Southwest Airlines Financial Report

PEPPERDINE UNIVERSITY

THE GEORGE L. GRAZIADIO

SCHOOL OF BUSINESS AND MANAGEMENT

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Mr. Paolo Perrone

Student

FINANCIAL STATEMENT ANALYSIS

Cost Accounting

Prof. Donald Rudkin

MONDAY November 29, 2010

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Southwest Airlines Company (LUV) | | |

13.53USD

26 Nov 2010 Price Change (% chg) | 26 Nov 2010 Price Change (% chg) $-0.22 (-1.60%) | Prev Close

$13.75 _________Open

$13.64 | Day's High

$13.68 _________Day's Low

$13.46 | Volume

2,616,247 __________Avg. Vol

3,995,209 | 52-wk High

$14.32 _________52-wk Low

$8.76 |

Business Summary

Southwest Airlines Company (LUV) operates as a passenger airline that provides scheduled air transportation in the United States. The company is considered one of the major low-cost airlines in the country. Since the startup the company remained always profitable, making great efforts to adjust its strategies based on the economic trend of the industry. Even if the year 2009 will be recognized as the “Great Recession” for airline companies, Southwest Airlines registered its 37th year of profitability.

It is also recognized for its unique mission statement which is centered on the highest quality of Customer Service through warmth, friendliness and Company Spirit of its employees. The company has a competitive advantage in loading free luggage and selling frequent flyer credits and related services to companies participating in its Rapid Rewards Program.

RATIO ANALYSIS

Liquidity Ratios

Current Ratio

Southwest Airlines’ current ratio is greater in the fiscal year 2009, 1,25:1 than that in the 2008, 0.95 : 1, resulting in a little improvement of the ability to pay short-term debt. Its competitor, SkyWest, Inc. (SKYW), shows much better ratios because it has $2.79 of current assets for every...