no easy task and I understood that I would require a coherent set of financial and business analysis tools that allow me to process the information in such a manner that it closely links with my research questions and allows me to test my thesis statement.https://www. This allowed me to keep the final set of information as authentic as possible. Liquidity & Solvency Business Analysis – Porter’s Generic Strategies Business Analysis – Porter’s Five Forces Analysis Business Analysis – SWOT Analysis Hence. At the same time. 2009). It is worth mentioning here that much of the information that I gained through my primary sources and online mechanisms helped in better understanding the financial statements. Choice of Financial & Business Analysis Techniques However.7 Reuters and a host of online journals and publications expanded my knowledge of the airline sector and the subject company in question. that is. Please note that no instance of ethical or professional misconduct took place. with the SWOT analysis preceding any recommendations. many assertions of the primary data gathering process were checked through secondary data sources and vice versa. My interaction with the staff of the civil aviation and Airblue provided me with bits of NON MATERIAL NON PUBLIC INFORMATION (for example the kind of aircraft that the airline uses and its benefits etc) which combined with the rest of my information allowed me to bring more clarity and depth to my analysis. the following tools and techniques.facebook. acting as a conclusion or presentation of findings. while the financial analysis portion would ideally explain the financial success of the firm and the reasons attributed to it. the ensuing discussion on company strategy would be tested using the two models of determining source of competitive advantage. perfection eludes mankind and hence none of the above tools and techniques used are free of limitations. Hence.https://www. after much deliberation.facebook.MUHAMMAD HATIF SAJJAD DAR GROUP :.com/HaTiFDaR . Unfortunately. Profitability.facebook. broadening my horizon.com/AccaGlobeExtended EMAIL :. Financial Analysis has an inbuilt bias to consider past information as an indicator of future performance while the financial statements themselves need to be looked at carefully as management might play around reporting PROVIDED BY :.The Airline of the Future? – A Financial & Business Appraisal of Airblue .com FACEBOOK:.

MUHAMMAD HATIF SAJJAD DAR GROUP :. 2009).com/HaTiFDaR .com/AccaGlobeExtended EMAIL :. fail to provide a comprehensive answer and serve as mere guiding rules with too many models being competed against by others.com/groups/accaglobeextended PAGE:.8 rules which are themselves very complex (Schweser.https://www.hatifdar@yahoo.The Airline of the Future? – A Financial & Business Appraisal of Airblue . PROVIDED BY :.facebook. building on totally different premises and approaches to answer the same question (BPP.com FACEBOOK:. Business analysis techniques. on the other hand.https://www.facebook.facebook. 2008).https://www.

3% 395 6.6% 5. Relevant Extracts of the financial statements have been made part of the analysis section only.6% 478 5.2% 2. Analysis.942 8.https://www.3% 29.040 10.972 5.4% 200 4.9% 93% FY 2009A 10.com FACEBOOK:.516 3.452 3. just to make the analysis more deep.6% 58 3.8% 54 0.564 8.hatifdar@yahoo.475 35.5% 88% FY 2006A 4.1% 694 8.https://www.2% 1.3% 315 5.533 10.6% 492 5.3% 183 11.3% 329 5.257 1.220 3 11 20 176 395 36 86 123 117 131 81 171 276 359 434 (27) 253 200 249 1.net Cost of operations Gross profit Other income Selling & marketing expenses Admin & general expenses EBITDA Financial charges Profit before tax Tax Profit after tax EBITDAR margin EBITDA margin Net profit margin Major expenditures (PKR mm) Revenue Fuel As a %age of revenue Aircraft lease rental & MRV As a %age of revenue Landing & handling As a %age of revenue Salary & benefits As a %age of revenue Repair & maintenance As a %age of revenue Passenger service As a %age of revenue Sales commission As a %age of revenue Financial charges As a %age of revenue Depreciation & amortization As a %age of revenue Total (as a %age of revenue) FY 2005A FY 2006A FY 2007A FY 2008A FY 2009A 1.3% 1.9% 10.7% 283 6.The Airline of the Future? – A Financial & Business Appraisal of Airblue .1% 308 7.1% 718 8.com/HaTiFDaR .574 4.035 10.4% 0.1% 3.7% 1.6% 73 0.7% 287 2.facebook.5% 916 22.0% 826 8.1% 279 2. the figures and snippets of information also relate back to as far as 2005.3% 54 0.8% 152 3.8% -5.416 7.8% 66 0.MUHAMMAD HATIF SAJJAD DAR GROUP :. These are for depth and breadth of information only. The Section has been titled “financial and operational analysis” as there is significant overlapping in the discussion between business and financial matters and hence provides better insight and structure.8% 181 4.263 38.facebook.0% 407 25.958 31.3% 436 7.574 519 33.153 1.8% 189 1.9 Part III Results.0% 18.024 1.2% 87% FY 2007A 6.527 34.0% 17.9% 90% FY 2008A 8.7% 105 6.facebook.0% 396 6.705 27.7% 4 0.799 21. many graphs have cover upto five years of information.https://www. Conclusions & Recommendations Financial & Operational Analysis Note: Due to the depth of information available in the annual report.4% 394 4.533 3.0% 324 3.116 24 30 19 54 189 (74) 173 127 122 860 8 20 37 70 301 (82) 153 90 52 559 19. 2008 & 2009) Income statement (PKR mm) Revenue Revenue .com/AccaGlobeExtended EMAIL :.615 25.com/groups/accaglobeextended PAGE:.5% 24 1.153 6.311 3.4% 30 0.6% 89% PROVIDED BY :.8% -1.257 8. At times.8% 19.804 64 448 526 476 1.7% 24 1.4% FY 2005A 1.311 1. Income Statement Extract & Comments on Key Items & Cost Breakdown (SourceAnnual Reports 2007.2% 3.2% 2.7% 6.4% 1.0% 19 0.7% 50 1.9% 58 3.524 5.

During FY 2009. which has resulted in high passenger yield and provides a synthetic hedge against PKR depreciation.257 (FY 2007) million to PKR 10.https://www. Nevertheless.The Airline of the Future? – A Financial & Business Appraisal of Airblue .206 thousand (FY 2009).153 1.com/AccaGlobeExtended EMAIL :.MUHAMMAD HATIF SAJJAD DAR GROUP :. however. 2) Capacity Addition: Number of available seats has been increased from 570 thousand (FY 2005) to 1. the EBITDAR margin during the corresponding period has posted a CAGR of 17%.065 1.com/HaTiFDaR . 2007.574 312 790 1. The aforesaid impressive growth is the result of the following factors: 1) Impact of Fuel Prices: The Company has successfully demonstrated its ability to manage the impact of increases in fuel prices. other cost saving measures adopted by the Company has also contributed thereto.311 million (FY 2009).facebook.facebook.564 FY 2005A FY 2006A FY 2007A FY 2008A FY 2009A (Annual Report .10 Revenue The Company’s top line (net of fixed excise duty and other taxes) has grown from PKR 6. Rev enue (PKR mm) EBITDAR (PKR mm) EBITDAR Margin (PKR mm) 20% 8.com/groups/accaglobeextended PAGE:.https://www.https://www. 3) Footprint Enlargement: The Company strategically placed more focus on enhancing its footprint outside Pakistan.257 18% 17% 3. the EBITDAR Margin jumped to 30% due to the fuel price collapse. airblue improved its EBITDAR margin through cost cutting measures during the corresponding period.hatifdar@yahoo. Whereas.facebook. Furthermore.com FACEBOOK:. this can be gauged from the fact that during the time of record high fuel prices it managed to retain its EBITDAR margin.311 30% 19% 6. 2008 & 2009) PROVIDED BY :.075 4.533 10. Currently 55% (86) of total weekly flights are being operated on international sectors. the Company’s ability to pass on the fuel price during peak time was partially compromised.

Subsequently.facebook.The Airline of the Future? – A Financial & Business Appraisal of Airblue . 2008 & 2009) Passenger Growth and Yield The number of revenue passengers has grown.com/HaTiFDaR . Approximately 75% sales are being generated through travel agents.MUHAMMAD HATIF SAJJAD DAR GROUP :. the Company changed its sales commission policy and restricted sales commission to “basic fare” only and excluded the “fuel surcharge” component of the total fare from the ambit of sales commission. 2008).com FACEBOOK:.8% 5.https://www. PROVIDED BY :.8% 58 FY 2005A 181 FY 2006A 315 FY 2007A 492 FY 2008A 287 FY 2009A (Annual Report . 2007.hatifdar@yahoo. PIA and other regional airlines followed suit and slashed sales commissions (Dawn Press Report.7% 2. Sales Commission (PKR mm) As a %age of Rev enue 5.11 Sales Commission Sales Commission is paid on basic fare. The Company pays 5% and 8% sales commission on domestic routes and international routes respectively.4% 3.facebook. However. which usually constitutes 50% of the total fare price. from 450k to approximately a million. in tandem with capacity additions. Seat factor has also increased from 74% (FY 2007) to a record high of 82% in FY 2009.0% 4. Sales commission increased steadily during FY 2005 – 2008 due to an increase in the number of flights on international routes.facebook.https://www. The average seat factor for the period covered is 78% (compared to PIA’s average of 69% for the corresponding period). during FY 2009.com/AccaGlobeExtended EMAIL :.com/groups/accaglobeextended PAGE:.https://www.

which increased from PKR 6. Competition from national and Middle-Eastern airlines.662 FY 2005A FY 2006A FY 2007A FY 2008A FY 2009A (Annual Report . in late FY 2007.260 1. 2008 & 2009) The seat factor came under pressure in FY 2006 and 2007.662 PROVIDED BY :.410 10. Therefore.com/groups/accaglobeextended PAGE:.234 1.12 Seats Av ailable ("000') Rev enue Passenger ('000') Seat Factor 1. Av erage Fare per Passenger (PKR) 8.facebook. and low business class occupancy were the major underlying reasons.043 80% 79% 1.206 82% 570 76% 74% 452 FY 2005A 810 FY 2006A 918 FY 2007A 969 FY 2008A 952 FY 2009A (Annual Report . i. all economy. 2007.The Airline of the Future? – A Financial & Business Appraisal of Airblue .MUHAMMAD HATIF SAJJAD DAR GROUP :.717 5. The aforesaid decision resulted in an increase in seat factor that jumped from 74% to 82%. the management of airblue decided to convert all aircraft from double cabin to a single class. The main reason for low business class occupancy was the unsuitability of single aisle fleet to compete with broad bodied aircraft being operated by national and regional airlines.e.https://www.https://www.com FACEBOOK:.https://www.079 3.717 (FY 2007) to PKR 10.facebook.689 6. when airblue commenced flights on the Pakistan – UAE sector. 2008 & 2009) The growth in number of passengers and seat factor was also accompanied by an increase in passenger yield.hatifdar@yahoo. 2007.facebook.com/HaTiFDaR .com/AccaGlobeExtended EMAIL :.

facebook.153 18% 3.533 10. PROVIDED BY :.13 (FY 2009). Subsequently.as a %age of rev enue EBITDAR Margin (%) 31% 38% 8. During first half of FY 2009.facebook. fuel prices collapsed due to the global economic recession and traded at the USD 30–35 level per barrel in December 2009.facebook. with the signs of economic recovery now visible. The aforesaid measures along with a significant reduction in fuel prices lead to higher EBITDAR margins in FY 2009. The increase in yield is mainly due to the deployment of aircraft on international sectors.com/HaTiFDaR .com FACEBOOK:.MUHAMMAD HATIF SAJJAD DAR GROUP :.The Airline of the Future? – A Financial & Business Appraisal of Airblue . fuel cost as a %age of revenue increased by 7% (i. from 31% (FY 2007) to 38% (FY 2008). 2008 & 2009) It is pertinent to mention here that during the period covered above.958 3. fuel prices have climbed to the USD 70 per barrel level. airblue slashed sales commission and curtailed passengers service cost be replacing hot meals with cold snacks. in FY 2008.311 34% 30% 36% 33% 6. The Company’s EBITDAR margin grew from 17% (FY 2007) to 18% (FY 2008) due to increase in seat factor. whereas the top line recorded a CAGR of 60%.https://www.574 FY 2005A FY 2006A FY 2007A FY 2008A FY 2009A (Annual Report . Nevertheless. 2010).https://www. 2007.com/AccaGlobeExtended EMAIL :.527 1. The surge in fuel price began in FY 2005 and continued till mid of CY 2008 when it peaked to USD 147 per barrel in July 2008 (The Economist.hatifdar@yahoo. which demonstrates the Company’s ability to pass on the increase in fuel price.e.263 1.475 519 1.com/groups/accaglobeextended PAGE:. Furthermore.257 20% 19% 17% 4. Rev enue (PKR mm) Fuel Cost (PKR mm) Fuel Cost . Fuel Cost This is the single largest component of the Company’s total cost.https://www. fuel cost grew at a CAGR of 61%.

https://www.35 22.8% Note: USD is being used to adjust the impact of PKR depreciation.USD Contribution margin per RPK .0% 8.394 1.com FACEBOOK:.016 0.com/HaTiFDaR .04 23.780 2.https://www.023 0. 2007. (Annual Report .330 2.35 48.USD Fuel cost per RPK . Contribution Margin per RPK represents the amount available to cover all other costs of the airline after deducting fuel cost from revenue on a per RPK basis.319 1.053 1.com/AccaGlobeExtended EMAIL :. Revenue and fuel cost per RPK Average fuel price per barrel .078 0.04 34.0 57. i. PROVIDED BY :.The Airline of the Future? – A Financial & Business Appraisal of Airblue . 2008 & 2009) The above table indicates that RPK has grown relatively faster than ASK. The following table summarizes the relationship between fare and fuel prices on a per RPK basis and calculates contribution margin.066 0.024 0.042 0.hatifdar@yahoo. which means that the fleet expansion plan undertaken by the Company during the period covered has resulted in an increase in seat factor.MUHAMMAD HATIF SAJJAD DAR GROUP :.074 0.043 CAGR 12.e.USD Revenue per RPK .982 CAGR 37% 38% (Annual Report .6 67.4 91.054 0.USD FY 2005A FY 2006A FY 2007A FY 2008A FY 2009A 43.facebook. ASK represents the numbers of seats available for passengers multiplied by the number of kilometers the seats are flown and RPK represents the number of kilometers flown by revenue passengers. 2007.048 0.facebook.3% 9.facebook. 2008 & 2009) Relationship between Revenue and Fuel Cost One of the best measures to assess the Company’s financial and operational performance is Available Seat Kilometers (ASK) and Revenue Passenger Kilometers (RPK) statistics.86 36.032 0.9 FY 2008A 72.9 60.9 FY 2006A 57.com/groups/accaglobeextended PAGE:.023 0. increased optimal utilization of aircraft.425 544 1. 2008 & 2009).5 FY 2005A 40.852 1.PKR 47.028 0.14 Fuel Consumption (million liters) Av erage Fuel Price per liter . ASK & RPK growth (million KMs) Avaialable seat kilometers Revenue passenger kilometers FY 2005A FY 2006A FY 2007A FY 2008A FY 2009A 682 1. 2007.6 0.0 FY 2007A 68.https://www.3% 7.066 0.045 0.2 FY 2009A (Annual Report .

airlines opt for low monthly fixed lease rentals and high MRV charges – as it limits the airline’s monthly liability to lessors during times of economic downturn (Annual Report. These charges are paid on a per hour and a per cycle basis and used to build reserves for repair and maintenance expenditures that will be incurred during the tenor of lease.MUHAMMAD HATIF SAJJAD DAR GROUP :. However.000 300.000 300. whereas fuel cost per RPK has grown by 9.3%.000 310.043 cents per RPK in FY 2009. 2009). The repair and PROVIDED BY :. contribution margin which was USD 0.https://www.15 Revenue per RPK has increased by 8. It also includes the cost being paid by airblue to lessors in case actual expenditures incurred exceed the MRV built with lessors. 2009) Repair and Maintenance Cost This represents the repair and maintenance cost incurred by airblue for the day to day maintenance of its aircraft. This demonstrates airblue’s ability to completely pass on fuel price during the period of record high fuel prices was partially compromised.https://www.facebook.facebook.000 280.hatifdar@yahoo.032 cents per RPK in FY 2005 has increased to USD 0.com/HaTiFDaR .com/AccaGlobeExtended EMAIL :. MSN 760-APBGW MSN 394-APBGU MSN 443-APBGV MSN-1199 APBJA MSN-1218 APBJB MSN 1008-APBRJ MSN-3385/APBIE MSN-3388/APBIF Manufacturing Date Nov '97 Oct '93 Oct '93 Mar '00 Apr '00 Apr '99 Mar '08 Feb '08 Monthly Fixed Rentals 261.com/groups/accaglobeextended PAGE:.000 280.https://www. which means that the Company now has more resources to cover all other costs.3%. The following table summarizes the monthly fixed lease rentals and MRV charges being paid by airblue on its existing fleet of seven aircraft: # 1 2 3 4 5 6 7 8 Aircraft A320 A320 A320 A321 A321 A321 A319 A319 Registration No.com FACEBOOK:.000 145.000 145.The Airline of the Future? – A Financial & Business Appraisal of Airblue .000 Per Cycle Charge 230 256 248 165 165 222 190 190 Per Hour Charge 260 537 379 233 233 408 159 159 (Annual Report.facebook. Lease Rentals & Maintenance Reserve Variable (MRV) Charges The Company is obligated to pay lessors under dry leased contracts the following charges on a monthly basis: 1) Monthly Fixed Rentals 2) MRV charges MRV charges are paid to lessors on the usage of the aircraft. Typically.

com FACEBOOK:. landing and handling costs have increased by 49% as airblue added 4 international sectors to its network and PKR depreciated by 20%. landing and takeoff fees and ground handling charges.hatifdar@yahoo.3% 3.com/AccaGlobeExtended EMAIL :.com/HaTiFDaR .facebook. 2007. As a %age of revenue. Repair and Maintenance Cost (PKR mm) As a %age of Rev enue 5. During FY 2009. 2007.6% 3.7% 4. 2008 & 2009) Landing and Handling Cost Landing and Handling cost consists of overflying charges (paid to different countries for using their air jurisdiction) airport parking.facebook.https://www. salary and benefits cost PROVIDED BY :.com/groups/accaglobeextended PAGE:. 2008 & 2009) Salary and Benefits Due to heavy reliance on the IT system.https://www.The Airline of the Future? – A Financial & Business Appraisal of Airblue .16 maintenance cost as a %age of revenue has declined in FY 2009 due to the induction of two six month old A319 aircraft in August 2008.1% 0.facebook.https://www.035 FY 2009A FY 2005A (Annual Report .MUHAMMAD HATIF SAJJAD DAR GROUP :.28% 4 FY 2005A 152 FY 2006A 329 FY 2007A 394 FY 2008A 324 FY 2009A (Annual Report . Landing & Handling Cost (PKR mm) As a %age of Rev enue 8% 7% 7% 10% 4% 58 308 FY 2006A 436 FY 2007A 694 FY 2008A 1. airblue’s salary and benefits cost structure is one of the lowest in the aviation world.

facebook.hatifdar@yahoo. 2008 & 2009) Passengers’ Service Cost Passengers’ Service Cost mainly includes meals.MUHAMMAD HATIF SAJJAD DAR GROUP :.The Airline of the Future? – A Financial & Business Appraisal of Airblue .com/AccaGlobeExtended EMAIL :. In response to record high fuel prices the Company curtailed the aforesaid cost by adopting cost-cutting measures such as replacement of hot meals with cold snacks.7% FY 2005A FY 2006A FY 2007A FY 2008A FY 2009A (Annual Report .https://www.facebook.com/HaTiFDaR .https://www. 2008 & 2009) PROVIDED BY :. newspapers and other consumable items served to passengers.facebook. compared to the industry benchmark of approximately 15% . Passenger Serv ice Cost (PKR mm) As a %age of Rev enue 11. 2007.6% 478 395 283 183 6.0% 6.com FACEBOOK:.com/groups/accaglobeextended PAGE:.18%. 2007.3% 5. 50% of the total payroll cost is attributed to cockpit and cabin crew.17 is a mere 8%.8% 279 6.https://www. Cost per passenger has been slashed from PKR 493 (FY 2008) to PKR 292 (FY 2009).6% 2.3% 105 FY 2005A 200 FY 2006A 396 FY 2007A 718 FY 2008A 826 FY 2009A (Annual Report . Salary & Benefits (PKR mm) As a %age of Rev enue 8.4% 8.7% 4.8% 6.

195 (Annual Report . Unearned Income is determined as the difference of tickets sold and boarding passes issued during the year.110 1.051 4 27 47 106 282 166 314 350 271 369 107 17 598 185 54 996 488 281 1.137 2. all profits have been reinvested into the Company.304 (Annual Report . 2007.399 598 996 1.facebook.https://www.MUHAMMAD HATIF SAJJAD DAR GROUP :.746 2.com/AccaGlobeExtended EMAIL :. deposits. 2008 & 2009) Equity The Company’s capital base is very thin due to its business model where the revenue generating asset.Net book value Long-term deposits Current assets Inventory Trade debts Advances. i. During FY 2009.174 2. A further induction of equity of USD 56M is planned in FY 2011 (Annual Report. is being operated on a dry leased contract basis. 2007.746 1.com/groups/accaglobeextended PAGE:.com FACEBOOK:.226 2. The Company has built equity over a period of time from its profits and since the commencement of operations.e.964 2. receivables Cash and bank balances Total assets FY 2005A FY 2006A FY 2007A FY 2008A FY 2009A 172 371 445 445 445 7 363 527 579 1. CEO of the Company.The Airline of the Future? – A Financial & Business Appraisal of Airblue .195 27 36 64 159 226 0 491 523 1.190 3. 2008 & 2009) Unearned Income The value of unutilized tickets and airway bills is shown as Unearned Income.facebook. PKR 56 million was injected into the Company by Mr.778 206 48 500 628 9 58 382 583 566 262 400 736 1.https://www.304 0 131 165 290 417 512 111 206 241 326 480 294 581 1. PROVIDED BY :.554 210 2. the aircraft. Shareholer's equity (PKR mm) Paid-up Capital Accumulated Profit & Loss Equity FY 2005A 178 (171) 7 FY 2006A 382 (19) 363 FY 2007A 456 71 527 FY 2008A 456 123 579 FY 2009A 512 683 1. 2010).facebook.077 196 4.964 4.hatifdar@yahoo.com/HaTiFDaR . prepayments. Tariq Mahmood Chaudhary.https://www.18 Balance Sheet Extract & Comments on Key Balance Sheet Items Balance sheet (PKR mm) Paid-up capital Shareholders' equity Non-current liabilities Aircraft financing loan Current liabilities Short-term financing Current portion of aircraft financing Unearned Income Trade & other payables Shareholder's equity & total liabilities Fixed assets .

airblue’s Revenue Management System blocks them from making further sales (Annual Report. 2009).257 382 6% FY 2008A 8.MUHAMMAD HATIF SAJJAD DAR GROUP :. however. which enables the Company to earn revenue.facebook.The Airline of the Future? – A Financial & Business Appraisal of Airblue .533 583 7% FY 2009A 10. PROVIDED BY :. Fixed Assets (PKR mm) Leasehold improvements Building Operating ground & catering equipment Engineering & flight equipment Office equipment.https://www. 2008 & 2009) Intangible The Company incurred PKR 70.19 PKR mm Revenue Unearned Income As a %age of Revenue FY 2005A 1. 2007.https://www.153 58 1% FY 2007A 6.com/AccaGlobeExtended EMAIL :. All offices of the Company are on rental premises.2 million on software development that has been fully amortized during FY2009.311 566 5% (Annual Report .574 9 1% FY 2006A 4. The most significant head of capital expenditure is Engineering and Flight Equipment. 2008 & 2009) Fixed Assets The Company has incurred capital expenditures very cautiously and used the savings to fund PDPs. 2009.hatifdar@yahoo. (Annual Report .facebook.com FACEBOOK:. furniture & fixtures Computers & accessories Sub-total Leased vehicles Total Cost 36 78 88 253 23 45 522 177 699 Accumulated Depreciation 7 17 57 7 32 120 67 187 Net Book Value 29 78 71 196 16 13 402 110 512 *As of June 30.com/groups/accaglobeextended PAGE:. The Sales Agents submit their collections on fortnightly basis and in the case of delay.facebook.https://www. Trade Debts The Company successfully exploited its revenue management system to keep Trade Debts within control. during FY 2009 airblue acquired office space in the Islamabad Stock Exchange Building to build its head office.com/HaTiFDaR . 2007.

100% profit retention ensured that the total debt to Equity ratio improved from 80: 20 to 72:28 from an year earlier. 2007.A.com FACEBOOK:.com/HaTiFDaR . a USD 15 Million equity injection is planned for FY 2011 to help the company reduce financial leverage. This growth is primarily based on an increase in advances to Airbus S.13 Billion to PKR 2. 2008 & 2009) Liquidity: The company's current assets grew from PKR 1.facebook. the company has been able to maintain a sound current ratio of 1:1 or close to it over the review period. current liabilities increased from PKR 1. Similarly.com/AccaGlobeExtended EMAIL :.com/groups/accaglobeextended PAGE:.1 Billion during the period under review. Accounts receivable and inventories have also increased which is in line with the growth in sales. going forward. The financial leverage at the start f the review period was roughly the same only.https://www.facebook. At the same time.hatifdar@yahoo.MUHAMMAD HATIF SAJJAD DAR GROUP :.1 billion to PKR 3.The Airline of the Future? – A Financial & Business Appraisal of Airblue . Overall. The cash conversion cycle has worsened from -16 days to 4 days but is still under manageable levels and hence no major liquidity risk is witnessed. in lieu of Pre Delivery Payments. However. Solvency: On the leverage side.facebook.https://www. the acquisition of three aircraft on an ownership basis is set to increase financial leverage with a proposed strategy of 100% profit retention to aid in keeping this under manageable levels.20 Trade Debts (PKR million) Trade Debtors Day s 350 314 38 271 369 166 28 20 12 13 FY 2005A FY 2006A FY 2007A FY 2008A FY 2009A (Annual Report . PROVIDED BY :.https://www.78 Billion with the only non operating factor being the growth in short term financing as a result of pressure on internally generated cash flows due to cash outflows as a result of PDP's and BFE's.

123 Long term investments 310 4.039 471 45. which included a “mater of emphasis para” explaining that PIA accounts have been prepared on a Going Concern basis due to the Government of Pakistan’s support to PIA.878 21.702) Surplus (revaluation of fixed 926 972 14.001) 2.381 5.206 Balance Sheet CY2005 CY2006 CY2007 CY2008 Property.538 105. The aforesaid situation led to an external auditor report.964 95.049 5.774 139.981 19.656 100.513) (102) (4.831) (39.005 CY2006 70.214 65.770 18.074 58.412) 3.924 4.781) 7. 1956.898 118.025 52.423 Reserves 4.281 4.880) 8.521 24.669 (CY 2007: 38.729) (3.009 Total non-current assets 60.670 FACEBOOK:.497 115.237 41.https://www.352 1.471 PROVIDED BY :MUHAMMAD HATIF SAJJAD DAR GROUP :https://www.587 69.854 14. plant and equipment 51.515 12.904) (46.193 assets) Non-current liabilities 41.160 mm).818 (7.160) (72.898 106.569) 8.449 5. which was subsequently repealed and replaced by the PIAC Act. PIA’s shares are quoted on all stock exchanges of Pakistan (PIA Website.039 Total assets 72.399 mm).136 433 720 (999) (13.498 Other long term assets 8.763) 3.728 77.127 88.370 7.376 79.125) Unrealized gain / (loss) on (15) 21 97 73 remeasurement of investments Accumulated losses (11.399) 5.882 705 4.639 5.481 66. PIA incurred a net loss of PKR 35.257 (5.880 mm (CY 2007: PKR 13.353 13.facebook.050 3.522 124. 2010).768 856 504 986 (13.849) (35.com/AccaGlobeExtended EMAIL 106.097) 33. During CY 2008.354) Total equity 10.251 15.540 4.708 PAGE:.446 (788) (11.281 (32.631 Current assets 12.390 5.948 5.264 78.774 139.415 4.463 10.601 115.395 4.943 6.809 4.562 3.441 4.242 (4.797 796 26.577) 4.528 4.941 5.652 (129) 30. PIA’s CY 2008 current liabilities exceeded its current assets by PKR 56.798 mm).050 71.481 (5.583 CY2008 89.215) (452) (12.670 Share capital 17.134 3.782) (68. Massive Losses PIA is facing mounting financial pressure.892 :.071) 328 (13.892 118.534 mm (CY 2007: PKR 37.887 (8. Income Statement Revenue Cost of services Gross profit Distribution costs Administrative costs EBIT Finance costs Other provisions Exchange loss Other operating income Profit/(loss) before tax Taxation Loss after tax Depreciation & Amortization EBITDA Fuel cost Staff cost Repair and maintenance CY2005 64.facebook. 1955 under the Pakistan International Airlines Corporation Ordinance 1955.hatifdar@yahoo.202 85.563) (37.326 (3.474 20.https://www. In addition.787 (34) 110 1.com/HaTiFDaR .010 Intangibles 112 98 103 113 Total fixed assets 51. resulting in accumulated losses of PKR 72.654 CY2007 70.556 3.com/groups/accaglobeextended Current liabilities 21.com Total equity and liabilities 72.800) (24.21 Competitor Analysis Pakistan International Airlines Corporation (PIA) was incorporated on January 10.facebook.062 95.The Airline of the Future? – A Financial & Business Appraisal of Airblue .119 (1.

Some of the reasons that can be attributed to this fall are the bans imposed in 2007 on PIA flights to EU member countries.9 57.5 69. which stands at 31% for CY2008.3% 41.6 0. A detailed review of the network was carried out to identify economically non-viable flights.facebook.6 71. As a percent of revenue fuel cost constitutes 51% of total revenue compared to the global average.1 0.149 CY2008 5.263 CY2006 5.MUHAMMAD HATIF SAJJAD DAR GROUP :. 47.5 bn in fuel costs over the year.4 67.The Airline of the Future? – A Financial & Business Appraisal of Airblue .com FACEBOOK:. as a consequence to this.463 51.1 0. 2008) Seat factor PIA’s seat factor fell continuously from CY2005 to CY2007.036 Source: Annual Report 2008 Fuel Cost Furthermore.0 0.3% 43.com/HaTiFDaR .854 33.0 35.4% FY2005 FY2006 FY2007 FY2008 Fuel cost (PKR mm) As a % of rev enue (Annual Report.hatifdar@yahoo.https://www. a number of routes were shelved and frequencies were curtailed based on the contribution of the route over and above its variable operating cost (VOC) and direct operating cost (DOC).https://www. The upshot to route PROVIDED BY :.3% 15.515 26.7 68.58 18. The aforesaid difference is mainly due to PIA’s ageing fleet.4% 13.5% 12.facebook.com/groups/accaglobeextended PAGE:.7% 11.54 18.45 19.7 27. the price of crude oil rocketed in 2008 to its highest ever level of USD 147 per barrel in July that caused an additional expenditure of PKR 15.81 18.com/AccaGlobeExtended EMAIL :.facebook.3% 45.3 32.370 30.22 Metric Revenue passengers (mm) Passenger load factor (%) Revenue per passenger (PKR) Jet fuel prices (PKR per liter) Jet fuel prices (USD per liter) Average employees CY2005 5.https://www.282 CY2007 5. .

com/groups/accaglobeextended PAGE:.5 67.facebook.MUHAMMAD HATIF SAJJAD DAR GROUP :. 2009).com/AccaGlobeExtended EMAIL :.5% 5.7 69.23 rationalization was simple: decisions were taken to close down some stations and cut down expensive foreign/overseas staff. PROVIDED BY :. of passengers (mm) Seat factor FY2007 FY2008 Annual Report. the financial statements of PIA show further decline with the national flag carrier depicting a loss of 5.3% 5. .https://www. 2008 As at the time of writing. 71.com/HaTiFDaR .The Airline of the Future? – A Financial & Business Appraisal of Airblue .https://www.2 Billion rupees due to a loss on cost control even though fuel prices have fallen depicting a declining efficiency trend for the airline (Annual Report.4% 5.7% 5.facebook.https://www.6 68.com FACEBOOK:.hatifdar@yahoo.facebook.4 FY2005 FY2006 No.

Maximum capacity utilization means “filling up” the maximum number of seats available on an aircraft. The aforesaid strategy resulted in high seat factors despite the current economic recession. The Company has the lowest sales commission structure in the industry and seeks to increase sales through its sales offices. flight delays and luggage losses are common occurrences in routes that have stopovers.com/groups/accaglobeextended PAGE:.hatifdar@yahoo. Furthermore. The Company strategically adopted a ‘single passenger class’ strategy as it would not be feasible for the company to compete on business class with a fleet of single aisle aircraft.com FACEBOOK:. Maximum Capacity Utilization . internet and call centers.com/HaTiFDaR . the internet and call centers. In other words. check-in.Airblue operates the A320 family aircraft and benefits from cost efficiencies in employee training and maintenance. company maintained sales offices. A single type of aircraft fleet ensures a cost efficient and productive workforce. Revenue Management System . It is pertinent to mention here that the Company has the credit of introducing E-ticketing in Pakistan. which cause further costs to be incurred.facebook.Point-to-point networks are cost effective. refueling at connecting hubs causes extra fuel costs to be incurred. This is because airlines that have connecting flights routinely pay airport taxes when they stop at connecting hubs. Airblue Operating Model.https://www.com/AccaGlobeExtended EMAIL :.https://www. Point-to-Point Networks .Airblue has low distribution costs through its sale agents. we now turn our attention to identifying the business model that allows the airline to enjoy this growth. weight & balance. which will further reduce distribution expenses in the future.The airline has developed a unique airlinewide.24 Business Analysis As the financial analysis proves that the airline has been financially viable.https://www. Revenue Management System & the Target Market – Observations – (Annual Reports 2007 – 2009 & Company Press Reports 2006-2009) Single Aircraft Type .facebook. web-based system that provides reservations.The Airline of the Future? – A Financial & Business Appraisal of Airblue . Low Distribution Costs .Airblue’s fleet is all coach class.facebook. Single Passenger Class . maintains low turnaround times and achieves high utilization rates on its fleet. the plan is to identify the source of competitive advantage for the firm. Point-to-point service enables the Company to make more round trips per aircraft per day. PROVIDED BY :. This is achieved by forecasting demand and supply of a particular route and adjusting fares accordingly by offering discounts or charging premiums. In addition.MUHAMMAD HATIF SAJJAD DAR GROUP :.

Synthesis – Porter’s Generic Strategies Judging by the aforementioned discussion. The airblue intranet system provides requisite functionality to operate the business in a way that ensures a paperless environment. The use of predatory pricing allows for maximum utilization and targeting of available resources which hints at allocative efficiency. industry structure too can be a source of competitive advantage.com/groups/accaglobeextended PAGE:. 2008).com/HaTiFDaR . follow predatory pricing. Furthermore. which results in huge savings on reservation charges. which has now become an effective tool to estimate demand and tweak fare structure as per demand and supply situation.https://www.MUHAMMAD HATIF SAJJAD DAR GROUP :.https://www. Combine the two.facebook. Industry Structure – A Source of Competitive Advantage? Many times. a source of competitive advantage enjoyed by the airline is its ability to undertake predatory pricing and operate through a low cost operating base. airblue has used a company specific reservation system.facebook. The analysis is presented on the next page in the form of an industry review. minimizes staff number and provides real time management information to both the functional operating areas and senior management. aviation consulting companies and senior executives of different regional airlines.https://www. It is pertinent to mention here that it would not be easy for any airline to replicate this system due to heavy cost of migration.25 revenue calculation and real-time management information. the company has kept its focus broad while its cost saving strategy (as detailed above) has allowed it to become productively efficient. internet based systems and its in house revenue management system.The Airline of the Future? – A Financial & Business Appraisal of Airblue . 2002). you have an airline which is economically efficient (Grant. Hence. 2008).facebook. By not differentiating between business and economy class or targeting a specific market subset. The Company has a complete record of all flights since the launch of its operations. we find that the company employs a cost leadership strategy with a broad market focus as described by Porter in his generic strategy model (BPP. The aforesaid in-house system has won recognition from industry experts. PROVIDED BY :. Porter’s Five Forces Analysis is a good proxy at ascertaining what drives industry structure and whether the same can be a source of competitive advantage for competing firms (BPP.com FACEBOOK:.com/AccaGlobeExtended EMAIL :.hatifdar@yahoo. thanks to its heavy reliance on information technology. that is.

lack of strong sponsor support and in the case of PIA (the national flag carrier). lack of investment in new aircraft.com/AccaGlobeExtended EMAIL :. rivalry on the international scene is higher as compared to the local sector on account of higher number of operators. after having made a great start on the international scene. massive politicization (Dawn Press Report. the international sector is more competitive and the increased choice does represent elements of moderate buyer power.https://www. The small number of operators mitigates any consumer choice that may pose a significant buyer power threat.https://www.The Airline of the Future? – A Financial & Business Appraisal of Airblue . However.hatifdar@yahoo. However. Threat of new entry remains low as a result of the natural obstacles faced by any potential entrant with regard to the dynamics of the industry where cost control and strong sponsor support is a must for survival.MUHAMMAD HATIF SAJJAD DAR GROUP :.com/HaTiFDaR .com/groups/accaglobeextended PAGE:. Negative industry trends further these obstacles as the failure of many local operators sets a bad precedent for potential entrants while the law and order situation in the country keeps many foreign operators (particularly European operators) away as the flow of their target market to and from Pakistan remains low.26 PAKISTAN'S COMMERCIAL AIRLINE SECTOR – BRIEF REVIEW On the domestic scene. market share.facebook. 2010).https://www. This is the result of many factors including but not limited to fuel costs. the Pakistani airline industry has waned over the years in terms of presence. Industry Structure Degree of Rivalry The degree of rivalry in the Pakistani market has dropped significantly as a result of a small number of domestic and international operators. aircrafts and routes operated. number of operators. Supplier power remains high as cost pressures from rising fuel costs are out of the control of the operators. Lack of sponsor support and a failure to curtail operating leverage to manageable levels through increasing load factor per flight has been the prime reason for the withdrawal of local operators while the threat of terrorism and tough competition by Gulf based airlines on traditional destinations of the Pakistani traveller has pushed away European operators leading to a high concentration ratio.com FACEBOOK:.facebook. Threat of New Entry Buyer Power Supplier Power PROVIDED BY :.facebook.

facebook. low buyer power.8% (IATA.com/AccaGlobeExtended EMAIL :.com/groups/accaglobeextended PAGE:. Bear in mind that Pakistan is a capacity constrained market – adequate fleet size is not available to serve demand. 2010).4% within which domestic traffic has grown at a 35-year CAGR of 5.com FACEBOOK:.https://www. This corresponds well when compared to a global average for last the 20 years – 4.hatifdar@yahoo. the lack of proximity coupled with the geographic factors of traditional destinations of the Pakistani consumer present a natural hedge for operators against alternative mechanisms. Nevertheless. low rivalry and low threat of new entrants coupled with the lack of any formidable substitutes means that any airline which wishes to avoid a loss making situation in this scenario has to hedge supplier costs.6% during the corresponding period. PROVIDED BY :.facebook.com/HaTiFDaR .MUHAMMAD HATIF SAJJAD DAR GROUP :. As can be inferred from the discussion so far. that is fuel.facebook. A capacity constrained market.https://www. to a great extent.5% and international traffic has grown by 7. we see that the local industry structure also provides Airblue an edge over its competitors and hence proves that there are significant factors that favor the airline and work in tandem with the factors identified in Porter’s generic model to help the airline survive. Synthesis As can be inferred from the above.https://www.The Airline of the Future? – A Financial & Business Appraisal of Airblue . The market size is 11 million + passengers growing at a 35-year CAGR of 6. the efficient operating model of the airline has allowed it to reap significant cost savings with its ability to do predatory pricing and passing on the cost of higher fuel to consumers without impacting brand equity adding to its competitive force. On the international sector. the market for air travel in Pakistan is lucrative and opportunistic operators stand to gain much if they are willing to take the risks of operating in such a competitive environment provided they do not repeat the mistakes that their predecessors and colleagues have made.27 Threat of Substitute Products The lack of widespread technological advancement coupled with lower focus on a quality experience by operators in road and rail travel in the country making threat of substitute products low on the domestic scene.

https://www.com/AccaGlobeExtended EMAIL :.facebook. landing and overflying rights are dependent on intercountry government relationships  Deterioration in geopolitical environment S W T  Pakistan is a supply constraint market  Favourable demographic structure.The Airline of the Future? – A Financial & Business Appraisal of Airblue . delays can occur due to high aircraft utilization  Strong brand equity  Safe and secure  Captive passenger base  Relatively young fleet  Unique airline-wide web based system & revenue  New LCCs being management software provides established in the a sustainable edge over its region competitors  Traffic.hatifdar@yahoo.com/groups/accaglobeextended PAGE:.com FACEBOOK:.MUHAMMAD HATIF SAJJAD DAR GROUP :.facebook.https://www.com/HaTiFDaR .28 Presentation of Findings  Perception of low price means compromising safety  In case of unplanned repair & maintenance. young populace (per capita income is rising)  Ethnic population on the rise in UAE and UK  Rapid urbanization  Strong economic growth  Opening up of Saudi Routes O PROVIDED BY :.facebook.https://www.

The important differentiator between it and the rest of the two players in the local industry. was its strategic positioning as an airline that specifically targeted a market that was looking for cheap air travel and at the same time established itself as a low cost producer.com FACEBOOK:. At the same time.The Airline of the Future? – A Financial & Business Appraisal of Airblue . airlines should realize that any seat not sold implies output and revenue lost forever (Grant.facebook.com/groups/accaglobeextended PAGE:. airlines that are in their stages of infancy or mid life should invariably try and adopt an efficient working style focusing on a low cost base as much as possible. I would like to state. Specifically.https://www.29 Conclusions & Recommendations The success of Airblue can be attributed to the following: Low cost – productively efficient High Capacity Utilization – resource allocation efficiency Predatory Pricing Techniques High Use of Internet & E Commerce systems Favorable Industry Structure While it would certainly be hard to find such a combination of factors for each and every airline. in case we talk about it adaptability of Airblue’s business model.https://www. Hence. would also have to take stock of the fact that the industry has become increasingly competitive and has important implications. the more efficient the airline and the more its ability to absorb cost pressures outside of its control. it should be the target of the airlines of the future to ensure maximum capacity utilization. the internet based systems reduce costs and allow wider reach and marketability. On an ending note. that the airline of the future. PROVIDED BY :. implies that for investor confidence to return. The lower the cost base. 2002). the airline of the future. Airblue’s case also depicts the importance of E systems and E commerce and this too has important implications of any future business model for the airline industry.https://www.facebook.com/AccaGlobeExtended EMAIL :.hatifdar@yahoo.com/HaTiFDaR . The favorable industry structure has helped Airblue’s cause well.facebook. Airlines of the future will also have to look into this factor and see which strategic positioning serves them best in terms of exploiting the maximum amount of benefit available.MUHAMMAD HATIF SAJJAD DAR GROUP :.

MUHAMMAD HATIF SAJJAD DAR GROUP :. (2009) Annual Report 2009. Retrieved From: http//: www. Islamabad: Airblue Limited. 7th Edition.hatifdar@yahoo.https://www. Retrieved From: http//: www.com FACEBOOK:. IATA Staff.The Airline of the Future? – A Financial & Business Appraisal of Airblue .facebook.com/articles/subject.com [Accessed 12th May 2010] The Economist (2010).https://www. Company Information & Press Reports. [Online].com/AccaGlobeExtended EMAIL :.org [Accessed 12th May 2010] PIAC (2010).facebook. Islamabad: PIAC. (2008) Annual Report 2008.airblue.htm [Accessed 12th May 2010] IATA (2010). Industry Information. (2002) Stanlakes Introductory Economics. [Online].facebook.piac. Retrieved From: http//: www. The Economist Staff. J. London: BPP Learning Media. Company Information & Press Reports. (2008) Annual Report 2007. Islamabad: Airblue Limited. (2008) Annual Report 2008. (2009) Annual Report 2009. BPP. Grant. Pakistan International Airlines Corporation. [Online].pk [Accessed 12th May 2010] PROVIDED BY :. Retrieved From: http//: www. Pakistan International Airlines Corporation.30 BIBLIOGRAPHY Airblue Limited. Susan. [Online]. (2010) ACCA Paper P3: Business Analysis. PIAC Staff.com/groups/accaglobeextended PAGE:.economist.com/HaTiFDaR . London: Longman Airblue Limited (2010). Islamabad: PIAC Schweser (2009) CFA Level One: Financial Statement Analysis. Airblue Limited. Airblue Limited.https://www.com. Articles: Airlines & Defense. Islamabad: Airblue Limited. London: Kaplan.iata. Airblue Staff.

com/AccaGlobeExtended EMAIL :. [Online].https://www.The Airline of the Future? – A Financial & Business Appraisal of Airblue .hatifdar@yahoo.pk [Accessed 12th May 2010] Dawn Newspaper Press Reports & Clippings.https://www.org. Economic Data.31 State Bank of Pakistan (2010).2010 PROVIDED BY :.com/HaTiFDaR .sbp.facebook. Retrieved From: http//: www.com/groups/accaglobeextended PAGE:.https://www. SBP Staff.com FACEBOOK:.MUHAMMAD HATIF SAJJAD DAR GROUP :.facebook. 2006 .facebook.

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