Airline accounts are not expected to show how much the airline is worth or even the value of its fixed assets. Fixed assets are generally included at their original historical cost, less an allowance for depreciation. It is unlikely that this book value of tangible assets at a given date would coincide with the market or re-sale value of the same assets. The last part of the previous chapter highlighted these differences in terms of the stock market value of an airline and its relationship to the book value of its assets.
This chapter will expand on this and introduce the further issue of the absence of sizeable intangible assets such as route rights and slots in most airline accounts. It will first examine how these might be valued by international airlines and then go on to review various approaches to valuing all or part of such airlines. This problem is faced by advisers to governments on the privatisation of their national airlines, which is the subject of subsequent chapters, as is the pricing of equity in an IPO.