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Performance Assessment Of Major U.S. Airlines Via Cash Flow Ratios

Author

Listed:
  • Stepanyan Armen

    (West University of Timisoara, Faculty of Economics and Business Administration)

Abstract

The paper addresses the assessment of major U.S. airlinesâ€(tm) liquidity and solvency based on information disclosed in the statements of cash flows as part of their 10-K Form annual reports filed with the Securities and Exchange Commission. Conducting financial statement analysis for major U.S. airlines has generated deep interest in and a significant importance towards using various frequently used cash flow ratios to gauge U.S. airlinesâ€(tm) viability both in the short term and long term in that cash flow information is more reliable and more revealing. The main purpose of this paper is to gain a thorough insight into the financial performance of U.S. airlines for the last five consecutive years using cash flow information as a supplement to the traditional ratio analysis. For this analysis various cash flow ratios for measuring a companyâ€(tm)s liquidity and going concern status are used and described. The paper covers the cash flow analysis for both the legacy carriers (Delta Airlines Inc., United Airlines Inc, American Airlines Inc, Continental Airlines Inc., US Airways Inc) which had been founded before the passing of the U.S. airline deregulation act in 1978 and two major low-cost carriers (Southwest Airlines Co. and JetBlue Airways). All cash flow ratios for the selected U.S. carriers have been calculated based on information from their three main financial statements: the balance sheet, income statement and the statement of cash flows for the period from 2007 to 2011.The U.S. airline industry has been significantly affected by the recent economic crisis and skyrocketing jet fuel prices. Therefore, the results of the cash flow analysis show that for the most part selected U.S. airlines have liquidity problems and are likely to face financial difficulties in terms of meeting ongoing financial commitments in the long term which, in fact, explains why major U.S. airlines are highly leveraged being dependent on external sources of financing. The paper may be useful for those who have interest in financial statement analysis.

Suggested Citation

  • Stepanyan Armen, 2013. "Performance Assessment Of Major U.S. Airlines Via Cash Flow Ratios," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 398-408, December.
    • Handle: RePEc:ora:journl:v:1:y:2013:i:2:p:398-408
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    File URL: http://anale.steconomiceuoradea.ro/volume/2013/n2/038.pdf
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    Citations

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    Cited by:

    1. Aydın, Umut & Karadayi, Melis Almula & Ülengin, Füsun, 2020. "How efficient airways act as role models and in what dimensions? A superefficiency DEA model enhanced by social network analysis," Journal of Air Transport Management, Elsevier, vol. 82(C).
    2. Slater, Philip J. & Greenfield, Alfred & Godfrey, Earl & Policastro, Felice, 2024. "Losing altitude: The impact of new leasing standards on the liquidity, leverage, profitability and valuation of U.S. and European airlines," Journal of Air Transport Management, Elsevier, vol. 117(C).
    3. Sulayman H. Atieh, 2014. "Liquidity Analysis Using Cash Flow Ratios as Compared to Traditional Ratios in the Pharmaceutical Sector in Jordan," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 5(3), pages 146-158, July.

    More about this item

    Keywords

    Cash flow; ratio analysis; financial statement; earnings; liquidity; airline industry;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General

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