Enterprise Distribution

US transportation companies come mostly from GA, TX, WA

 Typical Firm Performance by Region - Profit
Distribution

The firms in GA are much bigger than those in TX and WA

 Concentration and Competition Intensity - Total
Revenue

US transportation industry is dominated by a few large firms

 Concentration and Competition Intensity

China may have more opportunity and higher competition

intensity than US. US is more monopolized.
 Industrial Trend

China is catching up with US (SP500) on the total revenue

but still lag behind on profits
 Industrial Trend - Profitability

The typical company performance is going down for both US

& China
 Industrial Trend - Efficiency

US vs China, 2018, transportation, efficiency. US has a

higher inventory days and longer cash cycle than China, but
a much higher asset turnover and return on asset than China.
So US has a better asset utilization.
 Industrial Trend - Financial health

US vs China, 2018, transportation, financial health. China

has a better current ratio and liability asset ratio, but US firms
are much larger and have much more operating cash and
total cash
 Industrial Comparison

Supply chain: capital goods, automobile --> transportation -->

retailing. Transportation is smaller in revenue but has good
profit!
 Industrial Comparison

Whatever you do, don’t do auto / parts for its poor growth on
industry total & median
 Industrial Comparison

Transportation has a poor bargaining power but good ROA &

labor productivity
 Revenue vs. Cost - transportation, US, 2018

AAL is the largest, but slightly below average. UPS is the

largest by far. Indeed, AAL, DAL and UAL are very close, far
different from LUV (southwest) and Alaska airlines, …
 Operating Profit vs. Cost

This picture better shows the differences in profitability. DAL

is both large and highly profitable, UAL is smaller but equally
profitable as AAL, LUV is small but very profitable, Alaska air
is small and not very profitable.
 Operating Profit vs. Total Assets

AAL is the largest in asset, but operating profit / asset < 10%,
ROA (net profit / revenue) < 5%. UAL achieve about the same
operating profit with much less asset! DAL achieves a much
higher operating profit with about the same asset.
 Operating Margin vs. Revenue

AAL is far below the profit frontier, the worst performer in its
revenue class.
 Return on Asset vs. Liability Asset Ratio

AAL is worst on on ROA and financial health, Southwest is

the best on both. DAL and UAL are in between.
 Enterprise Ranking - Revenue

AAL is the largest airline, AAL: 2nd in size. DAL is slightly

smaller, UAL is smaller, Southwest is half the size, Alaska is
about 1/5.
 Enterprise Ranking - Revenue

AAL: 10th in Operating Margin. Southwest operating margin

is 14-15%, DAL is12% but AAL is 8%.
 Enterprise Ranking - Revenue

AAL: 13th in ROA. AAL has the smallest ROA at about 2%,
Southwest at 9%, DAL at 7%, UAL 5%, Alaska 4%.
 Profitability Distribution by Industry

AAL is among the worst performing 2 firms < 5% ROA. AAL

has a lot of potential!
 Enterprise Comparison

AAL has DAL’s revenue but Alaska air’s profit

 Enterprise Comparison

AAL has the smallest margins

 Enterprise Comparison

AAL has the smallest investment returns – explains AAL’s

stock prices
 Enterprise Comparison - KPIs

AAL is the worst performer in almost all areas: profitability,

growth, financial health and efficiency.
 KPI Examination - AAL

American Airlines has the lowest profit, worst financial health

and stagnant growth.
 Enterprise Trend - Market share

All revenues are increasing but all operating incomes are

decreasing, AAL had the sharpest decline.
 Enterprise Trend - Profitability

Margins are down for almost everyone except Southwest.

AAL doesn’t have the lowest gross margin but the lowest net
margin.
 Enterprise Trend - Financial health

AAL liability asset ratio and long-term debt ratio are way
above others into the danger zone.
 Enterprise Trend - Efficiency

AAL has the highest inventory days, among the longest cash
cycle, but the lowest employee productivity, and the second
lowest bargaining power.
 Value Driver Analysis

A higher liability asset ratio may lead to a lower operating

margin.
 Value Driver Analysis

A higher liability asset ratio may lead to a lower ROA.

 Enterprise Breakdown

AAL’s COGS ~ industry average, but way too much other

cost. DAL ~ industry average. Southwest > industry average
in COGS & net income!
 Enterprise Breakdown

AAL equity ~ 0. DAL ~ industry average. Southwest >

industry average on equity!
 Enterprise Breakdown

AAL: short on cash.Southwest has lots of cash!