Foundations of Airline Finance: Methodology and Practice (2nd Edition)

Foundations of Airline Finance: Methodology and Practice (2nd Edition)

Bijan Vasigh, Ken Fleming, Liam Mackay

Language: English

Pages: 775

ISBN: 2:00264630

Format: PDF / Kindle (mobi) / ePub

In recent years the airline industry has experienced severe volatility in earnings, with airlines recording periods of substantial profits that are closely followed by periods of financial distress. This trend has continued into the new millennium, with numerous examples of airlines across the globe entering bankruptcy protection or liquidating.

The text provides an introduction to both the basics of finance and the particular intricacies of airline finance where there can be significant fluctuations in both revenues and costs. This new edition also includes:

capital budgeting
management of current assets
financial risk analysis
fuel hedging
aircraft leasing

This textbook contains chapters that cover unique aspects of the aviation financial decision-making process. These include a rigorous and structured presentation of the buy versus lease decision that is prevalent in the industry, a valuation process for aviation assets, the recent trend toward privatization and the difficulty inherent in the valuation of a publicly-owned or semi-publicly owned asset.

The Foundations of Airline Finance, now in its second edition, is an introductory text that can be used either as a general financial text or in a specialized class that deals with aviation finance in particular.





















operating profit margin ratio compares the operating profit of a company with the total revenue generated in the same period. It enables a manager to determine how much operating income is generated from every dollar of revenue earned through normal business operations. The operating profit margin can be particularly useful because it excludes items such as interest expense and taxes, which largely reflect the capital structure of the company—that is, it is useful because excluding these items

aircraft manufacturers, airports, and leasing companies when determining whether or not an independent project should be undertaken, or to choose between multiple projects. These methods are as follows, the strengths and weaknesses of each of which will be discussed in turn: ● payback period; ● discounted payback period; ● net present value; ● internal rate of return; ● modified internal rate return; and ● profitability index. Payback period Airline managers are interested in knowing how

stockholders. This creates the incentive for management to increase shareholder value, since they are now (or will be) shareholders themselves. Other methods used for aligning objectives are providing top management seats on the board of directors, profit-sharing, and having other incentive-based pay schemes. The value of incentive-based pay has proven particularly successful when offered to front-line employees and middle management, although admittedly it can also be controversial, especially

Flightglobal, October 18. Available online at w­w­w­.f­l­i­g­h­t­g­l­o­b­a­l­.c­o­m­/­n­e­w­s­/­a­r­t­i­c­l­e­s­/­s­a­s­-­b­r­a­n­d­e­d­-­a­t­r­-­7­2­-­6­0­0­-­e­n­t­e­r­s­-­j­e­t­-­t­i­m­e­-­f­l­e­e­t­-­3­9­1­8­6­7­ (accessed July 13, 2014). MajcherK. (2013) “Air Canada Considers SLBs for 787s,” Flightglobal, September 19. Available online at w­w­w­.f­l­i­g­h­t­g­l­o­b­a­l­.c­o­m­/­n­e­w­s­/­a­r­t­i­c­l­e­s­/­a­i­r­-­c­a­n­a­d­a­-­c­o­n­s­i­d­e­r­s­-­s­l­b­s­-­f­o­r­-­7­8­7­s­-­3­9­0­7­7­3­

for the airlines. “We’re very aware of the pressure of rising costs in our business. We’re already taking action to make sure we can run a much tighter ship in 2012.” (J. Slosar, CEO, Cathay Pacific, quoted in Wang, 2011) In addition to no longer providing free food, airlines have also begun charging for other services that were previously free, such as pet transportation, telephone reservations, seat selection, and checked baggage. All major US carriers (except for Southwest and JetBlue, as

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