Question

In: Finance

What are the financial risks that an Airline company may have experienced in the past, is...

What are the financial risks that an Airline company may have experienced in the past, is experiencing currently due to COVID-19, and/or could experience in the future. Analyze at least 3 financial risks.

Solutions

Expert Solution

Three financial risk that an airline company is is currently experiencing and it may experience in future are as follows-

A. Bankruptcy risk-this is a risk which is being faced by the airlines company right now, because airline companies are facing with the shutdown of their operations and they are also highly loaded on the debt, so they are completely struck in this credit crunch cycle and they are facing the bankruptcy risk.

B. Liquidity risk-there is a low liquidity in the Global markets due to coronavirus crisis and there is no easy credit available so these airline companies are also facing the liquidity risk as their receivables are struck and they are not able to meet of their payables

C. Low profits are also visible with many Airlines companies as they are reporting with their results, because they have seen shutdown of their operations and they will continue to see decrease in the demand and profitability. Earning reports can reflect that as they have generated low Earning per share and lower projected future growth.


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