A FINANCIAL RATIOS ANALYSIS OF PERFORMANCE ASSESSMENT IN THE AIRLINE BUSINESS

Abstract

The coronavirus disease 2019 outbreak was considered a global pandemic. Even though so many airlines were most impacted by the outbreak, some of them were least impacted, regardless of the same situation they were confronting. Therefore, the purpose of this study aimed to 1) study the business performances of the selected airlines and 2) analyze and compare financial ratios for studying the business performances of selected airlines. The subjects of the study were selected carefully with the criteria that the financial situations of the subjects had to be different. Therefore, the analysis can present clear results and show how they operated their businesses differently. The first airline selected was the airline that filed for bankruptcy in 2020 or ‘Colombia’s flag carrier’ and the second airline was the airline that could continue its business in 2020 (despite the unforeseen pandemic in 2020) or ‘Japan’s flag carrier’. The study can be categorized into qualitative analysis and used descriptive method to present its result. It used financial ratios as a tool to analyze and focused on 5 different aspects of business performance. These 5 aspects are liquidity, solvency, profitability, operational efficiency, and passenger capacity utilization of the airlines. The financial data were subtracted from the annual reports of the airlines. The time period to study was selected 5 years prior to the pandemic.

          The results of the research showed that 1) Japan’s flag carrier had higher liquidity; 2) Japan’s flag carrier had more solvency; 3) Japan’s flag carrier had more profitability; 4) Japan’s flag carrier was more efficient, except the efficiency of debt collection from debtors, and 5) Colombia’s flag carrier had more passenger capacity utilization than Japan’s flag carrier