Scenario 2 The following scenario relates to two requirements. The country of Jayland has two airlines, Flag Co, its national airline, and Budget Co, a recent entrant into the market Flag Co Flag Co was government owned until ten years ago but is now operated as a private company. Its mission is to be the airline of choice for long distance travellers' it charges premium fares and operates routes from Jayland's capital city to the major airports serving the largest cities around the world Many of its fights have durations greater than 12 hours. The majority of its passengers are traveling on business and are prepared to pay high prices, however the demand for business travel is very sensitive to economic conditions its fleet of aircraft is regarded as 'ageing' by industry analysts Budget Co Budget Co was founded by a wealthy entrepreneur who invested their personal fortune in the company's equity. Its mission is to be the lowest fare airline on any route we serve. It offers flights to destinations up to three hours travel from Jayland Its fleet of aircraft are generally less than two years old. Most of its passengers are holiday makers and the demand for its fights appears to be relatively insensitive to economic conditions The following information is available for both companies Statement of profit or loss extract for year end 31 December 20x6 Total revenue Operating profit Finance costs Other non-operating costs Profit before tax Flag Co Budget Co $m 11.333 1,239 250 859 Statement of financial position (summarised) as at 31 December 20x6 Non-current assets Current assets (Note 1) Total assets Total equity Non-current liabilities Current labies Flag Co Budget Co Sm 11.972 3404 15,376 4,598 5,078 5,700 15,376 Total liabilities and shareholders equity Note 1: Current assets include inventory of $2 1m and $1 1m respectively. Other information for year end 31 December 20x5 Flag Co Budget Co Aviation fuel litres consumed (millions) 2434 Avaliable seat kilometres (millions) 21.423 Passenger seat kilometres (milions) 14.201 Operating gearing (contribution/prost before interest and tax) 950% Help Format Sheet Scenario 2: requirements (a) Analyse the financial performance of the two airlines, including reasons for the differences in the two businesses' performance. Note: Use the headings profitability, fiquidity and to structure your answer. There are up to six marks available for calculations QB1U6XxI 114 11 Q