BA/Ryanair Accounting

[Meering]

Interesting posting on a financial message board. Anyone know if the figures are in the right ballpark:

http://boards.fool.co.uk/Message.asp?mid=7070836

Meering

[Hand Solo]

Did anyone say dot.com?

[cat 3a]

Very interesting......for people interested in Ryanair Accounting

[mikeycollins]

As an ex accountant I think this is a non story. I think both methods are ok. Look at it this way. If you have a 4 year old car and have it serviced and MOT'd tomorrow..is it worth more than it is today? Of course it is. This article also neglets to say if BA are increasing the capital valuation of its aircraft after each overhaul. It simply says that costs are charged to P&L. Actually the more I think about this the more shifty this story gets. What I believe the author is doing is telling the P&L story of BA and the Balance sheet story of Ryanair. They, of course are interlinked.

[inverted flatspin]

Of all the things that MOL tends to fudge most is numbers, He consistently stretches the truth.

For instance on the add for pilot recruitment on this site he claims 150 new 737's

Actually it is 100 new 737's

With the option for 50 more

and this 100 includes delivery positions already assigned to Ryanair so the real number is somewhere around 89 (It is hard to figure out exactly because Ryanair are lying and Boeing are being a little vauge on their website)

In any case 89 or whatever it is, is not 150

Airfares: How many people actually get on a flight with Ryanair paying the advertised fare? who knows, but from my experience not many.

Accounting practices a bit iffy, does this surprise anyone?

This kind of behaviour could well kill the Goose that laid the golden egg, just look at Enron and the accounting done by Arthur Andersen.

[tinyrice]

The P&L strategy of booking expense in the current period, does reasonably assure that there are no major suprises down the road. Any balance sheet in todays marketplace is suspect until the quality of it's earnings, and the valuation methods applied to its assets are clearly understood.

[gyrohead]

Invertd Flatspin.

It is interesting that you should mention Enron and Arthur Andersen in the same breath as Ryanair. Companies that have collapsed or are now in trouble because of shoddy or downright criminal accounting practices should be a warning to all potential investors. Just because company X is in the headlines as being "succesful" financially should be more of a reason for the potential investor to be cautious. I have always wondered whether Ryanairs financial "success" has been a result of their actual operating model or whether the company has been propped up by gullible and unsuspecting petty investors. Time will tell!:cool:

[moe]

Hi folks,

There is something else in the accounts which is quite alarming. Last quarter profits were up a large amount. However nearly a quarter of this was from intrest from cash investments. This cash was raised to fund the future fleet expansion. It doesn't take an accountant to work out what will happen.

The plain fact is that Ryanairs yield is falling through the floor. To keep the load factors up the fares are dropping. When large carriers report this the city downgrades. For reasons like above Ryanair are getting away with it. But for how long?

Sold mine!!

[twistedenginestarter]

How many people actually get on a flight with Ryanair paying the advertised fare?

I have to jump to MOL's defence here. A few days ago I booked weekend flights for 3 people (in May) and got £8.99 tickets. I could have got some early on Friday morning for something like 89 pence!

Of course when you add everything in it got to £50 return which is not a lot less than I could have got with Sabena, BA or BMI but Stansted is more convenient for this group of people.

[hobie]

I must say that I would be quite happy to capitalize major expenses ....

e.g. a major maintenance expense of say 480,000 dollars that is expected to cover an operating period of say 12 months is capitalized and 40,000 dollars charged to the P&L each month ...... if the remaining life of the aircraft was say only 6 months then the monthly charge to the P&L would of course be 80,000 dollars ....... Net Investment and return on investment will be negatively affected but the P&L will be much easier to judge

One thing that worries me about the Author of the article mentioned is his reference to "Rust Buckets" ...... I consider this to be an affront to all the National Regulatory Agencies and Pilots/Engineers that keep the aircraft flying ..... I shall say no more!

[FlyingV]

Sounds OK to me. All Ryanair is doing is spreading the cost of maintenance over the period of time that maintenance gives a return to the company.

Also, while this periods maintenance costs may not all hit the P&L today, costs of maintenance performed over previous periods will.

The net effect is a smoother (and therefore arguably more realistic) report of finances.

Of course, none of this matters if you really, really hate Ryanair anyway ;) And they say love is blind :rolleyes:

Regards,
V.

[Young Paul]

Surely the point is that the cost of this maintenance will have to be met at some point down the line. I have no doubt it is acceptable accounting practice - but it is going to hit the profit somewhere. Presumably we might expect to see MOL selling at least some of his shares at the point at which some of the maintenance bills start to come home to roost.

[sunnykid]

These deferred amounts are included in the closing
valuation of the aircraft.

The question to ask is whether the closing valuation
reflects the Net Value / Realisible Value. I don't here
the Investment Analysts screaming about the balance
sheet - and Ryanair has come under a lot of scrutunity.

Anyway, if you consider the utilisation of the fleet and the
average age of the aircraft, these amounts could not
stay on the balance sheet for too long

[52049er]

I tjhought the interesting here is not over which is the right or wrong way to file accounts (happy to leave that to the PRofessional Auditors rumour neTwork Society) but that if BA accounted like Ryanair they would have made a £1bn profit last year, and if Ryanair did it like BA they would have made a loss.

[sky9]

Surely if you have 30 aircraft all getting maintained it really shouldn't matter whether you take the financial hit on he maintenance as it comes or against future use. The effect should average out to approx. the same.

With regard to Ryaniar's costings in an earlier thread I suggested that he would sell the a/c to a leasing company and pocket the difference. In a subsequent newspaper report MOL did suggest that their depreciation policy was on the purchase price on a reasonable timescale.

[MarkD]

FR making profits from "investments" is not new.

Have seen this flagged before.

[FlyingV]

I wonder if there is a professional accountants bulletin board where they make knowledgeable posts about dodgy practices by pilots ?

Perhaps in that alternative universe it is the high-cost airlines who are demonized :D