Power point of Class 2 group 5 American Airlines

Financial ManagementClass 2 Group 5

Trương Thị Thu Thảo 332974Bùi Minh Nguyệt 295800

Lý Sen Tâm 332939

Outline Financial StatementIncome statementBalance sheetCash flow Bonds and Bonds Valuation Stock and Stock Valuation Working Capital Management Financial RatioLiquidity ratioFinancial leverage ratioAsset management ratioProfitability ratio

Background of American Airlines• Bag information: In

economy, within Canada • To other destinations, prices

vary by itinerary.• CEO: Doug Parker• Headquarters: Fort Worth,

TX, United States of America

• Founder: Avco Founded: 1930, United States of America Current

• Logo: "The new American is arriving."

Southwest Airlines Co. • A major US airline and the

world's largest low cost carrier, headquartered in Dallas, Texas.

• The airline has nearly 46,000 employees as of December 2014 and operates more than 3,400 flights per day.

• June 5, 2011, it carries the most domestic passengers of any U.S. airline.

• November 2014, Southwest Airlines has scheduled service to 93 destinations in 41 states, Puerto Rico and abroad.

Question 1 WHAT ARE THE 3 MORE SIGNIFICANT CHANGES FROM

THE 3 FINANCIAL SHEETS FOR YOUR COMPANY AND FOR YOUR COMPETITOR FROM 2008-

2014, WHY DO YOU THINK THIS HAPPENED?

Financial StatementIncome Statement

American Airlines$ in million

2014 2013 2010 2009 2008

Net Sales or Revenues $42,650 $26,740 $22,170 $19,920 $23,770

Cost Of Goods Sold (COGS) $30,640 $19,010 $10,040 $16,040 $20,210Gross Profit $12,010 $6,940 $4,130 $3,000 $3,560Selling General & Adin Expense $6,460 $4,690 $2,730 $2,900 $4,240

Income Before Depreciation Depletion Aortization $5,540 $2,250 1,40 $100 -$602

Depreciation Depletion Amortization 1,30 $53 $1,090 1,10 $1,210

Non Operating Incoe -$150 -$2,720 -$22 -$46 $541Interest Expense $7 $56 $792 $702 $723Pretax Incoe $3,210 -$2,100 -$506 -$1,750 -$2,070

Provision for Incoe Taxes $330 -$346 -$35 -$204 -

Income Before Extra ordinaries & Disc Operations $2,000 -$1,030 -$471 -$1,470 -$2,070

Net Income (Profit/Loss) $2,000 -$1,030 -$471 -$1,470 -$2,070Average Shares used to copute Diluted EPS $734,020 $107,650 - - $0Average Shares used to copute Basic EPS 717,46 $10,765 - - -Income Before Nonrecurring Ites $4,100 $124 - - -Income fro Nonrecurring Ites -$13,000 - - -

Earnings Per Share Basic Net 4,02 -17,03 - - -

Earnings Per Share Diluted Net 393 -17.03 - - -EPS Diluted Before Nonrecurring Ites 5.7 11.56 - - -Dividend Per Share Coon 0.2 - - - -

Income StatementSouthwest Airline

$ in million2014 2013 2010 2009 2008

Southwest Airlines Net Sales or Revenues $18,610 $17,700 $12,100 $10,350 $11,020Cost Of Goods Sold (COGS) $13,110 $13,340 $9,060 $8,140 $8,590Southwest Airlines Gross Profit $5,490 $4,360 $3,040 $2,220 $2,430Selling General & Admin Expense $2,330 $2,210 $1,430 $1,340 $1,390Income Before Depreciation Depletion Amortization $3,160 $2,150 $1,620 $878 $1,050Depreciation Depletion Amortization $938 $867 $628 $616 $599Non Operating Income -$302 $38 -$94 $67 -$66Interest Expense $107 $107 $149 $165 $105Southwest Airlines Pretax Income $1,820 $1,210 $745 $164 $278Provision for Income Taxes $680 $455 $286 $65 $100Income Before Extra ordinaries & Disc Operations $1,140 $754 $459 $99 $178Southwest Airlines Net Income (Profit/Loss) $1,140 $754 $459 $99 $178

Average Shares used to compute Diluted EPS $696 $718 $747 $741 $739Average Shares used to compute Basic EPS $687 $710 $746 $741 $735Income Before Nonrecurring Items 1,40 $805 $540 $143 $294Income from Nonrecurring Items -$261 -$51 -$81 -$44 -$116Southwest Airlines Earnings Per Share Basic Net 1650 1060 0,620 0,130 0,240Southwest Airlines Earnings Per Share Diluted Net 1640 1050 0,610 0,130 0,240EPS Diluted Before Nonrecurring Items 2010 1120 0,720 0,190 0,400Dividend Per Share Common 0,220 0,130 0,020 0,020 0,020

Financial ratiofirst significant change

2014 2013 2010 2009 2008-3,000

-2,000

-1,000

0

1,000

2,000

3,000

American Airlines Net Income (Profit/Loss)Southwest Airlines Net Income (Profit/Loss)

2014 2013 2010 2009 2008-300.00%

-200.00%

-100.00%

0.00%

100.00%

200.00%

300.00%

400.00%

American Airlines Net Income (Profit/Loss)Southwest Airlines Net Income (Profit/Loss)

Balance SheetAmerican Airlines

$ in million 2014 2013 2010 2009 2008Cash $1,770 $2,100 $610 $613 $650arketable Securities $6,310 0,110 $4,330 $4,250 $2,920Receivables $1,770 $1,560 $730 $760 $11Inventory $1000 $1,010 $594 $557 $525Other Current Assets $1,260 $1,470 $560 $450 $1,030Total Current Assets $12,110 $14,320 $6,040 $6,640 $5,940Property Plant & Equipent $35,340 $30,390 - - -Accuulated Depreciation $12,260 $11,130 $11,640 $10,030 $10,450Net Property Plant & Equipent $23,000 $19,260 $15,000 $15,400 $15,740Intangibles $6,330 6,40 $932 $900 $1,110Deposits & Other Assets $2,240 2,30 $2,240 $2,330 2,40Total Assets $43,770 $42,200 $25,090 $25,440 $25,100Accounts Payable $1,300 $1,370 $1,160 $1,060 $952Current Portion Long-Ter Debt $1,710 $1,450 $1,700 $1,020 $1,050Current Portion Capital Leases - - $107 $90 $107Accrued Expenses $3,290 $3,610 $2,090 $2,040 $2,040Other Current Liabilities $7,060 $7,390 $3,660 $3,510 $4,420Total Current Liabilities $13,440 $13,010 0,700 $7,730 $9,370Deferred Taxes/Incoe $29 $935 $270 $272 $297Long-Ter Debt 16,20 $15,350 0,760 $9,900 0,420Non-Current Capital Leases - - $497 $599 $502Other Long-Ter Liabilities $11,290 $14,920 $10,730 $10,340 $9,440Total Liabilities $41,750 $45,010 $29,030 $20,930 $20,110Coon Stock Net $7 $3 $339 $339 $205Capital Surplus $15,140 $10,590 $4,450 4,40 $3,790Retained Earnings -0,560 -11,30 -$5,610 -$5,140 -$3,460Treasury Stock - - $367 $367 $367Other Liabilities -$4,560 -$2,030 -$2,760 -$2,720 -$3,100Shareholders Equity $2,020 -$2,730 -$3,950 -$3,490 -$2,940Total Liabilities & Shareholders Equity $43,770 $42,200 $25,090 $25,440 $25,100

Balance SheetSouthwest Airlines

$ in miliionFiscal year is Jan - Dec. 2014 2013 2010 2009 2008Cash $1,280 $1,360 $1,260 $1,110 $1,370Marketable Securities $1,710 $1,800 $2,280 $1,480 $435Receivables $365 $419 $195 $169 $209Inventory $342 $467 $243 $221 $203Other Current Assets $709 $418 $517 $666 $1,040Southwest Airlines Total Current Assets $4,400 $4,460 $4,280 $3,360 $2,890Property Plant & Equipment $22,510 $20,820 $16,340 $15,890 $15,870Accumulated Depreciation $8,220 $7,430 $5,770 $5,250 $4,830Southwest Airlines Net Property Plant & Equipment $14,290 $13,390 $10,580 $10,630 $11,040Intangibles $970 $970 - - -Deposits & Other Assets $534 $530 $606 $277 $375Southwest Airlines Total Assets $20,200 $19,350 $15,460 $14,270 $14,310Accounts Payable 1,20 $1,250 $739 $746 $668Current Portion Long-Term Debt $258 $629 $505 $190 $163Accrued Expenses $1,570 $1,230 $863 $696 $1,010Other Current Liabilities $2,900 $2,570 $1,200 $1,040 $963Southwest Airlines Total Current Liabilities $5,920 $5,680 $3,310 $2,680 $2,810Deferred Taxes/Income $3,260 $2,930 $2,580 $2,800 $3,050Long-Term Debt $2,990 $2,630 $2,880 $3,330 $3,500Other Long-Term Liabilities $1,260 $771 $465 - -Southwest Airlines Total Liabilities $13,430 $12,010 $9,230 $8,800 $9,360Common Stock Net $808 $808 $808 $808 $808Capital Surplus $1,320 $1,230 $1,180 $1,220 $1,220Retained Earnings $7,420 $6,430 $5,400 $4,980 $4,920Treasury Stock $2,030 $1,130 $891 $963 $1,010Other Liabilities -$738 -$3 -$262 -$578 -$984Southwest Airlines Shareholders Equity $6,780 $7,340 $6,240 $5,470 $4,950Southwest Airlines Total Liabilities & Shareholders Equity $20,200 $19,350 $15,460 $14,270 $14,310

Financial ratiosecond significant change

2014 2013 2010 2009 2008

-4,000

-2,000

0

2,000

4,000

6,000

8,000

American Airlines Shareholders EquitySouthwest Airlines Shareholders Equity

2014 2013 2010 2009 2008

-180.00%

-160.00%

-140.00%

-120.00%

-100.00%

-80.00%

-60.00%

-40.00%

-20.00%

0.00%

20.00%

American Airlines Shareholders EquitySouthwest Airlines Shareholders Equity

Cash FlowAmerican Airline

$ in million 2014 2013 2010 2009 2008Net Income Cash Flow 2,880 -1,830 -471 -1,470 -2,070Depreciation Depletion Amortization Cash-Flow 1,340 1,020 1,090 1,10 1,210Net Increase (Decrease) in Assets Liabilities -1,690 -384 385 393 -1,240Other Adjustments Net 542 1,870 234 901 708Net Cash from (used by) Operating Activities 3,080 675 1,240 930 -1,390Increase (Decrease) in Prop Plant And Equipment -5,280 -2,990 -1,960 -1,450 -396Acquisition Disposition of Subsidiaires - 206 - - -Increase (Decrease) in Investments 2,060 -1,030 -72 -1,330 1,440Other Cash Inflow (Outflow) from Investment Activities 307 - - 53 11Net Cash from (used by) Invesment Activities -2,910 -3,810 -2,030 -2,720 1,060Issuance (Purchase) of Equity Shares -1,050 - 1 413 295Issuance (Repayment) of Debt Securities 170 2,210 -612 574 -267Payment of Dividends & Other Cash Distributions -144 - - - -Other Cash from (used by) Financing Activities 711 1,590 1,420 768 354Net Cash from (used by) Financing Activities -315 3,80 804 1,760 382Net Change in Cash & Cash Equivalents -146 660 15 -38 43Cash & Equivalents at Beginning of Year 1,140 480 153 191 148Cash & Equivalents at Year End 994 1,140 168 153 191

Cash FlowSouthwest Airline

$ in millionFiscal year is Jan - Dec. 2014 2013 2010 2009 2008Southwest Airlines Net Income Cash Flow $1,140 $754 $459 $99 $178Depreciation Depletion Amortization Cash-Flow $938 $867 $614 $604 $587Net Increase (Decrease) in Assets Liabilities $325 $737 $577 $63 -$2,130Other Adjustments Net $503 $119 -$89 $219 -$152Southwest Airlines Net Cash from (used by) Operating Activities $2,900 $2,480 $1,506 $985 -$152Increase (Decrease) in Prop Plant And Equipment -$1,750 -$1,450 -$493 -$585 -$923Increase (Decrease) in Investments $105 $63 -$772 -$986 -$55Other Cash Inflow (Outflow) from Investment Activities -$84 - - $2 -Southwest Airlines Net Cash from (used by) Invesment Activities -$1,730 -$1,380 -$1,270 -$1,570 -$978Issuance (Purchase) of Equity Shares -$845 -$444 $55 $20 $63Issuance (Repayment) of Debt Securities -$272 -$318 -$155 $369 $945Increase (Decrease) in Bank & Other Borrowings - - -$44 -$414 $491Payment of Dividends & Other Cash Distributions -$139 -$71 -$13 -$13 -$13Other Cash from (used by) Financing Activities $8 -$18 $8 $368 $168Southwest Airlines Net Cash from (used by) Financing Activities -$1,250 -$851 -$149 $330 1,65Southwest Airlines Net Change in Cash & Cash Equivalents -$73 $242 $147 -$254 -$845Cash & Equivalents at Beginning of Year $1,360 $1,110 $1,110 $1,370 $2,210Cash & Equivalents at Year End $1,280 $1,360 $1,260 $1,110 $1,370

Financial StatementThird Significant change

2014 2013 2010 2009 2008

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

American Airlines Net Cash from (used by) Operating Activities

Southwest Airlines Net Cash from (used by) Operating Activities

2014 2013 2010 2009 2008

-800.00%

-600.00%

-400.00%

-200.00%

0.00%

200.00%

400.00%

American Airlines Net Cash from (used by) Operating Activities

Southwest Airlines Net Cash from (used by) Operating Activities

Question 2: WHAT IS THE MOST SIGNIFICANT CHANGE IN

THE INDUSTRY USING THE FINANCIAL RATIOS?

Airlines Industry RatiosIndustry 2014 2013 2010 2009 2008

Liquidity ratio current ratio 0.71 0.71 0.83 0.84 0.87quick ratio 0.58 0.41 0.57 0.53 0.51cash ratio

Profitability profit margin 0.80% 12.66% 2.99%

return on asset 0.09 0.04 0.57 return on equity 0.54 0.45

Financial leverage ratios Debt ratio 1.41 3.94 33.1 3.53 0.97

Time interest earned 7.5 4.7 2.8 1.03 Cash coverage ratio 0.4 0.2 0.16

Asset management ratios Inventory Turnover 22.2 25.5 29.4 52.18 33.5

Day sale in inventory 16.5 14.3 12.4 6.91 10.8Receivables Turnover 23.1 22.4 27.7 26.8 17.2Total Asset Turnover 2.62 4.04 1.59 3.61 3.54

Day sale in receivables 15.8 16.2 1.59 13.6 21.2DuPont analysis

Question 3: DOES YOUR COMPANY HAVE THE SAME CHANGE? IF

NOT WHY DO YOU THINK THIS ISDIFFERENT? IF THE SAME THEN WHAT IS YOUR ANALYSIS OF WHY THIS CHANGED SO MUCH?

Debt ratioThe debt ratio in 2010 was the most change to 2014

Debt ratio 2008 2009 2010 2013 2014

American Airlines 1.12 1.14 1.16 1.06 0.95

Industry 0.97 3.53 33.1 3.94 1.41

2008 2009 2010 2013 20140

5

10

15

20

25

30

35

American airlinesindustry

Question 4: ANALYZE ALL THE FINANCIAL RATIOS FOR YOUR COMPANY,

COMPETITOR AND INDUSTRY,GRAPH EACH ONE AND SHOW THE TREND

FROM 2008-2014.

Analyze ratiosLiquidity ratio analysis•Current ratio•Quick ratioFinancial leverage ratio analysis•Time interest earnedAsset management ratio analysis•Inventory turnover•Total asset turnoverProfitability ratio analysis•Return on asset•Day’s sale in turnover •Return on equity

Compared the ratios of 2 companies and industry

2008 2009 2010 2013 20140.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

American AirlinesSouthwest AirlinesIndustry

Current ratio 2008 2009 2010 2013 2014

American Airlines 0.63 0.86 0.78 1.04 0.90Southwest Airlines 1.03 1.25 1.29 0.79 0.74

Industry 0.87 0.84 0.83 0.71 0.71

Debt ratioThe debt ratio in 2010 was the most change to 2014

Debt ratio 2008 2009 2010 2013 2014

American Airlines 1.12 1.14 1.16 1.06 0.95Southwest Airlines 0.35 0.38 0.40 0.38 0.34

Industry 0.97 3.53 33.1 3.94 1.41

2008 2009 2010 2013 20140.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00


Quick ratioQuick ratio

2008 2009 2010 2013 2014


Southwest Airlines 0.96 1.17 1.22 0.70 0.69

Industry 0.38 0.41 0.57 0.53 0.51

2008 2009 2010 2013 20140.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40


Cash Coverage ratio and time interest earned

Cash coverage ratio 2008 2009 2010 2013 2014

American Airlines -1.19 -2.34 0.74 -1.55 5.08

Southwest Airlines 8.35 4.73 9.21 19.41 25.78 Industry 0.2 0.16 0.4

Times interest earned 2008 2009 2010 2013 2014

American Airlines -2.86 -2.49 -0.64 -2.55 3.62


Industry 2.8 4.7 7.50

Inventory turnover ratioInventory Turnover Ratio

2008 2009 2010 2013 2014



Industry 33.50 52.18 29.40 25.50 22.20

2008 2009 2010 2013 20140.00

10.00

20.00

30.00

40.00

50.00

60.00


Day’s sales in inventoryThe ratio of American airlines was high significantly

with Southwest Airlines and industryDays' sales in inventory

2008 2009 2010 2013 2014



Industry 1.50 0.96 1.59 1.86 1.92

2008 2009 2010 2013 20140.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00


Total asset turnoverThe ratio of industry airline is higher

than both companiesTotal asset turnover

2008 2009 2010 2013 2014



Industry 2.62 4.04 3.66 3.61 3.54

2008 2009 2010 2013 20140.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50


Question 5: SHOW A GRAPH OF THE 3 MOST SIGNIFICANT FINANCIAL RATIO CHANGES FROM 2008-2014,

DID YOUR COMPETITOR HAVE THE SAME CHANGE AND INDUSTRY? WHY OR WHY NOT?

Analyze financial ratios of American AirlinesRATIOS 201

4201

3201

0200

9200

8Debt Ratio 0.95 1.06 1.16 1.14 1.12

Current Ratio 0.90 1.04 0.78 0.86 0.63

Quick Ratio 0.83 0.96 0.71 0.79 0.58

Cash Ratio 0.13 0.16 0.07 0.08 0.07

Inventory Turnover 30.64 19.61 30.37 30.23 38.50

Days Sales In Inventory 11.91 18.61 12.02 12.07 9.48

Receivables Turnover 24.10 17.14 30.04 25.94 29.31

Days Sales In Receivable 15.15 21.29 12.15 14.07 12.45

Total Asset Turnover 0.97 0.63 0.88 0.78 0.94

Return on Assets 0.07 -0.04 -0.02 -0.06 -0.08

Profit Margin 0.07 -0.07 -0.02 -0.07 -0.09

Return on Equity 1.43 0.67 0.12 0.42 0.70

2014 2013 2010 2009 2008-0.10

-0.06

-0.02

0.02

0.06

Profit Margin

2014 2013 2010 2009 20080.000.200.400.600.801.001.201.401.60

Return on Equity

2014 2013 2010 2009 2008-0.10-0.08-0.06-0.04-0.020.000.020.040.060.08

Return on Assets

Question 6: SHOW ONE CHART OF ALL THE FINANCIAL RATIOS, 2008 AND

2014 FOR YOU AND YOURCOMPETITOR. INDICATE WITH COLORS THE ONES THAT ARE

DIFFERENT, ESPECIALLY IF ANY TREND IN A DIFFERENT DIRECTION. USE ONLY THOSE 2

YEARS FOR YOUR CHART.

Financial RatiosAMERICAN AIRLINES

RATIOS 2014 2008Debt Ratio 0.95 1.12

Current Ratio 0.90 0.63Quick Ratio 0.83 0.58

Cash Ratio 0.13 0.07

Inventory Turnover 30.64 38.50

Days Sales In Inventory 11.91 9.48

Receivables Turnover 24.10 29.31

Days Sales In Receivable 15.15 12.45

Total Asset Turnover 0.97 0.94

Return on Assets 0.07 -0.08

Profit Margin 0.07 -0.09

Return on Equity 1.43 0.70

SOUTHWEST AIRLINESRATIOS 2014 2008

Debt Ratio 0.66 0.65

Current Ratio 0.74 1.03Quick Ratio 0.69 0.96

Cash Ratio 0.22 0.49

Inventory Turnover 38.33 42.32

Days Sales In Inventory 9.52 8.63

Receivables Turnover 50.99 52.73

Days Sales In Receivable 7.16 6.92

Total Asset Turnover 0.92 0.77

Return on Assets 0.06 0.01

Profit Margin 0.06 0.02

Return on Equity 0.17 0.04

Bonds and bonds valuationBonds & Bonds Valuation

ISSUE DETAIL American Air Southwest Air

Amount Outstanding 60,900,000 86,300,000

Par Value 1000 0

Issue Size 100,000,000 86,300,000

Coupon 0 9.15%

Coupon Type Fixed Fixed

Coupon Frequency Semi-Annually Semi-Annually

Day Count Basis 30 / 360 30/360

First Payment Date 3/15/1987 1/7/1995

Accrual Start Date 9/15/1986 10/17/1995

Working capital management

2008 2009 2010 2013 2014

CCC -0.73 -12 -15.26 -1.66 4.51

2008 2009 2010 2013 2014

-20

-15

-10

-5

0

5

10

CCC

CCC

CONCLUSION•The financial ratios of airlines industry has a significant change with both company.• The number of business and leisure trips is expected to increase. This is supported by economic growth.

REFERENCEShttps://en.wikipedia.org/wiki/American_Airlineshttps://en.wikipedia.org/wiki/Southwest_Airlines

http://amigobulls.com/stocks/AAL/income-statement/annualhttp://amigobulls.com/stocks/AAL/balance-sheet/annual

http://amigobulls.com/stocks/AAL/cash-flow/annualhttp://amigobulls.com/stocks/LUV/income-statement/annual

http://amigobulls.com/stocks/LUV/balance-sheet/annualhttp://amigobulls.com/stocks/LUV/cash-flow/annual

http://quicktake.morningstar.com/stocknet/bonds.aspx?symbol=aalhttp://quicktake.morningstar.com/stocknet/bonds.aspx?symbol=luv

http://amigobulls.com/stocks/AAL/income-statement/annual



http://amigobulls.com/stocks/AAL/balance-sheet/annual

http://amigobulls.com/stocks/AAL/cash-flow/annual

http://amigobulls.com/stocks/LUV/income-statement/annual

http://amigobulls.com/stocks/LUV/balance-sheet/annual

http://amigobulls.com/stocks/LUV/cash-flow/annual

http://quicktake.morningstar.com/stocknet/bonds.aspx?symbol=aal

http://quicktake.morningstar.com/stocknet/bonds.aspx?symbol=luv

Date post:	12-Apr-2017
Category:	Economy & Finance
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Power point of Class 2 group 5 American Airlines

Economy & Finance