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International and Responsible Financial Management Assignment Sample

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International and Responsible Financial Management Assignment

International Finance and Responsible Financial Management

The impact of Covid-19 has been very devastating on the most of the countries around the world but there are few countries that has been affected worst and in that group of nations one of them is the United Kingdom. The people has lost their jobs and also their dearest ones but the financial impact of the pandemic has been deteriorating. The airways are one of the most affected businesses around the world due to the lockdown restrictions around the globe (Prihartono & Asandimitra, 2018).

Disaster Brewing from Pre Pandemic Period

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The British Airways is one of the largest in the country that carries travellers to the most of the destinations around the globe. But the impact of the Covid-19 has been brutal on the fiscal health of the organisation. The parent company of the organisation, International Airline Group, announced to fire its 12,000 employees due to the financial stress the company was bearing even before the pandemic. The company has been in the financial stress for years as its revenue has been declining for last five years. And the company has not been able to buy new fleet which is the objective for the management for the years (Kembauw et al., 2020).

Hit the Rock bottom during the Covid-19 Phase

The stringent lockdown measures were put in place in the United Kingdom in the late January of 2020. And it got worse for the company as it was for others to not be able to operate and the loss of revenue was very harsh for the organisation. The management of the company was in high waters in the lockdown phase as to cut down its expenses the company has announced to cut down its workforce as well as the routes it covers after the end of the lockdown restrictions in the United Kingdom as well as in the other regions. The company also has several of its fleet on lease and the lease payment has to be made by the company irrespective of its operations or the happening of the extraordinary events such as the Covid-19 pandemic (DAYI & ULUSOY, 2018). This has put the financial burden on the company and the airlines companies are expecting to deliver the services to the full capacity in the next two to three years as the travelling habits of the commuters has changes as there is fear among them. The step to cut down the expenses by firing the employees is a desperate measure of a company with its revenues in the red zone. The company is required to diversify the services it offers to the customers. The company has been in financial mismanagement for the last few years, and they have not been able to generate some positive returns for its shareholders. The shareholders have been paid dividends regularly as a bait to have faith in the management of the company. But on the other hand, the dividend is paid out even when the company has very fluctuating returns overtime. It is a worrying issue on part of the company as they are not utilising the income as retained earnings to expand its operations or to buy new fleets. And the Covid-19 phase also reduced the shareholders wealth as the company's reserves and surpluses has declined as they have used it to pay its short-term obligations and the salaries of the employees (Kirac? & Aydin, 2018).

What next?

The corporate objectives of the company have also altered after the happening of the Covid-19 pandemic. The British Airways has to alter their objectives as now the company is operating on the fewer routes after the end of the lockdown restrictions and surely the revenue generating capacity of the company has been affected due to it. The company's plan to invest into new fleets is now put on hold for the next two to three years or the time till the company is able to operate to its full capacity. The management has also decided to put a contingency fund for the extraordinary events such as Covid-19, which will be able to keep the company liquid for the period of at least six months. The management has also announced in the meeting that they will cut down all their unnecessary expenses and be able enhance the wealth of shareholders in the next four to six quarters. The company is also looking forward to have a restructuring of its finance in the next six months after the nod from the government, which will benefit the company as they have plan to reduce their debt or to turn the debt into equity (Quang, 2017).

References

DAYI, F., & ULUSOY, T. (2018). Evaluating Financial Performance With Minimum Spanning Tree Approach: An Application In Airlines Companies. Electronic Turkish Studies13(30).

Kembauw, E., Munawar, A., Purwanto, M. R., Budiasih, Y., & Utami, Y. (2020). Strategies of Financial Management Quality Control in Business. TEST Engineering & Management82, 16256-16266.

Kirac?, K., & Aydin, N. (2018). Factors that determine the capital structure: An empirical study on low-cost airlines. Scientific Annals of Economics and Business65(3), 227-246.

Prihartono, M. R. D., & Asandimitra, N. (2018). Analysis factors influencing financial management behaviour. International Journal of Academic Research in Business and Social Sciences8(8), 308-326.

Quang, N. H. (2017). Impact of working capital management to business efficiency of association of Asia Pacific Airlines. International Journal of Mechanical Engineering and Applications5(4), 8-13.

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