Aviation Finance Quiz 3

Whats the pur’pose of a financial forecast?

Making a future prediction/educated of the airline

There are 3 stages of a financial forecast, please name them and their duration.

• 1 year

• 3 year

• 5 year

When developing a financial forecast what element should you look at to more accurately make your predictions?

• KPI’s

• Stock

• Net Promoter Score

• Market Cap

When developing a forecast, you can either use one of two types. Please describe them, name them, and which format are we using?

• Quantitative - based on data

• Qualitative - based on opinions, news surrounding airline

• We use hybrid

On the revenue side of a valuation/forecast, what elements should you include and why?

• KPI’s - how much money youre making

• 2-way revenue - generate a lot of revenue

• Liquidity

• Market cap - how much the company’s worth

• Stock Performance - should be good

On the costs side of a here are two types of costs, what are they and give examples of each?

• Operating Expenses (OPEX)

• Cost of Goods Sold (COGS)

• CAPX

What’s the difference between an airline valuation and a financial forecast?

The valuation is the current state of the airline, the forecast is a future prediction

Please do a valuation of United Airlines

Go to UAL financials

1. Revenue (YTD - right side of QTR)

   • Revenue KPI’s

     • ASM

     • RPM

     • PRASM,

     • Load Factor

     • Yield

   • Deferred Revenue

     • Advanced Ticket Sales

     • Loyalty Programs (frequent flyer deferred revenue“ - 3.6 billion)

2. Costs

   • CAPEX (one time)

     • “capital expenditures”

   • OPEX (recurring)

3. Market Cap (use AI)

   • Stock Performance * Outstanding Shares

4. Stock Performance (Yahoo Finance)

   • 52 Week history of that stock (range + current valuation)

Based on your airline valuation, what’s your analysis?

Govt shutdown?

Low stock price?

Q4 revenue low?

What do yahoo analysts say?

Short or long term investment?