American Airlines Group Inc. (NASDAQ:AAL)

Current Ratio

The current ratio exhibited an overall improvement trend from 2019 through 2021, rising from 0.45 to 0.91. However, subsequent years show a decline, dropping to 0.71 in 2022 and further to 0.62 in 2023. Despite the initial strengthening of short-term liquidity, the ratio remained below 1 throughout, indicating potential challenges in covering current liabilities fully with current assets.

Quick Ratio

A similar pattern emerges with the quick ratio, which increased steadily from 0.31 in 2019 to 0.79 in 2021, suggesting enhanced ability to meet short-term obligations with liquid assets excluding inventory. This was followed by a decline in liquidity in 2022 and 2023, falling to 0.56 and then 0.48, respectively. Despite improvements, the quick ratio did not reach the threshold of 1, implying limited immediate liquidity.

Cash Ratio

The cash ratio showed considerable growth from 0.22 in 2019 to 0.71 in 2021, reflecting a significant increase in cash and equivalents relative to current liabilities. However, this ratio also declined in the last two years, dropping to 0.46 in 2022 and 0.38 in 2023. The downward trend suggests a decreasing capacity to cover current liabilities using only cash resources, although the level remains higher than the starting point in 2019.

Overall Liquidity Analysis

Across all liquidity ratios, the period from 2019 to 2021 displayed marked improvement, indicating a strengthening short-term financial position. The downturn from 2022 onwards reveals a reversal of that momentum, highlighting potential emerging liquidity pressures. Nonetheless, the ratios never surpassed the level of 1, signaling ongoing reliance on less liquid assets or financing for meeting current obligations.

Current Assets

The current assets exhibited a notable increase from 8,206 million US dollars in 2019 to a peak of 17,336 million US dollars in 2021. However, following this peak, a decline is observed with current assets dropping to 15,269 million US dollars in 2022 and further decreasing to 13,572 million US dollars in 2023.

Current Liabilities

Current liabilities have generally trended upward throughout the period analyzed, increasing from 18,311 million US dollars in 2019 to 22,062 million US dollars in 2023. Despite a slight decrease from 18,311 million in 2019 to 16,569 million in 2020, liabilities rose consistently from 2020 onward, reflecting growing short-term obligations.

Current Ratio

The current ratio shows an improving trend from 0.45 in 2019 to 0.91 in 2021, indicating a strengthened ability to cover short-term liabilities with short-term assets during this time. However, starting in 2022, the ratio declines to 0.71 and further to 0.62 by 2023, suggesting a weakening liquidity position and reduced coverage of current liabilities by current assets at the end of the period.

Overall Insight

While current assets increased significantly until 2021, the subsequent decline along with a steady increase in current liabilities has contributed to a deteriorating current ratio after 2021. This points to rising liquidity challenges in the most recent years, with the company’s capacity to meet short-term obligations diminishing despite earlier improvements.

Total Quick Assets

The total quick assets exhibited an upward trend from 2019 to 2021, increasing from $5,734 million to $14,926 million. However, this was followed by a decline in 2022 and 2023, dropping to $12,098 million and then to $10,514 million respectively. Despite the recent decreases, the values in 2022 and 2023 remain significantly higher than the 2019 level.

Current Liabilities

Current liabilities showed some fluctuations over the period. They decreased from $18,311 million in 2019 to $16,569 million in 2020, then increased steadily in the subsequent years, reaching $22,062 million by 2023. This indicates an overall rise in short-term obligations compared to the initial year.

Quick Ratio

The quick ratio improved markedly from 0.31 in 2019 to 0.79 in 2021, reflecting better liquidity and a stronger ability to meet short-term liabilities with quick assets. However, the ratio dropped in both 2022 and 2023 to 0.56 and 0.48 respectively, suggesting a weakening liquidity position compared to the peak in 2021, but still improved relative to 2019.

Summary of Observations

Overall, the company experienced growth in quick assets and liquidity through 2021, followed by a noticeable decrease in quick assets and quick ratio in the last two years reported. Concurrently, current liabilities increased, particularly after 2020. These trends suggest that although liquidity improved early on, the company’s short-term financial stability has somewhat weakened in recent periods, with diminishing quick assets relative to liabilities.

The data presents a financial overview over five years, outlining total cash assets, current liabilities, and the cash ratio, which elucidates liquidity trends.

Total Cash Assets

There is a pronounced upward trajectory in total cash assets from 2019 through 2021, increasing from $3.984 billion to $13.421 billion. This significant accumulation of cash resources peaked in 2021, after which it declined to $9.960 billion in 2022 and further decreased to $8.488 billion in 2023. Despite the reduction post-2021, cash levels remain above the 2019 baseline.

Current Liabilities

Current liabilities demonstrate an overall increasing pattern during the period. Starting at $18.311 billion in 2019, these obligations decreased slightly in 2020 to $16.569 billion, possibly reflecting short-term liability management. Thereafter, current liabilities rose consistently, reaching $22.062 billion by 2023. This upward trend post-2020 suggests growing short-term financial commitments.

Cash Ratio

The cash ratio, a liquidity measure comparing cash assets to current liabilities, shows steady growth from 0.22 in 2019 to a peak of 0.71 in 2021, aligning with the surge in cash assets relative to liabilities. Following 2021, the ratio decreases to 0.46 in 2022 and further to 0.38 in 2023, reflecting the combination of diminished cash reserves and higher current liabilities, though remaining above the initial 2019 level.

Overall, the data illustrates strong liquidity enhancement culminating in 2021, driven by increased cash reserves amid relatively stable liabilities. Post-2021, the company experienced a contraction in liquidity caused by reduced cash assets alongside rising current liabilities, indicating potential shifts in operational or financing strategies.