United Airlines, Southwest Airlines, airline industry, financial ratios, liquidity ratios, asset productivity, profitability ratios, market value ratios
The airline industry is a particular sector, subject to many changes because of external factors. This report is aimed at analysing the financial results of two big American airlines companies which had very different figures during these last 6 years. On the one hand, there is Southwest Airlines Company that has been for many years among the most admired companies in the US and consistently among the most profitable of US airlines. And on the other hand, the United Airlines company which, like most of the large US airlines, has had several financially difficulties in the last few years. In fact, United Airlines filed for bankruptcy in December 2002.
We will write an analysis of these two companies' financial performance, using ratios, in order to understand why these both companies have realized different results during these last years, why one has encounter success while the other one hasn't.
We will also talk about the background of the airline industry in order to better understand the situation. In fact, over the past several years, the airline industry and consequently all the airlines companies have been faced with several business challenges.
After having done an analysis of the airline market and a short presentation of the 2 concerned airlines companies, we will study several ratios concerning the companies profitability, liquidity, efficiency and financial risk ratio in order to do a complete analyse of the situation.
[...] In fact, Southwest Airlines still have better results than its competitor, has we have seen in this analysis. Concerning the Southwest Airline Company, we have to affirm that its leading position on the market is well represented in the different ratios we have established. We can say that its operating revenues have increased from between 2005 and 2006 thanks to the increase in passengers revenues Moreover its net income have increase by between 2005 and 2006 ($499). This company is staying one of the best and one presenting the best results among all competitors. [...]
[...] United Airlines employs 55,139 persons in the group. Its operating revenues increased from $ 2.0 billion, or in 2006 as compared to 2005 and by $ 2.9 billion, or in 2006 as compared to Southwest Airlines[2] The company, created 36 years ago by Rollin King and Herb Kelleher, wants to offer a stable work environment with equal opportunity for learning and personal growth to their employees. Today, Southwest Airlines flies almost 100 million passengers a year to 63 great cities all across the country, and we do it more than 3,300 times a day. [...]
[...] United Airlines vs Southwest Airlines Table of content Introduction I. Background of the airline industry II. Presentation of the 2 companies: United Airlines Southwest Airlines III. Analysis of the financial ratios Financial leverage ratios Liquidity ratios Efficiency ratios/ Asset productivity Profitability ratios Market value ratios Conclusion Bibliography Introduction The airline industry is a particular sector, subject to many changes because of external factors. This report is aimed at analysing the financial results of two big American airlines companies which had very different figures during these last 6 years. [...]
[...] Continued periods of high fuel costs or significant disruptions in the supply of fuel an affect the companies' financial results. We can see in today's news that the fuel barrel price in steal increasing per barrel on October 30, 2007). Due to the fierce competition, each airline company cannot increase its price when the price of fuel increases. It is why they try to establish partnerships in order not to suffer from big increases. These arrangements aim at protecting against rising fuel costs. Risk factors for airlines companies can also come from the weather and natural disasters. [...]
[...] This is due to their decrease of current liabilities. Moreover Southwest Airlines have decreased its cash between 2005 and 2006 whereas United Airlines have not. Companies must be careful not to have to much cash. In fact, United Airlines should invest its cash (which have been multiply by 2 in one year) instead of keeping it in its cash box Efficiency ratios/ Asset productivity Asset productivity ratios indicate of how efficiently the firm utilizes its assets. They sometimes are referred to as efficiency ratios, asset utilization ratios, or asset management ratios. [...]
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