Valuation of Air Berlin

Topics: Oneworld, Airline, Air Berlin Pages: 16 (4664 words) Published: August 29, 2011
Copenhagen Business School
MSc Accounting,Strategy and Control

Strategic-Financial Analysis of
Empirical Project

2011
Strategic-Financial Analysis of

Supervisor: Christian V. Petersen Authors:

• • •

Claudiu Luchian Wai Lin Chong Ying Wang

STU: x pages

1. INTRODUCTION 1.1. Motivation and Problem Statement The motivation for choosing to conduct a strategic-financial analysis and valuation of the German airline, Air Berlin, is based on the following factors: 1. Personal point of view: It should be seen as the foundation of my master thesis and the direction where I keen to develop future competences to work with. 2. Strategic point of view: The Corporation is defined as a hybrid carrier: it’s neither a lowfrills carrier nor a flag carrier. It has created its own sector providing an industry leading high quality service at significantly low fares 1. 3. Financial point of view: It is large enough to cover the curriculum of one of major subjects we have taken in our study line (Financial Statement Analysis). The overall purpose of this project is to determine the fair value of the Air Berlin through a strategic and financial analysis of the airline. This paper will seek to answer the following question: What is the fair value of Air Berlin equity (stock price) on May the 27th, 2011? We, similar to an external stock analyst, will be applying the competences gained by taking the FSA course, as an exercise to conclude if the listed stock value of Air Berlin is being overestimated, underestimated or it has the fair value. It is crucial, prior the valuation, to comprehend the airline’s development overtime, the market it operates in and how did they faced the Economical crisis. 1.2. Structure and Methodology To meet the objective described above, this thesis adopts a positivist research philosophy; relevant literature is reviews to establish a suitable conceptual framework (Saunders et al., 2007, s. 103). The purpose is to deduce hypotheses from the existing literature and from previous studies. (Gill & Johnson, 2002, s. 34; Ghauri & Grønhaug, 2005, s. 15). Then the second part of the paper focus on testing hypotheses and examining the causal relationship between the 1

Joachim Hunold (CEO of AIR Berlin) November 2007

concepts (Malhotra & Birks, 2007, s. 70; Saunders et al., 2007, s. 134), to be able confront the released results with the empirical results obtained. Because measurement is an essential element of the analysis of quantitative data, it must be conducted with precision to ensure the measurement’s accuracy (Collins & Hussey , 2005, s. 7). In order to ensure objective data collection, the researcher should be impartial to the subject matter being measured (Saunders et al., 2007, s. 118).Furthermore, to make the measuring of the concepts possible, they have to be presented in operational terms (Ghauri & Grønhaug, 2005, s. 15; Saunders et al., 2007, s. 118). The figure below is aimed to show how the paper is being framed so the reader can easily understand its composition.

Figure 1 The structure of this paper. Source: Own creation

1.3. Limitations The project is being based on a single public company’s case study and the industry it operates in, from an external point of view. Therefore all the information used to answer the statement problem is solely public information with a limited availability: the 25th of May 2011, the date of valuation. Further on, only 5 years of historical financial data have been considered to assess the financial performance of the carrier. The reader should have basic knowledge of the air shuttle industry and understand the strategicfinancial concepts, models and theories applied due to the short overview of the theoretical background. The project does not approach the One World alliance or the partnership with Fly Niki because the value gained from joining such alliance it will be difficult to estimate.

2. COMPANY PRESENTATION 2.1. Company profile (Source:...
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