Southwest Airlines Essay
Autor: acrawdaddy16 • May 4, 2015 • Research Paper • 2,666 Words (11 Pages) • 787 Views
Drew Crawford
Case Write Up 2- Southwest Airlines
Year | 2005 | 2006 | 2007 | 2008 | 2009 |
Leverage | 2.09 | 2.09 | 2.41 | 2.84 | 2.16 |
Debt Ratio | 9.96% | 11.64% | 12.22% | 24.86% | 23.30% |
ROE | 7.25% | 7.74% | 9.29% | 3.59% | 1.81% |
ROA | 3.46% | 3.71% | 3.85% | 1.27% | 0.69% |
The amounts that are above are in millions. With the calculations above, there are a few things that stand out to me. The first thing is the debt ratio. This number has increased quite significantly which is not something that a company generally wants to see but Southwest is an exception. Since there are expanding, they are using more of their profits to purchase more planes and their operating expenses are increasing as well from the expansion.
The next numbers that are quite significant are ROA and ROE. They are not getting any sort of return on the assets that they have and the equity is not doing so hot either.
Percentage of total operating costs across airlines compared to Southwest | |||||
Year | 1995 | 2000 | 2005 | 2008 | 2009 |
American | 130.61% | 132.72% | 135.41% | 136.07% | 127.12% |
Continental | 117.97% | 125.57% | 146.12% | 133.29% | 119.44% |
Delta | 124.01% | 117.78% | 148.80% | 137.81% | 136.95% |
United | 115.31% | 119.07% | 136.93% | 139.07% | 118.48% |
US Airways | 162.51% | 180.38% | 164.94% | 163.65% | 136.14% |
These numbers are great for Southwest and they also represent a main strategy for this company. The things that factor into the high value of these numbers are a couple of things. The first thing is their low maintenance costs and the second reason is the price that Southwest paid for gas compared to the rest of the competitors.
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