The prediction of the financial failure in the aviation companies by Altman Z Score Method

In this study, general information about the aviation industry is given and the basic indicators of three selected countries, namely Turkey, United States of America and Britain are explained. In the analysis section of the study, the financial failure estimates of 6 airline companies selected from the 3 countries are made by using Altman (1993) model. The study covers company data between 2014-2018 and annual financial statements are used for each company. The aviation industry has grown faster than the economic growth in the world when compared to the general aviation sector. It is observed that airline companies achieved an average occupancy rate of 80%. It is found that airline companies are constantly increasing the number of passengers and aircraft. According to the ratio analysis, there is a negative working capital across the airline companies which reveals the problems experienced by this sector in liquidity. While old companies fail to accumulate profits, it is observed that profitable but young companies accumulate more profit. This study use the financial failure prediction method of Altman (1993) Z "score model which is recommended for the service sector. In Turkey, Turkish Airlines is found to be continuously in financial failure while Pegasus is in gray area in 2014 and achieves financial success in 2015. After the events in Turkey in 2016, it is found to be in failed area due to the increasing exchange rates and costs, and then it remained in gray area in 2017 and 2018. In the USA, while American Airlines was experiencing financial failure, Southwest Airlines has been growing steadily. In the UK, Virgin Atlantic Airlines consistently has a negative Z score. Easy Jet airlines have consistently achieved financial success. According to the analysis, Pegasus, Southwest and Easy Jet Airlines, which focused on national flights, were found to be financially successful, while companies that focused on international flights experienced financial failure. It has been revealed that airlines that focus on national flights in all three countries are more profitable than companies that focus on international flights. Key words: Aviation Sector, Altman Z "Score Method, Financial Failure Prediction, Ratio Analysis