Assessing Airline Companies’ Financial Performance through Liquidity and Debt Ratios: An Accounting Approach

This study analyses the relationship between liquidity and debt management ratios and their impact on the financial performance of South Asian airlines from 2011 to 2022. The application of GARCH and TARCH models reveals a nuanced relationship among these factors. Open money, evidenced by strong positive lagged relationships with liquidity ratios and Return on Equity (ROE), plays a crucial role in financial prosperity. Conversely, elevated debt levels, indicated by negative lagged correlations with ROE, exert a detrimental effect. A long-term equilibrium relationship between the factors highlights their interconnectedness and the stability of this dynamic. However, potential limitations such as heteroscedasticity and neglected factors indicate the need for further investigation. This study emphasises the significance of effective liquidity management and prudent debt strategies for South Asian airlines to enhance financial performance and ensure long-term sustainability. Future research may explore the differential effects among various airline types and the influence of external factors, thereby facilitating enhanced financial practices and a robust aviation sector in the region.