Performance evaluation based on financial ratios. Case: Finnair and Scandinavian Airlines

Abstract

This research aims to analyze air travel performance of Finnair and Scandinavian Airlines (SAS) based on financial ratios since aviation industry is developing worldwide and attracting a lot of attention and competition. Fundamentally, the airline industry has a strong relationship with other kinds of business and economic factors; therefore, small changes in these businesses might lead to a dramatic effect on the airline companies. This research aims to understand each airline’s business behavior under many influencers by evaluating its financial performance with each other. A comprehensive investigation into profitability, debt coverage and market value ratios will help stakeholders have an exact evaluation and broader point of view about two rival airlines in the Nordic region. There are some limitations about technical operations that will not be explained in this thesis. Two analyses are conducted based on financial data extracted from financial statements of Finnair and SAS and other relevant sources. Besides, there are mathematical calculations to support the ratio analysis. All financial ratio interpretations of the two companies are shown in each ratio analysis which gives the most correct reflection of the companies’ performances. Finally, measurement of the overall analyses presents better result of profitability, operational efficiency and decision-making process to identify the better airline.