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Dominican Republic: Passenger Trends, Airports and Airlines
 

Dominican Republic: Passenger Trends, Airports and Airlines

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Passenger trends for the top 7 airports. Information includes airline and airport market share from the late 90s, in addition to country GDP growth rates and estimates

Passenger trends for the top 7 airports. Information includes airline and airport market share from the late 90s, in addition to country GDP growth rates and estimates

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    Dominican Republic: Passenger Trends, Airports and Airlines Dominican Republic: Passenger Trends, Airports and Airlines Presentation Transcript

    • Dominican Republic Airport and Airline Passenger Trends Vaughn Cordle, CFA Ionosphere Capital, LLC
    • Airports: Scheduled Service
    • Airport Market Share Total passengers % (scheduled & charter) 11 months ending Nov 2013 PUNTA CANA 49.3% LAS AMERICAS 29.9% SANTIAGO 10.4% PUERTO PLATA LA ROMANA CATEY LA ISABELA 7.2% 1.7% 1.2% 0.3% Source: Dominican Civil Aviation Institute & Ionosphere Capital, LLC
    • Airport Market Share Total passengers (scheduled & charter) 11 months ending Nov 2013 PUNTA CANA 4,678,683 LAS AMERICAS 2,836,139 SANTIAGO 983,309 PUERTO PLATA LA ROMANA CATEY LA ISABELA 687,945 163,891 109,450 32,097 Source: Dominican Civil Aviation Institute & Ionosphere Capital, LLC
    • Airport Market Share Scheduled + charter = over 10 million passengers Source: Dominican Civil Aviation Institute & Ionosphere Capital, LLC
    • Punta Cana (PUJ) Total passengers – 12 month average Punta Cana Thousands 12 month moving average ending Nov 2013 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 2001 2001 2001 2002 2002 2003 2003 2003 2004 2004 2005 2005 2006 2006 2006 2007 2007 2008 2008 2008 2009 2009 2010 2010 2011 2011 2011 2012 2012 2013 2013 1,000 Source: Dominican Civil Aviation Institute & Ionosphere Capital, LLC
    • Punta Cana (PUJ) Total passengers – monthly average PUNTA CANA Thousands Total passengers per month / 12 month moving avg thr Nov 2013 600 566 500 400 300 270 200 100 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 Source: Dominican Civil Aviation Institute & Ionosphere Capital, LLC
    • Las Americas (SDQ) Total passengers – 12 month average Las Americas Thousands 12 month moving average ending Nov 2013 4,000 3,500 3,000 2,500 2,000 2001 2001 2001 2002 2002 2003 2003 2003 2004 2004 2005 2005 2006 2006 2006 2007 2007 2008 2008 2008 2009 2009 2010 2010 2011 2011 2011 2012 2012 2013 2013 1,500 Source: Dominican Civil Aviation Institute & Ionosphere Capital, LLC
    • Las Americas (SDQ) Total passengers – monthly average LAS AMERICAS Thousands Total passengers per month / 12 month avg thr Nov 2013 350 318 300 250 227 200 150 Source: Dominican Civil Aviation Institute & Ionosphere Capital, LLC 100 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 Source: Dominican Civil Aviation Institute & Ionosphere Capital, LLC
    • La Romana (LRM) Total passengers – 12 month average La Romana Thousands 12 month moving average ending Nov 2013 600 500 400 300 200 100 2001 2001 2001 2002 2002 2003 2003 2003 2004 2004 2005 2005 2006 2006 2006 2007 2007 2008 2008 2008 2009 2009 2010 2010 2011 2011 2011 2012 2012 2013 2013 - Source: Dominican Civil Aviation Institute & Ionosphere Capital, LLC
    • La Romana (LRM) Total passengers – monthly average LA ROMANA Total passengers per month / 12 month avg thr Nov 2013 Thousands 75 70 60 50 40 30 24 20 10 5 2000 2000 2000 2001 2001 2002 2002 2002 2003 2003 2004 2004 2005 2005 2005 2006 2006 2007 2007 2007 2008 2008 2009 2009 2010 2010 2010 2011 2011 2012 2012 2012 2013 2013 - Source: Dominican Civil Aviation Institute & Ionosphere Capital, LLC
    • Scheduled airlines Top 10 Airlines – scheduled service into Dominican Republic
    • Scheduled airlines Top 10 airlines - % share 36 airlines Top 5: 54.3% Top 10: 72.3%
    • Punta Cana (PUJ) Airline passenger share Top 5 share: 43% Top 10 share: 65% Top 20 share: 90% Total airlines: 34 Notes: American includes US Airways Punta Cana is a below average concentrated airport. The HHI is a very low 619. This means that there is a high intensity of rivalry and low and competitive fares on average. This is likely the reason passenger traffic has grown fast over the last decade.
    • Las Americas (SDQ) Airline passenger share Top 5 share: 73% Top 10 share: 89% Top 20 share: 99% Total airlines: 25 Notes: American includes US Airways Las Americas is a below average concentrated airport. The HHI is a low 1,508. This means very competitive fares for the airport
    • La Romana (LRM) Airline passenger share Top 5 share: 86% Top 10 share: 100% Total airlines: 12 Notes: American + American Eagle account for 21.7% of the share. La Romana has low to moderate concentration. The HHI is 1,925. Jetblue has competitive fares and American Eagle and American have lowered labor and other costs in bankruptcy. The merger with US airways will result in more competitive fares as they integrate operations.
    • Regional Share of Airport Traffic Scheduled Passenger Service Scheduled Passenger Share 7% 3% North America 9% Europe Central Amr/Caribbean 15% 66% South America Eurasia
    • Regional Share of Airport Traffic Charter Passenger Service Charter Passenger Share 5% 6% 4% North America Europe 46% 39% Eurasia South America Central Amr/Caribbean
    • Regional Share of Airport Traffic Charter airlines Arrival Airline 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 THOMPSON FLY SUNWING AIRLINES AIRTRAN AIRWAYS, INC. FRONTIER AIRLINES, INC. CANJET AIRLINES TUI AIRLINES NEDERLAND MIAMI AIR INTERNATIONAL, S. A. ORENBURG AIRLINES, JSC. SUN COUNTRY AIRLINES CALIMA DE AVIACIÓN, S. L. EDELWEISS AIRLINES WHITE AIR XL AIRWAYS FRANCE THOMAS COOK AIRLINES CARIBBEAN SUN AIRLINES INSEL AIR INTERNACIONAL, INC. ALITALIA CASINO EXPRESS AIRLINE AIR GUYANE EXPRESS SERVICIOS AÉREOS PROFESIONALES AEROLINEA PRINCIPAL CHILE, S. A. Passengers Share 73,226 70,428 40,401 39,574 27,691 21,849 21,418 18,905 15,815 13,751 13,548 12,126 11,645 11,418 10,556 8,965 7,662 7,467 6,354 6,165 5,280 14.5% 13.9% 8.0% 7.8% 5.5% 4.3% 4.2% 3.7% 3.1% 2.7% 2.7% 2.4% 2.3% 2.3% 2.1% 1.8% 1.5% 1.5% 1.3% 1.2% 1% 50% 68% 80% 87% 159 charter airlines and various operators fly into the Dominican Republic airports. # 159 is NetJets
    • Regional Share of Airport Traffic Scheduled & Charter Passenger Service Scheduled & Charter Passenger Share 7% 3% 9% North America Europe Central Amr/Caribbean 17% 64% South America Eurasia
    • Top Passenger Routes Origin airports to Dominican Republic 88 routes Top 5: 48% share Top 10: 68% share Top 20: 87% share
    • Top City Pairs 230+ City-pairs Top 5: 29% share Top 10: 44% share Top 15: 56% share
    • Top JFK City-Pairs & Airline Share High Concentration on these city-pairs Jetblue is the only airline operating from JFK to POP, LRM and AZS . 100% market share = 10,000 HHI
    • U.S. to Latin America Passenger fares to Latin America
    • Country Market Share Origin countries to Dominican Republic Schedule Service Jan-Nov 2013 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 DR arrivals Passengers Market Share USA Canada Panama Germany France Spain Russia Brazil Peru Colombia Venezuela Netherlands Antilles Italy Argentia United kingdom 2,283,798 501,956 282,619 203,101 185,694 171,050 137,479 62,462 61,970 56,687 49,484 27,368 24,942 14,644 13,644 54.91% 12.07% 6.79% 4.88% 4.46% 4.11% 3.31% 1.50% 1.49% 1.36% 1.19% 0.66% 0.60% 0.35% 0.33% Sub Total 4,076,898 98.0% Total DR Pax 4,159,518 100.0% Top 10 countries represent 95% of all passengers into Dominican Republic. 83% US + Canada: 67% Top 15: 98% 95%
    • Economic Outlook Economic tail winds will lift passenger volumes in Dominican Republic airports – all else held constant. In turn, Dominican Republic’s economic growth is boosted by higher volumes of passengers. Country GDP Growth Rate Estimates 2012 USA Canada Panama Germany France Spain Russia Brazil Peru Colombia Venezuela Netherlands Antilles Italy Argentia United kingdom * Weighted Average 2013 2014 2015 2.8 1.9 2.8 3.0 1.7 1.7 2.2 2.4 10.5 7.5 6.9 6.9 0.9 0.5 1.6 1.4 0.0 0.2 0.9 1.5 –1.6 –1.2 0.6 0.8 3.4 1.5 2.0 2.5 1.0 2.3 2.3 2.8 6.3 4.9 5.5 5.9 4.2 4.0 4.3 4.2 5.5 0.7 0.5 1.7 -1.3 0.3 –2.5 –1.8 0.6 1.1 1.9 5.0 2.8 2.5 0.3 1.7 2.4 2.2 2.8 2.0 2.7 It should be noted that GDP forecasts have been too rosy every year for the last 5 years. FED tapering will result in currency devaluation in developing countries, and this in turn will increase airline operating costs in those regions. 2.9 Weighted Average GDP Growth Rates 3.0 2.5 2.0 1.5 Dominican Republic 3.9 2.5 3.9 4.9 * Weighted average is based on holding passenger market share constant Source: IMF, World Bank, Conference Board & Ionosphere Capital, LLC 2012 2013 2014 2015
    • US Economic Outlook The U.S. Economic Forecast 4.0 Consumer Spending 3.5 GDP Growth 3.0 3.1 2.5 2.4 Airline growth is not expected to exceed the growth rate in consumer spending. The Conference Board 2.0 Updated: January 15, 2014 1.5 Percentage change, seasonally adjusted annual rates 3Q The Conference Board, updated January 15, 2014 4Q 1Q 2Q 3Q 2013 2013 2014 2014 2014 4Q 2014 Real GDP Real Consumer Spending 2013 2014 2015 Year Year Year 1.9 3.0 2.8 2.0 2.6 2.4
    • Oil and Jet Fuel Outlook Lower oil and fuel costs Jet Fuel Refiner Price to End Users Lower energy costs boost economic output and air travel expenditures, in addition to lowering airline operating costs. As an example, the U.S. passenger airlines burned 15.5B gallons (368M barrels) of jet last year. Per quarter and in $/gal $3.20 $3.00 A $4 swing in in a barrel of oil lowers costs by ~ $1.6 billion, which is equivalent to lowering fares by 1%. This in turn would boost passenger volumes by about .6% - all else held constant. Of course rarely is all else held constant, especially in the airline industry. $2.80 $2.60 $2.40 $2.20 Source: EIA (Jan 2014) & Ionosphere Capital, LLC $2.00 2010 2011 2012 2013 2014 2015 2012 2013 2014f 2015f 2016f Oil Price (US$ per barrel) 105.0 104.1 103.5 99.8 98.6 Oil price (percent change) 1.00 -0.90 -0.60 -3.50 -1.20 Source: World Bank The current assumption is that oil will be about $4 (4.4%) lower in 2015 from 2013’s levels and that jet fuel will be 6% lower. Crack spreads are expected to fall and this is why jet will fall faster than oil.
    • Jet Fuel Costs & Airline Fares Jet fuel costs are expected to fall by 18 cents a gallon (6%) by 2015 from 2013’s $2.98. 2010 2011 2012 2013 2014 2015 Airline Ticket Price Index 278 Jet Fuel (cents per gal) % change 220 305 313 320 324 9.3% % change 304 0.3% 2.8% 1.9% 1.3% 310 298 289 280 305 38.6% 1.6% -4.0% -3.1% -3.1% Based on our (Ionosphere Capital) forecast of $163 billion in passenger revenue in 2015, it is assumed that fares will be about 1.7% lower than would be the case if fuel costs did not fall as forecasted. Given the expected price elasticity of demand, we estimate passenger volumes will be higher by approximately 1% because of the lower fuel costs. Source: BEA, EIA, & Ionosphere Capital, LLC Of course there are other factors and forces that must be considered, but directionally the relationships between fuel, fares, and passenger volumes have been very consistent over a full business cycle.
    • Passenger Growth Follows GDP Growth Passenger Demand Follows GDP Real GDP Growth Passengers (RIGHT) 6% 10% 4% 6% 2% 2% 0% -2% -2% -6% Source: Ionosphere Capital, LLC -4% -10%
    • Airfares Impact Passenger Demand ... Passenger Growth Follows Airline Fares Airline Ticket Prices (LEFT & Inverted) Passengers (RIGHT) -10% 10% -5% 6% 0% 2% 5% -2% 10% -6% Source: Ionosphere Capital, LLC 15% -10%
    • Jet Fuel Costs Drive Airfares All U.S. Airlines, yr-over-yr percentage change Airline Ticket Prices Follow Fuel Costs Airline Ticket Prices (LEFT) 15% Jet Fuel Costs (RIGHT) 80% 60% 10% 40% 5% 20% 0% 0% -20% -5% Source: Ionosphere Capital, LLC -10% -40% -60%