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?

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Part 1

a. Use the estimates in table,

Average Debt Betas by Rating and Maturity
By Rating	A and above	BBB	BB	B	CCC
Average Beta	< 0.05	0.10	0.17	0.26	0.31
By Maturity	(BBB and above)	1-5 Year	5-10 Year	10-15 Year	> 15 Year
Average Beta		0.01	0.06	0.07	0.14
Source: S. Schaefer and I. Strebulaev, "Risk in Capital Structure Arbitrage," Stanford GSB working paper, 2009.

to estimate the debt beta for each firm (use an average if multiple ratings are listed).

The beta of the debt for each company is: (Round to three decimal places.)

Company Name	Market Capitalization ($ million)	Total Enterprise Value ($ million)	Equity Beta	Debt Ratings	Debt Beta
Delta Air Lines (DAL)	4,916.3	17,049.9	1.971	BB	enter your response here
Southwest Airlines (LUV)	4,870.8	6,382.9	0.971	A/BBB	enter your response here
JetBlue Airways (JBLU)	1,275.7	3,859.7	1.995	B/CCC	enter your response here
Continental Airlines (CAL)	1,110.4	4,355.4	2.022	B	enter your response here