Southwest Airlines Company (LUV)
Solvency ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Debt-to-capital ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Debt-to-equity ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Financial leverage ratio | 3.26 | 3.47 | 3.31 | 3.49 | 3.90 |
Solvency ratios provide insights into a company's ability to meet its long-term debt obligations. For Southwest Airlines Company, the debt-to-assets ratio, debt-to-capital ratio, and debt-to-equity ratio have consistently remained at 0.00 from December 31, 2020, to December 31, 2024. This indicates that the company does not rely heavily on debt to finance its assets and operations.
The financial leverage ratio, on the other hand, has shown a declining trend from 3.90 on December 31, 2020, to 3.26 on December 31, 2024. A decreasing trend in the financial leverage ratio suggests that Southwest Airlines Company is relying less on debt financing in relation to its equity as time progresses.
Overall, the solvency ratios paint a positive picture for Southwest Airlines Company, indicating a strong financial position with minimal reliance on debt to support its operations and obligations. The decreasing trend in the financial leverage ratio further illustrates a prudent financial management strategy by the company.
Coverage ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Interest coverage | — | 0.93 | 3.22 | 3.82 | -11.36 |
The interest coverage ratio for Southwest Airlines Company has fluctuated over the years. In December 2020, the ratio was -11.36, indicating that the company's operating income was not sufficient to cover its interest expenses. This could raise concerns about the company's ability to meet its debt obligations.
By December 2021, the interest coverage improved to 3.82, suggesting that the company's operating income was able to cover its interest expenses nearly four times over. This is a positive sign of financial health and stability.
In December 2022, the interest coverage slightly decreased to 3.22, but it still remained at a level that indicates the company is generating enough income to cover its interest payments comfortably.
However, by December 2023, the interest coverage decreased significantly to 0.93, signaling a potential risk as the company's operating income may no longer be sufficient to cover its interest expenses adequately. This could indicate financial stress and the need for Southwest Airlines to reassess its debt levels and overall financial strategy.
The data for December 2024 is not available (denoted by "—"), which limits the ability to assess the latest financial position of Southwest Airlines in terms of interest coverage. It would be important for the company to monitor and manage its interest coverage ratio effectively to ensure sustainable financial performance and stability.