Finance 332
Financial Modeling and Communication
Fall 2012
Final Project
Southwest Airlines Analysis and Valuation
Initial Tasks:
1. Use the industry data provided to conduct an historical analysis of capacity, capacity utilization, revenue growth, and profitability. Be able to identify the
primary economic factors driving the industry and explain what has happened in the industry over the past 20 years.
2. Use the data provided for individual airline and industry capacity and capacity
utilization to measure market shares for the top 10 airlines in 2011. Be sure to measure market share for each airline company (e.g., combine United and Continental; Southwest and AirTran and any other airline carriers that have merged).
3. Estimate total industry revenue passenger miles for each of the next five years.
4. Estimate Southwests market share and revenue passenger miles and total
revenue for each of the next five years.
5. Conduct an analysis of the financial statements and ratios for Southwest and
other airlines available. Use your findings to develop a set of forecasting parameters
for Southwest.
6. Use your parameters to complete a five–?year forecast for Southwest.
7. Use the forecast results to estimate the value of Southwest. Make a comparison
of your valuation results to the market price of Southwest shares.
Written Analysis
Brandon Mills, Executive Director of the DD Investment Fund has hired you to conduct an analysis and valuation of Southwest Airlines. He has asked you
to include the following in your report:
Overview of the airline industry and prospects for growth for the next
five years
Analysis of the sustainability of the Southwest business model
Forecast and valuation of Southwest with comparison to the current
market value of the company as measured by its stock price.
Present your analysis and findings in a three to five page written report
supported by appropriate exhibits