Bankruptcy prediction for the European aviation industry: An application of the Altman model

Aviation industry is extremely vulnerable to economic turbulence or a pandemic. Over the past decade, a number of well‐known European airline brands have gone into bankruptcy, with consequences such as leaving thousands of passengers stranded abroad. The present research assesses the predictive power of the updated Altman Z‐score model (1983 and 2017) using data on European airline bankruptcies over the period 2009–2020. The results indicate that the Z″‐score (2017) for private non‐manufacturing companies shows satisfactory predictive power when applied on European aviation industry. In this study, we analyze in depth the performance of the updated Altman Z′‐ and Z″‐scores (1983, 2017), connecting airline's financial and non‐financial information, and provide a comprehensive interpretation of Z‐score predictive power. We aim to contribute to the literature by offering a unique and novel perspective on the Altman model's accuracy for the European air transport industry.