Corporate capital structure in turbulent times: a case study of the US airline industry

    Authors

    V. S. Guzhva;N. Pagiavlas

    Abbreviated Journal Title

    J. Air Transp. Manag.

    Keywords

    UNITED-STATES; PROFITABILITY; CHOICE; Transportation

    Abstract

    The paper examines airline performances focusing on the capital structure expressed as liabilities/assets ratio for current- and long-term liabilities. It is found that most airlines do not follow the traditional finance management practice of lowering liabilities during lean times and increasing them during economic upturns. Only Southwest Airlines illustrates finance management of this type, with positive effects on its performance. In addition, it is found that among all airlines, levels of current liabilities are properly adjusted for movements of interest rates. However, this practice is not extended to long-terms liabilities, where only Southwest manifested proper adjustments. Finally, return on assets has a negative influence on current liabilities for other airlines, suggesting a risky practice of increasing liabilities when asset profitability is reduced and symmetrically, not taking advantage of market opportunities by increasing liabilities when operations are profitable. (C) 2003 Elsevier Science Ltd. All rights reserved.

    Journal Title

    Journal of Air Transport Management

    Volume

    9

    Issue/Number

    6

    Publication Date

    1-1-2003

    Document Type

    Article

    Language

    English

    First Page

    371

    Last Page

    379

    WOS Identifier

    WOS:000186001900005

    ISSN

    0969-6997

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