Essays on Using Statement of Intermediate Balances Case Study

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The paper 'Using Statement of Intermediate Balances' is a great example of a Finance and Accounting Case Study. This report presents a CORE financial analysis of two competitive low-cost airlines, EasyJet and Ryanair. The CORE appraisal framework as described by Moon and Bates (1993) consists of four stages: A description of the Context, an Overview of the companies being assessed, an analysis of Ratios relevant to the strategic and environmental contexts of the companies, and an Evaluation of the outcomes. For EasyJet and Ryanair, the external profile of the context is the same – the competitive low-cost carrier (LCC) air transport sector.

Each company, however, has a slightly different internal context, slightly different strategic objectives, and of course, different financial states. Nevertheless, the companies are sufficiently similar in overall aspects to make a precise comparison possible. Most of the information presented in this report is taken directly from the annual reports of easyJet plc (for year-end 2011) and Ryanair Holdings plc (fiscal year ending 31 March 2012). Supporting information, particularly on the background and current state of the LCC sector, is provided by a number of articles from academic journals. Context: External Profile Ryanair and EasyJet are competitors in the low-cost carrier (LCC) market in Europe.

LCCs differ from traditional airlines in that they offer lower fares (or fares that are at least perceived to be lower) than traditional airlines, offer fewer ‘ frills’ – on-board services to passengers – operate in hybrid networks that combine the hub-and-spoke and point-to-point route models, and generally have lower unit costs than traditional airlines (Abda, Belobaba & Swelbar, 2011, p. 21). Ryanair and EasyJet have different analyses of their competitive environments.

easyJet’ s assessment focuses primarily on the overall economic environment in Europe and gives a great deal of attention to regulatory concerns that affect the airline’ s business. easyJet notes that the number of holiday travelers in the UK declined in 2011, but that the threat posed to the airline’ s business was compensated by declining business amongst its competitors. For example, EasyJet was able to increase its frequency of flights from Bristol, Glasgow, and Milan after the withdrawal or significant reduction of service by Ryanair, BMI, and Lufthansa from those airports (easyJet, pp.

13-14). In terms of the regulatory environment, easyJet makes it clear in no uncertain terms that it is very unhappy with the British government’ s decision to not convert an Air Passenger Duty tax into a per-plane tax, and instead reduce taxes charged to passengers on long-haul flights while raising those charged on short-haul flights; the latter tax, of course, directly affects virtually all of easyJet’ s customers. In addition, easyJet has concerns about increasing airspace and airport fees in several European countries, such as the UK, Germany, France, Spain, the Netherlands, and Italy (easyJet pp.

10-11). Ryanair by contrast takes a more general view of its external environment. The company explains that the LCC market is highly competitive, particularly because there are so many competitors in the market; one point Ryanair makes in its discussion – and by doing so, implying that the company is quite displeased with the circumstances – is that the EU-US Open Skies Agreement in place since 2008 allows American carriers to provide intra-Europe services, adding even more competition to the market. Ryanair also acknowledges that it is competing not only with other airlines but with alternative forms of transportation such as high-speed rail and ferry service (Ryanair, p.



Abda, M.B., Belobaba, P.P., and Swelbar, W.S. (2011), ‘Impacts of LCC growth on domestic traffic and fares at largest US airports’, Journal of Air Transport Management, 18, pp. 21-25.

Baker, C.R., Ding, Y., and Stolowy, H. (2005), ‘Using “Statement of Intermediate Balances” as Tool for International Financial Statement Analysis in Airline Industry’, Advances in International Accounting, 18, 169-198.

Barbot, C., Costa, Á., and Sochirca, E. (2008), ‘Airlines performance in the new market context: A comparative productivity and efficiency analysis’, Journal of Air Transport Management, 14, 270-274.

easyJet. (2012), europe by easyJet plc: Annual Report and Accounts 2011. easyJet plc.

Hamill, J. (1993), ‘Competitive Strategies in the World Airline Industry’, European Management Journal, 11(3), pp. 332-341.

Moon, P. and Bates, K. (1993), ‘Core analysis in strategic performance appraisal’, Management Accounting Research, 4, pp. 139-152.

Ryanair. (2012), Annual Report. Ryanair Holdings plc.

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