ABSTRACT
This chapter presents the various factors that affect valuation in the aviation industry, and provides a method for forecasting the future value of differing aviation entities. Two general methodologies are commonly used for estimating the enterprise value of a firm. The first is a "direct valuation" approach, which provides an estimate of firm value based upon the cash flows the firm is expected to generate. The second is a "relative valuation" approach in which value estimates of the company are obtained by examining the price of comparable firms. Aircraft valuation is another application of valuation in the airline industry and the Discounted Present Value model can be applied to estimate the theoretical value/hedonic price of commercial aircraft. The chapter examines the discussion of net present value and Internal Rate of Return to encompass the concept of valuation of high value assets such as airports and aircraft.
