Malaysian Airlines vs Air Asia
Malaysia Airlines Introduction Malaysia Airlines, the country’s national carrier, was first incorporated as Malayan Airways Limited (MAL) on 12 October 1937. It was a joint initiative of the Ocean Steamship Company of Liverpool, the Straits Steamship of Singapore and Imperial Airways which led to a proposal to the Colonial Straits Settlement government to run an air service between Penang and Singapore. On 2 April 1947, MAL took to the skies with its first commercial flight as the national airline.
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Fuelled by a young and dynamic team of visionaries, the domestic carrier turned into an international airline in less than a decade. With the formation of Malaysia in 1963, the airline changed its name to Malaysian Airlines Limited. In 1965, with the separation of Singapore from Malaysia, MAL became a bi-national airline and was renamed Malaysia-Singapore Airlines (MSA). However, in 1973, the partners went separate ways. Malaysia introduced Malaysian Airline Limited, which was subsequently renamed Malaysian Airline System or in short, Malaysia Airlines.
Today, Malaysia Airlines flies an average of 43,000 passengers daily to some 100 destinations worldwide and holds a lengthy record of service and best practices excellence. It was the recipient of the inaugural “World’s Best Cabin Staff” award by Skytrax,UK in 2001 and continued to retain this title for 2002-2004, 2007 and 2009 – the most for any airline. In 2010, Malaysia Airlines was recognised as the ‘World’s Leading Airline to Asia’, ‘Asia’s Leading Airline’ and ‘Asia’s Leading Business Class Airline’ by World Travel Awards (WTA). This year, WTA honoured Malaysia Airlines as ‘Asia’s Leading Airline’ and ‘Asia’s Leading Airline Lounge’.
The national carrier’s engineering subsidiary, Malaysian Aerospace Engineering (MAE), has also been acknowledged as the top airline affiliated Maintenance and Repair Organisation (MRO) in the world by Aviation Week’s Overhaul & Maintenance magazine. Its current fleet includes Boeing 747-400, B777-200, Airbus 330-300, Airbus 330-200, Boeing 737-800 and Boeing 737-400. By the second quarter of 2012, Malaysia Airlines will also join the league of the Airbus A380 operators, when the first of the six aircraft ordered enters into service. The national carrier will be the eighth airline in the world to operate this biggest commercial aircraft.
Malaysia Airlines is set to join oneworld by end of 2012, adding one of aviation’s most frequent award winners to the world leading quality airline alliance. When it becomes part of oneworld, its customer will gain access to the alliance’s truly global network. It will expand oneworld’s global coverage to almost 950 destinations in 150 countries, served by a combined fleet of more than 2,600 aircrafts operating some 10,000 flights a day. AirAsia Introduction AirAsia is a Malaysian-based low-cost airline. AirAsia is Asia’s largest low-fare, no-frills airline and a pioneer of low-cost travel in Asia.
AirAsia was established in 1993 and began operations on 18 November 1996. It was originally founded by a government-owned conglomerate, DRB-Hicom. On 2 December 2001 the heavily-indebted airline was bought by former Time Warner executive Tony Fernandes’s company Tune Air Sdn Bhd for the token sum of one ringgit with USD 11 million worth of debts. Fernandes turned the company around, producing a profit in 2002 and launching new routes from its hub in Kuala Lumpur, undercutting former monopoly operator Malaysia Airlines with promotional fares as low as MYR 1.
In 2003, AirAsia opened a second hub at Senai International Airport in Johor Bahru near Singapore and launched its first international flight to Bangkok. AirAsia has since started a Thai subsidiary, added Singapore itself to the destination list, and started flights to Indonesia. Flights to Macau began in June 2004, and flights to mainland China (Xiamen) and the Philippines (Manila) in April 2005. Flights to Vietnam and Cambodia followed later in 2005 and to Brunei and Myanmar in 2006, the latter by Thai AirAsia.
On August 2006, AirAsia took over Malaysia Airlines’s Rural Air Service routes in Sabah and Sarawak, operating under the FlyAsianXpress brand. The routes were subsequently returned to MASwings a year later, citing commercial reasons. Qualitative characteristics Qualitative characteristics of accounting information refer to the characteristics that must be present in the accounting information to make it useful. These characteristics are divided into two categories; primary and secondary qualities. primary qualities The primary qualities of accounting information are relevant and reliability. a) Relevant In everyday terms, we might describe relevant as important or being related. In accounting, relevant is described as something that makes a difference in arriving at a decision. In other words, something is said to be relevant if it influences or affects the decision being made. The extent to which information is considered relevant depends on its importance in decision making and may differ between one decision maker to another. Information that is relevant to you might not be relevant to another person and vice versa.
To become relevant, the information must have three characteristics, namely feedback value, forecast value and timeliness. (i) Feedback Value Relevant information must be able to assist users in substantiating or correcting early expectations matters at hand. (ii) Forecast Value Relevant information must be able to assist users in forecasting. (iii) Timeliness Relevant information must be obtained before it becomes obsolete or unusable. (b) Reliability Reliability means that users can rely or depend on the said information to make good decisions.
This characteristic is important because users might not have the time or expertise to evaluate some information. Generally, users simply depend on the information presented by the related entity and assume it to be true. This information is then used in decision making. Reliability does not mean that the said information must be precise. This is because in accounting there are a lot of information that involves estimation and approximation that might not be precise. What is important is that the estimation and approximation made must be reliable.
Reliable information must have the following characteristics: (i) Verifiable This means that the accounting information could be verified objectively by another person using the same method. (ii) Objective Objective in this case means that the information is not biased. Information contained in the financial statements must be able to fulfil the requirements of various users and not concentrating on certain groups only. (iii) Trustworthy Information presented is based on the actual result of economic activities using specified methods. secondary qualities. The secondary qualities are comparability and consistency. c) Comparability Comparability means that the information can be compared whether among companies, industries or different periods. This will enable users to identify the similarities or differences that might exist in the said information. This characteristic is important because information that can be compared is more useful. (d) Consistency Consistency means that an entity must use the same accounting procedures in every period. It is for the purpose of enabling comparison to be made more effectively. In other words, a company cannot change their accounting procedure every year.
This does not mean that the company cannot change the accounting procedure at all. Changes can still be made, but the company must make complete disclosure in the financial statement to explain to the users why they are making the changes and the effect of the changes towards the financial statements. In summary, accounting information is only useful if it has relevant, reliability, comparability and consistency qualities. Statement Of Comprehensive Income Referring to the Annual reports for the year 2010 and 2011 it shows Air Asia gained a revenue of RM 4,495 Million for the year 2011 as compared to RM 3,948 Million for the year 2010.
There was an increase of 547 Million, However, the net profit of the company after tax have shrunk down from RM 1,061 Million in 2010 to RM 555 Million Therefore, The company’s profit after tax have reduced by RM 506 Million. Malaysian Airlines gained revenue of RM 13,901 Million for the year 2011 as compared to RM 13,585 Million for the year 2010. There was an increase of 316 Million, However, company is facing a big loss after tax for the two years A loss of RM 237. 3 Million in 2010 to a loss of RM 2,521. Million in 2011 Therefore, with this information available the investors can see that Air Asia is having a good profit after tax but Malaysian airlines is in big loss after tax. Statement of Financial Position Total asset of Air Asia as on 2010 is RM 13,240 Million and got increased to RM 13,906 Million in 2011. Malaysian Airlines had a total asset of RM 613,639 Million in 2010 and increased to RM 815,468 Million. Statement Of Cash Flows One of the important point investor should look for when investing in a potential company is the company’s ability to produce cash.
Just a pointer it is not necessary for a company that shows a profit in an income statement does not mean that it cannot get into problems later because of insufficient cash flow According to the Statement of Cash Flows in the annual report of Air Asia, The cash flow from operating activities is RM 1594 million in the year 2010 and RM 1404 Million in the year 2011 The cash flow from investing activities is RM 1868 Million in the year 2010 and RM 487 Million in the year 2011 The cash flow from financing activities is RM 1031 Million in the year 2010 and RM 300 Million in the year 2011 The net cash flow for the year 2010 is RM 757 million and RM 617 Million for the year 2011.
According to the Statement of Cash Flows in the annual report of Malaysian Airlines, The cash flow from operating activities is RM 105. 5 million in the year 2010 and RM 960 Million in the year 2011 The cash flow from investing activities is RM 3362. 6 Million in the year 2010 and RM 1341. 6 Million in the year 2011 The cash flow from financing activities is RM 2922. 4 Million in the year 2010 and RM 1310. 4 Million in the year 2011 The net cash flow for the year 2010 is RM 1851 million and RM 860 Million for the year 2011. Statement of Changes in Equity The statement of changes in equity represents a company profit or loss for an accounting period.
The items of income and expense which is recorded in the Statement of Comprehensive Income for the period, the effects of changes in accounting policies and corrections of error recognised in the period, and the amounts of investments by, and dividends and other distributions to, equity investors during the period. (didn’t find much info) ASSESSMENT OF INFORMATION RELEVANCE Information relevance refers to the feedback value, forecast value and timelines. If the net income and its components confirm investor expectations about future cash-generating ability, then the net income has feedback value for investors. This confirmation can also be useful in predicting future cash-generating ability as expectations are revised. For information to be relevant, it needs to be predictable. By looking at the data, forecast can be made whether income will be acquired. The last characteristic is timelines.
To be relevant, the data should be up to date not outdated. The annual report of both Air Asia And Malaysian Airlines is available in their official website. There, they have an archive that lets you download the annual report according to year.. ASSESSMENT OF INFORMATION RELIABILITY Sometimes, the information given by the organization is the only data that the user depends on. This could be because of lack of knowledge to assess the information and lack of time to do so. In this case, the user must make sure the information given can be relied upon. To assess reliability, we have to think about three matters which are verifiable, objective and trustworthy.
Verifiable means that the information can be validated by someone else. Both Air Asia and Malaysian Airlines annual report can be downloaded by everyone who owns a laptop or desktop. That means that the information can be verified by everyone else. From the 2009 annual income to the the 2010 net profit, it can be checked by everyone else. It is important to get someone who knows what to look for to validate the information for you. Without their validation, decision making can be hard to do. Make a conclusion that air asia is having a good profit but Malaysian airlines is going with heavy loss So its safe to invest with air asia than with Malaysian airlines