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The podcast discusses three major airline companies: American Airlines, Delta Airlines, and Southwest. They talk about recent news and changes in the companies' rewards programs. They also discuss the impact of current conflicts on airlines and the industry as a whole. Financial ratios are analyzed, with Delta being highlighted as the most favorable investment option. Overall, Delta is considered the safest choice for investors, followed closely by Southwest. The podcast ends with a thank you and a promise to return next time. It's showtime. Hey everyone, welcome to Impulsive, the number one podcast at Stack. I am your host for today, Vassilios Stoglias. And today with me I have Nacho Simon. Of course, I have Nick Shalaba. Hi, I'm glad to be here. And I have Conor Tai. So for today in our podcast, each person has done excessive finance research for an airline company. Nacho, can you tell us which company you have? Of course, yes. Well, I picked American Airlines. I think that we all know what company it is. It is, in general terms, it's located in Dallas, as you can probably know. It's the biggest airline in the world, with a maximum of 6,800 daily flights. And it has 150 destinations in 48 countries. That's awesome. Nick, can you tell us a bit about your company? I did Delta Airlines. It was established in 1925, so it's almost already 100 years old. That's pretty crazy. And the CEO is Ed Bastian. Okay. And then, Conor, can you tell us about your company? Southwest is a company that operates in the airline industry, providing their passengers with a quick and easy way of transportation. They pride itself on being the world's largest low-cost carrier in their industry. Very interesting. So, of course, we've also taken a closer look to the industry as a whole, which is the airline industry. The airline industry has many highs and lows, like a roller coaster. Think of it kind of as a huge theme park in the sky, where airlines compete to take us to far and near destinations. Working in the airline industry has many thrilling parts, from taking relaxing trips to distant locations, and, of course, what we all know to be the inevitable times when you all despise waiting in line for security. So, now that we know our industry better and the companies, my friends here have some recent news for us. So, Nick, why don't you start us off with some of the recent news? All right. This is around two months ago, the week of September 28th. The CEO announces that they will be changing their rewards program. This was due to a backlash when COVID happened. A lot of the people that were on the highest tier, the diamond tier, kept their status, even though they weren't flying and they didn't want that to happen. But that got a lot of backlash, so the CEO reverted back to that. So, they've made it easier to reach the diamond status, which it was originally. But the CEO does point out that, eventually, that they are going to make it a bit more difficult. And with news like this, there is a general positive trend with news and the price of it, of the stock, which is kind of weird when I say, look, this seems like bad news because of the recent backlash, but the spikes are inconsistent. The highest spike was in July, when it went up to $48,000, the price. But then in April, there was a lot of news, but the price leveled off around $34,000, which is normal. So, the spikes are inconsistent. But news does have a general positive trend with the price. Well, very interesting, I guess. Also, I want to emphasize that the airline industry is going through a conflict that is normal, at least. It hasn't been normal for the last 20 years, after the Taukastik war. And as you guys know, Ukraine is in a war with Russia, and also another war conflict has just started in Israel with... Palestine. Yeah, with the Palestinians. So, that's important because not every airline operates in the same spot. The company will have to choose. They'll go, or at least they have, like, coupled routes through that airspace. Southwest actually followed suit with Delta. They made changes to their current model, making it easier for passengers to earn and access A-list status, which will include seat upgrades and better perks, such as free beverages and access to exclusive lounges within the airports. Very interesting. So, now that we understand a bit more in real time what the company's news has been, I would like to shift this talk and talk a bit more about ratios. First, I want to talk about financial ratios, what they are in general. They generally state the relative magnitude of two selected numerical values taken from an enterprise's financial statements. And I'm going to give it to Nick now to talk a bit more about the ratios in the companies in the industry. All right. We'll first do some of the ratios that Delta did the best at, at least according, compared to the groups from the other airlines that we researched into. Delta was the best in debt-to-equity, which is you take total debt and you divide that by total equity. And then another thing that it did very well was in the profit margin. Its return on assets was at 4.66. Oh, yeah, return on assets is net income divided by total assets. And then you take – and Delta was at 4.66 while the second highest in what we studied was 2.43, so that has a clear lead. But some ratios that it struggled in was a bunch of the short-term liquidity, which is things like current ratio, which is current assets divided by current liabilities. It was almost at the minimum, like the lowest possible, which was 0.37. Delta was at 0.44. Quick ratio was also another thing it struggled in, which makes sense because quick ratio is very similar to current ratio. You just take out inventory with the current assets, and that was at 0.3 while the minimum was at 0.24. So it had some highs and lows. Very interesting. Well, I mean, I'm going to emphasize one thing to get the context on. We just got out of the pandemic, so I think it's important to talk about the – For sure, for sure. Let me just determinize what is the potential capacity of debt for a company. So, yes, also when comparing business in the same industry, the current ratio, which measures a company's liquidity, compares its current assets to its current liabilities, as Nick said. Okay, let's go with, for example, the total debt-to-total assets. That basically shows the proportion of a company's assets owned by shareholders versus the creditors. For example, the total from the company has probably more. Along with the equity ratio and the debt-to-service ratio, it is one of the three calculations used to determine a company's debt capacity. I mean, the graph from American Airlines clearly shows that with the arrival of the pandemic, knowing that there would be a lockdown and airports were going to be closed, American's debt capacity goes up. That's probably every company. Southwest has a fairly good curve ratio when compared to its peers. They're about 0.45 higher than the average and nearly 1.0 higher than Delta. They seem to struggle in their return on asset ratio when compared to its peers. They're the lowest among the three companies we've talked about in this category. Interesting. Now that we listened to all the different ratios for each airline, what the numbers are and everything, this can lead us into understanding a bit more about the DuPont identity and the three factors of it, that is profit margin, asset turnover, and assets over equity. Nick, why don't you tell us a bit more about that? All right. For Delta, when comparing it to Southwest and American Airlines, its profit margin was the worst at only 2.61. Its asset turnover was 0.70. That's tied for the best of the three that we looked for. I don't remember which one I was tied with compared to the other two airlines, but it was tied for the best. Its assets over equity was by far the best with an astounding 9.72. Interesting. Now that we've heard all that, which company do you think we should invest in out of the three? Well, despite Delta having not the highest profit margin, its asset turnover is good and its assets over equity is so far ahead of the rest that I think that looking at the DuPont, you get the highest total when you multiply those three factors, so I think Delta would be the safest investor right now. Okay. I completely agree with Nick. I think that the management might be the best. From the three companies at which table, what do you think? I agree with both of you. I believe Delta has the slight edge over all three companies, but as a second, a close second, Southwest definitely holds some good financials in there as well. Okay. Okay. So, that is going to be it for today, guys. Thank you for listening to Impulsive, number one podcast at Stack, and I will see you all guys next time. Thank you.