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GLOBAL AIRLINES GLOBAL AIRLINES

GLOBAL AIRLINES - PowerPoint Presentation

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GLOBAL AIRLINES - PPT Presentation

ADNAN BRKIC KAREN GUAN BHUPINDER KAUR CANDICE ZHOU AGENDA INDUSTRY OVERVIEW SOUTHWEST AIRLINES SINGAPORE AIRLINES AIRLINE INDUSTRY OVERVIEW THE INTERNATIONAL AIRLINE INDUSTRY PROVIDES SERVICE FOR BOTH PASSAGENERS AND GOODS TO EVERY CORNER OF THE WORLDIT IS A MAJOR ECONOMIC ID: 162280

southwest airlines industry overview airlines southwest overview industry singapore quarterly fuel cash flow sheet balance hedging risk statement rate

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Slide1

GLOBAL AIRLINES

ADNAN BRKIC

KAREN GUAN

BHUPINDER KAUR

CANDICE ZHOUSlide2

AGENDA

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE

AIRLINESSlide3

AIRLINE INDUSTRY OVERVIEW

THE INTERNATIONAL AIRLINE INDUSTRY PROVIDES SERVICE FOR BOTH PASSAGENERS AND GOODS TO EVERY CORNER OF THE WORLD.IT IS A MAJOR ECONOMIC FORCE INFLUENCES BOTH THE RELATED INDUSTRIES SUCH AS TOURISM, AIRCRAFT MANUFACTURE AND INDIVIDUALS WHO TRAVEL BY AIR.

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES SINGAPORE AIRLINESSlide4

AIRLINE CATEGORIES

INTERNATIONALNATIONAL

REGIONAL

CARGO

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE

AIRLINESSlide5

AIRLINE

ALLIANCES

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE

AIRLINESSlide6

COST STRUCTURE

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE

AIRLINES

FUEL COST

15-35% OF TOTAL COSTS

LABOUR

40% OF TOTAL COSTS

DEPRECIATION & AMMORTIZATION

MAINTENANCE

FOOD/BEVERAGES/SUPPLIES

COMMUNICATIONS AND INFORMATION TECH

AIRCRAFT FINANCINGSlide7

OTHER FACTORS INFLUENCING COSTS

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE

AIRLINESSlide8

INDUSTRY PROFITABILITY

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE

AIRLINESSlide9

FACTORS DECREASE AIRLINE FARES AND REVENUES

COMPETITIVE PRESSURE FROM LOW-COST CARRIERSTHE LOSS OF CONSUMER CONFIDENCE IN THE AIR TRANSPORTATION SYSTEM’S RELIABILITY AND OPERATING PERFORMANCE, THE TRANSPARENCY OF PRICING FACILITATED BY THE INTERNET AND ONLINE TRAVEL DISTRIBUTION CHANNELS

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE

AIRLINESSlide10

LOAD FACTOR

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE

AIRLINESSlide11

PASSENGER AND CARGO STATISTICS

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE

AIRLINESSlide12

MAJOR RISKS

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE

AIRLINESSlide13

OPERATIONAL RISKS

OPERATIONAL RISKS ARISE FROM THE MORE TACTICAL ASPECTS OF RUNNING THE BUSINESS DAY-TO-DAY

ORGANIZATIONAL SOLUTIONS

REDESIGN THE PROCESS

ORGANIZATION STRUCTURAL CHANGES

IMPROVED COMMUNICATION

PERFORMANCE MEASUREMENT

REWARD SYSTEMS

CAPITAL ALLOCATION

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE

AIRLINESSlide14

STRATEGIC RISKS

STRATEGIC RISKS ARE DEFINED BY BUSINESS DESIGN CHOICES AND HOW THESE INTERACT WITH VARIOUS EXTERNAL FACTORS. EG: SHIFTS INCUSTOMER TASTES INDUSTRY CONSOLIDATION

SOLUTIONS

THROUGH THE SELECTION OF THE BUSINESS DESIGN ITSELF.

TRADITIONA RESPONSES

CREATING A CULTURE FOCUSED ON CUSTOMER

DEVELOPING A RIGOROUS STRATEGIC PLANNING PROCESS

MAINTAINING AN INDEPENDENT BOARD OF DIRECTORS

INDUSTRY OVERVIEW

SOUTHWEST

AIRLINES SINGAPORE

AIRLINESSlide15

SOUTHWEST AIRLINES

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide16

COMPANY OVERVIEW

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide17

SOUTHWEST

AIRLINES

“THE MISSION OF SOUTHWEST AIRLINES IS DEDICATION TO THE HIGHEST QUALITY OF CUSTOMER SERVICE DELIVERED WITH A SENSE OF WARMTH, FRIENDINESS, INDIVIDUAL PRIDE, AND COMPANY SPIRIT.”

MISSION STATEMENT

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide18

FINANCIALS

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide19

INCOME STATEMENT

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide20

QUARTERLY INCOME

STATEMENT

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide21

QUARTERLY INCOME

STATEMENT

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide22

QUARTERLY INCOME

STATEMENT

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide23

BALANCE SHEET

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide24

BALANCE SHEET

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide25

QUARTERLY BALANCE SHEET

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide26

QUARTERLY BALANCE SHEET

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide27

QUARTERLY BALANCE SHEET

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide28

QUARTERLY BALANCE SHEET

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide29

QUARTERLY BALANCE SHEET

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide30

QUARTERLY CASH FLOW

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide31

CASH FLOW

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide32

QUARTERLY CASH FLOW

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide33

QUARTERLY CASH FLOW

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide34

QUARTERLY CASH FLOW

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide35

GENERAL RISK FACTORS

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide36

RISK MANAGEMENT POLICY

FIRM USES DERIVATIVE INSTRUMENTS TO MITIGATE THE RISK OF JET FUEL PRICE INCREASES

TO REDUCE VOLATILITY IN OPERATING EXPENSES FIRM USES A FUEL HEDGING PROGRAM

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide37

HEDGING GOVERNANCE STRUCTURE

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide38

RISK

MANAGEMENT COMMITTEEAUDIT COMMITTEE CHARTER DEALS WITH RISK MANAGEMENT

DISCUSSES THE FIRM’S MAJOR FINANCIAL RISK EXPOSURES

EVALUATES THE FIRM’S RISK ASSESSMENT AND RISK MANAGEMENT POLICIES

ANALYSES THE MANAGEMENT’S INITIATIVE TO MONITOR, CONTROL, OR MITIGATE SUCH EXPOSURES

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide39

TYPES OF RISKS

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide40

JET FUEL EXPENSE

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide41

JET FUEL EXPENSE

FOR THE SEVEN CONSECUTIVE YEARS, FUEL AND OIL EXPENSE REPRESENTED THE COMPANY’S LARGEST OR SECOND LARGEST COST

.

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide42

HIGH DEPENDENCY ON FUEL

UNPREDICTABLE AND UNCONTROLLABLE PRICE MOVEMENTSLIMITED ABILITY TO PASS ON HIGHER FUEL COST TO CUSTOMERS

FUEL PRICE RISK

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide43

FUEL HEDGING

NOT WIDELY TRADED ON FUTURES EXCHANGES

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide44

FUEL HEDGING

NOT WIDELY TRADED ON FUTURES EXCHANGESSOUTHWEST USES CROSS-HEDGES IN THE OTC MARKET ON THE FOLLOWING:

CRUDE OIL

HEATING OIL

UNLEADED GASOLINE

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide45

DERIVATIVES USED

CALL OPTIONS

COLLARS (BUY CALL OPTION, WRITE PUT OPTION)

CALL SPREADS (BUY CALL OPTION AND WRITE CALL OPTION)

SWAP AGREEMENT

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide46

FUEL HEDGING POLICY

WHEN SOUTHWEST PERCEIVES THAT PRICES ARE LOWER THAN HISTORICAL OR EXPECTED FUTURE LEVELS, THEY PREFER TO USE FIXED PRICE SWAP AGREEMENTS AND PURCHASED CALL OPTIONS. HOWEVER, AT TIMES WHEN THEY PERCEIVE THAT PURCHASED CALL OPTIONS HAVE BECOME TOO EXPENSIVE, THEY CHOOSE TO USE MORE COLLAR STRUCTURES AND CALL SPREADS.

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide47

DERIVATIVES

SOUTHWEST FUEL DERIVATIVE CONTRACTS AS OF OCTOBER 17, 2011

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide48

DERIVATIVES

SOUTHWEST FUEL DERIVATIVE CONTRACTS AS OF OCTOBER 17, 2011

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide49

DERIVATIVES

THE LOCATION OF ALL ASSETS AND LIABILITIES ASSOCIATED WITH THE COMPANY’S HEDGING INSTRUMENTS

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide50

INTEREST RATE HEDGING

THE FLOATING RATES RECOGNIZED DURING 2010, BASED ON ACTUAL AND FORWARD RATES AT DECEMBER 31, 2010, UNDER THE COMPANY’S FIXED-TO-FLOATING INTEREST RATE AGREEMENTS

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide51

INTEREST RATE HEDGING

INTEREST RATE HEDGES FIXED THE FOLLOWING FLOATING-RATE TERM LOANS:$600 MILLION FLOATING-RATE LOAN AT 5.223% UNTIL MATURITY

$332 MILLION FLOATING-RATE LOAN AT 6.64% UNTIL MATURITY

INDUSTRY OVERVIEW

SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide52

SINGAPORE AIRLINES

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide53

SINGAPORE AIRLINES

“SINGAPORE AIRLINES IS A GLOBAL COMPANY DEDICATED TO PROVIDING AIR TRANSPORTATION SERVICES OF THE HIGHEST QUALITY AND TO MAXIMIZING RETURNS FOR THE BENEFIT OF ITS SHAREHOLDERS AND EMPLOYEES”

MISSION STATEMENT

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide54

COMPANY OVERVIEW

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide55

COMPANY OVERVIEW

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide56

COMPANY OVERVIEW

TOTAL 7 DIRECTORS

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide57

FINANCIALS

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide58

INCOME STATEMENT

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide59

INCOME STATEMENT

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide60

QUARTERLY INCOME

STATEMENT

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide61

QUARTERLY INCOME STATEMENT

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide62

INCOME STATEMENT

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide63

BALANCE SHEET

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide64

BALANCE SHEET

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide65

QUARTERLY BALANCE

SHEET

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide66

QUARTERLY BALANCE SHEET

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide67

QUARTERLY BALANCE SHEET

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide68

BALANCE SHEET

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide69

CASH FLOW

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide70

CASH FLOW

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide71

CASH FLOW

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide72

CASH FLOW

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide73

QUARTERLY CASH

FLOW

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide74

QUARTERLY

CASH FLOW

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide75

CASH FLOW

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide76

CASH

FLOW SEGMENTAL FORECASTS AND ASSUMPTIONS

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide77

RISK MANAGEMENT

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide78

RISK MANAGEMENT

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide79

RISK MANAGEMENT

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide80

DERIVATIVES

FORWARD CURRENCY CONTRACTS

FOREIGN CURRENCY OPTIONS

CROSS CURRENCY SWAPS

INTEREST RATE SWAPS

INTEREST RATE CAP CONTRACTS

JET FUEL EQUIVELANTS

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide81

DERIVATIVES

HEDGE 15 MONTHS FORWARD

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide82

FUEL HEDGING

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide83

FUEL HEDGING

SENSITIVITY ANALYSIS

HEDGING LOSS

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide84

CURRENCY HEDGING

FINANCIAL YEAR ENDED MARCH 2011:FOREIGN CURRENCY ACCOUNTED FOR 63.5% OF TOTAL REVENUEFOREIGN CURRENCY ACCOUNTED FOR 64.0% OF TOTAL OPERATING EXPENSES

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide85

INTEREST RATE HEDGING

INDUSTRY OVERVIEW SOUTHWEST AIRLINES

SINGAPORE AIRLINESSlide86

THANK YOU