Abstract:
The purpose of this study is to examine the capital structure and good corporate
governance impact towards profitability ratios and analysing financial failure
potential of airlines industry. Variable used as representatives of the capital
structure are collateralize value of assets, firm size, sales growth, fuel costs, and
financial strength. Then, variable used for the good corporate governance are
board size and safety committee. ROA and ROE are used as proxies of
profitability ratios. This research uses a quantitative research methods and fixedeffects
regression to test the significant impact. Altman Z Score model used to
support the depict of financial failure potential. Data were collected from 5 Asia
Pacific major airlines’ annual report in the period of 2013 until 2015. The result of
this research showed firm size, growth, and fuel costs significantly impact the
ROA. Meanwhile, growth and fuel costs significantly impact the ROE. The
Altman Z Score result shows that 4 out of 5 airlines were experienced financial
distress. In short, this study identify serious financial challenges of all 5 Asia
Pacific major airlines during 2013 - 2015.
