Southwest Airlines Company (LUV)
Interest coverage
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 321,000 | 224,000 | 1,017,000 | 1,721,000 | -3,816,000 |
| Interest expense | US$ in thousands | -35,000 | 241,000 | 316,000 | 450,000 | 336,000 |
| Interest coverage | — | 0.93 | 3.22 | 3.82 | -11.36 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $321,000K ÷ $-35,000K
= —
The interest coverage ratio measures a company's ability to meet its interest obligations with its operating income. A higher ratio indicates a stronger ability to cover interest expenses. Based on the provided data for Southwest Airlines Company:
- As of December 31, 2020, the interest coverage ratio was negative at -11.36, indicating that the company's operating income was insufficient to cover its interest expenses. This raises concerns about the company's financial health and ability to meet its debt obligations.
- By December 31, 2021, the interest coverage ratio improved to 3.82, suggesting that the company's operating income was more capable of covering its interest expenses. This improvement indicates a better position compared to the previous year.
- As of December 31, 2022, the interest coverage ratio slightly decreased to 3.22, still reflecting a relatively healthy ability to fulfill interest payments with operating income.
- However, by December 31, 2023, the interest coverage ratio dropped to 0.93, indicating a significant decline in the company's ability to cover interest expenses. This might raise concerns about the company's financial stability and its ability to manage debt effectively.
Unfortunately, there is no data available for December 31, 2024. It is crucial for Southwest Airlines Company to maintain a healthy interest coverage ratio to demonstrate financial stability and ensure its ability to meet debt obligations in the long term.
Peer comparison
Dec 31, 2024