View Full Version : Is 8% Roce Too Much
MR69696
11th Apr 2004, 03:28
A ? for any been counters or people in the trade about ROCE for an airline. SIA have announced they want 8% Return on Capital Employed and will go to cost cutting of S$1.6 Billion to get it. Is an airline capable of making this or has Mr you know who lost it?
Airbubba
11th Apr 2004, 03:34
Cost cutting in the airline business? Never heard of that before...
cwatters
11th Apr 2004, 18:42
I own an airline and I'm looking for investors. You can invest in my airline by buying bonds that currently pay 8% before tax. That's about 4% more than typical bank accounts BUT unlike a bank account your income and capital is only as secure as my airline. Interested? 8% not enough?
cwatters
12th Apr 2004, 12:08
It seems some of you believed me when I said I was running an airline because I got several email asking about my aircraft and routes etc.
Sorry to disapoint you but I wouldn't risk my money by investing in the airline industry for only 4% more than I can get at the bank.
Send Clowns
12th Apr 2004, 19:41
I was going to reply "Nah - I'd ask for a job :p "
LGS6753
13th Apr 2004, 20:40
Venture Capital investors (the people who generally bankroll new start-ups) are looking for around 30% per annum.
No, 8% is not enough!!
MR69696
16th Apr 2004, 05:54
Thankyou LGS6753. Do these Venture gamblers get 30% on their money or the profit of the airline, which could be more or less?
SIA is a well established airline that does not need V enture Vultures. They are one of the most profitable airlines in the world and only make 8% ROCE, just look at Delta and UA .
Maybe an airline accountant could explain this figure to a mere driver.
MR6...
I'm not a bean counter but if memory from study days serves me correctly, ROCE = Return on Capital Employed i.e. the total value of investments in the company. This would include institutional loans as well as private investments.
A return of 8% on ROCE would be calculated on the total investment value, i.e. net profits would equal 8% of the total capital invested in the company.
As regards the investment vs bank argument, there are many other aspects in addition to the basic return e.g. there may be tax implications, long term aspirations etc.
This is a hugely complex subject when it comes to airlines and other large companies.
mini :ok: