Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Southwest Airlines Accounting Analysis

3,537 views

Published on

Final group presentation for managerial accounting

Southwest Airlines Accounting Analysis

  1. 1. Financial Analysis Trent Davis | Tad Kilburn | Greg Williams
  2. 4. Analyzing Airlines
  3. 5. LUV Company Overview <ul><li>Founded in 1971 </li></ul><ul><li>550 aircraft, 72 airports serviced </li></ul><ul><li>Emphasis on customer service, company spirit, individual pride, and friendliness </li></ul><ul><li>Discount airline </li></ul><ul><li>Focus on one model of aircraft </li></ul><ul><li>Limited frills (open seating, no meals, no first class) </li></ul><ul><li>Profitable for 37 consecutive years </li></ul>
  4. 6. LUV Service Map
  5. 7. JBLU Company Overview <ul><li>Founded in 1998 </li></ul><ul><li>160 aircraft, 62 airports served </li></ul><ul><li>Many executives are former Southwest Airlines employees </li></ul><ul><li>Focus on providing low fares </li></ul><ul><li>Despite low fare focus, provide some amenities (full meal service, satellite radio, and TVs at each person’s seat) </li></ul>
  6. 8. JBLU Service Map
  7. 9. DAL Company Overview <ul><li>Founded in 1924 as a crop dusting company </li></ul><ul><li>Largest airline in the world in terms of passengers, fleet size, and destinations </li></ul><ul><li>733 aircraft, 247 airports served </li></ul><ul><li>Filed bankruptcy in 2004, emerged in 2007 </li></ul><ul><li>Traditional airline that focuses on business travelers </li></ul>
  8. 10. DAL Service Map
  9. 11. Sizing Up the Airlines <ul><li>Delta leads in Revenue </li></ul><ul><li>All three companies have grown since 2005 </li></ul><ul><li>JetBlue has the highest percentage growth </li></ul>
  10. 13. Operating Revenues
  11. 14. Expenses: Fuel and Oil Fuel and Oil   2009 % of Rev. 2008 % of Rev. 2007 % of Rev. 2006 % of Rev. 2005 % of Rev. Southwest 3044 29.41% 3713 33.68% 2690 27.28% 2138 23.53% 1341 17.68% JetBlue 945 28.76% 1397 41.23% 968 34.06% 786 33.26% 514 30.22%
  12. 15. Expenses: Salaries, Wages, and Benefits Salaries, Wages, and Benefits   2009 % of Rev. 2008 % of Rev. 2007 % of Rev. 2006 % of Rev. 2005 % of Rev. Southwest 3468 33.51% 3340 30.30% 3213 32.58% 3052 33.59% 2782 36.68% JetBlue 776 23.62% 694 20.48% 648 22.80% 553 23.40% 428 25.16%
  13. 16. Expenses: Landing Fees and Other Rents Landing Fees and Other Rents   2009 % of Rev. 2008 % of Rev. 2007 % of Rev. 2006 % of Rev. 2005 % of Rev. Southwest 718 6.94% 662 6.01% 560 5.68% 495 5.45% 454 5.99% JetBlue 213 6.47% 199 5.87% 180 6.33% 158 6.69% 112 6.58%
  14. 17. Net Income/Loss – Common Size Net Income (loss)   2009 % of Rev. 2008 % of Rev. 2007 % of Rev. 2006 % of Rev. 2005 % of Rev. Southwest 99 0.96% 178 1.61% 645 6.54% 499 5.49% 484 6.38% JetBlue 58 1.77% -85 -2.51% 12 0.42% -7 -0.30% -25 -1.47%
  15. 19. Cash and Cash Equivalents
  16. 20. Receivables, Less Allowances
  17. 21. Total Current Assets
  18. 22. Total Current Liabilities
  19. 23. Property and Equipment
  20. 24. Accounts Payable
  21. 25. Air Traffic Liability
  22. 26. Current Maturities of Long Term Debt/Leases
  23. 27. Long Term Debt and Lease Obligations
  24. 28. Treasury Stock
  25. 31. Elements of Market Value <ul><li>Southwest’s decline in market value is due to stock price drops </li></ul><ul><li>JetBlue’s market value has remained relatively stable because it issued more stock </li></ul><ul><li>Delta exited from bankruptcy then issued more stock, buoying its Market Value </li></ul>
  26. 33. Market Value and Book Value Comparison
  27. 37. Net Profit Margins <ul><li>Southwest is the only company to post a profit each year </li></ul><ul><li>JetBlue has lost money in three of five years </li></ul><ul><li>Delta has taken heavy losses in the observed period </li></ul>
  28. 38. Accounts Receivable Turnover <ul><li>Southwest has the leading Accounts Receivable Turnover rate </li></ul><ul><li>JetBlue is steadily improving their AR Turnover </li></ul><ul><li>Delta has the lowest AR Turnover rate, and it’s remaining steady </li></ul>
  29. 39. Days in Accounts Receivable <ul><li>Delta has the poorest Days in Accounts Receivable figures </li></ul><ul><li>Southwest and JetBlue are improving their Days in Accounts Receivable </li></ul><ul><li>Southwest leads these three companies </li></ul>
  30. 40. Current Ratio <ul><li>Southwest’s Average Current Ratio over this period is 0.99 </li></ul><ul><li>JetBlue’s ACR over this period is 1.02 </li></ul><ul><li>Delta’s ACR over this period is 0.83 </li></ul>
  31. 41. Assets and Liabilities
  32. 42. Quick Ratio
  33. 44. Return on Assets and Equity
  34. 45. Return on Assets and Equity
  35. 46. Return on Assets and Equity
  36. 47. Long Term Debt <ul><li>Delta’s debt has risen throughout the observed period </li></ul><ul><li>JetBlue has the worst ratio, but theirs has fallen steadily </li></ul><ul><li>Southwest has the lowest LTDR, but it’s increasing </li></ul>
  37. 48. Interest Coverage <ul><li>Southwest’s excellent Interest Coverage has fallen </li></ul><ul><li>JetBlue’s Interest Coverage has remained below zero throughout the five year period </li></ul><ul><li>Delta’s has fluctuated quite a bit, returning to near zero </li></ul>
  38. 49. Conclusions and Questions <ul><li>Southwest delivers on its strategic goals by minimizing costs, enabling consistent profitability by minimizing costs </li></ul><ul><li>By combining a high level of customer service with disciplined financial management, Southwest succeeds </li></ul><ul><li>Investors committed to investing in an airline would be wise to consider Southwest </li></ul>

×