Professional Services: The cost of legal fees and expenses, professional and technical fees and expenses; as well as general services purchased outside (aircraft and general interchange service charges).Food & Beverage: The cost of purchasing beverages and food, food service uniforms, commissary supplies and outside catering charges.Aircraft Insurance: The cost of flight equipment insurance; also referred to as ‘Hull Insurance.’Non-Aircraft Insurance: The cost of insurance unrelated to the hull itself. This category is broken down by two categories: general insurance (i.e., buildings and contents, materials and supplies, third party liability, passenger baggage and personal property) and traffic liability insurance (i.e., passenger baggage and personal property, cargo liability and provisions for self-insurance). Passenger Commissions: The costs paid to passenger travel agencies for services.Communication: The total cost of equipment and intercommunication rental and installation charges, telephone and teletype equipment, telegraph and cable message charges and navigation facility charges.Advertising and Promotion: Includes the cost of producing tariffs, schedules, timetables and other promotional and publicity expenses.Utilities & Office Supplies: The cost of light, heat, power and water, stationary, printing and office supplies and ‘other’ supplies including cleaning compounds, safety, electrical, and photographic supplies. Transport Related Expenses: Expenses related to the generation of transport related revenues- The cost of expenses (transportation facilities, services, etc.) Other Operating Expenses: Includes the cost of miscellaneous expenses such as personnel expense, outside flight equipment, excess of losses over insurance recoveries, interrupted trips expense, memberships, corporate and fiscal expenses, uncollectible accounts, clearance customs and duties. Employee Business Expense
Payments made in cash or cash equivalents over a period of more than one year. Capital expenditures are used to acquire assets or improve the useful life of existing assets. An example of a capital expenditure is the funding to construct a factory. In accounting, capital expenditures must be capitalized; that is, the expenditure is recognized on a balance sheet gradually over the course of an asset's useful life. Capital expenditures are recorded as liabilities on a balance sheet. They are also called capital outlays. See also: Capital asset.Capital expenditures (CAPEX or capex) are expenditures creating future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life extending beyond the taxable year. CAPEX are used by a company to acquire or upgrade physical assets such as equipment, property, or industrial buildings. In the case when a capital expenditure constitutes a major financial decision for a company, the expenditure must be formalized at an annual shareholders meeting or a special meeting of the Board of Directors. In accounting, a capital expenditure is added to an asset account ("capitalized"), thus increasing the asset's basis (the cost or value of an asset adjusted for tax purposes). CAPEX is commonly found on the cash flow statement under "Investment in Plant, Property, and Equipment" or something similar in the Investing subsection.
Also intense focus (and results) on improving baggage handling – through multifaceted approach including equipment (bag carousels/carts/scanners), software (real-time tracking for company and customers, shortest-path routings and real-time gate/status updates for drivers), training, internal reporting and communication, dedicated bag performance personnel, partnerships (e.g., airports, TSA, CBP), financial incentives (i.e., for employees, third-party contractors or interline partners), logistics (e.g., use of freighters in Alaska, improved delivery processes from plane to carousel, new sorting procedures, shuttling of bags twice during unloading of large aircraft, contingency plans if belts down)
“The FAA is supporting the use of Performance Based Navigation (PBN) to provide greater flexibility in the National Airspace System (NAS) and to facilitate more dynamic management of air traffic…” http://www.faa.gov/nextgen/implementation/pbn_initiatives/http://www.faa.gov/about/office_org/headquarters_offices/avs/offices/afs/afs400/afs470/pbn/Performance Based Navigation (PBN) is comprised of Area Navigation (RNAV) and Required Navigation Performance (RNP) and describes an aircraft's capability to navigate using performance standards. RNAV enables aircraft to fly on any desired flight path within the coverage of ground or space based navigation aids, within the limits of the capability of the self-contained systems, or a combination of both capabilities. RNP is RNAV with the addition of onboard performance monitoring and alerting capability. A defining characteristic of RNP operations is the ability of the aircraft navigation system to monitor the navigation performance it achieves and inform the crew if the requirement is not met during an operation. The performance requirements of PBN are conveyed to the operators through navigation specifications. PBN navigation specifications include RNAV 1, RNP 1, RNAV 2, RNAV 5, RNP 10, RNP 4 as well as RNAV (GPS) and RNAV (RNP) approaches.
CBP: The term “wait time,” as used to describe the delays experienced by individual flights arriving at international airports, does not represent the average delay experienced by all travelers. It represents the total flight processing time from arrival to the time the last passenger completes screening at the primary inspection area. It is the longest time that any passenger on a given flight had to wait. The average passenger on the flight would have a shorter wait and the first passenger off the plane will typically be processed in a fraction of the wait time shown below.Over the course of the day, incoming flights may not occur for extended periods of time due to variable flight arrival patterns. Wait times are calculated in hourly time intervals for all flights arriving at the airport/terminal shown. The CBP Airport Wait Times report displays only those time intervals during which at least one flight arrival was recorded. If no flights arrived during a particular time interval, that time interval will not appear in the report.
U.S. Airline Industry Summer Air Travel Forecast &First Quarter 2013 Financial/Operational ReviewJohn HeimlichVP & Chief EconomistMay 16, 2013Dan ElwellSVP-Safety, Security & Operations
airlines.org2Executive Summary» A4A projects an increase in summer air travel on U.S. airlines, narrowing the gap to the 2007 peak» Continued restructuring helped U.S. airlines report a narrower net loss in seasonally difficult 1Q» Improving financial results are leading many analysts to forecast that U.S. airlines will finallygenerate an economic profit (not merely accounting profit) in 2013, enabling airlines to attract newinvestors, lower their costs of borrowing and reinvest in the product and customer experienceo Restoring air service – adding back flights and seats domesticallyo CAPEX at highest level in 11 years (in part reflecting several hundred passenger aircraft on order)o Significant new investment in aircraft, operational spares, premium seating, airport terminals, customerlounges, ground equipment, mobile technology, customer kiosks, in-flight entertainment and wirelesso Also intense focus (and results) on improving baggage handling – equipment , software, staffing, training,internal reporting and communication, airport/agency partnerships, performance incentives, logistics, etc.» Despite challenging year-over-year deterioration of weather, affirmed by FAA data and analysis, U.S.airline operations remained strong in 1Q13, notably second best 1Q on-time arrival rate since 2003» Along with airline reinvestments in the product, advances in flight operations, expansion of expeditedscreening (Pre ™) and continued affordability of air travel make it a great time for customers to fly
A4A Projects Summer 2013 Air Travel to Rise Modestly, Narrowing Gap to 2007 PeakExpecting Record Number of Passengers to Fly Internationally on U.S. Carriersairlines.org3192.4184.5176.2177.3179.8179.918.104.22.1684.125.826.326.727.42007 2008 2009 2010 2011 2012 2013FDomestic InternationalSource: A4A and BTS T100 segment dataU.S. Airline Onboard Passengers (Millions)Scheduled Service, June 1 through August 31217.6210.2200.3 203.1 206.1 206.6 208.7 Nearly 209M passengers (2.27M per day)• Up 1% from 2012; busiest since 2008• Remains 4% below 2007 all-time high• YOY Seats: DOM +0.6%, INT +2.5%• Average load factor: 86%-87% Includes 27.4M travelers (~298K per day)on international flights – a new record Includes 9 of 11 busiest air travel days ofthe year for U.S. airports (esp. Thu/Fri inmid-June through first week of August) Key drivers include:• Rising household net worth, corporate profits• Abating energy prices, affordable airfares• Improved airline financial conditionSummer 2013 Forecast Highlights
In Tough Quarter, 1Q 2013 Bottom Line for 10 U.S. Airlines* Improved from 1Q 20122.5% Increase in Revenues and 1.0% Reduction in Costs Drive Smaller Net Loss* A4A analysis of reports by Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit, United and US Airwaysairlines.org41Q 2013 vs. 1Q 2012 % Better/(Worse)Operating Revenues ($34.3B) 2.5Operating Expenses (% of ) (2.3)Fuel (35%) (0.1)Wages & Benefits (24%) (3.0)Landing Fees & Terminal Rents (5%) (5.0)Maintenance, Materials & Repairs (6%) (3.8)Depreciation, Amortization & Rents (7%) (3.2)Other (23%) (4.0)Non-Op Income / (Expenses) and Tax 54.1Subtotal Expenses ($34.9B) 1.0Net Loss (-$552M, or -$3.30 per psgr.) 67.8(5.1)(1.6)1Q12 1Q13Net Profit MarginEarnings as % of Revenues
In 1Q 2013, U.S. Airlines* Lost 1.6 Pennies per Dollar of Revenue GeneratedWeak Margin – Albeit in Seasonally Weak 1Q – in Stark Contrast to Other Fortune 500sairlines.org5U.S. Airlines* 1Q13Net Income ($ Millions) (552)Net Margin (Percent) (1.6)Apple 1Q13Net Income ($ Millions) 9,547Net Margin (Percent) 21.9Ford Motor Co. 1Q13Net Income ($ Millions) 1,578Net Margin (Percent) 4.9Starbucks 1Q13Net Income ($ Millions) 390Net Margin (Percent) 11.0* A4A analysis of reports by Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit, United and US Airways
Post-Recession, as Economic Conditions Improve and Airlines Begin to GenerateHealthy Returns on Capital, Levels of Domestic Air Service Are Growing Yet Againairlines.org(10.0)(8.0)(6.0)(4.0)(2.0)0.02.04.06.01Q083Q081Q093Q091Q103Q101Q113Q111Q123Q121Q133Q13Scheduled Flights Scheduled Seats%ChangeYOY6Source: Innovata (via Diio Mi) published schedules as of May 11, 2013
Improving Balance Sheets Enable Reinvestment in Product and Customer Experience2012 Annual Airline Cash Capital Expenditures (Billions) at Highest Level Since 2001airlines.org7$16.27$13.92$7.75$6.61$6.12$5.39$6.07$7.83$8.27$5.88$5.16$6.62$9.77$0$2$4$6$8$10$12$14$16$182000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Source: Cash flow statements of AirTran, Alaska, Allegiant, America West, American, Continental, Delta, Hawaiian, JetBlue, Northwest, Southwest, Spirit, United, US Airways» Aircraft, engines, winglets, spare parts» Ground equipment, loading bridges» Passenger terminals, aircraft hangars» Premium seats, new aircraft interiors» Maintenance facilities and machinery» Bag carousels, carts, scanners» In-flight entertainment systems, wireless» Computers, kiosks, mobile technologyBillions invested
Balance Sheet Recovery Enabling Significant Fleet Renewal for Airline CustomersA4A Passenger Airlines Have 1,299 Aircraft* on Order for Delivery through End of 2022Source: Carrier SEC filings for deliveries from April 2013 through December 2022airlines.org8663251183411432124972* Consists of 1,102 narrowbody aircraft and 197 widebody aircraft
Source: FAA Air Traffic Organization, AvMet Applications and National Oceanic and Atmospheric Administrationairlines.org10FAA Analysis of Monthly Snow Cover: “Much more winter weather in First Quarter2013 compared to 2012, especially DEN, MSP, ORD, MDW, DTW, BOS, EWR, LGA, JFK”Jan 2012 Feb 2012 Mar 2012Jan 2013 Feb 2013 Mar 2013
Source: FAA Air Traffic Organization and AvMet Applications (http://www.avmet.com/avmet/)airlines.org11FAA Analysis: 1Q 2013 Precipitation (including Snow) Up YOY at Key U.S. AirportsAirport Jan-Mar 2012 Jan-Mar 2013BOS 4.88” 7.54”JFK 4.51” 7.68”ATL 10.89” 16.82”ORD 6.18” 8.31”DFW 13.80” 8.01”DEN 1.14” 1.90”CLT 7.48” 11.18”MSP 3.48” 4.17”SFO 7.59” 1.36”SEA 17.66” 8.48”More precipitation“Overall, more weather (including snowstorms and 1-2 crippling blizzards) inNortheast-ORD-MSP to ATL/CLT (morerain) in 2013; more significant West Coastsystems and TX convection in 2012”-- FAA Air Traffic Organization and AvMet
Industry’s Commitment to Customer-Centric Ops Has Outpaced USG’s Commitmentairlines.org12“The costs of air traffic control also have undoubtedly been inflated by the delaysand cost overruns attributable to the FAA’s inability to adopt new technology toupgrade and modernize the system. The long-anticipated next generation satellite-based air traffic control system…is billions over budget and years behind schedule.It may need to be renamed PastGen at the rate of its deployment.”Clifford Winston, Senior Fellow, Brookings Institution, “How to Avoid Another FAA Fiasco,” Wall Street Journal (May 8, 2013) Equipage (percent of Part 121 fleet)• 99% Area Navigation (RNAV)• 49% Required Navigation Performance (RNP) High-capacity, real-time weather modeling High-tech, 24-hour communications, includinguse of social media and smartphone alerts Early decision-making, preemptive cancellations Concerted multi-stakeholder collaboration• Airlines, airports, FAA, DHS, CBP, TSAU.S. Airlines Glacial roll-out of NextGen; few benefits to behad from airline investments made thus far Few Performance Based Navigation (PBN)procedures at even fewer key airports• Many in place at general-aviation airports• Development process is protracted, unproductive• FAA generally reluctant or unable to correctlyproduce efficient, timely procedures where andwhen airlines and their customers need them• Impediments include handbookchanges, procedural approvals, controller trainingU.S. Government (Congress and Administration)
Airlines Collaborating Actively with TSA to Expand Pre ™ Expedited ScreeningRecently, Partnership Yielding Significant Progress in Enhancing the Air Travel Experienceairlines.org13 TSA Pre ™ (an expedited screening initiative) nowavailable at 40 U.S. airports To date, almost 9 million U.S. airline travelers haveexperienced expedited screening By end of 2013, TSA expects that one out of four enrolledtravelers will have experienced Pre On April 25, TSA announced that passengers couldreceive notification of TSA Pre eligibility on boardingpasses (Delta, United and US Airways have commenced) As of May 7, Pre participants now eligible for expeditedscreening when traveling internationally on Alaska, AA,Delta, United or US Airways from TSA Pre airportsSource: Transportation Security Administration
Policy Focus: Allocation of U.S. Customs and Border Protection (CBP) ResourcesAbu Dhabi International Airport (AUH) Ranks 80th Among Aviation Gateways to the USAAvg. Daily Air Psgr.Arrivals to USA, 2012Rank Foreign Gateway Airport> 10,000 1-3 London Heathrow (LHR), Toronto (YYZ), Tokyo Narita (NRT)5,000 to 9,999 4-10Frankfurt (FRA), Paris (CDG), Cancun (CUN), Mexico City (MEX),Seoul (SEL), Vancouver (YVR), Amsterdam (AMS)1,000 to 4,999 11-60YUL / YYC / GRU / HKG / NAS / GDL / MBJ / PTY / MAD / SDQMUC / DXB / FCO / SYD / SJD / PEK / BOG / SJO / TPE / ZRHPUJ / PVG / KIX / DUB / LIM / SAL / TLV / LGW / EZE / MANPVR / AUA / YEG / CCS / BRU / IST / GCY / PAP / GIG / STIKIN / POS / DUS / MNL / MTY / SCL / YOW / SXM / NGO / GCM574 to 999 61-79BCN / AKL / BDA / MGA / MXP / KEF / DOH / LIR / CPH / PLSSVO / UIO / SAP / DEL / BZE / YWG / BGI / ARB / GYE573 80 Abu Dhabi International Airport (AUH)1 to 572 81-479 Too many to list in this spaceairlines.org14Source: DHS Advance Passenger Information System via U.S. Department of CommerceU.S. CBP preclearance location
CBP Has a Huge Opportunity to Better Align Its Resources and Improve the TravelExperience for the 90M Airline Customers Who Arrived at U.S. Airports in 2012airlines.org15Source: CBP “Airport Wait Times” (http://www.cbp.gov/xp/cgov/travel/wait_times/), Department of Commerce and DHS Advance Passenger Information System (APIS) Last year ~90M passengers (~246K/day)arrived at U.S. airports on international flights 15 airports saw more than 5K arrivals/day Average 2012 wait times as high as 1 hour Maximum 2012 wait times as high as 3 hours Some of longest CBP processing timesoccurred in July (and again in March 2013)010203040JFKMIALAXEWRORDATLSFOIAHIADDFWHNLBOSPHLMCOFLLTop 15: Daily International Pax Arrivals (000)~100K per day