Core modellingAdvanced · ~45 minWorking draft · 10 sheets · 1060 formulas

Airline operating and valuation model

Fleet, ASK, load factor, RASK and CASK, leases, DCF. Build an airline from its fleet: capacity in seat kilometres, traffic and revenue from load factor and yield, costs from the activity that causes them, leases on the balance sheet, three statements that balance, and a value per share checked against EV / EBITDAR.

Built in: Equity research and hedge funds, Investment banking, Private equity

By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.

On this subject: airline operating and valuation model.Updated 22 October 2026

Who builds it, and for whatThe model a transport analyst builds for an airline: equity research to forecast unit revenue and unit cost a quarter ahead of the company, leveraged finance and aircraft lessors to judge how much debt and rent the cash flow carries, and bankers and private equity to value a carrier on a basis that treats owned and leased fleets alike. Every forecast line traces back to aircraft, hours, seats, load factor, yield and the cost of a block hour.

Every sheet below, in your browser. Sign in free to change the inputs and watch it recalculate

Starter workbook free with an account. Worked model: one a month with Plus, every one with Pro. Downloads

Inspect the workbookAirline operating and valuation model · Working draft · 10 sheets · 1060 formulas

All checks read zero100%

Every value, every sheet, as the workbook holds it.

	A	B	C	D	E	F	G	H	I	J
1	Assumptions
2	$m unless stated. Annual periods; FY0A is the last actual year and the forecast runs FY1E to FY5E.
4	Year	Unit		FY0A	FY1E	FY2E	FY3E	FY4E	FY5E	Notes
5	Year number	#		0	1	2	3	4	5	FY0A = 0. Drives cost inflation, discounting and lease timing.
7	Scenario
8	Scenario	#	1	1 = base, 2 = bear, 3 = bull. Moves load factor, yield and the market fuel price in FY1E to FY5E.
9	Load factor, bear adjustment	pp	-2.0%	Added to the base load factor in every forecast year when Scenario = 2.
10	Load factor, bull adjustment	pp	2.0%	Added when Scenario = 3.
11	Yield, bear adjustment	%	-3.0%	Change to both base-case yields when Scenario = 2.
12	Yield, bull adjustment	%	3.0%	Change when Scenario = 3.
13	Market fuel price, bear adjustment	%	15.0%	Change to the base-case market price when Scenario = 2. The hedged share is unaffected.
14	Market fuel price, bull adjustment	%	-15.0%	Change when Scenario = 3.
16	Fleet and schedule
17	Narrowbody: owned aircraft, FY0A	aircraft	40
18	Narrowbody: leased aircraft, FY0A	aircraft	40
19	Narrowbody: owned aircraft delivered	aircraft			2	3	3	4	4	Bought; join the fleet at the start of the year.
20	Narrowbody: leased aircraft added	aircraft			2	2	2	2	2	New leases signed at the start of the year.
21	Narrowbody: seats per aircraft	seats	186
22	Narrowbody: utilisation	block hours a day	11.5	Gate to gate hours flown per aircraft per day.
23	Narrowbody: block speed	km per block hour	760	Average distance covered per block hour, taxiing included.
24	Narrowbody: average stage length	km	1300	Average distance of one flight.
25	Widebody: owned aircraft, FY0A	aircraft	8
26	Widebody: leased aircraft, FY0A	aircraft	4
27	Widebody: owned aircraft delivered	aircraft			0	1	0	0	1	Bought; join the fleet at the start of the year.
28	Widebody: leased aircraft added	aircraft			0	0	1	0	1	New leases signed at the start of the year.
29	Widebody: seats per aircraft	seats	300
30	Widebody: utilisation	block hours a day	14.0	Gate to gate hours flown per aircraft per day.
31	Widebody: block speed	km per block hour	830	Average distance covered per block hour, taxiing included.
32	Widebody: average stage length	km	6500	Average distance of one flight.
33	Operating days a year	days	365
35	Traffic and fares
36	Load factor, base case	%		83.0%	84.0%	84.5%	85.0%	85.0%	85.0%	RPK / ASK: the share of seat kilometres sold. FY0A is actual.
37	Narrowbody yield, FY0A	US cents per RPK	8.40	Passenger revenue per revenue passenger kilometre.
38	Widebody yield, FY0A	US cents per RPK	5.60	Lower per kilometre on long flights.
39	Yield change, base case	%			1.5%	1.5%	1.5%	1.5%	1.5%	Annual, both yields.
40	Ancillary revenue per passenger, FY0A	$ per passenger	15.00	Bags, seats, change fees, onboard sales.
41	Ancillary revenue per passenger, annual change	%	3.0%
42	Cargo revenue per widebody ASK	US cents per ASK	0.35	Belly cargo on long-haul flights.
44	Fuel and hedging
45	Narrowbody: fuel burn	tonnes per block hour	2.6
46	Widebody: fuel burn	tonnes per block hour	7.2
47	Jet fuel market price, base case	$ per tonne		850	800	790	780	780	780
48	Hedged share of fuel	%		55.0%	60.0%	40.0%	20.0%	0.0%	0.0%	Share of the year’s fuel bought forward at the hedged price.
49	Hedged price	$ per tonne		720	760	780	790	790	790	Applies to the hedged share only.
51	Unit costs
52	Unit cost inflation, annual	%	3.0%	Applied to crew, maintenance, airport, navigation and overhead unit costs from FY0A.
53	Narrowbody: crew cost per block hour, FY0A	$ per block hour	1800
54	Widebody: crew cost per block hour, FY0A	$ per block hour	3800
55	Narrowbody: maintenance per block hour, FY0A	$ per block hour	800
56	Widebody: maintenance per block hour, FY0A	$ per block hour	1800
57	Airport charges per passenger, FY0A	$ per passenger	8.00
58	Narrowbody: airport charges per departure, FY0A	$ per departure	1000
59	Widebody: airport charges per departure, FY0A	$ per departure	4000
60	Navigation charges per kilometre flown, FY0A	$ per km	0.50
61	Selling and distribution, % of revenue	%	5.0%
62	Overhead and other costs per ASK, FY0A	US cents per ASK	0.85
64	Owned aircraft and capital spending
65	Narrowbody: price per aircraft delivered	$m per aircraft	52.0
66	Widebody: price per aircraft delivered	$m per aircraft	150.0
67	Useful life, aircraft delivered	years	25
68	Residual value, % of cost	%	15.0%
69	Aircraft and equipment, net book value, FY0A	$m	2,600.0
70	Remaining life of the FY0A owned fleet	years	14	Straight line on the FY0A net book value.
71	Other capital spending, % of revenue	%	3.0%	Spare engines, parts, systems. Assumed equal to its depreciation.
73	Aircraft leases
74	Narrowbody: lease rent	$m per aircraft a month	0.36
75	Widebody: lease rent	$m per aircraft a month	1.05
76	Lease discount rate	%	6.5%	Discounts rent still to pay to the lease liability.
77	Remaining term, FY0A lease portfolio	years	7	Rent is paid at each year end.
78	Term of new leases	years	12
79	EV / EBITDAR multiple, lease-adjusted	x	6.5x	For the cross-check on the Valuation sheet; applied to FY1E EBITDAR.
81	Working capital
82	Air traffic liability, days of passenger and ancillary revenue	days	60	Tickets sold for flights not yet flown: unearned revenue.
83	Receivables, days of revenue	days	12
84	Payables, days of operating costs before rent and depreciation	days	35
85	Tax rate	%	21.0%
87	Financing
88	Cash, FY0A	$m	900.0
89	Aircraft debt, FY0A	$m	1,900.0
90	Debt raised, % of delivery spending	%	80.0%
91	Scheduled repayment, % of opening debt	%	8.0%
92	Interest rate on debt	%	5.5%	On the opening balance.
93	Interest rate on cash	%	3.0%	On the opening balance.
94	Dividends, % of net income	%	30.0%	Paid in the year; nothing is paid on a loss.
95	Shares outstanding	m shares	250
97	Cost of capital and terminal value
98	Risk-free rate	%	4.2%
99	Equity risk premium	%	5.5%
100	Levered beta	β	1.30
101	Pre-tax cost of debt	%	6.0%
102	Target debt, % of capital	%	35.0%
103	Terminal growth rate	%	2.0%	Annual growth in free cash flow after FY5E. Must be below WACC.

Select a cell to see its row, its schedule and the type of cell. Font colours: blue for inputs, black for formulas, green for links to other sheets. Scroll sideways to see every period.

Download

Airline operating and valuation model: the workbook

Excel workbook with working formulas, no macros and no external links. Work with it above first; it is the same model as the preview.

Checking your access Sign in for the starter workbook

What the base case says

RASK, FY1E (US cents): 7.50
CASK ex-fuel, FY1E (US cents): 5.18
Value per share, DCF ($): 21.55
Available seat kilometres, FY1E (bn): 65.11
Load factor, FY1E: 84.0%
EBITDAR margin, FY1E: 21.0%
EBIT margin, FY1E: 9.3%
Net debt including lease liabilities, FY1E: $1,788.9m
Value per share, EV / EBITDAR ($): 17.72
EBIT from one more point of load factor, FY1E: $49.5m

Read from the workbook as served, every input at its default. Periods: FY0A, FY1E, FY2E, FY3E, FY4E, FY5E. The figures are invented and move with whatever you type in.

What this model is

A five-year model (FY1E to FY5E, from an FY0A actual year) of an airline with a narrowbody and a widebody fleet, built from the drivers an airline is run on rather than from a revenue growth rate: aircraft, hours flown, seats, load factor, yield and the cost of each block hour, departure and passenger.

It runs from the fleet to ASK, RPK and passengers, to revenue, RASK, costs, CASK and CASK ex-fuel, to EBITDAR, EBITDA and EBIT; then to an integrated income statement, cash flow statement and balance sheet with a lease liability, and to a DCF with an EV / EBITDAR cross-check. Set Scenario on the Assumptions sheet to 2 (bear) or 3 (bull) to move load factor, yield and fuel together.

CASK ex-fuel is the operator’s own number. Fuel is priced in a world market that every airline pays, partly hedged; crew, maintenance, airport charges and overheads per seat kilometre are what management negotiates, schedules and controls, so it is the figure an analyst compares across airlines and over time.

EBITDAR is the line that compares airlines with different fleets. One airline owns its aircraft and shows the cost as depreciation and interest; another leases the same aircraft and shows rent. Before rent, depreciation and interest the two are alike, which is why airlines are compared on EBITDAR, and on net debt including lease liabilities against it.

A point of load factor is worth more than it looks. The aircraft flies anyway, so one more passenger in a hundred seats brings a fare and ancillary revenue while adding only selling costs and per-passenger charges. The Valuation sheet works out what one point is worth in EBIT and per share, and what $100 a tonne of fuel costs.

Seats: Equity research and hedge funds, Investment banking, Private equity.

Sheets in the workbook

Cover. How to read it, the conventions, the sheet map.
Assumptions. Scenario selector, fleet and schedule by aircraft type, load factor, yields, ancillary and cargo, fuel and hedging, unit costs, ownership and leases, working capital, financing and valuation inputs.
Fleet. Owned and leased aircraft by type, block hours, kilometres flown, departures and available seat kilometres (ASK).
Revenue. Load factor, RPK and passengers; yields and average fares; passenger, ancillary and cargo revenue; RASK.
Costs. Fuel with hedging, crew, maintenance, airport and navigation charges, selling and overhead; EBITDAR, aircraft rent, EBITDA, depreciation and EBIT; CASK and CASK ex-fuel.
Leases. Aircraft rent by lease vintage, the lease liability as the present value of rent to pay, its roll-forward, right-of-use assets and lease-adjusted leverage.
Financials. Income statement below EBIT, debt, aircraft and equipment, working capital including the air traffic liability, cash flow statement and balance sheet.
Valuation. WACC, unlevered free cash flow, DCF and equity bridge, the EV / EBITDAR cross-check, and what one point of load factor and $100 a tonne of fuel are worth.
Sensitivity. Value per share by load factor and fuel price; EBIT margin by yield and CASK ex-fuel.
Checks. Traffic, revenue, balance sheet, lease and grid tie-outs. Each should read zero.

How the schedules connect

Every row in the workbook is tagged with the schedule it belongs to; the inspector above shows the tag when you click a row. These are the schedules this model is made of and where each one lives.

Airline capacity and traffic: ASK, RPK and load factor

Fleet, block hours, seat kilometres, passengers

Assumptions, rows 17–33 · Assumptions, row 36 · Fleet, rows 6–12 · Fleet, rows 15–21 · Fleet, rows 24–30 · Revenue, rows 6–12

Airline unit revenue and unit cost: RASK and CASK

Yield, fares, RASK, CASK and CASK ex-fuel

Assumptions, rows 37–42 · Assumptions, rows 52–62 · Revenue, rows 15–20 · Revenue, rows 23–30 · Revenue, rows 33–35 · Costs, rows 15–23 · Costs, rows 33–40 · Costs, rows 43–49

Airline fuel cost and hedging

Burn per block hour, hedged share, price paid

Assumptions, rows 45–49 · Costs, rows 6–12

Capex and depreciation (PP&E roll-forward)

Opening, plus capex, less depreciation, closing

Assumptions, rows 65–71 · Costs, rows 26–30 · Financials, rows 21–24

Aircraft leases, lease liability and EBITDAR

Rent by vintage, lease liability, lease-adjusted debt

Assumptions, rows 74–79 · Costs, row 35 · Leases, rows 6–14 · Leases, rows 17–23 · Leases, rows 26–31 · Leases, rows 34–38 · Leases, rows 41–44 · Valuation, rows 33–39

Working capital schedule

Receivables, inventory and payables in days

Assumptions, rows 82–84 · Financials, rows 27–31

Tax

Tax on profit, and tax on operating profit

Assumptions, row 85 · Financials, row 6 · Financials, rows 9–11

Debt schedule

Tranches, interest, amortisation and the sweep

Assumptions, rows 88–94 · Financials, rows 7–8 · Financials, rows 15–18

Enterprise value to equity value

Debt off, cash on, per share

Assumptions, row 95 · Valuation, rows 26–30

Cost of capital (WACC)

CAPM, after-tax debt, target weights

Assumptions, rows 98–102 · Valuation, rows 6–8

Discounting and terminal value

Discount factors, two terminal methods, reconciled

Assumptions, row 103 · Valuation, rows 11–23

Balance sheet

Every line from a schedule, and the check

Financials, row 12 · Financials, rows 47–59

Cash flow statement

Indirect method, closing on balance-sheet cash

Financials, rows 34–44

Sensitivity tables

Two assumptions at once, without a data table

Valuation, rows 42–49 · Valuation, rows 52–56 · Sensitivity, rows 5–8 · Sensitivity, rows 11–16 · Sensitivity, rows 19–27

What you should be able to explain

How ASK is built from aircraft, utilisation, block speed and seats, and why RPK is ASK times load factor.
Why RASK and CASK are the two numbers an airline is judged on, and why CASK ex-fuel is the one management controls.
Why airlines are compared on EBITDAR and lease-adjusted net debt, so that a carrier that owns its aircraft and one that leases them read alike.
How a fuel hedge delays a price move rather than removing it, and what $100 a tonne does to value once the hedge rolls off.
Why a point of load factor is worth so much: the flight costs almost the same with one more passenger on it.
Why a DCF on cash flow after rent deducts debt but not the lease liability, while an EV / EBITDAR valuation deducts both.

What a reviewer looks for

Forecasting revenue from a growth rate, so capacity, load factor and yield never appear and a fleet plan cannot move the numbers.
Comparing EBITDA across airlines that lease different shares of their fleets, rather than EBITDAR.
Deducting the lease liability from a DCF of cash flow that has already paid the rent, which counts the leases twice.
Pricing all fuel at the market price when much of the next year is hedged, or forgetting that the hedge rolls off.
Driving every cost from ASK, so fuel and crew do not follow block hours and airport charges do not follow departures and passengers.

Conventions this workbook uses

Stated on the cover sheet too. A model is only as trustworthy as the decisions it tells you it made.

Aircraft join the fleet at the start of a year and fly all of it. Capacity is aircraft x utilisation x operating days (block hours), x block speed (kilometres), x seats (ASK); departures are kilometres / average stage length.
One load factor applies to both fleets. Passengers are RPK / stage length; passenger revenue is passengers x average fare, where the fare is yield x stage length, so RPK x yield rebuilds it on the Checks sheet.
Fuel burn is per block hour. The hedged share of each year’s fuel is bought at the hedged price; the rest at the market price for the selected scenario.
Leases follow the operating-lease treatment of US GAAP (ASC 842): rent is an operating cost above EBITDA, and the balance sheet carries a lease liability equal to the rent still to pay discounted at the lease rate, with an equal right-of-use asset. Rent is paid at each year end; no lease ends within the forecast. Under IFRS 16 rent would leave EBITDA, which would then be close to EBITDAR.
Owned aircraft: the FY0A net book value is depreciated straight line over its remaining life; aircraft delivered after FY0A over their useful life to a residual value. Other capital spending is assumed equal to its depreciation. Deliveries are funded partly with debt; the rest is paid from cash.
Interest is charged on opening balances, so there is no circular reference. Tax in the income statement has no credit for a loss; tax in the DCF is charged on EBIT at the full rate.
The DCF discounts unlevered free cash flow after rent from each year end and adds a perpetuity growth terminal value. Because rent is already deducted, the bridge to equity deducts debt but not the lease liability. The EV / EBITDAR cross-check values the airline before rent and so deducts the lease liability as well as net debt.
Cash is not held to a minimum and no revolver is modelled; the Checks sheet warns if a scenario takes cash below zero.

Build it yourself

The starter workbook

The capacity build has been cleared: owned and leased aircraft, block hours, kilometres, departures and ASK by type on the Fleet sheet, and load factor, RPK and passengers on the Revenue sheet. Rebuild it from the Assumptions sheet. The Checks sheet shows when RPK equals ASK x load factor.

Blanks: Airline capacity and traffic: ASK, RPK and load factor. Free with any account. Compare with the worked model when you are done: download above.

The path around this model

Understand it, drill it, read the build, then apply it to a real company.

Build · Lab · ~15 min

DCF Builder

Build a DCF by hand from revenue to a share price, know how much of it sits in the terminal value, and name the one assumption the answer hinges on.

Build · Lab · ~12 min

WACC Builder

Build a discount rate you can defend line by line: beta, equity risk premium and cost of debt, each from a source you can name.

Build · Lab · ~12 min

EV to Equity Bridge

Walk from enterprise value to a price per share without dropping a claim: net debt, pensions, minorities, leases and options.

Read · Guide · 12 min

How to Build a DCF Model: Build Order, Terminal Value and the Sanity Checks

Read · Guide · 7 min

Equity Research Interview Questions: The Coverage Mindset

Read · Guide · 7 min

Enterprise Value vs. Equity Value, Once and For All

Read · Guide · 11 min

Financial Modelling Best Practices: The Conventions That Make a Model Auditable

Apply · Skill

Company Profile

Build a banker-grade one-pager on any company, fast.

Apply · Skill

Model Audit

Find the errors in a financial model before someone senior does.

Vocabulary: Operating Lease, Enterprise Value (EV), WACC (Weighted Average Cost of Capital), Free Cash Flow (FCF), Deferred Revenue, Hedging.

Questions about this model

What are ASK, RPK and load factor?

ASK (available seat kilometres) is capacity: every seat flown one kilometre, whether sold or not. RPK (revenue passenger kilometres) is traffic: every paying passenger flown one kilometre. Load factor is RPK over ASK, the share of capacity sold. Here 96 aircraft fly 65.1 billion ASK in FY1E; at an 84% load factor that is 54.7 billion RPK and 34.2 million passengers.

Why is CASK ex-fuel watched more closely than CASK?

Because fuel is priced in a world market every airline pays, and hedging only delays it. Crew, maintenance, airport charges and overheads per seat kilometre are what management negotiates and schedules, so CASK ex-fuel says how well the airline is run. Here it is 5.18 US cents in FY1E against total CASK of 6.79 cents and RASK of 7.50 cents.

What is a point of load factor worth?

About $50 million of EBIT in FY1E, and $2.77 a share when every forecast year is a point higher. The aircraft flies anyway, so one more passenger in every hundred seats brings a fare and ancillary revenue while adding little more than selling costs and the airport charge per passenger. Fuel works the other way: $100 a tonne more on the unhedged fuel in every year takes $6.49 a share off the value.

Why do airlines use EBITDAR rather than EBITDA?

Because the same aircraft can be owned or leased. An owner shows its cost as depreciation and interest, below EBITDA; a lessee shows rent, above it. EBITDAR adds the rent back so both read alike, and the matching measure of debt is net debt including lease liabilities. Here EBITDAR is 21.0% of FY1E revenue, and the cross-check at 6.5 times EBITDAR gives $17.72 a share against $21.55 from the DCF.

What does it cost?

Nothing to preview: the whole workbook is on this page, and a free account works with it online, every formula included. Every starter workbook downloads with a free account. L3VLUP Plus ($4.99/month) keeps one worked model each billing month, yours for good, and L3VLUP Pro ($25/month) keeps every one.

Related models

Core modelling · Core

Discounted cash flow model

Unlevered free cash flow to a share price

Core modelling · Foundation

Integrated three-statement model

The operating model everything else sits on

Credit and restructuring · Advanced

Credit model

Debt capacity, covenants, sweep, maturities, recovery

Share your result 📊

𝕏 in 💬🤖

Instagram and TikTok have no desktop share link, so copy the caption and paste it into the app.

Provided for information purposes only, not financial advice. The model, its inputs and the outputs quoted on this page are illustrative, produced from assumptions you control, and must not be relied on for any investment, financial or business decision. Read the full notice

Not advice, and not a recommendation. Everything L3VLUP publishes is provided for information purposes only. Nothing here is financial, investment, legal, tax or accounting advice, a personal recommendation, or an offer or solicitation to buy or sell any security or financial instrument. It takes no account of anyone’s objectives, financial situation or needs.

Not a regulated adviser. L3VLUP does not provide regulated financial services. Speak to a suitably qualified and regulated professional before acting on anything you read here.

Illustrative figures. Default values are plausible starting points chosen so a model has somewhere to begin. They are not data, not a view on any company, and not calibrated to anything. Outputs move with whatever you type in.

No warranty, and limited liability. This page is provided “as is” without warranty of any kind. To the fullest extent permitted by law, L3VLUP accepts no liability for any loss or damage arising from use of, or reliance on, anything on it. Nothing in this notice limits any liability that cannot lawfully be limited.

Full terms: Information Purposes and No Advice · Terms