Title: An analysis of factors affecting financial distress of airline companies: case of India

Authors: Umesh S. Mahtani; Chandra Prakash Garg

Addresses: Department of Finance and Accounting, Goa Institute of Management, Goa, India ' Department of Transportation Management, School of Business, University of Petroleum and Energy Studies (UPES), Dehradun, 248007, India

Abstract: The airline companies in India face a number of challenges owing to dynamic conditions prevailing in the passenger market and in the input cost structure. These conditions have led to many of these companies facing financial distress and even bankruptcy. In this environment, it is extremely important that management is able to identify those factors which have a large impact on their financial performance. This study focuses on identifying those factors from financial, operational and external conditions which are a major influence on the financial condition of the airlines. Financial and operating data of seven airlines in India is compiled from 2006 to 2017. The importance of including these factors is tested by comparing the accuracy of all factors based model against a model designed with financial ratios only. The study confirms that a logistic regression model designed with performance, operating and financial factors have a higher accuracy in the assessment of financial distress for an airline in India, as compared to models consisting only financial factors.

Keywords: financial distress; logistic regression; model; airlines; India.

DOI: 10.1504/IJBEX.2020.104851

International Journal of Business Excellence, 2020 Vol.20 No.1, pp.130 - 148

Received: 24 Jul 2018
Accepted: 22 Oct 2018

Published online: 31 Jan 2020 *

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