Airline Balance Sheet Comparison
05-07-2020 | 04:51 PM
#11
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Great info, but not the whole story. Personally, my airline (Southwest) has so much debt that is not on the books now, but they are obligated to pay, and would need to pay in order to keep an operable fleet. This does not take that in to account. I am speaking of new aircraft on order. Our fleet is old! I think we are going to end up a 300-400 aircraft company going forward over the next 10 years, but even at that rate of shrinking, we do have to replace the aging fleet. If for any other reason, is to improve our cost per seat per mile.
05-07-2020 | 05:12 PM
#12
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Joined: Aug 2016
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From: Fully Retired
In generally accepted accounting principles (GAAP), debt to asset ratio does NOT use just cash and unencumbered assets.
To put it in a personal example. Assuming you have $5,000 cash. Suppose you had bought a house for $100,000 and have a mortgage for $80,000. Also, suppose you have a car worth $10,000 paid off and unencumbered.
You have $80,000 debt and $115,000 in assets. Your debt to asset ratio is $80,000 / $115,000 = 0.70.
It is not figured as $80,000 debt with $10,000 in unencumbered assets and $5,000 in cash for an incorrect debt to asset ratio of $80,000 / $15,000 = 5.33.
That house asset has value. If you default on your mortgage the bank will come to take your asset. They will take your $100,000 home. They consider it an asset.
To put it in a personal example. Assuming you have $5,000 cash. Suppose you had bought a house for $100,000 and have a mortgage for $80,000. Also, suppose you have a car worth $10,000 paid off and unencumbered.
You have $80,000 debt and $115,000 in assets. Your debt to asset ratio is $80,000 / $115,000 = 0.70.
It is not figured as $80,000 debt with $10,000 in unencumbered assets and $5,000 in cash for an incorrect debt to asset ratio of $80,000 / $15,000 = 5.33.
That house asset has value. If you default on your mortgage the bank will come to take your asset. They will take your $100,000 home. They consider it an asset.
05-07-2020 | 05:31 PM
#13
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Joined: May 2016
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In generally accepted accounting principles (GAAP), debt to asset ratio does NOT use just cash and unencumbered assets.
To put it in a personal example. Assuming you have $5,000 cash. Suppose you had bought a house for $100,000 and have a mortgage for $80,000. Also, suppose you have a car worth $10,000 paid off and unencumbered.
You have $80,000 debt and $115,000 in assets. Your debt to asset ratio is $80,000 / $115,000 = 0.70.
It is not figured as $80,000 debt with $10,000 in unencumbered assets and $5,000 in cash for an incorrect debt to asset ratio of $80,000 / $15,000 = 5.33.
To put it in a personal example. Assuming you have $5,000 cash. Suppose you had bought a house for $100,000 and have a mortgage for $80,000. Also, suppose you have a car worth $10,000 paid off and unencumbered.
You have $80,000 debt and $115,000 in assets. Your debt to asset ratio is $80,000 / $115,000 = 0.70.
It is not figured as $80,000 debt with $10,000 in unencumbered assets and $5,000 in cash for an incorrect debt to asset ratio of $80,000 / $15,000 = 5.33.
Total Debt/Cash+Assets
SWA:13/15.5+5=0.63
05-07-2020 | 05:39 PM
#14
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From: Fully Retired
American Airlines
The Total Of (Cash + Unencumbered Assets + Encumbered Assets) has to be used for the denominator of the Ratio.
- Total Cash-11B
- Total Debt-46B
- Total Unencumbered Assets-5B
- Debt to Asset Ratio-2.875
The Total Of (Cash + Unencumbered Assets + Encumbered Assets) has to be used for the denominator of the Ratio.
05-07-2020 | 05:43 PM
#15
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From: Fully Retired
05-07-2020 | 05:46 PM
#16
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Joined: Jan 2018
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Great info, but not the whole story. Personally, my airline (Southwest) has so much debt that is not on the books now, but they are obligated to pay, and would need to pay in order to keep an operable fleet. This does not take that in to account. I am speaking of new aircraft on order. Our fleet is old! I think we are going to end up a 300-400 aircraft company going forward over the next 10 years, but even at that rate of shrinking, we do have to replace the aging fleet. If for any other reason, is to improve our cost per seat per mile.
05-07-2020 | 06:19 PM
#17
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Good catch thanks! I’m too lazy to look all that up but that would put AA and Spirit in better shape with a newer fleets. And SWA’s older fleet would be a hit. One could argue the need for a new fleet at this point in time.
05-07-2020 | 08:43 PM
#18
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You could make that argument but then how do you explain AA and DAL using MD80's (until now)? Allegiant made big money flying old MD80's. Even Skywest flew the Brasilia (and CRJ50) well past their prime and made a ton of money doing it. There is a cost advantage to the newer aircraft but those old birds - at the right company - can still make lots of money.
05-08-2020 | 06:58 AM
#19
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Joined: Oct 2013
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From: The right seat
Great info, but not the whole story. Personally, my airline (Southwest) has so much debt that is not on the books now, but they are obligated to pay, and would need to pay in order to keep an operable fleet. This does not take that in to account. I am speaking of new aircraft on order. Our fleet is old! I think we are going to end up a 300-400 aircraft company going forward over the next 10 years, but even at that rate of shrinking, we do have to replace the aging fleet. If for any other reason, is to improve our cost per seat per mile.
05-08-2020 | 07:50 AM
#20
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