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M.Sc. In Air Transport Management Program › Courses › Aviation Economics and Financial Analysis (2015-2016)

Aviation Economics and Financial Analysis (2015-2016)

Course Instructors

The instructors for the course are Dr. David Gillen and Dr. Tuba Toru Delibasi. Their bio can be seen in the links below:

Dr. David Gillen
Dr. Tuba Toru Delibasi

Course Intent

This course will provide background in the micro and macro economics of the airline industry as well as cover the essentials of key topics in airline finance. The course concludes with an examination of airport economics.

The micro-economics will cover the basics of supply and demand. It will cover the differences in the economics of various carrier business models (full service network carriers, low cost carriers, ultra low cost carriers and charter operations. It will look at airline strategy models and tools to assess competitive advantage. It will discuss airline alliances and families, including co-owned major carriers (e.g., Lufthansa-Swiss-Austrian) and feeder carriers. With the emergence of carrier families and alliances, it is increasingly important to understand how competition authorities review proposed acquisitions and alliances. Airline strategies will be discussed including Porter’s five forces model and students will develop a literacy in game theory and how to apply it to airline management and strategy development.

The macro-economics will cover points that are of considerable significance for a global airline where ‘macro literacy is important’. This includes macroeconomic variables and measurement, money, inflation and monetary and interest rate policy, the drivers of exchange rates, business cycles and managing the airline and the importance of productivity growth.

Airline finance will cover the basic sources of funds for carriers, financial planning and financial analysis. We will cover airline cost classification, investment appraisal and risk management. Risk analysis to assess liquidity, profitability and solvency are also examined.

Course Evaluation

In class assignments – Day 3 & 4 (20%)-these will be handed in by groups not individually.
Case analysis – completed by each group, due December 5th – 30%
Final Exam – to be written after the course is completed – 40%
Class Participation: 10%

Class participation grades are based upon the instructor’s assessment of a student’s contribution to class discussion, preparation for class, intelligent discussion and positive engagement with others in the class.

Course Outline

You can see the course outline from here.

Lecture Notes

These are the lecture notes for the course.

Lecture Notes
Module 01	Introduction: The Aviation Value Chain
Module 02	Financial Performance and Sources of Finance
Module 03	Aspects of Airline Finance
Module 04	Financial Analysis
Module 05	Demand and Supply
Module 06	Airline Costs
Module 07	Airline Business Models/Airline Pricing
Module 08	Pricing
Module 09	Distribution Economics
Module 10	Case Analysis: A Brief Introduction
Module 10	Business Strategy and Competitive Advantage
Module 11	Mergers and Alliances
Module 12	Economics of Mergers and Alliances
Module 13	Applications of Game Theory to Assess Airline Strategies
Module 14	Marcoeconomics Literacy
Module 15	Business Cycle and Economic Indicators
Module 16	International Indicators
Module 17	Money, Interest Rates & Exchange Rates
Module 18	Airport Economics

Course Readings

These are the reading materials for the course.

Reading Materials
Module 01	Costs Economic Performance of the Airline Industry The Aviation Value Chain - Economic Returns and Policy Issues Modeling Applications in the Airline Industry The Airline Industry: Trends, Challenges, Strategies
Module 02	Airline Finance Working Capital and Current Asset Management
Module 03	Example Approach - Airline Business Approach Plan Managing Risks - Airline Fuel and Currency Hedging Risk and Return
Module 04	Traditional Ratio Analysis in the Airline Business Financial Statement Analysis
Module 05	Air Travel Demand Airline Industry - Price Elasticity of Supply and Demand Airline Management: Chapter 2 Airline Management: Chapter 3
Module 06	A Comparative Analysis of Cost Change CAPA Cost Analysis Identifying Airline Cost Economies
Module 07	Airline Business Models Airline Economics An Empirical Analysis of the Airline Industry
Module 08	Airline Competition and Bundling Airline Economics - The Economics of Unbundling and Ancillary Fees Airline Pricing and Yield Management Product Unbundling in the Travel Industry Cost and Pricing Notes Airline Revenue in Networks Why Unbundling is a Good Thing?
Module 09	Airline Distribution Distribution Costs New Distribution Capacities The Case for a New Airline Distribution Model The Economics of Travel Distribution in an Internet Driven Environment
Module 10	Strategic Responses of Turkish Airlines to the Deregulation in Turkey Competition Strategies of the Airline Companies in Turkey Southwest Porter Model
Module 11	Network and Alliance Strategy
Module 12	Baggage Fees - A Game Theoretic Perspective Game Theory - The Developer's Dilemma, Boeing vs Airbus How Airlines Compete Lecture Notes on Game Theory Subgame Perfect Nash Equilibrium
Module 14	Macroeconomics I Macroeconomics in MBA Real Exchange Rates The State of Macro
Module 15	Macroeconomics II Macroeconomics for MBA
Module 16	International Macroeconomics - Beyond the Mundell-Fleming Model International Macroeconomics - Use as Reference The Six Major Puzzles of International Macroeconomics
Module 17	IS LM Model Money Interest Rates and Exchange Rates
Module 18	All-in Airport Cost per Enplanement A Guide to Airport Performance Measures European Airports and Airlines: Evolving Relationships and the Regulatory Implications Explaining Variability in Air Traffic Control Costs in the Domestic US Infrastructure Costs Methodologies for Assessing ATC Performance

Case Study and Assignments

You can see the assignments in the table below:

Assignments
Assignment 1	Porter Model Application Assignment Porter's Five Forces Analysis of Ryanair
Assignment 2	Game Theory Application Assignment

You can reach the answer to the Assignment 2 from this link.

Case study will be delivered at December, 5th, 17:00. No extension allowed. You can see the case study below:

Case Study
	Estonia Air Big Buy Case Study Estonia Air Case Reading

Previous Exams

You can reach last year's exam from this link.