Delta Air Lines is mainly identified to be one of the major American airlines, whose overall net income amount to $4.373 billion in 2016. The company has a large history, where it started the operations of crop dusting during 1925. Moreover, from 1928 the overall Delta Air Lines mainly started its flight operations in 1928, where the first operations began in 1929 with the flights between Dallas, Texas and Jackson. The company during 1980 started the pacific and internal flight operations (Ir.delta.com, 2017). However, during 2007 the company faced bankruptcy but the merger with Northwest Airlines allowed Delta Airlines to become world’s largest Airline. Lastly, the combining of website and reservation system mainly retired the Northwest Airlines name and brand from Delta Air Lines.
The competitors of Delta Air Lines, are Southwest Airlines Co, American Airlines Group Inc and United Continental Holdings Inc. The competitors of the organisation can be identified from the Market Cap that is enjoyed by the companies. The overall competitors of the company have mainly increased the intense competition in the market, which intensifies the competition level in the airline industry. The main target customer of Delta Air Lines ranges from first class facilities to basic economy, where high end customer and as well as low income earning customers are targeted by the company (Ir.delta.com, 2017).
The top management of Delta Air Line is Ed Bastian (Chief Executive Officer), Glen Hauenstein (President), Gil West (S.E.V.P. and Chief Operating Officer), and Paul Jacobson (E.V.P. and Chief Financial Officer). These identified top management personnel mainly conduct the relevant operations for improving profitability of the organization. The management information mainly helps in identifying the relevant income, which could be generated from the operations (Ir.delta.com, 2017).
From the overall evaluation of company’s performance, the relevant business strategy of Delta Air Line could be identified. This could eventually allow the company to generate the required level of profitability and attain sustainable growth. The main business strategy of Delta Air Lines is to attract more customer for their Airbus, which helps in generating higher revenue from investment (Ir.delta.com, 2017). In addition, merger is also one of the major activities and strategy of Delta Air Lines, which has allowed the organisation to increase its activities and become one of the largest Airlines in United States.
Analysis of the short term liquidity and longer term solvency:
|
Particulars |
2014 |
2015 |
2016 |
|
Solvency ratio |
12.8% |
36.4% |
38.4% |
|
Debt/Equity ratio |
83.7% |
79.6% |
76.0% |
|
Quick ratio |
68.8% |
47.7% |
43.0% |
The above table mainly represents the overall short term and long term solvency condition of the Delta Air Lines from 2014 to 2016. The overall valuation of solvency ratio mainly increased from 2014 to 2016, where the risk from investment relevantly increased. This problem in solvency condition mainly increased over time, which raised the problems in company’s financial attribute. The relevant debt/equity ratio decline rapidly indicating relevant reduction in debt accumulation, which is been conducted by the company. The relevant evaluation of debt to equity ratio and solvency ratio mainly helps in understanding the overall long term and short term solvency condition of the company. Abdul-Baki, Uthman & Sannia (2014) mentioned that with adequate ratio investor are able to detect the financial condition of the company, where relevant investments could be conducted.
The overall liquidity conduction of the company is also evaluated with the help of quick ratio, where ability of the company to support short term obligations is greatly reduced. The overall financial ability of the company mainly declined, where its quick ratio declined from 0.69 in 2014 to 0.43 in 2016. This mainly indicates that the company’s ability to support short term obligations has relevantly declined in 2016. Hence, the Delta Air Line is not able to support the relevant financial obligations and conduct relevant operations. Baños-Caballero, García-Teruel, & Martínez-Solano (2014) mentioned that the use of liquidity ratio could eventually allow the investor to detect viability of the current assets. Therefore, the problems in the overall financial stability of the organisation could be detected from the valuation of the financial condition.
|
Asset Efficiency |
2014 |
2015 |
2016 |
|
Working capital ratio |
0.74 |
0.52 |
0.49 |
|
Inventory turnover |
23.99 |
22.07 |
20.08 |
|
Total asset turnover |
75.89% |
75.90% |
75.94% |
The overall table mainly depict the relevant asset efficiency of Delta Air Line, which directly help in detecting management efficiency in controlling business activities. The overall working capital ratio has mainly declined over the period of 3 years where it reduced from 0.74 to 0.49. This reduction in working capital ratio mainly reduces the relevant capability of the company to support its activities. Furthermore, the overall inventory turnover ratio is also identified from the above table, which is relevantly declining from 2014 to 2016. This relevant decline in inventory level could eventually reduce the overall ability of the company to clear its inventory in time. The overall asset turnover ratio of the company could eventually help in generating higher revenue from investment. The asset turnover ratio has mainly increased from 75.89% to 75.94%, which helps in depicting relevant returns generated by the company. Therefore, the overall asset efficiency of the organisation has mainly increased, while the other efficiency measure mainly reduces financial viability of the company (Delen, Kuzey & Uyar, 2013).
|
Profitability |
2014 |
2015 |
2016 |
|
Profit margin |
1.63% |
11.12% |
11.03% |
|
Gross margin |
43.10% |
58.00% |
59.79% |
The overall above table mainly represent the profitability ratio of Delta Air Lines, which could help in depicting its financial viability. The overall profit margin of the organisation has drastically increased from 2014 to 2015, which depicting the overall revenue generated by Delta Airlines. However, the overall profit margin of the company mainly declined from 11.12% in 2015 to 11.03% to 2016. This relevant decline is mainly due to the rising expenses incurred by the company, which resulted in reduce income generated in 2016 as compared to 2015. The overall gross profit margin of the company has mainly inclined adequately from 2014 to 2016, which could help in depicting its revenue generation capacity. However, from the overall evaluation it could be seen that net profit margin did not increase adequately, as the gross profit margin, which relatively depicts the increased administrative expense incurred by the company. In this context, Duchin & Sosyura (2014) mentioned that investor with the help of profitability ratio is able to detect trend on revenue generation capacity of the company. This detection of the revenue and expense trend mainly allow the investors to detect financial viability of the investment.
|
Cash flow analysis |
2014 |
2015 |
2016 |
|
Operating cash flow |
0.13 |
0.45 |
0.46 |
The overall operating cash flow ratio is mainly identified from the above table, which is relatively seen to be rising in nature. This relevant increment in the operating cash flow of the company is mainly high, as the overall revenue increased exponentially. From the evaluation it could be identified that operating cash flow increased exponentially from 0.13 in 2014 to 0.45 in 2015. However, the increment in operating cash flow from 2015 to 2016 was nominal at 0.01. This relevantly indicates that the company’s overall expenses increased in 2016, which relevantly reduce the overall operations cash flow of the organisation (Erdogan, 2014).
The overall firm’s earnings quality mainly inclined from 2014 to 2016, which relatively depicts the overall management control for generating higher revenue from investment. The company after completion of 2014 mainly ended the expenses incurred from the operations, which in turn help in generating higher earnings from operation. In addition, the relevant increment in total revenue earned by the organisation and the overall cost of sales could be evaluated from the annual report. The overall reduction in cost of revenue could be conducted, which might help in increasing the overall gross profit of the organisation. This relevant increment in the overall revenue mainly indicates the profits that is generated by the organisation by conducting low expenses. The restructuration of merger and acquisition expense after 2014 mainly declined to nil in 2016. This relevantly helped in improving profitability of the company, which in turn generate higher revenue from investment. The relevant decline in cost of capital is mainly conducted by the management for increasing the profits of the organisation. Grinblatt & Titman (2016) mentioned that the overall valuation of earnings per share could help ion depicting the relevant growth, which might be attained by the company in future.
From the overall evaluation of the above figure relevant share price of the stock can be denitrified, which is relatively seen to be in an uptrend. The long term trend of the organisation is relatively in uptrend, while the short term trend is relatively in consolidation. This overall evaluation of the share price mainly indicates that share price valuation of the company is currently declining. The levels of 51.40 is mainly identified to be the relevant support level for the share price, which could directly increase over time. Le & Viviani (2017) mentioned that with the help of share price valuation investors are mainly able to detect the price range and trend, which could help in making adequate investment decisions.
The trend line is adequately visible where relevant viability of an uptrend could be identified, which could allow the organisation to generate higher revenue from investment. Hence, the use of technical analysis could mainly help in identifying the relevant share price of the company, which could help in making adequate investment decisions. The above figure mainly represents the relevant future price predictions that could estimate the relevant price of current Delta shares. The levels of 48.33 is mainly identified to be the stop loss with the relevant target of 58.76 in future. This move could mainly help in improving returns that will be generated from investment. Leary & Roberts (2014) argued that technical analysis valuation is only viable if the investors are able to accurately estimate the price trend and generate higher revenue from investment. Therefore, with the help technical analysis relevant price level of Delta Air Line could be identified.
The overall evaluation of the assignment mainly helps in depicting the current financial performance of Delta Air Lines company. This relevant valuation of the company could help in depicting the investment option, which might help in generating higher revenue from investment. The evaluation of all relevant issues mainly help in identifying financial viability of Delta Airlines, which could help in generating higher returns from investment for the investors. Technical analysis conducted in the above section also depict the relevant financial Trend of the organization, which might provide higher returns from investment in future. The evaluation of earnings per share also depict relevant growth, which could be obtained by the organization in near future. Hence, it advisable for investors to relatively invest in Delta Airlines, as it might help in generating higher revenue for them in near future and create wealth. Therefore, from the overall evaluation financial viability of delta Airlines could be identified, which might help investors in making adequate investment decisions.
Reference:
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