Southwest Airlines Company (LUV)

Financial leverage ratio

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Total assets	US$ in thousands	36,487,000	35,369,000	36,320,000	34,588,000	25,895,000
Total stockholders’ equity	US$ in thousands	10,515,000	10,687,000	10,414,000	8,876,000	9,832,000
Financial leverage ratio		3.47	3.31	3.49	3.90	2.63

December 31, 2023 calculation

Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $36,487,000K ÷ $10,515,000K
= 3.47

The financial leverage ratio of Southwest Airlines Co has fluctuated over the past five years, ranging from 2.63 to 3.90. The ratio measures the extent to which the company relies on debt financing rather than equity to fund its operations and growth.

In 2019, the ratio was relatively low at 2.63, indicating a lower level of debt usage compared to equity. However, there was a significant increase in the ratio in 2020 to 3.90, suggesting a higher reliance on debt financing that year. This increase may have been influenced by various factors such as the impact of the COVID-19 pandemic on the airline industry, leading to a need for additional liquidity to navigate the crisis.

Subsequently, the ratio decreased in 2021 to 3.49 before slightly dropping further in 2022 to 3.31. The most recent data for 2023 shows an increase in the financial leverage ratio to 3.47. These fluctuations indicate that Southwest Airlines Co has been adjusting its debt-to-equity mix over the years, potentially to manage its capital structure in response to changing business conditions or strategic objectives.

Overall, the trend in Southwest Airlines Co's financial leverage ratio reflects a balance between debt and equity financing, with fluctuations reflecting changes in the company's financing decisions and economic environment. Investors and stakeholders may monitor this ratio to assess the company's risk profile and financial stability.