AVIA1902: Airline Financial Analysis and Decision Support - Accounting and Finance Assignment Help

Assignment Task

Course Aims

This course aims to equip students with the skills needed to make sound financial decisions when managing an airline or airport.

Course learning outcomes (CLO)

At the successful completion of this course you (the student) should be able to:

1. Identify the tools that can be used to make air transport financial decisions

2. Evaluate the financial viability of aircraft investments

3. Apply analytical methods and techniques to evaluate airline route network and yield and revenue management decisions

4. Apply the Capital Asset Pricing, Weighted Average Cost of Capital and Return on Invested Capital models in project evaluation 3

5. Effectively use financial statements when making financial-decisions

6. Discuss financial derivatives and how they can be used to hedge risks associated with fuel price and currency movements

7. Use capital budgeting-based analysis when making aircraft investment decisions

 Individual Assignment

An Excel Spreadsheet in the Assignment section of Moodle entitled “AVIA 1902 Assignment Data.xlsx” includes information about Air France/KLM fuel costs inclusive of hedge gains and losses denominated in Euro dollars, Air France/KLM ASKs, Air France/KLM fuel consumption per barrel and the Euro price of 1 US$ over the quarterly time period Mar-11 to Dec-21. You are to use the data in this spreadsheet to answer the following questions.

Question 1 Construct a calendar annual line graph in Microsoft Excel of Air France/KLM fuel costs per barrel in US dollars between 2011 and 2021. Ensure that your axes are properly labelled and that the graph you construct is of a high quality. Build the graph in Microsoft Excel and copy the graph into a word document. Marks will be allocated to the quality of the graph you construct.

Question 2 Construct a calendar annual line graph in Microsoft Excel of Air France/KLM fuel cost per ASK in US cents per ASK between 2011 and 2021. Ensure that your axes are properly labelled and that the graph you construct is of a high quality. Build the graph in Microsoft Excel and copy the graph into a word document. Marks will be allocated to the quality of the graph you construct.

Question 3 Use the data you constructed in Question 1 on Air France/KLM fuel cost per barrel in US dollars between 2011 and 2021 to find the compound annual growth rate of Air France/KLM fuel cost per barrel in US dollars between 2011 and 2021 using the regression-slope method. Compare this to the estimated compound annual growth rate using the end-point method. Discuss the reasons why the estimates are different, and which is preferred.

Question 4 Use your estimates of Question 1 to draw a graph of Air France/KLM fuel cost per barrel in US dollars against the U.S. Gulf Coast spot price of jet fuel per barrel over the calendar annual period 2011 to 2021. Build the graph in Microsoft Excel and copy the graph into a word document. Marks will be allocated to the quality of the graph you construct. To complete this task, you will need to find data on the U.S. Gulf Coast jet fuel price over the relevant time period. Discuss why the Air France/KLM fuel cost per barrel in US dollars may be greater than or less than the Gulf Coast jet fuel price.

Question 5 Find the correlation between the Air France/KLM fuel cost per barrel and the Gulf Coast jet fuel price both in the current time period for the Gulf Coast price, and the one period lagged value of the Gulf Coast price. The correlation will need to be estimated over the time period 2011 to 2021. To find the estimates of the correlations you will need to study and use the function in Microsoft Excel “=correl(range 1, range 2)”. Discuss and explain the differences in the answers you obtain.

Question 6 In the case of your question 2 estimate of fuel cost per ASK in US c/ASK, what type of factors would you expect to be causing this metric to change over time?

Question 7 Discuss in a single paragraph of no more than 100 words why Covid-19 raised the likelihood that airlines would make significant hedge losses if they used financial instruments to hedge against the movement in jet fuel prices in 2020 and 2021.

Question 8 Find the variance of Air France/KLM fuel cost per barrel in Euro and compare this to the variance of Air France/KLM fuel cost per barrel in US dollars over the calendar annual period 2011 to 2021. In 8 100 words or less discuss and explain your results. To find the estimates of the variance you will need to study and use the function in Microsoft Excel “=var(range)”.

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