(business valuation) - unibg · (business valuation) mauro marchese december 17 th 2010. ......

UNIVERSITÀ degli STUDI di BERGAMOFacoltà di Ingegneria

Corso di Laurea Specialistica in Ingegneria Gestionale

Fundamentals of Finance II(Business Valuation)

Mauro Marchese

December 17th 2010

Agenda

� Case 1: Company Valuation - S.E.A.

� Case 2: Determinants of Company Value - The Aviation Industry- The Aviation Industry

Company Valuation

S.E.A.Società Esercizi Aeroportuali

Case 1

Società Esercizi Aeroportuali

Agenda - Case 1

� The Aviation Industry� S.E.A. Group� Group Valuation: Multiples Method

� Choosing Comparables� Choosing Multipliers

S.E.A. - Società Esercizi Aeroportuali

� Choosing Multipliers� Group Valuation: DCF Method

� Scenario 1: without Alitalia’s impact� Scenario 2: considering Alitalia’s impact

� Final Considerations

Aviation Industry

20

30

40

50

60

70

80

90

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Mili

oni d

i ton

nella

te

Mili

oni d

i pas

sege

ri

� World economic growth� Competition rise among

airlines� Development of low-

cost airlines� Tickets fares reduction

Source:ACI (Airports Council International) Europe (2007)


� Passengers 2006: 4.196 million � CAGR 2002-2006: 6,7% � Freight 2006: 78,24 million tons� CAGR 2002-2006: 5,0%

0

10

0

500

2000 2001 2002 2003 2004 2005 2006

Passeggeri Merci (t)

� Tickets fares reduction

Aviation Industry

Passengers Growth Est.- 20 years� +4% (ACI)

� +4,5%(Boeing)Asia – PRC

Western Europe – PRCWestern Europe – Middle East

Intra AsiaDomestic Asia

Caribbean – Western EuropeAfrica Sub Sahara – Western Europe

Canada – Western EuropeWestern Europe – Indian …

Western Europe – North Africa

2005 2025


RPK Growth Est.� +12,3% India� +8,2% China� +4,1% Europe� +2,7% U.S.A.0 200 400 600 800 1000120014001600

Domestic USIntra Western EuropeWestern Europe – US

Domestic PRCAsia – Western Europe

Western Europe – South AmericaJapan – US

Asia – USDomestic India

Asia – PRC

Source:Global Market Forecast, Airbus (2006)

Aviation Industry

1,000

1,500

2,000

2,500

3,000

Air

craf

t P

asse

nger

s p

er 1

.00

0 P

eop

le

China

Brazil

Spain

Japan

France

Germany

Canada

U.K.

Australia

U.S.A.


� Brazil, China, India and Russia:80 million new potential passengers per year

� CAGR 10 years: +9,9%

-500

0

500

-10,000 0 10,000 20,000 30,000 40,000 50,000

GDP Per-Capita (PPP)

India

BrazilMexico

Russia

Hungary

Source:Elaborazione propria su dati GlobeScan ed International Monetary Fund 2005

Aviation Industry- EuropeAir Traffic Growth fostered by:

� Deregulation� Borders removal among

UE Members

Società di gestione

Nazione Migliaia di passeggeri

(2006)

Fatturato 2006 (M€)

Fatturato 2005(M€)

EBIT 2006(M€)

EBIT 2005(M€)

1 Aena Spagna 191.843 2.780 2.455 154 300

2 BAA Regno Unito 147.776 3.189 3.021 1.227 1.473

3 Aeroports de Paris

Francia 82.472 2.073 1.923 407 343

4 Fraport Germania 73.780 2.250 2.142 330 302

5 LuchthavenSchiphol

Olanda 48.169 1.037 948 316 311

6 Avinor Norvegia 36.203 730 658 114 101

7 AdR Italia 35.134 567 581 146 147

8 SEA Italia 31.314 652 640 86 103


8 SEA Italia 31.314 652 640 86 103

15 Flughafen Zurich

Svizzera 19.237 443 453 114 113

16 Flughafen Wien

Austria 16.856 477 433 104 92

Source:ICCSAI, Business Report (2007)

Airport System - Europe:

� Majority of Airports controlled by Governments� France, Germany, UK, Spain: big hubs� Italy: Wide network of regional Airports for point-to-point flights

Two main international Airports: Fiumicino and Malpensa

Aviation Industry - Italy

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

20

40

60

80

100

120

140

160

Mig

liaia

di m

ovim

enti

M

iglia

ia d

i ton

nella

te

Mili

oni d

i pas

segg

eri Passeggeri: Movimenti: Merci:


Source:Assaeroporti, Dati di Traffico (2007)

00

2000 2001 2002 2003 2004 2005 2006 2007

� Passengers 2007*: 136,4 million * Estimate from January-November 2007 data

� CAGR 2002-2006: 7,8% (+1% vs world CAGR)� Growth 2005-2006: +8,7%� Growth 2006-2007: +10,23%

� Freights 2007*: 1,03 million tons� CAGR 2002-2006: 4,3%

Aviation Industry- Italy

� Natural Monopoly� Catchment Area depending on

air station reachability


� Fares� Infrastructural connectivity� Attractiveness and efficiency

of offered services

� Privatization process

SEA Group� Linate and Malpensa managing Company� Forty-years Authorization - Expiry date 2041

ASAM, 14.56%

Altri azionisti

pubblici e privati, 0.88%

SEA

SEA Handling SACBO100% 49,98%


Comune di Milano, 84.56%

SEA Handling

Malpensa Energia

Consorzio Malpensa Constr.

M.L.E.

SACBO

CID Italia

Dufrital

AeropuertosArgentina

Disma

GESAC

100%

51%

51%

40%

40%

36%

18,7%

5%

SEA Group

0

5000000

10000000

15000000

20000000

25000000

30000000

35000000

Malpensa

Linate

Traffic data 2006:� 31 million Passengers� +9,5% vs 2005

� 440.000 tons Freight� +8,9% vs 2005


Malpensa:

� Main Northern Italy Airport� International and intercontinental

flights� 22 million Passengers (2006),

thereof 18 international� Main Italian freight Airport

(43% of the total amount)

0

2003 2004 2005 2006

Linate:

� Domestic and Europeanshort-haul traffic

� Presence of low-cost Airlines� 9,7 million Passengers (2006)

SEA Group - BusinessNon Aviation Revenues:� Retail, cargo, parking, other services� 189,4 million euro (2006)� +8% vs 2005

29%

44%

28%

Ricavi non aeronautici Ricavi aeronautici

Handling :� 185,3 million euro (2006)


Ricavi non aeronautici Ricavi aeronautici

Handling e logistica� 185,3 million euro (2006)

Aviation Revenues:� Airport fares, centralized

infrastructures, safety� 276,8 million euro (2006)� -0,5% vs 2005

(fares reduction law 248/05)

55%

19%

26%

Diritti Sicurezza Infrastrutture centralizzate

SEA Group - Swot AnalysisStrengths

� Area with strong industrial development.� Specialization between the two airports

and among terminals.� Malpensa is an important hub for business.� Presence of several touristic points of interest.� Malpensa’s growth rate is higher than those of

several European hubs and than Fiumicino’sone.(Malpensa+9,7% in theperiod2002-2006)

Weaknesses� Few and overcrowded infrastructural links to

reach the Airports.� The greatest part of Malpensa’s flights

covered by Alitalia.


(Malpensa+9,7% in theperiod2002-2006)

Opportunities

� The improvement of infrastructural linkscould bring to an increase in Milan airports’catchment area

� Lombardy, thanks’ to its strategic geographicposition and to its economic potential, ischaracterized by a predictable increase in themobility demand.

Threats � Alitalia’s crisis. The possibility for Alitalia to

leave Malpensa as its hub means a significantpotential loss concerning passengers traffic.

� Liberalization of handling services can causestrong competition and the consequent erosionof market shares.

SEA Group - Economic data

EBITDA Margin: 32%(flat in the last three years)EBIT Margin: about 15%(amortization increase)

10%

15%

20%

25%

30%

35%

200

300

400

500

600

700

Mili

oni d

i Eur

o Totale Ricavi di Gestione Ebitda% Ebit%


0%

5%

0

100

2003 2004 2005 2006

0

50

100

150

200

250

300

2003 2004 2005 2006

Mili

oni d

i Eur

o

Ricavi aeronautici Handling e Logistica Ricavi non Aeronautici

Non Aviation: CAGR 8,1%Handling: flatAviation: CAGR 4,9%

Group Valuation: Multiples Method

Choice of Comparables limited at European Union:� Common rules� Privatization process of Airports


Valuation of Italians Comparables:� Air traffic volumes and turnovers are significantly lower

SocietàPasseggeri

2006 (k)

Merci 2006

(kt)

Fatturato

2006 (M€)

EBITDA

2006 (M€)

EBITDA

Margin

EBIT 2006

(M€)

SEA 31.464 446,6 651,6 207,2 31,8% 85,5

SAVE 6.342 26,7 225,2 53,7 23,8% 30,5

SAT 3.015 14,0 43,5 9,4 21,6% 6,0

AdF 1.531 2,3 28,1 8,2 29,2% 3,3

Choosing Comparables

Valuation of European Comparables:� Aeroports de Paris and Fraport: bigger size� Flughafen Zurich and Flughafen Wien: smaller size� EBITDA Margin: between 26% and 37%

(except Flughafen Zurich)

Società Passeggeri Merci 2006 Fatturato EBITDA EBITDA EBIT 2006


Società Passeggeri

2006 (k)

Merci 2006

(kt)

Fatturato

2006 (M€)

EBITDA

2006 (M€)

EBITDA

Margin

EBIT 2006

(M€)

Aeroports de Paris 82.472 2.240,0 2.076,8 664,7 32,0% 407,0

Fraport 73.780 2.610,0 2.250,3 578,4 25,7% 330,4

SEA 31.464 446,6 651,6 207,2 31,8% 85,5

Flughafen Zurich 19.237 363,3 458,7 235,4 51,3% 117,9

Flughafen Wien 16.856 265,8 463,9 169,6 36,6% 103,7

Comparables: AdP, Fraport, Zurich andWien

Choosing Multipliers

European Comparables:� P&L elements not affected by depreciation, amortization,

financials and tax policies (Sales, EBITDA)

Multipliers:� EnterpriseValue/ Sales


� EnterpriseValue/ Sales� Enterprise Value / EBITDA

Assumptions:� Market Value: average capitalization over 2007� Net Financial Position: Annual Report 2006� Average and median multipliers

Group Valuation - ResultsSocietà Sales (M€) EBITDA (M€) EV (M€) EV/Sales EV/EBITDA *EV/EBITDA

Aeroports de Paris 2.076,8 664,7 9.330,1 4,49 14,04 12,45

Fraport 2.250,3 578,4 5.120,2 2,28 8,85 8,48

Flughafen Zurich 458,7 235,4 2564,2 5,59 10,89 9,43

Flughafen Wien 463,9 169,6 1.746,7 3,77 10,30 9,07

Media 4,03 11,02 9,86

Mediana 4,13 10,89 9,25

* Capitalizzazione24/01/2008 - EBITDA Forecast2007


* Capitalizzazione24/01/2008 - EBITDA Forecast2007

Gruppo SEA Valore (M€)

EV - Media EV/Sales 2.626,42

MV 2.176,62

EV - Mediana EV/Sales 2.690,39MV 2.240,59EV - Media EV/EBITDA 2.283,30

MV 1.833,50

EV - Mediana EV/EBITDA 2.256,69MV 1.806,89

� EV lower vs AdP and Fraport� EV higher vs Wienn� EV aligned with Zurich

(EBITDA Margin 51,3%)

� EV*: -10%(Recent Stock Exchange crisis)

Group Valuation: DCF Method

Risultato operativo (EBIT)

∑∞

= +=

1 )1(tt

t

t

WACC

FCFFEV PFNEEV +=


Imposte teoriche sul risultato operativo -

Costi non cash (escluso TFR di periodo) +

Ricavi non cash -

Cash Flow Lordo

Nuovi investimenti immobilizzati -

Variazione del capitale circolante netto operativo -

Variazione del TFR +

Cash Flow to the Firm (FCFF)

Group Valuation: DCF MethodTwo different Scenario have been assumed:

� Scenario 1: without Alitalia’s impact� Scenario 2: considering Alitalia’s impact

Assumptions:A. Not renewal of authorization at expiring (2041)B. Perpetuitywith growthrateg


2007 Traffic volume forecast for Milan Airports:� 33,8 million Passengers (+7,5% vs 2006)� 514.000 tons Freight(+15,1% vs 2006)� 400.000 Flights (+4,9% vs 2006)

B. Perpetuitywith growthrateg

Scenario 1: FCFF ForecastREVENUE GROWTH

GRUPPO SEA 2005 2006 2007 2008 2009 2010 2011 2012 2013Ricavi Aeronautici + Handling e Logistica

464.269 462.149 512.985 559.154 601.091 637.156 669.014 699.119 727.084

Crescita % 9,03% -0,46% 11,00% 9,00% 7,50% 6,00% 5,00% 4,50% 4,00%Ricavi Non Aeronautici 175.440 189.440 203.648 216.885 228.814 240.254 251.066 261.109 270.247Crescita % -4,00% 7,98% 7,5% 6,5% 5,5% 5,0% 4,5% 4,0% 3,5%TOTALE RICAVI DI GESTIONE

639.709 651.589 716.633 776.039 829.904 877.411 920.080 960.228 997.332

Crescita % 5,12% 1,86% 9,98% 8,29% 6,94% 5,72% 4,86% 4,36% 3,86%


� Historical increase in revenues higher than passengers’ one (except 2006)� Aviation Revenues 2007: +11%

(average between Passengers and Freight growths)� CAGR Passengers 2002-2006 in Italy: +7,8% (World CAGR 6,7%)� Group’s strategy focused on development of the Airport System� 20 years passengers growth forecast: +4/4,5% per year (Airbus, Boeing)� Growth expectations: rates decrease (4% in 2013 - 3% long term)� Non Aviation Revenues: lower growth rate

(7,5% in 2007 - decrease to 3,5% in 2013)

Scenario 1: FCFF ForecastEBITDA

� Last three years: EBITDA Margin between 31,8% and 33%� Consistencywith EU Comparables’profitability

GRUPPO SEA 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

EBITDA 200.819 204.075 207.196 229.323 252.213 273.868 289.545 303.626 321.676 334.106

EBITDA MARGIN (%)

33,00% 31,90% 31,80% 32,00% 32,50% 33,00% 33,00% 33,00% 33,50% 33,50%

Crescita % 24,47% 1,62% 1,53% 10,68% 9,98% 8,59% 5,72% 4,86% 5,94% 3,86%


� Consistencywith EU Comparables’profitability� Revenues reduction in 2005-2006: EBITDA decrease� Focus on Efficiency: re-alignment to 2004 figures

and new boost in the long term

AMORTIZATIONS

� Consistency with Investments� Constant Ratio: 7% Fixed Assets

Scenario 1: FCFF ForecastINVESTMENTS

� Investment Plan 2005-2009: 622 million euro(agreedwith ENAC)

GRUPPO SEA 2005 2006 2007 2008 2009 2010 2011 2012 2013Capitale Immobilizzato 833.270 881.753 945.564 1.005.200 1.051.588 1.118.095 1.186.830 1.257.259 1.328.803Nuovi Investimenti Immobilizzati

136.596 109.146 130.000 130.000 120.000 144.772 151.813 158.437 164.559

Nuovi Investimenti (% Fatturato)

21,35% 16,75% 18,14% 16,75% 14,46% 16,50% 16,50% 16,50% 16,50%

Crescita % 19,21% -20,10% 19,11% 0,00% -7,69% 20,64% 4,86% 4,36% 3,86%


(agreedwith ENAC)� 2007-2008: 130 million / 2009: 120 million euro� Long term: flat New Investments / Revenues ratio (16,5%)

DEPRECIATION AND TAXES

� Depreciation / Revenues: 9% (flat)� Tax / EBIT: 46,34% (2003), 48,61% (2004), 48,83% (2005), 47,14% ( 2006)� Tax Rate: 47% flat (simplified hypothesis)

Scenario 1: FCFF ForecastNET WORKING CAPITAL

� Growth Rate coherent with turnover’s one

TFR

� Hypothesis: on-going firm with Strategy focused on efficiency� FlatTFR in 2007-2013: 98million euro


� FlatTFR in 2007-2013: 98million euro

FREE CASH FLOW TO THE FIRM

GRUPPO SEA 2005 2006 2007 2008 2009 2010 2011 2012 2013FREE CASH FLOW TO THE FIRM (FCFF)

41.964 61.964 61.129 76.166 100.833 87.860 91.812 98.490 102.541

Scenario 1: Discounting FCFFWACC ESTIMATE

� Financial Structure constant over the valuation period� One WACC value to discount Cash Flows

k ESTIMATION: CAPITAL ASSETPRICINGMODEL

)1( CDE TED

Dk

ED

EkWACC −

++

+=


kE ESTIMATION: CAPITAL ASSETPRICINGMODEL

βpremiumriskmarketfreeriskE kk −− ∆+=

Rendimento lordo BTP 10 anni

krisk-free

4,62% (Ministero dell’Economia e delle Finanze)

4,04% (Tassazione 12,5%)

�market risk-premium

4,00% (Banca Intesa SanPaolo Estimation - Valutazione

SAT 2007)

β - Aeroports de Paris 1,08β - Fraport 0,47β - Flughafen Zurich 0,55β - SAVE 0,53β - AdF 0,30β - Media 0,59β - Banca Intesa SanPaolo Estimation

0,80

β - Risultante 0,70

Source:Infinacials - 1 anno

%84,6=Ek

Scenario 1: Discounting FCFFkD ESTIMATION:

EMPIRICAL METHOD ANALYTIC METHOD

%56,4=Dk

EBIT 2006 85.504Oneri Finanziari 2006 17.003EBIT/Oneri Finanziari 2006 5,03Default Spread (A-) 1,30%KD (Metodo Empirico) 5,34%

Oneri Finanziari 2006 17.003Posizione Finanziaria Netta 449.800Oneri Finanziari/Posizione Finanziaria Netta

3,78%

K D (Metodo Analitico) 3,78%

(averageof thetwo methods)


%56,4=Dk (averageof thetwo methods)

WACC ESTIMATE: FIRST STEPAliquota Fiscale (IRES) 33%Equity 262.560Debt 449.795Totale (Equity+Debt) 712.355WACC - Primo Step 4,45%

DURATION CALCULATION:� Cash Flows beyond 2013: flat growth rate (3% until 2041)� Duration: 15,84 years

Scenario 1: Discounting FCFF

WACC ESTIMATE:SECOND STEP

Krisk-free lordo 15 anni (BTP) 4,60%Krisk-freenetto 15 anni (BTP) 4,03%∆ Market Risk Premium 4,00%β

KE

0,706,83%

KD (Metodo Empirico) 5,33%KD (Metodo Analitico) 3,78%KD 4,55%WACC - Secondo Step 4,44%


DURATION CALCULATION� Duration: 15,85 years� Iterative procedure reached convergence (WACC 4,44%)

TERMINAL VALUE ESTIMATE – EXPIRING DATE 2041� g: 3% - WACC: 4,44%� Terminal Value : 2.467 million euro (2014)

Scenario 1: Discounting FCFFWACC ESTIMATE: MARKET VALUE OF EQUITY

� Previous Estimates: Equity and Debt Book Values� Book Value of Equity different from Market Value� WACC estimated through following iterations


2007 2008 2009 2010 2011 2012 2013 TV WACC EV PFN EFCFF 61.129 76.166 100.833 87.860 91.812 98.490 102.541 2.466.828Iteraz.1 61.129 72.927 92.439 77.121 77.163 79.255 79.005 1.819.811 4,4415% 2.358.850,26 449.795 1.909.0552 61.129 71.774 89.541 73.523 72.400 73.188 71.805 1.627.821 6,1183% 2.141.181,32 449.795 1.691.3863 61.129 71.824 89.665 73.676 72.601 73.441 72.103 1.635.721 6,0449% 2.150.160,01 449.795 1.700.3654 61.129 71.822 89.659 73.669 72.592 73.430 72.090 1.635.362 6,0483% 2.149.752,67 449.795 1.699.9585 61.129 71.822 89.659 73.669 72.592 73.430 72.091 1.635.379 6,0481% 2.149.771,07 449.795 1.699.9766 61.129 71.822 89.659 73.669 72.592 73.430 72.091 1.635.378 6,0481% 2.149.770,24 449.795 1.699.9757 61.129 71.822 89.659 73.669 72.592 73.430 72.091 1.635.378 6,0481% 2.149.770,28 449.795 1.699.9758 61.129 71.822 89.659 73.669 72.592 73.430 72.091 1.635.378 6,0481% 2.149.770,28 449.795 1.699.9759 61.129 71.822 89.659 73.669 72.592 73.430 72.091 1.635.378 6,0481% 2.149.770,28 449.795 1.699.975

Scenario 1: Group ValueGROUP VALUE: EXPIRING DATE 2041GRUPPO SEA 2007 2008 2009 2010 2011 2012 2013 TV

FCFF 61.129 76.166 100.833 87.860 91.812 98.490 102.541 2.466.828FCFF ATTUALIZZATI 61.129 71.822 89.659 73.669 72.592 73.430 72.091 1.635.378

VALORE GRUPPO SEA (Annuity 2041)

2.149.770,28

SENSITIVITYANALYSIS: g and WACC PARAMETERS


g / Wacc 5,00% 5,50% 5,75% 6,05% 6,25% 6,50% 7,00%1,00% 1.889.787 1.837.654 1.812.283 1.782.620 1.762.888 1.738.845 1.692.0241,50% 1.976.354 1.921.389 1.894.643 1.863.372 1.842.573 1.817.230 1.767.8802,00% 2.070.321 2.012.283 1.984.043 1.951.028 1.929.069 1.902.315 1.850.2212,50% 2.172.399 2.111.023 2.081.161 2.046.250 2.023.033 1.994.745 1.939.6693,00% 2.283.373 2.218.367 2.186.741 2.149.770 2.125.183 2.095.229 2.036.9123,50% 2.404.103 2.335.148 2.301.604 2.262.392 2.236.316 2.204.548 2.142.7054,00% 2.535.539 2.462.285 2.426.651 2.384.999 2.357.302 2.323.560 2.257.878

� g ± 0,5%� EV ± 5%� WACC 6,50%� EV -2,5%� WACC 5,50%� EV +3,2%

Scenario 1: PerpetuityWACC ESTIMATE

� Krisk-free: BTP rate of return over 30 years

Krisk-free lordo 30 anni (BTP) 4,97%Krisk-freenetto 30 anni (BTP) 4,35%∆ Market Risk Premium 4,00%β

KE

0,707,15%

KD (Metodo Empirico) 5,65%KD (Metodo Analitico) 3,78%K 4,71%KD 4,71%WACC 4,63%

TERMINAL VALUE ESTIMATE - PERPETUITY

� g: 2% - WACC: 4,63%

� Terminal Value : 3.998 million euro (2014)

gWACC

FCFFTV

−= 2014


2007 2008 2009 2010 2011 2012 2013 TV WACC EV PFN E

FCFF 61.129 76.166 100.833 87.860 91.812 98.490 102.541 3.977.864

Iteraz.

1 61.129 72.796 92.108 76.707 76.610 78.546 78.158 2.897.849 4,6293% 3.433.902,01 449.795 2.984.1072 61.129 71.622 89.161 73.055 71.787 72.414 70.894 2.586.140 6,3442% 3.096.201,58 449.795 2.646.4073 61.129 71.658 89.252 73.167 71.933 72.598 71.111 2.595.363 6,2902% 3.106.210,84 449.795 2.656.4164 61.129 71.657 89.249 73.163 71.928 72.592 71.104 2.595.060 6,2919% 3.105.882,25 449.795 2.656.0875 61.129 71.657 89.249 73.163 71.928 72.592 71.104 2.595.070 6,2919% 3.105.893,00 449.795 2.656.0986 61.129 71.657 89.249 73.163 71.928 72.592 71.104 2.595.070 6,2919% 3.105.892,65 449.795 2.656.0987 61.129 71.657 89.249 73.163 71.928 72.592 71.104 2.595.070 6,2919% 3.105.892,66 449.795 2.656.0988 61.129 71.657 89.249 73.163 71.928 72.592 71.104 2.595.070 6,2919% 3.105.892,66 449.795 2.656.0989 61.129 71.657 89.249 73.163 71.928 72.592 71.104 2.595.070 6,2919% 3.105.892,66 449.795 2.656.098

WACC ESTIMATE: MARKET VALUE EQUITY

GROUPVALUE: PERPETUITYandSENSITIVITYANALYSIS


GRUPPO SEA 2007 2008 2009 2010 2011 2012 2013 TVFCFF 61.129 76.166 100.832 87.860 91.812 98.490 102.541 3.977.864FCFF ATTUALIZZATI 61.129 71.657 89.249 73.163 71.928 72.592 71.104 2.595.070VALORE GRUPPO SEA (Perpetuity)

3.105.892,66

g / Wacc 5,50% 6,00% 6,29% 6,50% 7,00%1,00% 2.484.234 2.412.896 2.372.435 2.344.107 2.277.7621,50% 2.808.927 2.727.018 2.680.569 2.648.050 2.571.9022,00% 3.257.109 3.160.609 3.105.893 3.067.590 2.977.9102,50% 3.915.769 3.797.827 3.730.962 3.684.159 3.574.5913,00% 4.978.681 4.826.135 4.739.665 4.679.146 4.537.484

GROUPVALUE: PERPETUITYandSENSITIVITYANALYSIS

� g ± 0,5%� EV +20,13% e -13,69%

Scenario 2: FCFF ForecastREVENUE GROWTHGRUPPO SEA 2007 2008 2009 2010 2011 2012 2013 2014 2015Ricavi Aeronautici + Handling e Logistica

512.985 448.000 472.640 505.725 548.711 595.352 637.027 675.248 709.011

Crescita % 11,00% -12,67% 5,50% 7,00% 8,50% 8,50% 7,00% 6,00% 5,00%Ricavi Non Aeronautici

203.648 192.000 196.800 203.688 212.854 222.432 231.330 240.583 249.003

Crescita % 7,5% -5,7% 2,5% 3,5% 4,5% 4,5% 4,0% 4,0% 3,5%TOTALE RICAVI DI GESTIONE (A)

716.633 640.000 669.440 709.413 761.565 817.784 868.356 915.831 958.014

Crescita % 9,98% -10,69% 4,60% 5,97% 7,35% 7,38% 6,18% 5,47% 4,61%


� Revenue loss: 70/75 million euro (2008)� Net Revenues split between aviation and non aviation as per historical trends

(Aviation Revenues: 70%)� Milan Airports are so attractive that Alitalia’s slot are likely to be re-assigned� Hypothesis of gradual recovery of Aviation Revenues growthrates� Long-term Expectations: decrease in growth rates (4% in 2017 - 3% later)� Non Aviation Revenues: similar trend with lower percentages

Scenario 2: FCFF ForecastEBITDA

� EBITDA Margin fall due to impossibility to cut fixed costs inthe short-term� Hypothesis: 5% cost saving as consequence of 10,7% Total Revenue loss� Strategyfocusedonefficiency: realignmentto 2004figures

GRUPPO SEA 2007 2008 2009 2010 2011 2012 2013 2014 2015EBITDA 229.323 176.000 200.832 230.559 255.124 273.958 290.899 306.803 320.935

EBITDA MARGIN (%) 32,00% 27,50% 30,00% 32,50% 33,50% 33,50% 33,50% 33,50% 33,50%

Crescita % 10,68% -23,25% 14,11% 14,80% 10,65% 7,38% 6,18% 5,47% 4,61%


� Strategyfocusedonefficiency: realignmentto 2004figuresand further increase in the long term

AMORTIZATIONS

� Consistency with Investments� Constant Ratio: 7% Fixed Assets

Scenario 2: FCFF ForecastINVESTMENTS

� Investment Plan 2005-2009 kept unvaried in order to not preventthefirm’s growthin thelong-term

GRUPPO SEA 2007 2008 2009 2010 2011 2012 2013 2014 2015

Capitale Immobilizzato 945.564 1.005.200 1.051.588 1.082.243 1.121.763 1.170.662 1.227.982 1.228.873 1.352.285

Nuovi Investimenti Immobilizzati

130.000 130.000 120.000 106.412 118.043 130.845 143.279 151.112 158.072

Nuovi Investimenti (% Fatturato)

18,14% 20,31% 17,93% 15,00% 15,50% 16,00% 16,50% 16,50% 16,50%

Crescita % 19,11% 0,00% -7,69% -11,32% 10,93% 10,85% 9,50% 5,47% 4,61%


thefirm’s growthin thelong-term� 2010-2012: reduction of the investment ratio to generate cash flows� Long-term: flat New investments / Revenues ratio (16,5%)

DEPRECIATION, TAXES and NET WORKING CAPITAL

� See Scenario 1 Hypothesis

Scenario 2: FCFF ForecastTFR

GRUPPO SEA 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Trattamento di Fine Rapporto

98.000 90.000 92.000 95.000 98.000 98.000 98.000 98.000 98.000 98.000 98.000

Trattamento di Fine Rapporto(% Fatturato)

13,68% 14,06% 13,74% 13,39% 12,87% 11,98% 11,29% 10,70% 10,23% 9,81% 9,45%

VARIAZIONE DEL TFR

944 -8.000 2.000 3.000 3.000 0 0 0 0 0 0

� Announced HeadCount Reduction: 200 people (2008)


� Further redundancy: 700 people (Trade Union estimate)� Hypothesis of effective reduction: 450 people� Consequent TFR reduction: 8 million euro

(TFR 2006: 91,7 million euro - 5.678 people)� Afterwards gradual increase in HeadCount and TFR

FREE CASH FLOW TO THE FIRM

GRUPPO SEA 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

FCFF 61.129 6.915 54.624 88.836 95.084 93.701 93.645 97.908 101.721 105.931 110.044

Scenario 2: Discounting FCFFWACC ESTIMATE:

� See Scenario 1 procedure and hypothesis

TERMINAL VALUE ESTIMATE - EXPIRING DATE 2041

� g: 3% - WACC: 4,44%� Terminal Value : 2.329 million euro (2018)

WACC ESTIMATE: MARKET VALUE EQUITY2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 TV WACC EV PFN E

FCFF 61.129 6.915 54.624 88.836 95.084 93.701 93.645 97.908 101.721 105.931 110.044 2.329.217

1 61.129 6.621 50.077 77.978 79.912 75.401 72.151 72.228 71.849 71.641 71.258 1.444.124 4,4415% 2.154.370,48 449.795 1.704.575

2 61.129 6.520 48.570 74.484 75.174 69.854 65.830 64.901 63.581 62.436 61.160 1.220.678 6,0498% 1.874.317,03 449.795 1.424.522

3 61.129 6.528 48.678 74.733 75.509 70.245 66.271 65.409 64.150 63.065 61.845 1.235.727 5,9317% 1.893.290,06 449.795 1.443.495

4 61.129 6.527 48.670 74.714 75.484 70.214 66.237 65.369 64.106 63.016 61.792 1.234.560 5,9408% 1.891.819,01 449.795 1.442.024

5 61.129 6.527 48.670 74.715 75.486 70.217 66.240 65.372 64.110 63.020 61.796 1.234.650 5,9401% 1.891.931,96 449.795 1.442.137

6 61.129 6.527 48.670 74.715 75.485 70.217 66.240 65.372 64.110 63.020 61.796 1.234.643 5,9402% 1.891.923,28 449.795 1.442.128

7 61.129 6.527 48.670 74.715 75.485 70.217 66.240 65.372 64.110 63.020 61.796 1.234.643 5,9402% 1.891.923,95 449.795 1.442.129

8 61.129 6.527 48.670 74.715 75.485 70.217 66.240 65.372 64.110 63.020 61.796 1.234.643 5,9402% 1.891.923,89 449.795 1.442.129

9 61.129 6.527 48.670 74.715 75.485 70.217 66.240 65.372 64.110 63.020 61.796 1.234.643 5,9402% 1.891.923,90 449.795 1.442.129

10 61.129 6.527 48.670 74.715 75.485 70.217 66.240 65.372 64.110 63.020 61.796 1.234.643 5,9402% 1.891.923,90 449.795 1.442.129

11 61.129 6.527 48.670 74.715 75.485 70.217 66.240 65.372 64.110 63.020 61.796 1.234.643 5,9402% 1.891.923,90 449.7961.442.128

Scenario 2: Group ValueGROUP VALUE: EXPIRING DATE 2041

SENSITIVITYANALYSIS: g AND WACC PARAMETERS

GRUPPO SEA 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 TV

FCFF 61.129 6.915 54.624 88.836 95.084 93.701 93.645 97.908 101.721 105.931 110.044 2.329.217

VA (FCFF) 61.129 6.527 48.670 74.715 75.485 70.217 66.240 65.372 64.110 63.020 61.796 1.234.643

VALORE GR. SEA

1.891.923,90


� g ± 0,5%� EV ± 3,75%� WACC 6,50%� EV -4,6%� WACC 5,50%� EV +3,9%

g / Wacc 5,00% 5,50% 5,75% 5,94% 6,25% 6,50% 7,00%

1,00% 1.779.453 1.706.393 1.671.273 1.645.162 1.603.719 1.571.234 1508724

1,50% 1.840.432 1.764.267 1.727.660 1.700.445 1.657.255 1.623.404 1558274

2,00% 1.905.876 1.826.379 1.788.175 1.759.776 1.714.710 1.679.393 1611451

2,50% 1.976.147 1.893.072 1.853.154 1.823.483 1.776.404 1.739.512 1668552

3,00% 2.051.639 1.964.720 1.922.961 1.891.924 1.842.681 1.804.098 1729894

3,50% 2.132.778 2.041.728 1.997.990 1.965.485 1.913.917 1.873.515 1795826

4,00% 2.220.028 2.124.535 2.078.670 2.044.585 1.990.516 1.948.160 1866722

Scenario 2: Perpetuity

TERMINAL VALUE ESTIMATE– PERPETUITY

� g: 2% - WACC: 4,63%

WACC ESTIMATE:

� See Scenario 1 procedure and hypothesis

FCFF

� Terminal Value : 4.269 million euro (2018)

gWACC

FCFFTV

−= 2018

WACC ESTIMATE: MARKET VALUE EQUITY

� Convergence of iterative procedure : WACC 6,2407%


Scenario 2: Group ValueGROUP VALUE: PERPETUITY

GRUPPO SEA 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 TV

FCFF 61.129 6.915 54.624 88.836 95.084 93.701 93.645 97.908 101.721 105.931 110.044 4.268.952

VA (FCFF) 61.129 6.509 48.395 74.083 74.635 69.229 65.123 64.089 62.673 61.433 60.070 2.193.408

VALORE GR. SEA

2.592.510,66

SENSITIVITYANALYSIS: g AND WACC PARAMETERS

g / Wacc 5,50% 6,00% 6,24% 6,50% 7,00%1,00% 2.108.133 2.015.439 1.972.577 1.927.652 1.844.4881,50% 2.389.410 2.282.460 2.233.018 2.181.203 2.085.3062,00% 2.777.664 2.651.037 2.592.511 2.531.186 2.417.7132,50% 3.348.252 3.192.708 3.120.832 3.045.531 2.906.2293,00% 4.269.038 4.066.828 3.973.409 3.875.554 3.694.570

� g ± 0,5%� EV +20,38% e -13,87%


Final ConsiderationsGRUPPO SEA Enterprise Value

Comparables (EV/Sales) 2.690.390

Comparables (EV/EBITDA) 2.256.690

DCF Scenario 1- Concessione 2041 2.149.770

DCF Scenario 1- Perpetuity 3.105.893

DCF Scenario 2- Concessione 2041 1.891.924

DCF Scenario 2- Perpetuity 2.592.511

� According to the latest evolution in Alitalia’s case, the most predictablescenario is the second one, which takes into consideration losses caused bythe deletion of several intercontinental routes

� Furthermore, the possibility for SEA to have renewed the contract after2041 is relevant

� As a result the Group value determined as Scenario 2 - Perpetuity seems tobe the most likely, since the context conditions occurred toits estimation


Final Considerations

A final analysis on the figures determined by the DCF Method underlines howAlitalia’s case caused a deep reduction in SEA Group value; it can be quantifiedbetween 250 million euro, not considering the authorization renewal in 2041, and500 million euro, assuming that future cash flows will be generated for an infiniteperiod of time


Determinants of Company Value

The Aviation Industry

Case 2


Agenda - Case 2

� The Aviation Industry� Aviation Industry Structure� Profitability in the Aviation Chain

� Selection of Companies� Selection of Companies

� Value Drivers� Relevant data� Methodology� Aviation Value Drivers� Airports vs Airlines Value Drivers


Aviation Industry Structure

Aircraft

Manufacturers

Leasing

Companies

Airlines

Customers

(Passengers

and Freights)

Airports

Handling

and Catering

Services

GDS

and Freights)


Aviation Industry StructureAircraft Manufacturers:

� Boeing: American public company

� Airbus: European competitor

Leasing Companies:


6,935 7,942 9,02810,467

1,5382,411

3,899

5,681

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1992 1997 2002 2007

Leased Owned

Aircraft owned vs leased by Airlines, trend 1992-2007

Source:AWAS 2008


AIRPORTS Country Passenger (k) Operator Stock ExchangeAtlanta Hartsfield-Jackson U.S.A. 89.379 Department of Aviation -

Chicago O’Hare U.S.A. 76.178 Chicago Airport System -

London Heathrow U.K. 68.069 BAA -

Tokyo Aviation Bureau (Airfield);

Airports:


Tokyo Haneda Japan 66.671Tokyo Aviation Bureau (Airfield); Japan Airport Terminal (Terminal)

Tokyo Stock Exchange

Los Angeles U.S.A. 61.896 Los Angeles World Airports -

Paris Charles de Gaulle France 59.922 Aéroports de Paris Euronext Paris

Dallas Fort Worth U.S.A. 59.786 DFW Airport Board -

Frankfurt Germany 54.162 Fraport Frankfurt Stock Exchange

Beijing Capital China 53.584 Beijing Capital Int. Airport Hong Kong Stock Exchange

Madrid Barajas Spain 52.123 Aena -


Handling & Catering:� Wide range of activities taking place in Airports and providing support

to Airlines

� Several diversified players due to the segmentation of market


GDS (Global Distribution System): � System born in the 80’s and used nowadays by travel agencies

in order to book and sell tickets

� Four main Players: Amadeus, Sabre, Galileo & Worldspan (M&A 2006)


589 777

2,197

1,523

International Domestic

Passenger-Kilometres Performed (Billion)

1985 2005

29,38410,429

118,482

24,092

International Domestic

Freight Tonne-Kilometres Performed (Million)

Airlines: Flagcarriers �� Deregulation �� Low-cost

Source:ICAO Environmental Report 2007


AIRLINES Country Passenger (k) Passenger Growth 06-07 Stock ExchangeSouthwest Airlines U.S.A. 101.911 +5,83% New York Stock Exchange

AMR - American Airlines U.S.A. 98.166 +0,02% New York Stock Exchange

Air France - KLM France 73.671 +2,12% Euronext Paris

Delta Air Lines U.S.A. 73.086 -0,65% New York Stock Exchange

UAL - United Airlines U.S.A. 68.363 -0,84% NASDAQ

China Southern Arlines China 56.522 +16,06% Hong Kong Stock Exchange

Northwest Airlines U.S.A. 54.696 -2,11% New York Stock Exchange

Lufthansa Germany 54.165 +5,78% Frankfurt Stock Exchange

Continental Airlines U.S.A. 49.059 +4,78% New York Stock Exchange

Ryanair Ireland 49.030 +20,89% London Stock Exchange

Passenger-Kilometres Performed (Billion) Freight Tonne-Kilometres Performed (Million)


Main Risk Factors suffered by Airlines

36%

20%

17%

12%

10%

Fuel

Staff

Landing - Parking - Route Leases

Depreciation - Operating Leases

Maintenance

Other Expenses

Airlines cost structure, 2006

Source:Airbus - Global Market Forecast 2007

RISK EXAMPLES

Project-Specific Future Development of an Airport Availability of Additional Slots

Competitive Increase of Competition

Industry-SpecificHigh Level of Fixed Costs

Fuel Price Seasonal Fluctuations

Changes in Industry

Regulation

Changes in Acquisitions or

Leasings

InternationalForeign Currency

FluctuationsChanges in Government

RegulationsHigher

Landing FeesHigher Rate of

Taxes

MarketInterest Rate Fluctuations Extraordinary Events General Economy Conditions


Main Risk Factors suffered by Airlines

Profitability in the Aviation Chain

290 160

-1,100

-11,700

380

-220

660

~11.000

Aircraft Manufacturers

Leasing Companies Airports Airlines

Freight Forwarders

Handling Services GDS

Aviation Industry

Inve

sto

r R

etur

n (M

illio

n $

)


Average yearly Investor Return within Aviation Industry, 1996-2004

Aircraft Manufacturers, exposed to a weak competition from new entrants,Leasing Companies and especially GDS reach higher returns on invested capital;

On the contrary, Airlines, except for the profitable niche of Freight Forwarders,raising 55% of the over 680 billion dollars totally invested in the Aviation Industry,

cause the deepest loss ininvestor return

Source:IATA Economics Briefing 2006

Selection of CompaniesIdentification of the Public Companies

operating in the Aviation Industry on 31 December 2007

Rank according positioning along the chain

� Datamonitor, Lexis Nexis (Thomson Financial)

� Orbis (Bureau van Dijk Electronic Publishing) � NACE CODE

Sources:


� Orbis (Bureau van Dijk Electronic Publishing) � NACE CODE

� Annual Report Analysis

� Holding: considered Airports or Airlines only if the majority of their business

is focus on, respectively, airport management and passengers transport

Assumptions:

Selection of Companies

� Airlines: passengers air transport companies owner of a fleet composed for majority by airplanes;

excluded Delivery - Air Cargo Services companies and companies offering Helicopterservices

� Airports: excluded Airport Services Companies whose main business is the

Assumptions:

� Airports: excluded Airport Services Companies whose main business is the maintenance of air station

Public companies(31/12/2007):

� 24 Airports� 87 Airlines


Value Drivers

The expression value driver has originally been created in order to indicate all economic variables that impact significantly on a firm’s revenues and costs functions.

They are finally used for the company’s value determination.

The birth of literature concerning value drivers can be ascribed to Shareholder Value Analysis, Rappaport(1986), whose aim was the identification of the sources of valueAnalysis, Rappaport(1986), whose aim was the identification of the sources of value

for shareholders and which is based on the analysis of a number of value drivers.

In the last decade researches on value drivers evolved quickly, becoming one of the most interesting topic in contemporary financial literature. Analyzed variables are not necessarily linked to financials, balance sheet and profit & loss anymore, but aim to investigate the impact of different areas such as Corporate Governance, Ownership

Structure and Industry-Specific characteristics.

Value Drivers

The following analysis aims tothe identification of variables significantly impacting on value

of the companies part of the Aviation Industry,of the companies part of the Aviation Industry,both common and specific for each player

Data of InterestProxy of Company Value:

� “Main” variable: Tobin’s Q (Chung e Pruitt, 1994)

TA

NFPMVQ

+=� “Secondary” variable: Market Value / Book Value

VARIABLE Q MV/BV

1year QTY MBY

Variables definition:

6months QT3 MB3

-60

-40

-20

0

20

MBY MB3

Aerovias de Integracion Regional

Eurofly

Midwest Air Group

Pakistan International Airlines

SkyeuropeHoldings

MV/BV distribution for Airlines

Source:Elaborazione propria su dati Datastream, Orbis e Reuters - 20080

1

2

3

4QTY QT3

AIRLINES AIRPORTS

Tobin’s Q distribution for the Aviation Industry

Source:Elaborazione propria su dati Datastream, Orbis e Reuters - 2008

� QTYAIRLINES = 0,72

� QTYAIRPORTS = 1,65


MethodologyMethodological choices:

� Time Period: 2007� Statistical Model: Multiple Regression Analysis

Implemented procedure:

� Preliminary Analysis

� RegressionAnalysis� RegressionAnalysis� Stepwise Algorithm (AIC)� Chain vs Players

� Residual analysis

Results:� Aviation� Airports� Airlines


Aviation Value DriversSENSITIVITY TABLE QTY QT3 MBY MB3

SHARE CONCENTRATION 0,4592(0,2728)*

STATEYes-0,3042

(0,1469)**

CHAINAirports0,8686

(0,1383)***0,4921

(0,2036)**1,0440

(0,4143)**1,2879

(0,4457)***

FIRM SIZE -0,0765(0,0344)**

-0,1116(0,0369)***

-0,2674(0,0984)***

-0,3251(0,1036)***

LEVERAGE 2,1482(0,8502)**

2,3027(0,8616)***

0,4519 1,2187

Shareholders Concentration:

� Great emphasis to maximize the company’s value (La Porta et al., 2002)


COUNTRYLower-Middle Income0,4519

(0,1540)***1,2187

(0,3629)***

R-Squared 0,4066 0,4979 0,2491 0,3301

Adjusted R-Squared 0,3816 0,4655 0,2070 0,2677



STATEYes-0,3042

(0,1469)**

CHAINAirports0,8686

(0,1383)***0,4921

(0,2036)**1,0440

(0,4143)**1,2879

(0,4457)***

FIRM SIZE -0,0765(0,0344)**

-0,1116(0,0369)***

-0,2674(0,0984)***

-0,3251(0,1036)***

LEVERAGE 2,1482(0,8502)**

2,3027(0,8616)***

0,4519 1,2187

State:

� Market could perceive objectives different from maximisation of value

� Strategic importance and social function of Airlines and Airports



(0,1540)***1,2187

(0,3629)***

R-Squared 0,4066 0,4979 0,2491 0,3301




STATEYes-0,3042

(0,1469)**

CHAINAirports0,8686

(0,1383)***0,4921

(0,2036)**1,0440

(0,4143)**1,2879

(0,4457)***

FIRM SIZE -0,0765(0,0344)**

-0,1116(0,0369)***

-0,2674(0,0984)***

-0,3251(0,1036)***

LEVERAGE 2,1482(0,8502)**

2,3027(0,8616)***

0,4519 1,2187

Chain Positioning:

� Being upstream impacts positively on value

� Business model little exposed to competition

� Assets are very important for economic development of Countries



(0,1540)***1,2187

(0,3629)***

R-Squared 0,4066 0,4979 0,2491 0,3301




STATEYes-0,3042

(0,1469)**

CHAINAirports0,8686

(0,1383)***0,4921

(0,2036)**1,0440

(0,4143)**1,2879

(0,4457)***

FIRM SIZE -0,0765(0,0344)**

-0,1116(0,0369)***

-0,2674(0,0984)***

-0,3251(0,1036)***

LEVERAGE 2,1482(0,8502)**

2,3027(0,8616)***

0,4519 1,2187

Firm Size:

� Negative impact on value at chain level

� Marginal contribute of Airports is positive



(0,1540)***1,2187

(0,3629)***

R-Squared 0,4066 0,4979 0,2491 0,3301


Airports Value DriversSENSITIVITY TABLE QTY QT3 MBY MB3

ROIC 19,2655(6,0980)***

9,6947(4,5490)**

22,7859(6,8633)***

22,2289(6,5610)***

LEVERAGE 2,3380(1,0118)**

4,3944(1,4671)***

4,2862(1,4283)***

PASSENGER GROWTH 9,3708(3,8211)**

AIRPORTS within 100KM 0,1455(0,0816)**

0,1978(0,0938)**

0,1690(0,1289)

0,2562(0,1242)*

FIRM AGE -0,0312(0,0127)**

-0,0248(0,0112)**

-0,0201(0,0116)

FIRM SIZE 0,6381

Leverage:

� Limited exposition to risk, regardless the leverage� “Catch of regulator” by main Airports


FIRM SIZE 0,6381(0,2917)**


(0,5420)1,2557

(0,4284)***1,3874

(0,6774)*

COUNTRYUpper-Middle Income-1,0317(0,6721)

0,0845(0,4796)

0,2088(0,7538)

R-Squared 0,6799 0,5434 0,4972 0,6269



ROIC 19,2655(6,0980)***

9,6947(4,5490)**

22,7859(6,8633)***

22,2289(6,5610)***

LEVERAGE 2,3380(1,0118)**

4,3944(1,4671)***

4,2862(1,4283)***



0,1978(0,0938)**

0,1690(0,1289)

0,2562(0,1242)*

FIRM AGE -0,0312(0,0127)**

-0,0248(0,0112)**

-0,0201(0,0116)

FIRM SIZE 0,6381

Airports within 100Km:

� Importance of the catchment area

� Growth of competition more than compensated by the importanceof connectivity network


FIRM SIZE 0,6381(0,2917)**


(0,5420)1,2557

(0,4284)***1,3874

(0,6774)*


0,0845(0,4796)

0,2088(0,7538)

R-Squared 0,6799 0,5434 0,4972 0,6269



ROIC 19,2655(6,0980)***

9,6947(4,5490)**

22,7859(6,8633)***

22,2289(6,5610)***

LEVERAGE 2,3380(1,0118)**

4,3944(1,4671)***

4,2862(1,4283)***



0,1978(0,0938)**

0,1690(0,1289)

0,2562(0,1242)*

FIRM AGE -0,0312(0,0127)**

-0,0248(0,0112)**

-0,0201(0,0116)

FIRM SIZE 0,6381

Firm Size:

� Value relevance linked to the opportunity to generate non aviation revenues


FIRM SIZE 0,6381(0,2917)**


(0,5420)1,2557

(0,4284)***1,3874

(0,6774)*


0,0845(0,4796)

0,2088(0,7538)

R-Squared 0,6799 0,5434 0,4972 0,6269


SENSITIVITY TABLE QTY QT3 MBY MB3

SHARE CONCENTRATION 0,3251(0,1590)**

ALLIANCE Yes0,1812

(0,0800)**0,1213

(0,0800)0,8601

(0,3588)**0,9696

(0,3710)**

FLEET TYPE 0,0014(0,0007)*

0,0069(0,0033)**

PASSENGER GROWTH 0,6250(0,2203)***

2,2239(1,0050)**

SCHEDULED ROUTES -0,0003(0,0001)**

-0,0002(0,0001)*

ROUTE LENGTH -0,0001

Airlines Value Drivers

Alliance Agreement:� Air traffic volumes and profitability

growth along the interested routes(Park e Zhang, 1998)

� Savings on several operative costs

� Widerbargainingpowervs suppliersROUTE LENGTH -0,0001(0,0001)*

FIRM AGE -0,0036(0,0013)***

STATEYes-0,1864

(0,0964)*

FIRM SIZE -0,0620(0,0288)**

-0,4912(0,1668)***


(0,1024)***1,1925

(0,5540)**

COUNTRYUpper-Middle Income0,2699

(0,1057)**0,9209

(0,4351)**1,0566

(0,4508)**

R-Squared 0,3724 0,4269 0,4259 0,3834


� Widerbargainingpowervs suppliers

� Reduction in risk exposure

� Code Sharing Agreement




ALLIANCE Yes0,1812

(0,0800)**0,1213

(0,0800)0,8601

(0,3588)**0,9696

(0,3710)**

FLEET TYPE 0,0014(0,0007)*

0,0069(0,0033)**


2,2239(1,0050)**


-0,0002(0,0001)*



Fleet Type:

� Average number of available placeson the airplanes

� Economies of scale, ceteris paribusROUTE LENGTH -0,0001

(0,0001)*

FIRM AGE -0,0036(0,0013)***

STATEYes-0,1864

(0,0964)*

FIRM SIZE -0,0620(0,0288)**

-0,4912(0,1668)***


(0,1024)***1,1925

(0,5540)**


(0,1057)**0,9209

(0,4351)**1,0566

(0,4508)**

R-Squared 0,3724 0,4269 0,4259 0,3834





ALLIANCE Yes0,1812

(0,0800)**0,1213

(0,0800)0,8601

(0,3588)**0,9696

(0,3710)**

FLEET TYPE 0,0014(0,0007)*

0,0069(0,0033)**


2,2239(1,0050)**


-0,0002(0,0001)*


Airlines Value DriversScheduled Routes:� Trade-off between network covering

level and profitability of its routes

� “Feederaggio” routes to hub

Route Length:ROUTE LENGTH -0,0001(0,0001)*

FIRM AGE -0,0036(0,0013)***

STATEYes-0,1864

(0,0964)*

FIRM SIZE -0,0620(0,0288)**

-0,4912(0,1668)***


(0,1024)***1,1925

(0,5540)**


(0,1057)**0,9209

(0,4351)**1,0566

(0,4508)**

R-Squared 0,3724 0,4269 0,4259 0,3834


Route Length:

� Short-haul routes are more profitable

� Limited in-flight services offered

� Lower baggage transported

� Reduction of ground-stop

� Savings on fuel costs




ALLIANCE Yes0,1812

(0,0800)**0,1213

(0,0800)0,8601

(0,3588)**0,9696

(0,3710)**

FLEET TYPE 0,0014(0,0007)*

0,0069(0,0033)**


2,2239(1,0050)**


-0,0002(0,0001)*



ROUTE LENGTH -0,0001(0,0001)*

FIRM AGE -0,0036(0,0013)***

STATEYes-0,1864

(0,0964)*

FIRM SIZE -0,0620(0,0288)**

-0,4912(0,1668)***


(0,1024)***1,1925

(0,5540)**


(0,1057)**0,9209

(0,4351)**1,0566

(0,4508)**

R-Squared 0,3724 0,4269 0,4259 0,3834


Firm Age:

� Associated to a decrease of thecompany’s value, even if it’s noteasy to find out the reason

� Older operators are generally FlagCarriers




ALLIANCE Yes0,1812

(0,0800)**0,1213

(0,0800)0,8601

(0,3588)**0,9696

(0,3710)**

FLEET TYPE 0,0014(0,0007)*

0,0069(0,0033)**


2,2239(1,0050)**


-0,0002(0,0001)*



ROUTE LENGTH -0,0001(0,0001)*

FIRM AGE -0,0036(0,0013)***

STATEYes-0,1864

(0,0964)*

FIRM SIZE -0,0620(0,0288)**

-0,4912(0,1668)***


(0,1024)***1,1925

(0,5540)**


(0,1057)**0,9209

(0,4351)**1,0566

(0,4508)**

R-Squared 0,3724 0,4269 0,4259 0,3834



Thanks for your kind attention

UNIVERSITÀ degli STUDI di BERGAMOFacoltà di Ingegneria

Corso di Laurea Specialistica in Ingegneria Gestionale

Mauro Marchese

December 17th 2010

Thanks for your kind attention

Company Valuation: S.E.A - Determinants of Company Value: The Aviation Industry

(business valuation) - unibg · (business valuation) mauro marchese december 17 th 2010. ......

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