Airlines Financial Analysis
14
Financial Performance American Airlines vs. Continental Airlines Deborah Obasogie
-
Upload
deborah-obasogie -
Category
Documents
-
view
92 -
download
1
Transcript of Airlines Financial Analysis
Financial Performance
American Airlines vs. Continental Airlines Deborah Obasogie
Company Profile
American Airlines
(AMR)
Type: Public
Founded: 1934
Headquarter: Forth Worth, TX
Industry: Transportation
Services: Airlines Services
Employees: 85,500 (2008)
Continental Airlines
(CAL)
Type: Public
Founded: 1934
Headquarter: Houston, TX
Industry: Transportation
Services: Airlines Services
Employees: 42,490 (2008)
Highlights
Ratios
Liquidity Solvency Profitability
2003 - 2008
Liquidity – Current Ratio
Continental appears to
have the advantage in
terms of paying their short
term debt over American.
0.00
0.20
0.40
0.60
0.80
1.00
1.20
2003 2004 2005 2006 2007 2008
Year
Rate
American Airlines Continental Airlines
Liquidity – Current Cash
Debt Coverage Ratio
Both are below 40%,
however Continental is
not as bad as
American. We will look
at Receivables
turnover ratio to
access the number of
times the company
collects receivables
during the period.
-0.20
-0.10
0.00
0.10
0.20
0.30
0.40
2003 2004 2005 2006 2007 2008
Year
Rate
American Airlines Continental Airlines
Liquidity – Receivables
Turnover Ratio
American appears to
be more stable in their
ability to turn its
receivables into cash
slightly quickly than
Continental. But it’s
very close..
Let’s look at Average
Collection Period to
look at the company’s
credit and collection
policies.
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
2003 2004 2005 2006 2007 2008
Year
Tim
es
American Airlines Continental Airlines
Liquidity – Average
Collection Period
American appears to
be more stable in their
effectiveness of
company’s credit and
collection policies.
Therefore it has a
better likelihood of
paying its current
obligations. Although
Continental but has a
downward trend.
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
2003 2004 2005 2006 2007 2008
Year
Da
ys
American Airlines Continental Airlines
Solvency – Debt To Total
Assets Ratio
Both American & Continental
are relying on too much debt
financing & will have
increasing debt to pay in the
future. Continental, however
do not have as much financing
through debt as American.
Continental is better.
0.00
0.20
0.40
0.60
0.80
1.00
1.20
Rate
2003 2004 2005 2006 2007 2008
Year
American Airlines Continental Airlines
Solvency – Cash Debt
Coverage Ratio
Both American and
Continental will have
troubles repaying their
debts with cash
generating from
operations, however
Continental will do better
than American. Both
companies are under 20%
which is cause for more
investigation. We’ll look at
times interest earned
ratio.
-0.06
-0.04
-0.02
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
2003 2004 2005 2006 2007 2008
Year
Rate
American Airlines Continental Airlines
Solvency – Times Interest
Earned Ratio
American has more
ability to meet interest
expenses as they come
due than Continental.
American has more stable
and has a upward trend.
-80.00
-70.00
-60.00
-50.00
-40.00
-30.00
-20.00
-10.00
0.00
10.00
20.00
2003 2004 2005 2006 2007 2008
Year
Tim
es
American Airlines Continental Airlines
Profitability – Earnings Per
Share
We are looking at the
income earned on earn
share of common stock.
American’s income from
it’s stock is lower and
took a downward trend in
2008.
Continental’s income from
stock has experience
bumps, then climbs and
took a downward dive in
2008 as well.
-10.00
-8.00
-6.00
-4.00
-2.00
0.00
2.00
4.00
6.00
2003 2004 2005 2006 2007 2008
Year
Do
lla
rs
American Airlines Continental Airlines
Profitability – Gross Profit
Rate
American has definitely
had more growth and
periods of growth that
Continental.
Continental has steadily
decreased in growth
until 2008.
American experienced
growth when there were
very high fuels prices
and lower ticketing.
0
10
20
30
40
50
60
70
%
2003 2004 2005 2006 2007 2008
Year
American Airlines Continental Airlines
Profitability – Profit Margin
Ratio
Continental was a lot
more profitable than
American.
In spike of American
having more growth and
periods of growth than
Continental.
(effects of debt
obligations)
-0.10
-0.08
-0.06
-0.04
-0.02
0.00
0.02
0.04
0.06
2003 2004 2005 2006 2007 2008
Year
Rate
American Airlines Continental Airlines
Ratio Scoring
WINNER
Solvency
Profitability
Liquidity
