Z-score model on Indian Aviation Industry

Abstract

Ever since the first flight flew in the Indian skies in 1911, there has been considerable efforts by many people to develop a successful aviation company in the country. After liberalisation of the economy in 1991, many airlines started but failed to gather enough momentum to continue flying. In order to spur growth, the government allowed private airlines to operate scheduled air services in 1994. This led to the first round of private airlines in India with Jet Airways, Air Sahara, Modiluft, Damania Airways and NEPC Airlines among others commencing operations during this period. Since then, many airlines have come and gone begging the question of reliable prediction of risk of bankruptcy of the companies. Altman's Z-score has been accepted as a reliable source of bankruptcy prediction. It has been used in this study to find out presence of any bankruptcy risk in the selected Indian aviation companies. The result of the research indicated that only one airline had no risk of bankruptcy as per the Altman’s Z-score model despite recent improvements in the airline industry. All the rest were in the danger zone of high risk of bankruptcy.