FINANCIAL ANALYSIS

Financial Analysis - The Symptom of the Historical Disaster



Financial Analysis - The Symptom of the Historical Disaster

Introduction

During 1990s, when Lufthansa was in the major crisis, Swissair would have more than sufficient amount of funds to take over the German national air-carrier. Fortunately, the brilliant insight management team of Lufthansa, lead by Jürgen Weber was successful in stabilizing and bringing the company to the excellent condition with the sustainable growth strategy.

Back to Swissair, the graphic demonstrates the change of stock price of SAirGroup. In 1998, the company was extremely wealthy because of having plenty of assets which collected over several decades.

Since the beginning of the year 2001, the stock price of SAirGroup had dropped dramatically and constantly throughout the following months. This arose out of the investment failure which forced the company to gain loss in the expansion strategy from the previous years. The following table presents an annual result of the corporate in 2000. SAirLine, the passenger transportation service of SAirGroup consisted of several affiliated companies such as Swissair and Crossair. The other airline companies such as Air Libertè, Sabena and some others are the companies which the SAirGroup had purchased their stake in different proportions. The following table summarized that all namely airline companies gained losses in 2000; this implies that SAirGroup not only gain nothing from its investment but also losing money in maintain the loss making partner companies. (Turnbull, 2006)

From the author's point of view, the share prices of the small airlines were not expensive for a giant corporate like Swissair. However, if the small airlines do not generate the profit, the investment of the leading buyer would only gain loss. As the main concept of the impressive expansion strategy is acquiring the stakes in the small airline companies then try to manage and improve them to make benefit, therefore, several evidences presented that Swissair purchased the stakes of the airlines which mostly considered as a second level or possessed the financial instability records of both cases such as AOM, Austrian Airlines, Air Europe, TAP Air Portugal, Volare, Turkish Airlines; the Polish air-carrier, LOT; South African Airways, French regional carriers, Air Littoral, Air Liberte. The Belgian national carrier, Sabena owns a record of one time profit in its forty years of operation ((Bednarek, 2001). The one time profit of the airline published in some resources and known amongst people that it happened because of the airline company had traded several of its affiliated businesses and some other assets (Romano, 1999).

According to (Bednarek, 2001) it explored that TAP Air Portugal, one of Swissair's partners gained loss at their operation for twenty two years. Although, the restructuring plan to obtain the state assistance approved by the European Commission in 1994, the airline company has been in trouble and always failed to achieve the goal of corporate, loss reduction in the first semester of the year.

Where was the possible assistance from the financial institution?

The well known fact which also confirmed by Gordon Bethune (1998), the CEO of the ...