Consider the following airline industry data from mid$-2009$:

a$.$ Use the estimates in table, $,$ to estimate the debt beta for each firm $($use an average if multiple ratings are listed$).$

b$.$ Estimate the asset beta for each firm.

c$.$ What is the average asset beta for the industry, based on these firms?

a$.$ Use the estimates in table, $,$ to estimate the debt beta for each firm $($use an average if multiple ratings are listed$).$

Enter the beta of the debt for each company in the following table: $($Round to three decimal places.$)$

$\backslash$table$[[$Company Name,$\backslash$table$[[$Market$],[$Capitalization$],[($$ million$)]],\backslash$table$[[$Total$],[$Enterprise$],[$Value $($$ million$)]],\backslash$table$[[$Equity$],[$Beta$]],\backslash$table$[[$Debt$],[$Ratings$]],\backslash$table$[[$Debt$],[$Beta$]]],[$Delta Air Lines $($DAL$),4,938\mathrm{.}5,17,038\mathrm{.}4,2\mathrm{.}052,$BB$,],[$Southwest Airlines $($LUV$),4,924\mathrm{.}5,6,399\mathrm{.}7,0\mathrm{.}905,$A$/$BBB$,-],[$JetBlue Airways $($JBLU$),1,281\mathrm{.}2,3,871\mathrm{.}5,1\mathrm{.}982,$B$/$CCC$,-],[$Continental Airlines $($CAL$),1,056\mathrm{.}9,4,429\mathrm{.}5,2\mathrm{.}029,$B$,-]]$

Data table

$($Click on the following icon in order to copy its contents into a spreadsheet.$)$

Average Debt Betas by Rating and Maturity

$\backslash$table$[[$By Rating,A and above,BBB$,$BB$,$B$,$CCC$],[$Average Beta,By Maturity,,,,,$],[$Average Beta,$($BBB and above$),1-5$ Year,$5-10$ Year,$10-15$ Year,$>15$ Year$]]$

Source: S$.$ Schaefer and I. Strebulaev, "Risk in Capital Structure Arbitrage," Stanford GSB working paper, $2009.$

Dala ta$$ve

$($Click on the following icon $$ in order to copy its contents into a spreadsheet.$)$

$\backslash$table$[[$Company Name,$\backslash$table$[[$Market$],[$Capitalization$],[($$ million$)]],\backslash$table$[[$Total$],[$Enterprise$],[$Value $($$ million$)]],$Equity Beta,Debt Ratings$],[$Delta Air Lines $($DAL$),4,938\mathrm{.}5,17,038\mathrm{.}4,2\mathrm{.}052,$BB$],[$Southwest Airlines $($LUV$),4,924\mathrm{.}5,6,399\mathrm{.}7,0\mathrm{.}905,$A$/$BBB$],[$JetBlue Airways $($JBLU$),1,281\mathrm{.}2,3,871\mathrm{.}5,1\mathrm{.}982,$B$/$CCC$],[$Continental Airlines $($CAL$),1,056\mathrm{.}9,4,429\mathrm{.}5,2\mathrm{.}029,$B$]]$