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Message: RE: Air Canada of all people. - Sinkman

RE: Air Canada of all people. - Sinkman

posted on Jun 10, 2005 08:31AM
Agreed as usual! It`s still a big IF, so people should NOT get too excited. However, it doesn`t hurt to ponder the possibilities should these dots actually connect....

Along these lines, I`ve already ``worked the numbers``. Air Canada`s narrow-body fleet consists of 230 planes and a total of about 21,000 seats. But we`re currently looking at 143 planes out of the 230. I did simple averaging to come up with a possible order for about 13,000 digEsystem units. This number is IMO skewed to the low side due to the bulk of planes being what they call ``regional`` with only 50 seats each; and I`d think ``regional`` aircraft would be used for short hops not conducive for IFE. So recognize this ``conservative baseline``. Non-regional planes, by contrast, have 120-166 seats each.

Now, 13,000 units at a price of around $600 (to EDIG) works out to $7.8M in revs, and (using 25% margin) $1.95M profit. That profit works out to around a penney per outstanding share. One penney with a P/E of 50 equals a fundamental (no emotion) PPS of 50 cents.

A more realistic, but also more optimistic approach would be to skew the calculations away from the regional aircraft, and assume all non-regionals get the system, and only a few (to make up the difference) regionals with longest flight duration will get the system.

Using this approach, I come up with a seat count of about 16,600. 16,600 X $600 = ~ $10M in revs and ~ $2.5M in profit to EDIG. Same/same = ~ 75 cent PPS based purely on fundamentals (no emotion factor), albeit using a P/E of 50.

Just some stuff to consider, however seriously. Throw in the emotional factor and ......

Then consider their saying that they may go narrow fleet wide, and that`s a total of 21,000 units. Then consider if they ultimately decide to go this route with their wide-body aircraft. That would add another 14,000 seats.

All pure conjecture, cuz I KNOW nuttin`!

SGE

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