VALUATION OF AIRLINE COMPANIES: A FUNCTION OF EARNINGS OR CASH?

Bert Zarb
Embry-Riddle Aeronautical University
ABSTRACT
Company valuation is crucial for corporate sustainability and growth. To this effect, this
study examines whether operating income and operating cash flows affect the valuation of airline
companies. It is posited that airline firm value is a function of these variables.
The results of this study show that both operating income and cash flow from operations
are statistically significant with respect to company valuations. When company size was
considered, the results showed that this variable, in addition to operating income is statistically
significant in predicting company value.