Orlando International Airport (MCO) is a financially self-sustaining enterprise. The core responsibility i s to offer organized services on both air passenger and cargo. The authority of the airport is fiscally dependent on the city for its financial leverage by approving the budget and the related debt issuances (Comprehensive annual financial report, 2019). The preparation of the financial statements of the airport follows the generally accepted accounting principles. According to the fund financial statements the net position and revenue statements of the airport, the activities depend on the fees obtained from different support (Shaban, 2018). The government is financially accountable for various components of the airport. In investigating the problem, comparison of the efficiency of the ownership of the airport is important, with the element of privatization, the management of the airport continues to face challenges related to pressure in finding more cost-efficient ways of managing the airport. Implementation of the improvement standards is significant. There is a deficiency in the internal control related to the compliance of operation and design which does not allow a smooth performance of various functions.
Source: (Yu, 2018).
Financial Analysis and Interpretation
According to the fiscal year 2019, the airport generated positive revenue and scaled up its operational performance by a wide margin compared to the past years. The reflection is on liquidity improvement. The balance on both the investment and cash went up by $5.7 million compared to the previous years where there was no major improvement (Yu, 2018). The operating performance improvement can be attributed to the proper management by maintaining the revenue and significantly reducing the expenses. The net effect before the reduction of the expenses and other revenues and expenses which are non-operating stood at $770,451 in comparison to the net loss of the 2018 fiscal year . The airport earnings before the contribution of capital and depreciation were $2.8 million in the 2019 fiscal year (Comprehensive annual financial report, 2018) This was a major improvement compared to the performance in the year 2018 which recorded $1.045 million. The improvement can be attributed to measures put in place concerning cost reduction together with the enhancement of revenue for instance the implementation of client facility charge in the 2019 fiscal year (Comprehensive annual financial report, 2019).
Delegate your assignment to our experts and they will do the rest.
The overall net position for the airport according to the records of 2019 stood at $170,876,418 out of which $10,446,169 was unrestricted and could only be released with conditions of servicing the ongoing obligations of the airport to creditors and vendors. The unrestricted investment and cash as of September 30, 2019, stood at $18,469,000 compared to the previous year which recorded $12,787,030 (Comprehensive annual financial report, 2018) The increase was because of stringent measures of cost-cutting put in place combined with enhancement of revenue for instance implementation of rental car facility for the client expense in the fiscal year 2019. According to the performance in the fiscal year 2019, the improvements went up primarily because of substantial completion of the runway, the progress of the construction declined by an approximately similar amount as other services were ongoing (Karanki, Lim, & Choi, 2020). The diagram below shows a completion of a runway
Source: (Yu, 2018).
The analysis serves as the initial step in understanding the airport's financial position. Its financial statement comprises three components that provide further details on the financial performance of the airport. It provides supplemental information that would guide any investor in making an appropriate decision by understanding the details and progress of the airport financials. The airport is a proprietary business. The financial operations are established by creating a cash flow to pay for different services (Comprehensive annual financial report, 2018). The funds for the enterprise involve a measurement focus that relates to the flow of economic resources. It is similar to the one used by other commercial entities outside the aviation industry. In the analysis, both the long-term liabilities and long-term assets is taken into consideration to understand the root cause of the identified problem at the airport.
References
Karanki, F., Lim, S. H., & Choi, B. J. (2020). The determinants of aeronautical charges of US airports: A spatial analysis. Journal of Air Transport Management , 86 , 101825. Retrieved from https://www.journals.elsevier.com/journal-of-air-transport-management
Shaban, A. (2018). Profitability and Financial Performance Indicators in US Airports-A Preliminary Investigation. Retrieved from https://commons.erau.edu/edt/387/
Yu, J. (2018). Considering Financial and Environmental Factors in Airport Efficiency Measurement: A Network DEA Analysis for USAirports. Retrieved from https://ecommons.cornell.edu/handle/1813/64928
COMPREHENSIVE ANNUAL FINANCIAL REPORT. (2018). Retrieved from https://orlandoairports.net/site/uploads/CAFR_2018.pdf
COMPREHENSIVE ANNUAL FINANCIAL REPORT. (2019). Retrieved from https://orlandoairports.net/site/uploads/CAFR_2019.pdf
