Local Law Firms Home > Bankruptcy & Foreclosure News > Bankruptcy Filings Reshape the Airline Industry
It is not completely clear if or when the company will seek protection for bankruptcy. As a matter of fact, American Airlines is the only main network carrier that has never filed for bankruptcy. The CEO of the airline empire is justly against the idea and it is easy to make the claim that American is concentrating on its monetary issues.
The Altman Z-Score measures many different components of a business's financial status to predict the likelihood of it going bankrupt. Since its beginning, the method has been 72% correct in foreseeing commercial bankruptcies two years prior to the filing.
On a universal basis, corporations with a Z-Score above 3 are viewed as safe, while companies with a score of 1.8 or lower are viewed as being in trouble financially. Anything in between the two scores is considered a gray area.
The Z-score accumulates four or five standard company ratios, weighted by coefficients, which were chosen by recognizing businesses that once pursued Chapter 7 bankruptcy protection. The ratios include working capital to total assets; retained wages to total assets; wages before tax and interests to total assets; market value/book value of complete number liabilities to sales and total assets.
While the method isn't the only gauge of the economic status, and is by no means a definite measure of a corporation's bankruptcy odds, it may be a metric worth pondering for those airlines that fall below the safety zone. Those companies with a Z-Score that keeps declining is often a red flag.