Valuation of Deutsche Lufthansa AG: Is Air Berlin a Potential Acquisition Target?

Robin Diestelhorst

Student thesis: Master thesis


The ultimate goal of this report is to provide the marginal investor with a thorough strategic as well as financial analysis of Deutsche Lufthansa AG leading towards a recommendation whether to buy, sell or hold the company's stock on 30.12.2016. Included in this analysis is an assessment of the credibility of current rumors about Lufthansa's potential engagement in M&A activity with Air Berlin. As consolidation is generally anticipated within the European airline industry, an informed assessment of the rumors' credibility is of relevance for the marginal investor. The applied DCF-valuation model derives at an estimate of 18,41€ for Deutsche Lufthansa AG's fair share price. As the stock is trading for 12,27€ on the valuation date, this report suggests that the market undervalues Lufthansa's stock. The additional constructions of a best and worst case scenario provide a potential range of share prices resembling possible deviations in estimated future growth rates of ASKs, load factors, unit yields, fuel and staff costs. The scenarios lead to a share price of 21,19€ in the best case and 14,10€ in the worst case. With the purpose of further triangulating the results of the present value model, a relative valuation based on multiples suggests a fair value of 26,14€ per share. Thus, the relative valuation supports the general tendency of the DCF, however implies a more significant undervaluation. The current rumors about an acquisition of Air Berlin have been evaluated as non-credible due to the limited strategic as well as synergetic fit. It is further found that a wet-lease agreement in 2016 has already provided Deutsche Lufthansa AG with a predominant share of Air Berlin's only initially attractive assets.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2017
Number of pages135