A:

As of May 2015, based on trailing 12-month data, the average long-term debt/equity ratio of airline companies is 91.53. Airline companies are included in the major airlines and regional airlines subsectors, which are a part of the transportation sector.

The debt/equity ratio measures a company's financial stability and leverage, and is calculated by dividing a company's total liabilities by its shareholders' equity. If a company has a high debt/equity ratio, it typically indicates that the company has a high debt level per each dollar of shareholders' equity. Therefore, investors favor companies with low debt/equity ratios.

The average long-term debt/equity ratio of companies in the major airlines industry is 104.89, which indicates that for every $1 of shareholders' equity, the average company in the industry has $104.89 in total liabilities. Since the major airline industry is highly capital-intensive, companies in this industry tend to have high debt/equity ratios.

Similarly, the average long-term debt/equity ratio of companies in the regional airlines industry is 78.16, indicating that the average company in the regional airlines industry has $78.16 in debt per $1 of shareholders' equity.

The average of the long-term debt/equity ratios of companies in the airlines sector is 91.53, or (104.89 + 78.16) / 2. This average includes the long-term debt/equity ratios of large-, mid- and small-cap companies. Delta Air Lines Inc. has a long-term debt/equity ratio of 105.82; American Airlines Group Inc. has 684.59; United Continental Holdings, 408.44; Spirit Airlines Inc., 30.39; and Virgin America Inc., 28.39. American Airlines and United Continental are using high debt levels to finance their growth compared to the overall sector.

RELATED FAQS
  1. What are the most common leverage ratios for evaluating a company?

    Learn more about some of the most common leverage ratios used by traders to determine whether a company is using debt in ... Read Answer >>
  2. What are financial risk ratios and how are they used to measure risk?

    Explore some of the primary financial risk ratios that investors and analysts commonly use to evaluate a company's overall ... Read Answer >>
  3. Is the airline industry an oligopoly?

    Has the air line industry become an oligopoly? Lean about the changing regulations, the history of the airline industry and ... Read Answer >>
  4. What does it mean when airline revenues are adjusted for air traffic liability?

    Understand how the accounting method used by airlines requires them to adjust revenues for air traffic liability and when ... Read Answer >>
  5. If a company has a high debt to capital ratio, what else should I look at before ...

    Learn about some of the financial leverage and profitability ratios that investors can analyze to supplement examining the ... Read Answer >>
  6. What debt/equity ratio is common for companies in the drugs sector?

    Find out more about the drugs sector, what the debt-to-equity ratio measures and what debt-to-equity ratio is common for ... Read Answer >>
Related Articles
  1. Investing

    American Airlines’ 3 Key Financial Ratios (AAL)

    Learn about the financial ratios that are important in understanding and evaluating the business and financial statements of American Airlines Group.
  2. Insights

    TripAdvisor Ranks the World's Best Airlines

    Travel review portal TripAdvisor has provided a ranking for leading airlines at global and regional levels.
  3. Investing

    3 Best Airline ETFs for 2018

    These ETFs have high potential for gains in 2018 with increased interest in the airlines category.
  4. Investing

    Debt Ratios

    Learn about the debt ratio, debt-equity ratio, capitalization ratio, interest coverage ratio and the cash flow to debt ratio.
  5. Insights

    4 Reasons Why Airlines Are Always Struggling

    Why is the airline industry synonymous with ongoing losses and insolvency? We list four reasons.
  6. Investing

    Would Airlines Be Better Off With $100 Oil? (DAL, LUV)

    The cost of jet fuel -- the biggest expense for most airlines -- has declined by about $1 per gallon since this time last year. As a result, airlines have been among the biggest beneficiaries ...
  7. Personal Finance

    3 Thoughts from Deutsche Bank on U.S. Airline Stocks (DB, DAL)

    Explore the near- and long-term outlooks for the airline industry, and discover why Deutsche Bank analyst Michael Linenburg has downgraded major airlines.
  8. Investing

    3 Oustanding Airline Stocks

    A look at three airline stocks that have outperformed the market over the last five years.
  9. Investing

    Evaluating a Company's Capital Structure

    Learn to use the composition of debt and equity to evaluate balance sheet strength.
  10. Investing

    American Airlines & US Airways Merger: It Matters!

    While the two airlines' merger creates a new giant in the industry and reduces choice for consumers and employees, investors should benefit.
RELATED TERMS
  1. Debt/Equity Swap

    A transaction in which the obligations (debts) of a company or ...
  2. Capitalization Ratios

    Capitalization ratios are indicators that measure the proportion ...
  3. Ratio Analysis

    A ratio analysis is a quantitative analysis of information contained ...
  4. Debt Ratio

    The debt ratio is a financial ratio that measures the extent ...
  5. Long-Term Debt To Total Assets Ratio

    The long-term debt to total assets ratio is a measurement representing ...
  6. Accounting Ratio

    Accounting ratios, also known as financial ratios, are used to ...
Trading Center