The United States of America hosts a large number of air transport companies, with the American Airlines being the nation’s largest carrier. In addition, the carrier was the first corporation that joined e-business with the traditional business idea. The American Airlines was founded in 1930, it was formerly named American Airways since it combined more than 80 small airlines, but the name was officially changed to American Airlines in 1934 (American Airlines (aa) Annual Report, 2015). AAL company started trading on the New York Stock Exchange in the year 1939. Initially, it based in New York City where it remained to maintain a durable existence. However, American Airlines shifted its headquarters to Fort Worth, Texas in 1979, and since then, it has become one of the largest airlines in the economic world subsidizing nearly $100 billion to the United States and worldwide economies. The Airline itself has helped to generate more than 900,000 vacancies globally, and is supported by 1400 non-profit organizations worldwide. American Airlines and its regional affiliates, American Connection and American Eagle Airlines, serves nearly 250 cities in over 40 nations, with an average of 3500 daily flights. The airlines cover the territories of North America, Pacific, Europe, Latin America and the Caribbean (AA, 2015). This report is created to give an insight into the American Airlines financial performance, with the focus on the income statement, cash flow, and the balance sheet.
Income Statement Analysis of AAL
Fiction or nature presents the AAL income analysis. Nature is a well-known form of statement revenue preparation; it eases the intermediate balance before the net revenue figures (Augustine). An intermediate balance circulation is a useful tool for analyzing the financial statement, particularly in preparing company performance and comparative analyzes.
The revenue statement shows gross returns by the company. This statistics comprises of any amounts received for merchandises and services over a convinced period. The AAL’s gross income for TTM is 24,912 billion associated with the business average of 17,008 billion for Southwest Airlines, and 22,460 billion for US Airways. Being the world’s largest airline, AAL produces higher sales than its competitors having available seat-miles running head to head with United (UAL) and Delta (DAL) in the US (Augustine). A gross profit margin gauges the revenue a firm makes from its cost of goods sold. AAL has forwarded a 12,997 billion of its gross profit and has been on the rise for the past five years associated with its contestant Delta (DAL) 8,438 and US Airways 1,959 gross profit. The most alarming numbers from the income statement of AAL is the net operating income. The AAL’s net functional income of TTM is 1,889 (Elliot, 2014).
A negative operating income arises when a firm’s working expenses surpass its revenue from merchandises and services. Such a negative operating income is usually a bad display for business. Another opponent such as US Airways also displays negative operating revenue. Nonetheless, Delta (DAL) displays a positive number in the last declaration, which is 623,000 million. The airlines business does not portray any compact figures on the operating income sector; still, Southwest Airlines statistics has tripled during the past few years from $59 billion to $98 billion (Bloomberg, 2015). Negative operational revenue may be triggered by increasing manufacture cost, poor management or small profit margins. AAL shows some enhancement of EPS (earning per share) ranging from a negative (4.29) in 2011, (7.89) in 2012, and (0.29) from the current TTM. AAL has revealed development, but still, it is negative according to the most recent TTM (Elliot, 2014).
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The AAL Balance Sheet
The balance sheet shows how the assets are financed and what the firm owns in the form of ownership interests and liabilities. The balance sheet comprises a list of firm’s assets, shareholders equity and liabilities. A close study of AAL’s balance sheet illustrates that the total budget of the company is 3,892 billion, which implies a reduction as compared to the past few years, with total cash typically way over 4 billion. Cash is a firm’s most liquid asset since it can willingly be used to finance the firm’s working activities (Elliot, 2014). A business can use cash to achieve a diversity of goals. The contribution of cash affects some money that shareholders have capitalized in business because the less the cash, the more the decrease in shareholders’ equity. The AAL cash flows show 7,987, which is the maximum deterioration of the past three years. A business average, especially in regard to Southwest Airlines and Delta, have advanced cash flows compared to AAL correspondingly shown 8.3 billion whereas Southwest Airlines shows an astounding numbers on total 1.2 billion (American Airlines Group Inc., 2014) Southwest was the only hauler to have positive figures. The total AAL assets are 23.5 billion. The Delta figures are nearly double AAL’s, with 43.5 billion, and southwest has a spectacular 18.6 billion in assets sum. In contrast, the AAL’s total liabilities are higher than the businesses average (Bloomberg, 2015). The AAL’s total liabilities comprise 31,497 billion, which is similar to Delta that displays 9.8 billion on the balance sheet. Southwest Airlines displays 9.6 billion, which is almost a part of its current asset. In addition, AAL has dispatched a negative tendency in the shareholder equity unit on the balance sheet (7,987). This is an extremely low figure from a shareholder’s point the view if compared to the figure Southwest shows, which is 4.9 billion (Elliot, 2014).
The company’s cash expenditure is measured using cash flow statements. The cash flow report varies from these financial statements because it is considered as a kind of business checkbook that settles the income statement and balance sheet. The cash flow statement accounts the firm’s cash transactions, both the inflows and outflows, for a given period (Bloomberg, 2015). The AAL’s cash flow has revealed some refining figures. Nevertheless, these enhancements have been resultant from the operating events. These flows are connected to the main line of business and comprise the cash receipts from sales or recital of services, payroll and other expenses of employees, payments to contractors and suppliers, tax payments, payments for utilities and rent payments. If comparing to Southwest Airlines (LUV), there is a healthy 40 billion dollars and a business average 10-12 billion. Further on the cash flow report, there is a negative figure of the net cash flow for the shareholder (3,956). These are exploited as assets on the balance sheet statistics. Capitalizing events also includes savings that are not involved in the usual line of business (Elliot, 2014).
The cash flows could also contain acquisitions of property, plant and equipment, incomes from the sale of stuff, purchases of goods or other securities other than cash counterparts, and incomes from the sale or improvement of savings. US Airways and Southwest Airlines show positive figures of 2.2 billion and 985,000 million, but the average in the business is negative or break even at best (Bloomberg, 2015). The last columns in the cash flow are cash flow from financing events: these movements relate to the customs debt or equity funding. They include returns from loans, debts, and other loan instruments, installment fees on mortgages or other compensation of debts, cash collected from the issuance of commodity or equity in the business, purchases of treasury stock and dividend payments, or interests of capital. AAL has posted TTM of 3,956, and these numbers clearly show that AAL is a distressed company (Elliot, 2014).
AAL is one of the world’s main airlines that have an enormous client base associated with its services. The client utilization and holding signify the primary gain that AAL relishes and needs to utilize to protect and build its position. The company’s objectives and corporate vision statement are to provide superior customer service. The company also should produce returns to shareholders and stakeholders through increasing business and thus allies’ firm and income opportunities for sellers. For a profit gain, the firm should also set the business standards for safety security as well as strengthen the image and brand name as the best carrier. To capitalize upon inherent advantage, the company should rise creative ticketing, promotions break packages (American Airlines, 2015).
Even though AAL figures on the financial statements do not seem to have a positive tendency, there is room for improvement for the company. There are numerous factors that the business should apply to advance business’s position radically, for example, through outsourcing some of the mechanic and partnering with low-cost carriers. For the CEO of the American Airlines, it is recommended to improve the economic discipline and consider any good relative advantages for enhancement. In addition, to maintain the company’s output, the CEO should conduct studies and surveys to accommodate and keep the client base and attract new clients who may be pleased with some striking deal (Elliot, 2014). The company needs to compete globally in different markets, for example, the Asian market, and power them to regulate their price or win clients.