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Foundations of Airline FinanceMethodology and PracticeBijan Vasigh, Embry-Riddle Aeronautical University, USA,

Ken Fleming, Aviation Consulting Group, USA and

Liam Mackay, Continental Airlines, USA

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June 2010 Paperback c. 350 pages 978-0-7546-7770-3c. 25.00 c. 20.00c. $49.95 c. $39.96

June 2010 Hardbackc. 350 pages 978-0-7546-7769-7c. 65.00 c. 52.00c. 124.95 c. $99.96

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Foundations of Airline Finance: Methodology and Practice is a textbook that comprehensively covers all aspects of the subject, bringing together the numerous and informative articles and institutional developments that have characterized the field of airline finance in the previous two decades.

In the early chapters, the reader is introduced to the elementary ideas of the role of finance in the airline industry. This is followed by an in-depth presentation of the role of accounting in airlines. The steps used in the creation of financial statements are presented to provide the reader with a greater understanding of the impact that managerial decisions and actions may have on financial statements. Ratio analysis is then used to further analyze airline financial statements. Financial indices such as return on investment (ROI), profit margin, debt-equity ratio, and price-earnings ratio are then introduced; these are used not only internally by airlines, but also externally by the investment community. Airline industry specific metrics, such as cost per available seat mile (CASM) and revenue per revenue passenger mile (RRPM), are then covered. The concepts of financial and operational leverage and how they help airline decision-makers

determine the financial effect that business uncertainties may cause. By calculating the actual financial leverage for specific airlines, the impact of increases in price or decreases in costs is then determined for individual airlines.

A major decision facing airline industry is to either purchase or lease an aircraft. Since in the airline industry the most capital intensive asset is an aircraft, we present a brief overview of the aircraft purchasing and leasing markets. The advantages and disadvantages of either purchasing or leasing are then discussed and shown to depend mainly on the airlines capital structure. This is followed by a detailed buy versus lease example that is used to help illustrate the decision-making process. The book also contains a full chapter on managing risk. This introduces the idea of fuel hedging and how it can help reduce the risk. The concepts of future and forward contracts and how they affect hedging are then explained.

Foundations of Airline Finance: Methodology and Practice will be of greatest value to students of air transportation but will also serve as an accessible and comprehensive reference for industry professionals.

Professor Vasigh has produced that rare thing a book on applied finance that is readable and illuminating. Since the industry routinely destroys shareholder value, despite creating tremendous consumer value, this expertly guided tour behind airline financial statements should be required reading for analysts, policy-makers and newcomers to airline management.Brian Pearce, Chief Economist, IATA

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Contents: Preface

Part 1 Theoretical Aspects of Airline Finance Role of finance in the airline industry Airline cost classifications Time value of money Risk and return

Part 2 Airline Accounting and FinanceRole of accounting in airlines Airline financial statements Financial statement analysis

Part 3 Airline Capital BudgetingAirline capital budgeting Airline capital structure and cost of capital Working capital and current asset management

Part 4 Practical Applications of Airline Finance Managing risks: airline fuel and currency hedging Buy versus lease decision-making Aviation industry valuationAppendices Glossary Index

Vasigh has created a highly readable and accessible text which provides an understanding of the complexities of airline financial management. He covers not only the essential techniques in financial analysis but also provides key material on aviation industry valuation, capital budgeting and importantly risk management. This excellent book should be essential reading for students of aviation as well as air transport industry professionals.David Gillen, University of British Columbia, Canada

Bijan Vasighs book offers the reader a good overview of the considerations and analyses that are important in evaluating the financial performance of the airline industry. It offers many real-life examples and insights into the challenges facing todays airlines. Vasigh links traditional financial concepts with airline examples, giving the reader a better avenue for understanding the metrics and methods that are particular to the industry.Zane Rowe, Continental Airlines, USA

Dr Vasighs book is a valuable source of information for those who have a keen interest in understanding airline industry finance and accounting. The systematic approach adopted in writing it successfully navigates the readers through the complexities of airline financial statements, airline capital structure, cost classifications, and more.Fariba Alamdari, Boeing Commercial Airplanes, USA

We are fortunate to have this work added to the body of literature in our field. The area of airline finance needs this methodological approach to solve the decades-old problems the industry has not resolved.Brent Bowen, Purdue University, USA

This book is a fantastic introduction to the complexities of airline finance. It would be an invaluable guide for anyone just entering the management side of an airline, whether they be students or ex-line employees, allowing them to confidently discuss and understand the basics of airline finance.Richard Tame, Airline Consultant

In order to survive in an ever-increasing competitive market, airlines must manage their finances properly. This book is a comprehensive guide for the finance-related issues that emerge in the airline industry. In a time of global crisis, the concepts thoroughly addressed by Dr. Vasigh are critical. It is of inestimable value for airline executives, managers, researchers and students. Alessandro Oliveira, Aeronautics Institute of Technology, Brazil

This textbook is a great companion to Introduction to Air Transport Economics and I recommend it to students, scholars and practitioners who recognize that practicing cutting-edge financial management in the air transportation industry is essential.Daniel L. Petree, Embry-Riddle Aeronautical University, USA

In one textbook it applies economic theory to all aspects of the aviation industry, bringing together the numerous and informative articles and institutional developments that have characterized the field of airline economics in the last two decades.2008 Paperback 350 pages 978-0-7546-7081-025.00 $39.95

2008 Hardbackc. 350 pages 978-0-7546-7769-765.00 $124.95

Foundations of Airline FinanceMethodology and Practice