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    Airline Industry Analysis

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    Sarah
    Financial statement analysis of the airline industry including Southwest, American, and Delta airlines. Includes Porter's 5 Forces analysis and comparative financial performance grids using standard metrics.

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    Airline Industry Analysis

    Uploaded by

    Sarah
    544 views14 pages
    Financial statement analysis of the airline industry including Southwest, American, and Delta airlines. Includes Porter's 5 Forces analysis and comparative financial performance grids using standard metrics.

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    Financial statement analysis of the airline industry including Southwest, American, and Delta airlines. Includes Porter's 5 Forces analysis and comparative financial performance grids using standard metrics.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    544 views14 pages

    Airline Industry Analysis

    Uploaded by

    Sarah
    Financial statement analysis of the airline industry including Southwest, American, and Delta airlines. Includes Porter's 5 Forces analysis and comparative financial performance grids using standard metrics.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 14

    American Delta Southwest

    < %hreat of Entry


    Easy entry, given low bank borrowing rates
    Highly saturated
    Brand name recognition and frequent flier points important
    Barriers to entry heightened by the hub system
    < Bargaining Power of Suppliers
    ow threat of forward integration
    High supplier concentration
    < Bargaining Power of Buyers
    ow buyer bargaining power
    Buyers can comparison shop for fares thanks to the internet
    < Availability of Substitutes
    ikely substitutes include automobiles, trains, and interstate bus lines.
    Customers consider time, money, personal preference, and convenience when travelling
    < Competitive Rivalry
    ierce competition
    Moderate industry growth
    Carriers struggling to increase market share
    High exit barriers
    < Southwest
    ow prices, friendly service, no "frills
    ow operating expenses fuel hedging
    requent, direct flights (point-to-point flights)
    < American
    Second largest airline
    arge fleet and large number of routes
    Acquisitions and mergers, international flights
    ull service, brand loyalty (first frequent flyer program)
    < Delta
    argest airline in U.S.
    ncreased international routings
    Brand loyalty
    Airline industry-leading airport model
    2006
    (Best overaII
    Year)
    RNOA NOPM NOAT ROE
    American
    Airlines
    4.35% 3.7% 1.17 -22%
    Delta Airlines -13% 3.22% -3.96% -53.58%
    Southwest
    Airlines
    7.98% 7.27% 1.097 7.6%
    20.36
    15.63
    8.75
    0
    5
    10
    15
    20
    25
    Passenger Revenue
    2004
    2005
    2006
    -35.00
    -30.00
    -25.00
    -20.00
    -15.00
    -10.00
    -5.00
    0.00
    5.00
    10.00
    Profit Margin
    2004 2005 2006
    0.19
    0.42
    0.73
    0.2
    0.7
    0.66
    0.19
    0.64
    0.56
    American Airlines Delta Airlines Southwest Airlines
    "uick Ratio
    2004 2005 2006
    American Airlines Delta Airlines Southwest Airlines
    2004 -0.77 -22 8.5
    2005 -0.45 -12 10.8
    2006 4.7 0.34 10.3
    Operating Margin
    33
    30
    23
    20
    13
    10
    3
    0
    3
    2004 2003 2006
    294
    429
    361
    261
    296
    079
    2133
    1823
    3128
    keturn on Assets
    SouLhwesL
    Amerlcan
    uelLa
    et ncome
    %otal Assets
    %ime
    23
    20
    13
    10
    3
    0
    3
    2004 2005 2006
    031 021 024
    2328
    910
    1987
    236
    068 048
    Debt to Lqu|ty
    SouLhwesL
    Amerlcan
    uelLa
    1lme
    %otal iab.
    %otal Equity
    nformation beyond FinanciaI Statements
    < Management Discussion and Analysis (MD&A)
    < Independent Auditor Report
    < inancial statement footnotes
    < Regulatory filings
    Audit report
    < Accounting firm
    - American, Southwest : Ernst & Young
    - Delta : Deloitte & %ouche (04,05), Ernst & Young (06)
    < All 3 companies received an "unqualified opinion
    Useful financial information for investors
    2007 2008 2009 2010
    NOPAT 644,080.39 709,238.66 780,988.66 859,997.24
    NOA 7,810,757.16 8,443,249.89 9,143,069.87 9,896,796.11
    NOAT 1.30 1.36 1.38 1.40
    FCFF 439,323.23 76,745.94 81,168.68 106,270.99
    Est. Stock Price $14.53 $12.80
    ActuaI Stock Price $14.62 $13.21
    10 Year CAGR 10.12%
    WACC 8.65%
    Growth 7.70%
    2007 2008 2009 2010
    NOPAT 846,499.38 880,020.61 914,869.28 951,097.96
    NOA 8,442,425.06 8,808,655.68 9,186,113.38 9,575,043.93
    NOAT 2.84 2.83 2.82 2.81
    FCFF 491,074.32 513,789.99 537,411.59 562,167.41
    Est. Stock Price $30.89 $24.19
    ActuaI Stock Price $30.33 $9.03
    10 Year CAGR 3.96%
    WACC 8.00%
    Growth 2.00%
    2007 2008 2009 2010
    NOPAT 456,891.62 467,703.70 478,771.64 490,101.50
    NOA 13,794,275.37 13,968,464.98 14,144,592.50 14,322,681.96
    NOAT 1.28 1.30 1.31 1.32
    FCFF 284,616.25 293,514.09 302,644.12 312,012.04
    Est. Stock Price $17.26 $12.95
    ActuaI Stock Price $20.72 $14.42
    10 Year CAGR 2.36%
    WACC 10.00%
    Growth 2.00%
    Based on:
    < iquidity tests
    < Predicted stock price
    < Multiple other financial factors

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