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1. Fixed Charge Coverage Ratio:

Selling, general and administrative expenses, Interest on term loans may be broadly treated as
fixed costs of the company as they do not bear a direct relation with generating revenue.
Gross- profit being also the contribution from continuing operation.
2012 2011 2010
British Airways: Revenue (m) 10,827 9,987 7,994
Direct Cost of revenue ((m) 4,337 3,789 2,877
Gross profit (m) 6,490 6,198 5,117
Administrative expenses (m) 5,750 5,244 5,058
Selling costs (m) 466 436 290
Interest payable (m) 173 161 157
Total fixed costs (m) 6,389 5,841 5,505
Fixed charges cover ratio 1.01 times 1.06 times 0.92 times
Ryanair: Revenue (m) 4,390 3,629 2,988
Direct cost of revenue (m) 1,698 1,321 980
Gross profit (m) 2,692 2,308 2,008
Administrative expenses (m) 1,829 1,665 1,461
Selling costs (m) 180 155 145
Interest payable (m) 109 93 72
Total fixed costs (m) 2,118 1,913 1,678
Fixed charges cover ratio 1.27 times 1.20 times 1.19 times

(Direct cost of revenue = Fuel and oil costs + Maintenance, materials and repairs)
(Selling cost = Marketing costs)
(Administrative Expenses = Total cost of revenue- Direct cost of revenue)
(Interest payable = Finance Costs)
(Fixed charges cover ratio= Gross profit/Total fixed costs)

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2. Return on Capital Ratio.

British Airways:
2012 2011 2010
Net profit after tax and interest (m) (100) 672 (425)
Average Capital & reserves ((m) 2,770 2,591 2,400
Return on capital ratio (%) n/a 25.93 n/a
Ryanair:
Net profit after tax and interest (m) 530 375 305
Average Capital & reserves ((m) 3,130 2,901 2,849
Return on capital ratio (%) 16.93 12.92 10.70

(Average Capital & reserves = opening equity + closing equity/2)
(Return on capital ratio= Net profit after tax and interest/Average Capital & reserves)

3. Debt Coverage Ratio:

Debt Coverage Ratio= Net profit after tax+ Depreciation + Non-Cash expenses/Loan
Installments payable during the year.
Since Fixed Loan Installments payable is not always easily obtainable from the published
accounts, for the time being this ratio analysis, we can keep it pending.
4. Days Sales in inventory ratio
Since an airlines final output (seat- kilometres) cannot be stored, this ratio is not relevant to
airline industry.
Days Sales = Total credit sales/365





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5. Accounts Receivable Turnover Ratio:

Average collection period = Trade Debtors / (Credit Sales/365)
Ideally, it should be in terms of the number of days credit sales, but this information is rarely
available from the financial statements, So total operating revenues is used.
Average Collection period in days 2012 2011 2010
British Airways 16 days 17 days 17 days
Ryanair 4 days 5 days 5 days
Trade debtors
British Airways(m) 488 460 384
Ryanair(m) 52 51 44
Total Sales
British Airways (m) 10,827 9,987 7,994
Ryanair(m) 4,390 3,629 2,988
Credit sales/day (m)
British Airways (m) 29.66 27.36 21.9
Ryanair(m) 12.02 9.94 8.18
The outstanding debtors are seen to bear the following proportions to respective sales.
British Airways 0.045 0.046 0.048
Ryanair 0.011 0.014 0.014
The Collection period is:-
British Air ways 0.045*365=16 days 0.046*365=17 days 0.048*365=17 days
Ryanair 0.011*365=4 days 0.014*365=5 days 0.014*365=5 days

Source: Published Airline Reports
(Average collection period in days= day sales in receivables)



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Since the Statement of Cash flows is not available from the published airline reports, following
ratios are not calculated. These are all supplementary ratios, not belongs to any key financial
ratios.
1. Cash Reinvestment Ratio
2. Cash flows to revenue ratio
3. Cash flows per share ratio
4. Cash return on assets ratio