Catalysts
Had marketable securities (MS) for a rainy day and now facing a storm better than competition
Domestic aviation will recover faster than international
To acquire 68 new Boeings by 2023 with option of buying 52 more by 2026, selling all Airbus
Joined Oneworld Alliance recently
Risks
Recovery from pandemic taking longer than expected and people are still fearful of traveling
Higher oil prices
Inflation
Business travel may take years to return to normal
Financial Analysis
Valuation
My personal Biases
I have been buying this stock since March 2020
5.5% of my portfolio
Assumptions
70% of 2019 revenues in 2021, 85% in 2022, 105% in 2023 with growth of 5% annually till 2025
Operating Cash Flow and Revenues number for 4Q21 average of company estimates
Operating cash flow margins of 15% for 2022-2025
CapEx ignoring acquisition of new planes (focus on maintenance CapEx)
Discount Rate of 12%
Terminal Growth rate of 2%
Exit Multiples analysis
Based on 2025 Owner’s earnings
P/OE range of 8-24
Bull case 20% higher OE and 10% lower for Bear case
Conclusion
Around intrinsic value and future expected gain around 15%
Downside small and yet to gain from resumption in normal economic activities
Still a Buy
