Jenny Kuan Gabriel Li Morris Tang Industry Overview Southwest Airlines British Airways Singapore Airlines Agenda ATK Available Tonne Kilometer Capacity Passenger and cargo capacity ID: 1038949
Download Presentation The PPT/PDF document "Global Airlines Presented by:" is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
1. Global AirlinesPresented by:Jenny KuanGabriel LiMorris Tang
2. Industry OverviewSouthwest AirlinesBritish AirwaysSingapore AirlinesAgenda
3. ATK: Available Tonne Kilometer (Capacity) = Passenger and cargo capacityASK: Available Seat Kilometer (Capacity) = [Number of seats] * [kilometers flown]RPK: Revenue Passenger Kilometer (Traffic) = [Number of paying passengers] * [kilometers flown]FTK: Freight Tonne Kilometer (Traffic) = [Freight tonnes carried] * [kilometers flown]YIELD = [Revenue] / [RPK]LF: Load Factor (Capacity Utilization) = [RPK] / [ASK] = [number of passengers]/[number of seats]Break Even LF: Unit cost / Yield i.e. Operating cost = Operating RevenueTerminology
4. History/Regulations
5. History/Regulations (2)
6. Open skies competition for international routesOpen skies refers to the Air Transport Agreement whichLiberalizes the rules for international aviation markets and minimizes government interventionMilitary and other state-based flights may be permittedAfter World War II
7. Jet: 1950’s - 1960’sBoeing 707DH 106 Comet
8. Jumbo Jet: 1960’s – 1970’s Boeing 747-8
9. To remove government control over fares, routes, and market entry => CAB eliminatedUnderserved airports opened to major carriersMergers between local carriers were allowedImplementation of “Hub and Spoke” systemAirline Deregulation Act (1978)CAB
10. Key factors affecting the business:Airport capacityRoute structureTechnologyCosts to lease/buy the aircraftsWeatherCost of fuelCost of labourGlobal Airlines
11. Network-Legacy AirlinesHub and Spoke as main systemLong routes, international flights, main airportsMax. passenger load factor↑wait time, ↓utilization timee.g. British Airways, Singapore AirlinesLow-Cost AirlinesPoint to Point as main system→ Fly directly to destinationShorter routes, usually regional/domestic↓wait time, ↑utilization→ Lower unit coste.g. SouthwestTypes of Airlines & Models
12. Network-Legacy AirlinesMore Luxury aircraftsEconomic/Business/First ClassPrice discriminationYield management systemDifferent prices for same classHigher faresFrequent-flyer programAirlines alliancesFrillsLow Cost AirlinesFewer types of aircrafts Lower maintenance expensesEconomic classFly early/lateLower landing feesHigh proportion of sales from the InternetLower faresNo allianceNo frillsTypes of Airlines & Models (2)
13. Airline Alliances
14. An extended and optimized networkCost reduction from sharing ofSales officesMaintenance/operational facilitiesOperational staffInvestment and purchasesBenefits TravelerLower PriceMore choice of departure and destinationFaster mileage reward Benefits of Alliances
15. Industry Overview
16. Airline Index (AMEX)
17.
18. Year% of Operating CostAvg Price/ Barrel of Crude (USD)Break-even Price/ Barrel (USD)Total Fuel Cost (USD)200314%28.823.344 billion200417%38.334.565 billion200522%54.551.891 billion200624%65.167.4107 billion200727%7381.1134 billion200833%9988.9189 billion200923%6255.3113 billion201026%7980.6140 billionFuel Costs – Impact on Operating Costs
19. Fuel Costs – Impact on Net Profits
20. Industry Statistics – International Traffic
21. Industry Statistics – International Traffic
22. State of the Industry – Passenger Market
23. State of the Industry – Passenger Market
24. Demand in Passenger Market
25. Growth of International Schedule Passenger Demand (2009-2010)Source: IATA
26. International Scheduled Freight Market Volume (2009-2010)Source: IATA
27. State of Industry – Cargo MarketsFTKs: Freight Tonnes Kilometres
28. State of the Industry – CapacityASKs:Available Seats KilometresAFTKs:Available Freight Tonnes Kilometres
29. State of the Industry – Capacity
30. State of the Industry – Yields
31. State of the Industry – Revenues
32. State of the Industry – Yields
33. State of the Industry – Fuel Costs
34. State of the Industry – Cash Flow
35. State of the Industry – Profits
36. State of the Industry – Profits
37. State of the Industry – Cash and Balance Sheets
38. State of the Industry – Financial Sustainability
39. Southwest AirlinesSOUTHWEST AIRLINES
40. Stock Quote (NYSE:LUV)
41. Southwest Stock (NYSE:LUV)
42. Moving Average (One-year)
43. Moving Average (Five-year)
44. Moving Average (Ten-year)
45. Southwest VS. Oil Price (AMEX) - 5 Year
46. Southwest VS. Airline Index (AMEX) - 5 Year
47. 5 Year Cumulative Return(reinvestment of dividends)
48. Southwest is a major domestic airline that provides primarily short-haul, high-frequency, point-to-point, low-fare serviceHeadquarters in Dallas, TexasOperates over 500 Boeing 737 aircrafts in 69 citiesHas among the lowest cost structures in domestic airline industry and consistently offers the lowest and simplest faresAverage passenger airfare for a one-way ticket is $131.82 Adopted the first profit-sharing plan in U.S. airline industry in 1973 where employees own about 8% of the company stockCompany Profile
49. 1967Air Southwest Co. was incorporated1971Air Southwest Co. changes its name to Southwest Airlines Co.Begins service to Dallas, San Antonio and Houston with three Boeing 737s1973Ends the year with first yearly profit1974Carries one-millionth customer1975Common stock listed on American Stock Exchange under the ticker “LUV”1978Flies to New Orleans, first flight destination outside of Texas1990Revenue exceeded $1 BillionHistory of Southwest
50. 1994Acquires 2 airline companies: Morris Air and Arizona One1996Online booking site launched2005Enters first code-share agreement with American Trans AirHistory of Southwest (2)2009 Becomes largest carrier in the US with 545 Boeing 737 aircrafts servicing 68 airports in 35 states and able to offer more than 3,300 flights a day
51. World’s largest low cost carrierMaintains the 4th largest passenger fleet of aircraft among all airlinesOne of the most profitable airlines (37th consecutive profitable year in 2010)Has nearly 35,000 employees and makes more than 3,200 flights a daySouthwest Airlines Today
52. Size of Southwest AirlinesBy Fleet Size:By Scheduled Passengers:
53. Southwest Servicing Map 69 cities in 35 states
54. Region Break-down & Market Share
55. In June 2010, the American Customer Satisfaction Index ranked Southwest Airlines number one among all airlines for the 17th year in a row.Customer Service
56. “One of the most innovative companies in the world” – BusinessWeek, 2009EarlyBird Check-InBy paying $10 (one-way), customers can be checked in automatically up to 6 hrs before general boarding positions become available and have a confirmed boarding positionAllows customers to have earlier access to seats and luggage compartmentsGenerated $15 million in revenue in 2009P.A.W.S. (Pets Are Welcome on Southwest)Customers can bring a small dog or cat on board by paying $75In the first 7 months (june to dec 2009), it generated more than $5 million in revenueInnovation
57. [Number of seats available] * [Number of miles flown]Southwest Operations[Number of revenue passengers]*[Number of miles flown by those passengers]
58. Southwest Operations (2) The amount of passenger revenue earned per ASM; also referred to as “unit revenue.”The amount of operating cost incurred per ASM; also referred to as “unit cost”.
59. Southwest AirlinesManagement
60. Herbert D. Kelleher - Founder and Chairman EmeritusIncorporated Southwest in 19671976 to 2008: Executive Chairman1981 to 2001: President and CEOMay 2008: Stepped down from the role of Chairman and resigned from the Board of DirectorsGraduated with honors from Wesleyan University, where he was an Olin ScholarMajor in English and Minor in Philosophy Graduated from NYU Law School, where he was a Root-Tilden ScholarManagement
61. Gary C. Kelly – Chairman, President (since 1994), CEOAge: 551986: Joined the company as Controller1989: CFO and VP of Finance1991: Executive Vice President1994: CEO2008: Chairman of the Board of DirectorsEducation:Earned B.B.A. in Accounting from University of TexasCertified Public AccountantManagement
62. Laura Wright - CFO, VP of Finance (Since 2004)Age: 491988: Joined the company as Director of Corporate Taxation1990: Director of Corporate Finance1995: Assistant Treasurer1998: Treasurer2001: VP of Finance and Treasurer2004: VP Finance and CFOEducation:Earned B.S.A and an M.S.A. (emphasis in taxation) from the University of North TexasCertified Public AccountantManagement
63. Michael Van de Ven – COO, Executive Vice PresidentAge: 48Joined the company in April 1993Experience in the Company:Executive Vice President of Aircraft OperationsSenior Vice President of PlanningVice President Financial Planning & AnalysisSenior Director of Financial Planning & AnalysisDirector of Financial PlanningDirector of Internal AuditEducation:B.B.A. from University of Texas at AustinCertified Public AccountantManagement
64. Southwest AirlinesFinancial Analysis
65. Annual Income Statements (in millions, except per share amounts)
66. 4th Q 20091st Q 20102nd Q 20103rd Q 2010Quarterly Income Statement (in millions, except per share amounts)
67. Income & Expense Figures
68. Balance Sheet - Annual
69. Balance Sheet - Annual
70. The company`s cash collateral deposits related to derivates that have been provided to a counterpart have been adjusted to show a ``net`` presentation against the fair value of the company`s fuel derivative instruments
71.
72. RecommendationHOLD
73. British Airwys
74. Stock Performance
75. Moving Average (One-year)
76. Moving Average (Five-year)
77. Moving Average (Ten-year)
78. Comparing with Indices (One-year)
79. Comparing with Indices (Five-year)
80. Comparing with Indices (Ten-year)
81. UK’s largest international scheduled airlineOne of the largest Network-Legacy AirlinesMember of Oneworld AllianceFlying to more than 300 destinationsHQ in London: Heathrow, GatwickOverview
82. Carried more than 32 million passengers last yearEarned £8 billion in revenueCarried 760,000 tones of cargoHave 238 aircrafts in serviceOverview (2)
83. Upgraded customer experienceMore first cabin for long-haul fleetCapacity and fleetMore aircraft and more destinationsCompetitive cost baseMore competitive cost by introducing structural changeCorporate responsibilityWorking with “Flying Start,” and planning to raise £8 million by 2013Key Business Priorities
84. Timeline of the Company
85. Current News
86. Flight Routes (Europe)
87. Flight Routes (Other Destinations)North AmericaFar EastSource: BA
88. Management
89. Non-executive director since May 2000Became Chairman in July 2004Chairman of the Nominations CommitteeMBA from University of HullCompensation: £351k + awardExecutive board member since May 2005MBA from Trinity College, DublinFormer CEO of Aer Lingus (an Irish airline)Compensation: £1,024k + awardMartin BroughtonChairmanWillie WalshCEO
90. Executive Board Member since January 2006Degree in History, Chartered AccountantCompensation: £582kSenior independent non-executive director since 2002Audit, Nominations and Remuneration CommitteesCompensation: £46kNon-executive director since November 2006Unilever’s CFO (2007-2009)Degree in Economics from Yale, MBA from Harvard Business SchoolCompensation: £47kKeith WilliamsCFOMaarten van den BerghJim Lawrence
91. Financial Analysis
92. Quick Overview(I/S)
93. Quick Overview (B/S)
94. Quick Overview (B/S) (2)
95. Quick Overview (Ratios)
96. Annual Report (I/S)
97. Annual Report (B/S)
98. Annual Report (B/S) (2)
99. Annual Report (C/F)
100. Current Performance
101. 6-month (I/S)
102. 6-month (Other comprehensive income)
103. 6-month (B/S)
104. 6-month (B/S) (2)
105. 6-month (C/F)
106. RecommendationHOLD
107.
108. Singapore Airline1 US dollar =1.2975 SGDLast update Nov 18th
109. Shares Outstanding
110. One Year Stock Price (moving average)Source: Reuters (In Singapore Dollars)
111. Five Year Stock Price (moving average)Source: Reuters (In Singapore Dollars)
112. Ten Year Stock Price (moving average)Source: Reuters (In Singapore Dollars)
113. One Year Stock Price ComparisonSource: Reuters (Comparison with Nasdaq and Dow)
114. Five Year Stock Price ComparisonSource: Reuters (Comparison with Nasdaq and Dow)
115. Ten Year Stock Price ComparisonSource: Reuters (Comparison with Nasdaq and Dow)
116. Current EventsQuantas keeps A380 grounded, exam 3 suspect enginesRolls says progress made in Qantas A380 engine probeThe Australian newspaper reported Qantas operated its A380 engines at higher maximum thrust levels than rivals, which could result in resonating vibrations that cause oil lines to cracksafety regulator orders A380 engine inspection
117. Listed and traded on Singapore Stock ExchangeShare price as of Nov 18th15.90 SGDCurrency exchange rate as of Nov 18th1 US = 1.2975 SGDSingapore Airline
118. Begin as an incorporation of Malayan Airlines (MAL) in 1937.First flight from British Straits Settlement of Singapore to Kuala Lumpur in 1947 using Airspeed Consul twin Engine airplaneIn 1963, the Federation of Malaysia was born and the Airline became known as Malaysian Airways. Singapore Airline Brief History
119. In May 1966, it became Malaysia-Singapore Airlines.In 1972, Malaysia-Singapore Airlines split up to become two entities - Singapore Airlines and Malaysian Airline SystemSingapore Airline Brief History
120. Provide innovative promotions to attract new customers and maintain competitive advantageMaximize return for shareholder and employeesStated Objectives Continuously maintain profitable position in times of economy downturn, and recover loss as the economy starts to pick up.
121. Enhance customer experience by providing service such as free beverage (with or without alcohol) and hot towels…etc free of chargeMaintain cost efficiency by using latest aircraft (four A330-2010) and at the same time as marketing purpose. SIA also decommissioned 6 B777s (four for lease and two for sale)Adding capacity to designations such as Hong Kong, New Delhi, and Seoul. Also Expanding the Singapore and Munich-Manchester serviceStrategy
122. Global Route Map
123. West Asia and Africa Route MapHere SIA uses “hub and spoke” method
124. Type of Aircrafts
125. SilkAirTradewinds Tour and TravelSIA Engineering CompanySIA CargoNO MORE Singapore Airport Terminal Service (SATS) diversified from SIA in 2009SIA Subsidiaries
126. Cathay Pacific Airways LimitedJapan Airline CorporationMalaysian Airline System BerhadMain Competitors
127. Main Controller
128. Key Financial Highlight
129. Dividend
130. Net liquid asset increase from 2,802 to 3,274 (million) over a year due to deconsolidation of SATS Group, including 200(m) notes payable issued by SATS GroupTotal debt to equity ratio lower by 0.02 Group Liquid Asset
131. Cost Structure
132. Cost Structure
133. Fuel Cost
134. Revenue Composition by Product
135. Revenue Composition by Product
136. Revenue by Business Segment
137. Revenue Composition by Region
138. The decrease in internally generated cash flow is driven by lower proceeds from disposal of aircrafts and other assets93% of capital spending was on aircraft and spare enginesCapital Expenditure
139. Passenger carriage (in revenue passenger-km) was 8.0 per cent lower year-on-year, at a slower pace than the reduction in capacity (in available seat-km) of 10.3 per cent. As a result, passenger load factor increased 1.9 percentage points to 78.4%Passenger yield fell due to intense competition and aggressive promotional fare activitiesOperating Performance
140. Earnings Breakdown
141. Singapore AirlinesManagement
142. Joined SIA in 1972 and held senior assignments and headed the planning and marketing division at corporate headquarters. Become CEO in 2003Director of Singapore Exchange Ltd and Government of Singapore Investment CorporationMember of board of governors of IATABachelor degree (honors) in mechanical engineering from university of SingaporeMaster degree in Operations Research and Management Studies from Imperial College, University of LondonCEO: Chew Choon Seng
143. Became chairman of BOD in 2006Managing Director of Shanghai Commercial & Savings Bank (Taiwan) and Great Malaysia Textile Investments Pte LtdPresident of the Singapore National Employers’ Federation since 1988 and is a Council Member of the Singapore National Wages CouncilNominated Member of Parliament from 1994-1997 and was awarded the Distinguished Service Order Award in 2006 and the Public Service Star Award in 1998graduated from Northwestern University, Illinois, USA in 1973 with a Masters in Business AdministrationBOD Chairman: Stephen Lee Ching Yen
144. Become senior Executive Vice President of Marketing & Corporate Services at Singapore Airlines Ltd. on March 1, 2010Chief of Air Force from 1992 to 1995 and Chief of Defence Force in the Ministry of Defence from 1995 to 2000graduated with a Bachelor of Arts in Engineering and has a Master of Arts degree in Engineering from the University of CambridgeMaster of Public Administration Degree from Harvard University in 1988attended the Advanced Management Program at the Harvard Business School in 2000Senior Executive VP: Bey Soo Khiang
145. Singapore AirlinesFinancial Analysis
146. Income Statement (Consolidated)
147. Comprehensive Income Statement
148. Balance Sheet
149. Balance Sheet
150. Cash Flow Statement
151. Cash Flow Statement
152. Quarterly Financial Result 2nd Q 2010-20112nd Q 2010-20111st Q 2010-20111st Q 2009-2010Total Revenue3,631.23,082.13,465.82,871.4Total Expenditure3,285.53,263.53,215.33,190.7Operating profit/(loss)345.7(181.4)250.5(319.3)Non-operating Items134.759.36749.4Profit/(loss) before tax480.4(122.1)317.5(269.9)Profit/(loss) attributable to owners of the parent380.2(158.8)252.5(307.1)Per share dataEarning/(loss) before tax (cents)40.2(10.3)26.6(22.8)Earning after tax-basic31.8(13.4)21.2(26)Earning after tax- diluted31.4(13.4)20.9(26)
153. 2nd Q 2010-20112nd Q 2009-20101st Q 2010-20111st Q 2009-2010Passenger carried (thousand)4,1654,1944,0183,809Revenue Passenger-km21,564.321,252.720,303.418,655.0Available seat-km26,856.226,693.125,903.226,072.6Passenger Load Factor (%)80.379.678.471.6Passenger yield (cent/pkm)11.89.811.710.2Passenger unit cost (cent/ctk)8.88.798.6Passenger Load B.E. factor (%)74.688.876.984.3Quarterly Result
154. RecommendationBUY