Why do all airlines have “current ratio” less than 1?

If you can do business with other people’s money, that would save you cost of borrowing money from banks for short term use to pay your bills. In airline business you can keep the cash and inventory at bare minimum level as you have sufficient cash flow from advance booking of tickets including government taxes and airports charges. This cash remains with you for quite a few days and you can use it to meet your day to day requirements, instead of borrowing it from the bank. Current liabilities side is accordingly high because you are holding other people’s money.

Besides accounts payable in the form of interest on long term debt and cost of aircraft lease etc results in higher current liabilities. Hence with low current assets and higher current liabilities; current ratio ought to be less than 1.

In airline business ‘equity to assets’ ratio is also very low as airlines leverage assets upto 80% to 90% of their total assets because of very high cost of capital. Hence most of the airlines would have equity to assets ratio in the range of 0.1 to 0.2.