Risk and Investment Value Analysis in the U.S. Airline Sector of the Stock Market

Abstract

Amid the evolving global economic landscape, the U.S. airline industry has undergone significant transformations, thus raising the need for comprehensive analyses of its investment value and inherent risks. Financial health, risk management strategies, and investment potential of key players in the U.S. airline sector were assessed, namely, Southwest Airlines, American Airlines, and Singapore Airlines. The research methodology involves a thorough evaluation of the financial ratios of these airlines, their strategic initiatives such as hedging, as well as their environmental, social, and governance (ESG) risk ratings. Key metrics such as Return on Invested Capital (ROIC), the Piotroski F-Score, Altman Z-Score, and debt ratios among others form the foundation of the analysis, providing insights into their operational efficiency, financial strength, and risk profiles. The study concludes that each airline exhibits a distinct financial profile with varying levels of investment potential. The choice between investing in these airlines hinges on individual investor preferences, risk tolerance, and investment horizons. The results reveal that Southwest Airlines and Singapore Airlines present lower risk profiles, potentially appealing to conservative investors, while American Airlines could appeal to more aggressive investors due to its high potential returns, albeit at a higher risk. Meanwhile, Singapore Airlines offers a balanced profile attractive to growth-focused investors. The importance of aligning investment decisions with personal investment objectives and risk tolerance was underscored, thereby providing valuable insights for potential investors in the U.S. airline sector.