The company selected for this business proposal is AirAsia Berhad (hereafter referred as AirAsia) and both the business and financial performance of AirAsia would be analysed from 1st January 2009 to 31st December 2011. “The company was incorporated in 2001, as a private limited liability company both incorporated and domiciled in Malaysia. AirAsia was converted into a public limited liability company on 8th June 2004 and became listed on the Main Board of Bursa Malaysia Securities Berhad on 22 November 2004. The principal activity of AirAsia is providing Air Transportation Services”. The vision of AirAsia has been “to be the largest low cost airline in Asia and serving the 3 billion people who are currently underserved with poor connectivity and high fares”.
AirAsia’s mission is to create a globally recognized brand in the ASEAN (Association of Southeast Asian Nations) and sustain profitability growth with the highest quality services and technological advancements. The philosophy of AirAsia is to make flying possible for everyone. Since 2001, AirAsia had swiftly broken travel norms across the globe, where it is a leading low-cost carrier that does not need further introduction in ASEAN. With the tagline “Now everyone can fly”, AirAsia ferried 135 million guests as at 31 December 2011. Furthermore during the past decade AirAsia established successful ventures with Thai AirAsia, Indonesia AirAsia, AirAsia Philippines, AirAsia Japan and AirAsia X (primarily focused on long-haul segment), allowing AirAsia to take low-cost flying to a further level with a route network that spans over 20 countries.Reasons for doing this business proposal Prior knowledge
The main reason for selecting this topic is to apply prior knowledge obtained from the business and financial modules previously covered in the ACCA syllabus. Moreover, financial analysis is crucial in interpreting results disclosed in the financial statements. Availability of information
Also availability of annual reports and other business sources provided me with adequate information to analyse the performance of AirAsia that further encouraged in choosing this topic. The annual reports were readily available from the company website and no time was wasted on extraction of it. Reasons for choosing AirAsiaExtensive growth of AirAsiaIn January 2002, AirAsia had only two airplanes that had been flying to six destinations within Malaysia. During the past decade AirAsia had significantly expanded to fly over 80 destinations with a fleet of 97 aircrafts as at 31 December 2011. Hence I was motivated to find out how AirAsia managed to achieve successful growth and a healthy bottom line. Famous in South East Asia (SEA)
AirAsia is one of the largest and most popular low cost airlines in SEA, which had facilitated travelling at affordable prices; which is the main reason behind passengers preferring AirAsia for both domestic and international flights. Moreover the destinations flown by AirAsia covers more hubs compared to other airlines and passengers are presented with bundled travel package options, which include air ticket, hotel accommodation, travel services. In addition, AirAsia was chosen as the “World’s Best Low-Cost Airline” awarded by Skytrax World Airline for four consecutive years (from year 2009 to 2012). Moreover, in the year 2009 and 2011, AirAsia was awarded with “Best Asian Low-Cost Carrier” award by TTG Travel Awards. Project objectives and research questionsProject objectives To analyse and evaluate the financial performance of AirAsia over a 3 year period by comparing its performance against Tiger Airways Holdings Limited using relevant financial ratios. To analyse and evaluate the business performance of AirAsia over a 3 year period using the remaining three perspectives of the Balance Scorecard technique To assess, with reasons whether AirAsia is a worthwhile investment opportunity Research questionsHow did AirAsia financially perform in comparison with its competitor Tiger Airways?
How does AirAsia’s financial performance impact on its shareholders? How was AirAsia’s business performance within the 3 years? How does AirAsia manage to sustain its ‘no-frills’ strategy and position amidst the increasing competition? Sources of informationPrimary data sourcesPrimary data refers to new data collected by a researcher relating to the issues of the study. The methods used to collect primary data involve questionnaires, observations, surveys and interviews. The researcher who collects the data is referred as primary user(s). Primary data would not be used in this project as it is time consuming to collect such data and respective information is readily available. Therefore information available from secondary sources will be used to meet the project objectives and research questions defined earlier. Secondary data sourcesSecondary data refers to data gathered by someone else and already used for their (primary users’) purpose. The person undertaking the research is referred as the secondary user, who would undertake desk or library research for the said project. The main sources of secondary data used for project are:
Textbooks were used as the main source of information as they were complied by people who have vast knowledge in the subject area and tend to be more reliable and accurate compared to other sources. The main types of textbooks referred in this project for financial analysis are ACCA BPP study materials and academic reference books such as “Accounting Principles” by Weygandt, Kimmel and Kieso and “Financial and managerial accounting” by Horngren, Harrison and Oliver. To analyse the company’s business performance, “Alignment: using the balanced scorecard to create corporation synergies” by Kaplan, Roberts and Norton had been referred to. Electronic sources
E-sources were used due to convenience and effectiveness. The main e-source used was AirAsia’s website to abstract the annual reports and all information regarding the company. Additionally, Internet had been used for further reading to enhance academic knowledge and obtain relevant newspaper articles and other information about the company.