Essay on Alaska Airlines: America's Largest Airline & Leader in Customer Satisfaction

Introduction

Alaska Airlines, headquartered in Seattle, is one of America's largest airlines in terms of passenger traffic and air carrier. With its roots tracing back to 1932, the airline has grown to serve numerous customers within the US and across America's continents (Alaska Airlines, 2020). Operating five hubs, Alaska Airlines is an employer to over 24,000 employees and is ranked by the J. D. Power and Associates as the best airline with the highest customer satisfaction among traditional airlines. Its achievements are also reflected in its financial performances.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

Review of Accounting Statements

Alaska Airlines had total operating revenue of $8.781 billion in 2019. Comparatively, this is a 6.26% increase in revenues compared to the total operating revenues it earned in 2018 ($8.264 billion) (Yahoo! Finance, 2020). In 2017, the company had operating revenue of $7.933 billion, which is 10.69% lower than what it earned in 2019. The company had a net income of $769 million, $437 million, $1.034 billion in 2019, 2018, and 2017 respectively (Yahoo! Finance, 2020). From these net incomes, the company had basic net earnings per share of $6.24, $3.55, $8.39 in 2019, 2018, and 2017 respectively (Yahoo! Finance, 2020). From the net earnings per share, it declared a cash dividend per share of $1.4, $1.28, and $1.2, respectively (Yahoo! Finance, 2020). The airline committed $12.933 billion, $10.912 billion, and $10.74 billion in assets in the respective years. The shareholders' equity for the same respective years was $4.331 billion, $3.751 billion, and 3.721 billion (Yahoo! Finance, 2020).

Trends that Emerge

The reports from the financial statements exhibit interesting trends. First, Alaska Airlines revenues have been increasing, which is a positive indication for better future performance. The revenues increased by 10.69% within the three-year 2017-2019 accounting period. The increasing revenues can be associated with the intensifying efforts that the airline is putting in place towards increasing customer satisfaction. For the last few years, the company has been fitting its planes and hubs with unique features and services which have acted as boosts towards better customer satisfaction (Alaska Airlines, 2020).

As a result, customer traffic has increased, leading to higher revenues. However, such efforts, in addition to the need to respond to tax obligations, reflected quite negatively on the company's expenses. Despite committing more assets, expenses have been skyrocketing for the last three years. The expenses between 2017 and 2019 were $6.673 billion, $7.621 billion, and $7.718 billion, respectively. Perhaps, this can explain the low and reducing net incomes between 2017 and 2019 accounting periods. It had a net profit margin of 13.03%, 5.29%, and 8.79% in 2017, 2018, and 2019 respectively. Unless the company finds ways to cut down their costs, the low and unfavorable profit margin will reflect quite negatively on its future profitability.

The Potential Weaknesses

There are various potential weaknesses of Alaska Airlines, as portrayed by the financial statements. The most evident one is the increasing expenses which have reflected quite adversely on its promising revenues. Additionally, the company has been experiencing increasing losses on its net cash flows, both from investing activities and financial activities. The increasing losses would adversely affect its net cash flows both in the present and in the future, making it difficult for the company to carry out its operative activities efficiently.

Conclusion

From the analysis, it is evident that Alaska Airlines' achievements are evident in its financial performance, especially in its revenues. Although the company has been experiencing increasing revenues, its expenses have also been intensifying, leading to low net incomes. There is a need for the company to establish ways to cut costs as a way of leveraging profit margins and the long-term profitability of the firm. It also needs to look into its net cash flows from investment activities and financial activities to ensure their sustainability to the firm's cashflows.

References

Alaska Airlines. (2020). About us. Alaska Air. https://www.alaskaair.com/content/about-us

Yahoo! Finance. (2020). Alaska air group, Inc. (ALK). Yahoo Finance - Stock Market Live, Quotes, Business & Finance News. https://finance.yahoo.com/quote/ALK/financials/