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Analysis of Airbus Group - Final Project

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by

Marvin Ar

on 17 December 2014

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Transcript of Analysis of Airbus Group - Final Project

Analysis of Airbus Group

Airbus Group business divisions
Macroeconomic - Analysis
general environment

= forces outside of a company which can influence whole industry and markets in different ways
Company Valuation
Airbus
Airbus Defense and Space
Airbus Helicopters
Conclusion
DFC Valuation
Market Value
Relative Valuation
Price Earning Ratio (PER)
Price Book Value Ratio
Price Sales Ratio
Enterprise value/EBITDA
Enterprise value/Sales
Mergers & Acquisitions
Agenda
1. Introduction of the Airbus Group
2. SWOT - Analysis
3. Macroeconomic - Analysis
4. Industry Structure
5. Company Valuation
Conclusion
Industry Structure
Conclusion
Thank you very much for your attention !!
Regarding further information, please don't hesitate to ask !
by Livia Kandefer, Luca Derelli, Marc Schotter and Marvin Arras
Bloomberg. (2014). Bloomberg. Retrieved 12 12, 2014 from bloomberg.com

economics, T. (2014). Trading economics. From http://www.tradingeconomics.com/euro-area/gdp-growth

Estanislao, J. (2011). From http://de.scribd.com/doc/50196600/Case-Study-Global-Marketing-Ethics- and-Airbus

Lynch, R. L. (2006). Corporate strategy. Harlow, England; New York: FT/Prentice Hall.

Santos, D. S. (2014). Mergers & Acquisition. Universidad Europea de Madrid.
Bibliography
by Livia Kandefer, Luca Derelli, Marc Schotter and Marvin Arras
Determining the WACC
Required Rate of Return
Information by bloomberg.com
Determining the risk free rate
"Average return of treasury bonds with a maturity of 10 years"
Information from the Income Statement & Balance Sheet
WACC:
23, 63 %
"Rate to satisfy its creditor"
Discounted Cash Flows
Yearly Growth Rate: + 5, 7 %
Present Value of Airbus:
34,837,644,122 €
Present Value of Equity:
30,881,644,122 €
Closing Price per share from the 12th of December 2014 - bloomberg.com
Market Value:
31,891,590,000 €
Duopoly
only peer competitor is Boeing
Amount in US - Dollar
Enterprise Value :
57,010,542,794 €
Present Value of Equity:
30,881,644,122 €
Market Value:
31,891,590,000 €
PESTEL
Basics of Europe
Enterprise Value :
57,010,542,794 €
Relative Valuation:
different financial characteristics
Net Sales
Free Cash Flow

=

Solution: Average Value of all firms in the market
Over - Rated:

Market Value > Present Value of Equity
Strengths
High profitability and revenues
Vertically integrated production
Diversified consumers
Brand semplicity: 3 models (compered with 7 of Boing)
Brand loyalty
Weaknesses
A380 engines problems
Small business units can lower the profitability
Difficult logistics
Highly competitive market
Opportunities
Increased demand from developing countries
Surge in defense spending in China and India
Lower oil price can lower competitive advantage of Boing
Air traffic will double in the next 15 years (2012-2017)
Threats
Increase in labor cost and recruitment
Unstable relation between governments
Governments regulations
Prices competitiveness
SWOT ANALYSIS
Porter´s Five Forces
low
not many airplane manufactures, but large number of airlines
high switching costs -> high technological product, requiring many information
high, large impact on Airbus
Airbus counts more than 2000 suppliers in over 20 countries
coordination of the R&D field
contracts and long-term agreements to protect sales


medium
substitutes trains, cars, ships
most substitutes more time-consuming


low
high entry barriers
new entrants have to face high production costs, R&D costs, lack of expertise
Threat of Competitors
Bargaining power of substitutes
Threat of New Entrants
Bargaining power of suppliers
Bargaining power of buyers
Future of Airbus Group excellent though yearly growth of + 5,7 % and increase of globalization
Why the European area?

-> still important market
+ place of origin
economic and monetary union
18
European Union countries
euro as their currency

second largest
economy in the world
fourth most populous with
330 million
inhabitants
France, Germany, Italy and Spain are the most important economies accounting for over
74

percent
of the Union’s GDP.
current economic crisis
-> raising doubts over the euro’s future and is the major obstacle to growth
Opportunities
Threats
Indicators
highly competitive market
although duopoly
Continuing competition between Airbus & Boeing
result of merger
low threat, because of two gigantic companies
-> decrease or increase in the
market value
of the goods and services produced by the European area economy
Indicators
-> measure and compromise the overall wealth of the EU with other countries or economic areas
Indicators
-> provides information about the labour situation of the economic area = cost of labour
Indicators
-> used by investors to measure a country
ability
to make future payments on its debt = affecting the
country borrowing costs
and
government bond yields
P
ESTEL
-> political
Airbus was established by European Countries primarily
to compete
against the American aircraft company
Boeing

considered the aircraft industry as
strategic
-> be protected or controlled

number of airlines which are state owned flag carriers

aircraft orders tended to be
influenced by governments
in the past and will be in the
future highly influenced

P
E
STEL
-> economic
virtual duo-poly between Airbus and Boeing

Future:
next 20 years growth in air travel

high barriers to entry
= large capitalization required to operate

high fixed costs
&
development costs
-> great volume is critical for cost recovery and profit
PE
S
TEL

Europe vs America transcends pure commercial rivalry

Terrorism might impart temporary setbacks to the industry


-> social-cultural
PES
T
EL
-> technological

value created
= very technological

all
innovations
-> great influence on the performance of Airbus

high investment costs + increasing technological requirements in every new aircraft development project are needed

Increasing sophistication of commercial air travelers -> increasing demands on aircraft innovations
Fluctuation in oil and aviation fuel prices -> need of fuel-efficient and environmentally friendly aircraft
PEST
E
L
-> environmental
gaining importance in the industry

governments passing more stringent environmental rules

-> Aim:
to reduce carbon footprints
PESTE
L
-> legal
increasing pressure
for Airbus against corrupt business practices

Accusations
by both Airbus and Boeing made against each other in terms of illegal and anti-competitive government financing and subsidies
very intensive competition -> accuses of state aid
too much influence from the government
progressive Innovations
fluctuation of oil prices
too slow recovery of the economy
excellent resources and capabilities
sophistication of air travelers
strong market position
high growth expectations in
next 20 years
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