skyrider wrote:
No Problem nwtk. That will just get them billions more from taxpayer money because it will be shown to be linked to the c***d "disaster".
True but with difficulty too when you consider their D/E ratio as well… They also got large stimulus funding during the p******c whether it was through the PPP or the government funded EDIL.
The Debt-To-Equity Ratio in the Airline Industry
The average D/E ratio of major companies in the U.S. airline industry is 1.1562, which indicates that for every $1 of shareholders' equity, the average company in the industry has $115.62 in total liabilities. The airline industry is a highly capital intensive sector and is often considered to have some of the highest D/E ratios.
Could it be like what happened in the auto industry sure, are we willing to take the risk, sure, let’s rock it find out!
Airlines companies need to purchase planes, outfit those planes, pay for fuel, air hangars, flight simulators, repairs on planes, pilots, flight attendants, baggage handlers, and a multitude of other costs. It is not a surprise that their debt levels are high.
The airline industry is a service industry that uses the income it generates to pay off its debt. This puts tremendous levels of strain on airline companies, as they are constantly under pressure to generate business, and therefore income, to continuously pay off their debt. In addition, the airline industry is a seasonal industry. People tend to travel more in the summer months when the weather is warm and children are on summer holidays. This seasonality can make it difficult to pay down debt throughout the year as incoming cash flows fluctuate.
The Bottom Line
The debt-to-equity ratio is a simple formula that shows how much debt a company is using to operate its business compared to its equity. Appropriate levels of debt can help a business function well and be successful, while too much debt can be a financial burden. When comparing a company's D/E ratio, it's important to analyze it in the context of its industry. The airline industry has one of the highest D/E ratios because of the capital intensive nature of running an airline.