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.).
[...] Southwest Airlines / ((16772+14308)/2) = 0,7 American Airlines / ((28571+25175)/2) = 0,9 If the ratio is high it means that the profit margin is low and vice versa. In that case Southwest Airlines has a lower asset turnover ratio than American Airlines It means that Southwest can cover easily its liabilities so that it makes a higher profit margin on its products. (the smaller is better) (Working Capital: Current assets -current liabilities It indicates immediate short term debt paying ability, in other words, the current obligations. [...]
[...] Southwest Airlines - / ((9831+9355)/2) = -0,158 American Airlines - / ((28110+25914)/2) = 0,051 Both companies have ratio under 1. It means that they are both unable to pay their current debt. It means that their liabilities are too high compared with their net cash from operation. However, Southwest seems more able to pay back its debt. (Free cash flow: cash provided by operation capital expenditures dividends paid This ratio indicates the cash available for paying dividends and expanding operation. [...]
[...] attractive prices, with national traditional companies such as American Airlines. Today and thanks to strategic acquisitions, Southwest serves 68 destinations in 35 US states with more than 3000 flights a day. According to these facts, we can imagine that the company has a real competitive advantage on the local US market. It has generated in 2008 $ millions revenue. In that study, we will to analyze both companies in order to identify their main strengths and weaknesses through a ratio analysis. [...]
[...] (Synthesis Profitability Ratio American Airlines profitability ratios show that the company has an unhealthy financial position. In fact, the company hasn't got a good profit margin, which means that it is losing money. However on the long run, it can represent a growth: as the company is investing it has high costs debts which should be reimburse in the future. In fact, if the business performance is good, it will give positive net profit as soon as the debt will be paid out. [...]
[...] It represents the source for paying additional expenses and future savings Southwest Airlines 6647) / 11 023)*100 = 39,7% American Airlines 15583) / 23 766)*100 = 34,4% American Airlines and Southwest Airlines have a good gross profit rate. That means that both companies are stable. Even if they have losses because they are investing, they should not fluctuate much from on period to another. (Profit Margin Ratio: Net income / Net sales This ratio indicates the net income generated by each dollar of sales. [...]
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