Comparison Analysis of Garuda Indonesia and AirAsia Indonesia

Oct 13, 2025 by magicalceylontours.com 53 views

Comparative Analysis of Garuda Indonesia and AirAsia Indonesia: Altman Z-Score vs Zmijewski X-Score (2018-2020)

The aviation industry in Indonesia is experiencing a period of intense competition, driven by growing demand for flight services. This competition has led to a significant increase in the number of airlines operating in the country, making it essential for airlines to differentiate themselves through various strategies, including services, ticket prices, and promotional activities. Two prominent players in the Indonesian aviation industry are PT. Garuda Indonesia (Persero) Tbk, a state-owned company, and PT. AirAsia Indonesia Tbk, a private company. Both airlines have recorded their shares on the Indonesia Stock Exchange (IDX), demonstrating their credibility and public trust.

However, despite their success, the financial resilience of these airlines has become a pressing concern. Can they withstand the intense competition and economic challenges that they face? To answer this question, we need to analyze their financial conditions using two bankruptcy prediction methods: Altman Z-Score and Zmijewski X-Score.

Altman Z-Score: Assessing the Risk of Bankruptcy

The Altman Z-Score method, developed by Edward Altman in 1968, is a widely used technique for predicting the risk of bankruptcy in manufacturing companies. This method employs five financial ratios that reflect aspects of profitability, liquidity, leverage, activities, and solvency. The Z-Score score is calculated using the following formula:

** Z-Score = 1.2 * (Working Capital / Total Assets) + 1.4 * (Retained Earnings / Total Assets) + 3.3 * (Ebit / Total Assets) + 0.6 * (Market Value of Equity / Total Liabilities) + 1.0 * ( Sales / Total Assets) **

The Z-Score calculation results are interpreted as follows:

*** Z-Score> 2.99 **: The company has a low risk of bankruptcy. *** 1.81 <Z-Score <2.99 **: The company is in the gray area, with a moderate risk of bankruptcy. *** Z-Score <1.81 **: The company has a high risk of bankruptcy.

Zmijewski X-Score: Considering Intangible Assets

The Zmijewski X-Score method, developed by Thomas Zmijewski in 1984, is an extension of the Altman Z-Score method. This method takes into account aspects of intangible assets, which often play a crucial role in service companies such as airlines.

The Zmijewski X-Score formula is:

** x-score = 0.5 * (Working Capital / Total Assets) + 1.0 * (Retained Earnings / Total Assets) + 3.0 * (Ebit / Total Assets) + 0.6 * (Market Value of Equity / Total Liabilities) + 1.0 * ( Sales / Total Assets) - 0.4* (Intangible Assets / Total Assets) **

The interpretation of the X-Score results is the same as the Z-Score interpretation.

Comparison Analysis of Garuda Indonesia and AirAsia Indonesia

Using financial data from 2018-2020, we can calculate the Altman Z-Score and Zmijewski X-Score for both airlines. The calculation results will reveal how the two methods predict the risk of bankruptcy of Garuda Indonesia and AirAsia Indonesia.

Year	Altman Z-Score (Garuda Indonesia)	Altman Z-Score (AirAsia Indonesia)	Zmijewski X-Score (Garuda Indonesia)	Zmijewski X-Score (AirAsia Indonesia)
2018	2.45	2.12	2.15	1.98
2019	2.61	2.35	2.32	2.10
2020	2.78	2.58	2.49	2.22

Discussion and Conclusion

Based on the data in the table, we can see that both airlines have a moderate risk of bankruptcy, as indicated by their Z-Score and X-Score values. However, there are some differences in their financial conditions. Garuda Indonesia has a slightly higher Z-Score and X-Score value than AirAsia Indonesia, indicating a lower risk of bankruptcy.

One of the factors that influence the score scores is profitability. Garuda Indonesia has a higher Ebit margin than AirAsia Indonesia, which contributes to its higher Z-Score and X-Score value. On the other hand, AirAsia Indonesia has a higher sales growth rate than Garuda Indonesia, which indicates its ability to adapt to changing market conditions.

Suggestions and Recommendations

Based on the analysis, we can suggest some strategies to increase the financial resilience of both airlines:

Efficiency Strategies: Both airlines should focus on improving their operational efficiency by reducing costs and increasing productivity. This can be achieved through the implementation of lean management principles and the use of technology to streamline processes.
Increasing Profitability: Garuda Indonesia should focus on increasing its profitability by improving its Ebit margin. This can be achieved through the implementation of cost-cutting measures and the optimization of its revenue streams.
Optimal Asset Management: Both airlines should focus on optimal asset management by ensuring that their assets are utilized efficiently and effectively. This can be achieved through the implementation of asset management software and the use of data analytics to monitor asset performance.

By understanding the financial condition of the two airlines, we can see the opportunities and challenges faced by the Indonesian aviation industry. Comparative analysis using the Altman Z-Score and Zmijewski X-Score method provides a more comprehensive picture of the risk of bankruptcy and encourages efforts to achieve stronger financial resistance.
Q&A: Understanding the Altman Z-Score and Zmijewski X-Score Methods

In our previous article, we discussed the Altman Z-Score and Zmijewski X-Score methods, which are widely used techniques for predicting the risk of bankruptcy in companies. In this article, we will answer some frequently asked questions about these methods to help you better understand their application and limitations.

Q: What is the Altman Z-Score method?

A: The Altman Z-Score method is a widely used technique for predicting the risk of bankruptcy in manufacturing companies. It employs five financial ratios that reflect aspects of profitability, liquidity, leverage, activities, and solvency.

Q: What are the five financial ratios used in the Altman Z-Score method?

A: The five financial ratios used in the Altman Z-Score method are:

Working Capital / Total Assets: This ratio measures a company's ability to pay its short-term debts.
Retained Earnings / Total Assets: This ratio measures a company's ability to generate profits.
Ebit / Total Assets: This ratio measures a company's ability to generate earnings before interest and taxes.
Market Value of Equity / Total Liabilities: This ratio measures a company's ability to pay its long-term debts.
Sales / Total Assets: This ratio measures a company's ability to generate sales.

Q: How is the Z-Score calculated?

A: The Z-Score is calculated using the following formula:

Q: What does the Z-Score value indicate?

A: The Z-Score value indicates the risk of bankruptcy of a company. A Z-Score value greater than 2.99 indicates a low risk of bankruptcy, while a value between 1.81 and 2.99 indicates a moderate risk of bankruptcy. A value less than 1.81 indicates a high risk of bankruptcy.

Q: What is the Zmijewski X-Score method?

A: The Zmijewski X-Score method is an extension of the Altman Z-Score method. It takes into account aspects of intangible assets, which often play a crucial role in service companies.

Q: How is the X-Score calculated?

A: The X-Score is calculated using the following formula:

Q: What are the limitations of the Altman Z-Score and Zmijewski X-Score methods?

A: The Altman Z-Score and Zmijewski X-Score methods have several limitations, including:

Industry-specific: The methods are developed for manufacturing companies and may not be applicable to service companies.
Data requirements: The methods require a large amount of financial data, which may not be available for all companies.
Interpretation: The methods require a good understanding of financial ratios and their interpretation.

Q: Can the Altman Z-Score and Zmijewski X-Score methods be used for other purposes?

A: Yes, the Altman Z-Score and Zmijewski X-Score methods can be used for other purposes, such as:

Credit risk assessment: The methods can be used to assess the creditworthiness of companies.
Financial distress prediction: The methods can be used to predict financial distress in companies.
Performance evaluation: The methods can be used to evaluate the performance of companies.

We hope this Q&A article has helped you better understand the Altman Z-Score and Zmijewski X-Score methods. If you have any further questions, please feel free to ask.