Introduction
For the purpose of this paper, Alaska Air Group (ALK) is the subject of the primary financial analysis with the majority of comparisons made against Southwest Airlines Co (LUV). For financial purposes, the airline industry falls under the transportation sector, consisting of airlines, railroad, and trucking and characterized by the movement of people and products. For the purpose of this analysis, comparable airline carrier ratios are used. An enhanced look into the specifics of Alaska and Southwest’s financial statements and accounting methods explain their positioning in the airline industry and reflect their performance in recent years. Activities
Alaska Airlines reported record earnings for the year 2010, with a $203 million improvement from 2009. A 9.8% increase in passenger traffic over the previous year drove the revenue increase (Alaska Air Group, Inc., 2011). Alaska also led the ten largest carriers in on-time performance for the year. For the third year in a row, it ranked highest in customer satisfaction among traditional network carriers, as listed by J.D. Power and Associates (Alaska Air Group, Inc., 2011).
Challenges * The safety and financial results could be harmed in the event of an accident or incident * Changes in government regulations or restrictions could drive operating costs up * Security concerns related to the airline industry as a whole * Labor actions * Fluctuating fuel costs, affecting operating costs * Dependence on a limited number of suppliers for aircraft parts * Economic uncertainty or a recession could harm the overall financial condition * Increases in insurance costs and the benefit pension plans can negatively affect their ability to compete in the marketplace * A failure in the
