Us Airways Group

US Airways Inc

Table of Content

The Executive Summary 3

Part I Introduction 4

Industry Characteristics 4

Impact of fuel on profitability 5

Stock Prices of US Airways 5

Graphical representation of share prices between 2006 - 2011 6

Part II Terminal Value Determination 7

Snapshot of finacial performance 2011 7

Terminal Value of US Airways 7

Part III Position of US Airways to Corporate Distress 9

US Airways: Acquisition or Take overs 10

Targets for US Airways Inc 11

Conclusions 12

References 13

Executive Summary

The aviation industry is unique unlike other industries. Profitability of airlines is influenced by a number of factors. US Airways is the company that will illustrate determination of profitability and terminal valuation. US Airways is a company that operates 3,100 scheduled passenger flights across America, Europe and Asia. The company is a member of Star Alliance which has a membership of 27 airlines operating in 189 countries. There are a number of factors that influence profitability of US Airways. For instance, the fluctuation of crude oil significantly affects US Airways. In the same case, fixed obligations and cost of financing and fluctuations of interest rates negatively affect US Airways profitability. Another factor is the fluctuation of foreign exchange. Labor strikes and threat of sabotage at times influence profitability negatively. Just to mention, fuel costs consist of significant operation cost. For instance, in 2009 crude oil cost stood at 23.8% compared to 35.8% in 2011. Considering $100 invested in US Airways shares in 2006 displays significant fluctuations which are unimpressive by 2011. However, the potential of the company is high. It is worth noting that that in 2011, operational revenues rose by 11.8% while yields increased by 10.1% I comparison with the 2010 figures. Fluctuations of crude oil prices were such that in 2010 a barrel averaged at $80 compared to $127 in May 2011 and $108 in December 2011. On the...