American Airlines vs. Southwest Airlines

Résumé du document

The Airline market is facing problems across the years. Before, national companies were leader in their countries, but with the opening of the airline market, the deregulation of the industry and the globalization phenomenon thousand of new airlines have borne. What does it mean? Traditional Airlines companies have now to make the differences with low cost ones in order to keep their competitive advantages and remain references on the global scale. Thanks to this largest offer, people take more and more the airplane. In the US, the commercial aviation has increased importantly since the end of the World War II. Today, in a low fare environment, the main companies have decided to create partnerships with smallest ones, in order to be dominant and to be difficultly competed. (Air France-KLM for instance which is now the leader on the global scale.).

Extraits

[...] American Airlines vs. Southwest Table of contents Introduction 3 I. Financial Definitions 4 II. The Financial Analysis 8 A. The Liquidity Ratio 8 B. Solvency Ratios 13 C. Profitability Ratios 15 Recommendations and Conclusion 19 References: 22 Introduction The Airline market is facing problems across the years. Before, national companies were leader in their countries, but with the opening of the airline market, the deregulation of the industry and the globalization phenomenon thousand of new airlines have borne. What does it mean? [...]

[...] American Airlines has more difficulties to cover its liabilities. Its management seems to be more risky because the company gets paid with long delays and its inventory turnover is too long. That can explain that it has higher costs. Solvency Ratios The Solvency Ratios measure the ability of the company to survive over a long period of time. We have to take care of the company's post tax net profit and the depreciation. More the solvency ratios are high; more the company is on a good health. [...]

[...] (The smaller is better) (Payout Turnover: Cash dividends declared on common stock / Net income It indicates the percentage of earnings distributed in the form of cash dividends. The lower the payout ratio is, the higher will be the amount of earnings will be, it means that if it's high the company will have a strong financial position. Normally, mature company such has AA, should have a high payout turnover. In this case, it is the contrary. As AA hasn't payout dividend. Whereas Southwest, with has distributing its earnings in the form of cash dividends. [...]

[...] In fact, the investment that it do aren't enough big as American Airlines ones. Recommendations and Conclusion As we already explained in our introduction, airlines companies have been able, across the years, to face several financial problems due to external phenomenon. The different financial crisis, even the September 11th 2001 events have changed the customers' behavior. Travels are expensive, low cost are borne and people do not feel as safe as before when they take the airplane because of the increasing of air crashes. [...]

[...] We can't predict today what is going to happen, but we can suppose the AA situation should increase in the long term if its investments are enough strategic to succeed. References: http://financial-dictionary.thefreedictionary.com/, I found financial definitions on this website: financial analysis/financial statement/GAAP/Balance Sheet/Income Statement/Cash Flow Statement http://www.accountingformanagement.com/limitations_of_financial_statement_an alysis.htm “Limitations of Financial Statement Analysis”. Thanks to the class lessons and this website, I have been able to understand and identify the financial statement analysis limitations all the definitions given in this first part of our study come from the online financial dictionary. [...]