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Southwest Airlines Corporation

Southwest Airlines is based in Dallas, US. It is known for its affordable cost carrier. In 2018, it

recorded the highest domestic passengers in the US airlines. In 2019, it returned approximately

$2.4B to shareholders, $372M was allocated to the dividend payment and $2B directed to

repurchasing shares. The company recorded $303M and $2.0B from investing activities in 2019

and 2018, respectively. The dividend per share increased by 16.7% from $0.65 to $0.7 in 2019.

The company had unrestricted liquidity of $7.38B. Besides, the current ratio is 2019 was 0.67.

the proportion was higher than the average current ratio in the airline industry. The current

obligation exceeded the current assets by $259M, meaning the current assets could not offset

current liabilities.

Current ratio= Current assets / current obligations /liabilities

Current ratio = $ 5,974/ $ 8,952 = 0.67

As at 2020, the company had outstanding shares of 517,295,540. It repurchased common shares

worth $2.0B between 2019 and 2018. The company’s debt/equity ratio was 62% - 38% in 2018

and 2019. The net profit margin was 10%

Debt-equity ratio = Total obligation/liabilities / Total equity

Debt-equity ratio 2018 = $ 16,390 / $ 9,853 = 62% - 38%)

Debt/equity ratio 2019 = $ 16,063 / $ 9,832 = 62% - 38%

Net profit margin = Net profit / Net revenue

Net profit margin 2019 = $ 2,300 / $ 22,428 = 10%

Ernst & Young LLP, a sovereign registered CPA firm, audited the Southwest Airlines

Corporation's financial reports. The company is doing relatively well compared to its peers in the

airline industry.

Air Canada

Air Canada is the largest airline offering domestic and international airline company. In 2001,

the company acquired Canadian airlines to expand its operations. In 2019, the company recorded

operating revenues of $19.13B. Besides, it marked a 13% ($423M) EBITDA and an operating

income of $1.65B, which was a 10% ($154m) compared to 2018. The company had a dividend

yield of 0% for 2019 and 2018, respectively.

The current ratio and debt-equity ratio for2018 and 2019 was 0.96 and debt/equity ratio of 85% -

15% and 84% - 16% in 2018 and 2019 respectively. Besides, the company recorded a net profit

margin of 3.4%.

Current ratio= Current assets / current obligations /liabilities

Current ratio = $ 7,516 / $ 7,775 = 0.96

Debt-equity ratio = Total obligation/liabilities / Total equity

Debt-equity ratio 2018 = $ 18,606 / $ 3,277 = 85% - 15%

Debt-equity ratio 2019 = $ 23,359 / $ 4,400 = 84% - 16%

Net profit margin 2019 = $ 152 / $ 4,429 = 3.4%

Pricewaterhouse copper LLP an independent firm audited the Air Canada financial statements in

2019. The company generates foreign exchange gain of $499 in 2019, the previous year. The

company had recorded a foreign exchange loss of $578. The gains were used to offset part of

non-operating expenses.

Southwest Airlines Corporation and Air Canada are airline companies offering passengers and

goods carriage within American and Canada and other countries. Southwest Airlines Corp. is

performing relatively better compared to its peer in Canada. The financial solvency of Air

Canada is high compared to Southwest Airlines Corporation, which would lead to bankruptcy.
 Works cited

Investors.Southwest.Com, 2020, http://investors.southwest.com/~/media/Files/S/Southwest-

IR/LUV_2019_Annual%20Report.pdf.

Annualreports.Com, 2020,

http://www.annualreports.com/HostedData/AnnualReports/PDF/TSX_AC-A_2019.pdf.