Regional aviation has been very successful over the past decade, but the introduction of larger regional jets seating 100 passengers or more threatens to disrupt the business model. These new planes will offer passengers a better experience than the current 50-seat jets at lower fares, stimulating more demand. Their significantly lower costs per seat could undermine the profitability of 50-seat regional jets by forcing down prices. Major airlines and regional carriers will need to carefully assess their contracts and competitive strategies to minimize exposure when these new planes begin entering service in a few years and transforming the regional aviation market.
This document analyzes potential stock market bubbles in GCC countries like Saudi Arabia and the UAE. It notes that stock prices have risen rapidly despite deteriorating valuations. Common bubble characteristics are emerging, like discarding valuation benchmarks and retail investors embracing risk. The Saudi stock market in particular has concerning valuations like a price-earnings ratio of 50.4x and market capitalization larger than GDP. For the bubble to correct safely, profit growth of 10-30% per year would be needed for many years for valuations to normalize.
- Michelin's net sales for the first half of 2009 were €7.1 billion, down 13.4% from the first half of 2008, due to a 23% decline in unit sales caused by falling tire demand globally except in China.
- The operating margin was 4.0% before non-recurring items, down 4.6 points from the first half of 2008, as operating income fell 60.2% to €282 million due to lower unit sales and higher unused capacity costs.
- Michelin reported a net loss of €122 million for the first half after €292 million in restructuring costs for plans in France and North America to increase competitiveness.
The presentation discusses Sherwin-Williams, a global coatings manufacturer. It provides an overview of the company, the coatings industry, and Sherwin-Williams' competitive advantages. These include a diversified customer base, controlled distribution network, leading brands, investment in technology, and a strategy of growth through acquisitions. Financial highlights show Sherwin-Williams has maintained profitability and strong cash flows despite challenges in its end markets.
EU Retailing Opportunities for FTSE100 Oil Companies, Hypermarkets & FMCG...shahzad6708
2009-2020 Outlook, B2B & B2C Opportunities, Proposition Development for FTSE100 Oil Majors, Hypermarkets, Retailers and Suppliers like Mars, Nestle!
The document outlines 15 challenges facing telecom operators in Sub-Saharan Africa. Intensifying competition from rivals and over-the-top players has led to declining margins. Operators must focus on developing new revenue streams as voice revenue decreases. Effective use of data analytics and providing excellent customer experience will also be important to remaining competitive in the current environment. Business transformation efforts are needed to address challenges around pricing, profitability, and regulatory constraints.
Hawaiian Airlines Investor Day Andrew Watterson Planning.Revenue.ManagementAndrew_Watterson
The document provides an overview of Hawaiian Airlines' network expansion plans. It summarizes new routes that have been added between 2010-2012 to various US cities, Asian cities like Tokyo, Seoul, and Taipei, as well as Australian/New Zealand cities. It highlights how the network has deepened in key markets and notes opportunities remain to expand to other large metropolitan areas. Overall, the summary outlines Hawaiian's goal to broaden its network reach and connect more cities internationally.
Airline operators face the decision of whether to refresh their fleet by signing on for new re-engined aircraft models from manufacturers like Airbus and Boeing, or to wait for potential future upgrades. Re-engining presents complex trade-offs between potential benefits like increased fuel efficiency against costs like more complex engine maintenance. The document examines past re-engining programs to provide lessons for evaluating current options, finding median fuel burn reductions of 9.5% but mixed impacts on maintenance costs. It recommends airlines perform detailed analyses of risks and potential impacts on fuel costs, maintenance expenses, and current fleet values to make the wisest re-engining decision.
This document analyzes potential stock market bubbles in GCC countries like Saudi Arabia and the UAE. It notes that stock prices have risen rapidly despite deteriorating valuations. Common bubble characteristics are emerging, like discarding valuation benchmarks and retail investors embracing risk. The Saudi stock market in particular has concerning valuations like a price-earnings ratio of 50.4x and market capitalization larger than GDP. For the bubble to correct safely, profit growth of 10-30% per year would be needed for many years for valuations to normalize.
- Michelin's net sales for the first half of 2009 were €7.1 billion, down 13.4% from the first half of 2008, due to a 23% decline in unit sales caused by falling tire demand globally except in China.
- The operating margin was 4.0% before non-recurring items, down 4.6 points from the first half of 2008, as operating income fell 60.2% to €282 million due to lower unit sales and higher unused capacity costs.
- Michelin reported a net loss of €122 million for the first half after €292 million in restructuring costs for plans in France and North America to increase competitiveness.
The presentation discusses Sherwin-Williams, a global coatings manufacturer. It provides an overview of the company, the coatings industry, and Sherwin-Williams' competitive advantages. These include a diversified customer base, controlled distribution network, leading brands, investment in technology, and a strategy of growth through acquisitions. Financial highlights show Sherwin-Williams has maintained profitability and strong cash flows despite challenges in its end markets.
EU Retailing Opportunities for FTSE100 Oil Companies, Hypermarkets & FMCG...shahzad6708
2009-2020 Outlook, B2B & B2C Opportunities, Proposition Development for FTSE100 Oil Majors, Hypermarkets, Retailers and Suppliers like Mars, Nestle!
The document outlines 15 challenges facing telecom operators in Sub-Saharan Africa. Intensifying competition from rivals and over-the-top players has led to declining margins. Operators must focus on developing new revenue streams as voice revenue decreases. Effective use of data analytics and providing excellent customer experience will also be important to remaining competitive in the current environment. Business transformation efforts are needed to address challenges around pricing, profitability, and regulatory constraints.
Hawaiian Airlines Investor Day Andrew Watterson Planning.Revenue.ManagementAndrew_Watterson
The document provides an overview of Hawaiian Airlines' network expansion plans. It summarizes new routes that have been added between 2010-2012 to various US cities, Asian cities like Tokyo, Seoul, and Taipei, as well as Australian/New Zealand cities. It highlights how the network has deepened in key markets and notes opportunities remain to expand to other large metropolitan areas. Overall, the summary outlines Hawaiian's goal to broaden its network reach and connect more cities internationally.
Airline operators face the decision of whether to refresh their fleet by signing on for new re-engined aircraft models from manufacturers like Airbus and Boeing, or to wait for potential future upgrades. Re-engining presents complex trade-offs between potential benefits like increased fuel efficiency against costs like more complex engine maintenance. The document examines past re-engining programs to provide lessons for evaluating current options, finding median fuel burn reductions of 9.5% but mixed impacts on maintenance costs. It recommends airlines perform detailed analyses of risks and potential impacts on fuel costs, maintenance expenses, and current fleet values to make the wisest re-engining decision.
The document summarizes the 2022 financial performance of the global aviation value chain. It finds that while all subsectors improved over 2021, the overall value chain still recorded significant losses of $69 billion. Airlines remained the biggest drag, with losses of $45 billion. Airports and air navigation service providers also saw large losses due to high fixed costs and low traffic volumes. In contrast, freight forwarders and jet fuel producers were the only profitable segments, helped by increased cargo rates and higher fuel prices. Most subsectors have yet to fully recover to pre-pandemic profitability levels.
Group 1 Automotive is a top five U.S. automotive dealer group with over 170,000 vehicle sales in 2008 and $4.3 billion in annual revenue. In the first quarter of 2009, revenues decreased 32.2% to $1.02 billion compared to $1.5 billion in the first quarter of 2008. Parts and service generates 70% of gross profits and covers 75-85% of fixed costs. The company expects to dispose of some dealerships that do not provide acceptable returns in 2009 but does not plan additional acquisitions.
2002* ApresentaçãO Realizada Na ConferêNcia De AméRica Latina Do Salomon Smit...Embraer RI
This document provides an overview of Salomon Smith Barney's Latin Conference on March 7-8, 2002. It includes forward-looking statements about Embraer's financial performance and expectations. Some highlights discussed are that Embraer is the 4th largest commercial aircraft manufacturer, has a premier global customer base, strong partners, and outstanding financial performance. It provides details on Embraer's commercial jet families, including over 800 orders for the ERJ 135/140/145 family and over 300 deliveries. The E170/190 family has over 300 orders and development costs were partly borne by risk-sharing partners. The presentation discusses industry trends of using regional jets to maintain capacity as demand decreased after 9/11 and rightsizing
Presentation for Salomon Smith Barney Latin Equity ConferenceEmbraer RI
This document provides an overview of Salomon Smith Barney's Latin Conference on March 7-8, 2002. It includes forward-looking statements about Embraer's financial performance and expectations. Some highlights discussed are that Embraer is the 4th largest commercial aircraft manufacturer, has a premier global customer base, and had strong financial performance in 1999-2001. It provides details on Embraer's commercial jet families, including 866 orders for the ERJ 135/140/145 family and 112 orders for the new EMBRAER 170/175/190/195 family. The document also discusses the transition of the airline industry after 9/11, including rightsizing capacity by transferring routes to regional jets.
This document provides a forecast for the turboprop aircraft market from 2016 to 2035. It predicts that the global turboprop fleet will grow from 2,100 to 3,900 aircraft during this period, with 65% of deliveries going to fleet growth and 35% to replacement needs. Half of the fleet growth is expected to come from the creation of over 3,000 new routes, especially in emerging markets in Africa, Asia, and Latin America. The forecast also anticipates strong growth in China's turboprop fleet and operations. Overall, the turboprop market is envisioned to continue playing a key role in connecting communities and promoting regional economic development.
This document provides an overview of Waste Management, Inc. and the waste management industry. Some key points:
- Waste Management is the largest waste management company in North America with $13.4 billion in annual revenues and a 26% market share.
- The waste management industry generates $52 billion annually in North America. Key assets are disposal facilities and landfills which Waste Management has a large share of.
- Waste Management operates in 48 US states, Canada, and Puerto Rico, serving nearly 20 million customers with over 360 collection operations and 273 landfills.
- The company focuses on operational excellence, cost cutting, and consistent strategies around profitable revenue growth and uses of
This document discusses the importance of building a positive public image for airports through excellent customer service. It notes that customer service should be the top priority and drive all airport operations. Ensuring a positive customer experience reduces stress and increases satisfaction, loyalty and revenue. The document also emphasizes engaging and unifying all airport service providers to consistently meet passenger needs and preferences. A tale of two airports is provided as an example of how prioritizing customer service can distinguish one airport from its peers and attract more customers and revenue.
Aeromexico Overview Presentation - September 2014Aeromexico_IR
Aeromexico is Mexico's leading airline with a hub and spoke model and two-class service. It has 80 destinations in 20 countries with over 600 daily flights. The airline is focusing on increasing connectivity and profitability through strengthening its hubs in Mexico City and Monterrey. It aims to improve market share and revenue through network expansion, upgauging aircraft, and increasing connectivity between flights. Aeromexico has a solid financial profile and is focusing on cost control initiatives to improve productivity and profitability.
1) Marshall Larsen, Chairman, President and CEO of Bank of America, spoke at the 35th Annual Investment Conference in San Francisco on September 21, 2005.
2) The document contains forward-looking statements and cautions readers that actual results may differ due to risks and uncertainties.
3) It provides an overview of Goodrich Corporation, describing it as one of the largest worldwide aerospace suppliers with the broadest portfolio of products and over 130 years of operating history.
1) Marshall Larsen, Chairman, President and CEO of Bank of America, spoke at the 35th Annual Investment Conference in San Francisco on September 21, 2005.
2) The document contains forward-looking statements and cautions readers that actual results may differ due to risks and uncertainties.
3) It provides an overview of Goodrich Corporation, describing it as one of the largest worldwide aerospace suppliers with the broadest portfolio of products and over 130 years of operating history.
This document provides a summary of the Airbus Global Market Forecast covering the period from 2009 to 2028. Some key points:
1) Global passenger traffic is expected to increase by 4.7% annually over the period, with over 24,000 new passenger and freighter aircraft demanded.
2) Emerging markets will continue to see strong growth in air travel, while network carriers and low-cost carriers both benefit from new demand. Mega-cities and congestion will influence aviation development.
3) Technological innovation, particularly in alternative fuels, will be critical to developing a sustainable future for aviation. Over 14,000 existing aircraft will need to be replaced by more efficient models to reduce aviation's
This document analyzes Sana'a Airport in Yemen using the BCG matrix. It finds that:
1) Sana'a Airport has a high market share of domestic air traffic in Yemen but a negative growth rate, placing it in the "Cash Cow" quadrant.
2) Other domestic Yemeni airports have lower market shares but Sana'a Airport captures most of the country's air traffic.
3) Expansion plans for a new Sana'a airport aim to improve its growth rate and move it into the "Star" quadrant, generating more cash flow.
Major Role Of Aviation In Development Of Countrymandaramshekar
High oil prices have significantly impacted the domestic air travel industry in India. Aviation fuel (ATF) contributes 40% of airline operating costs in India, but ATF prices are 65% higher on average in India than international benchmarks. This high cost of ATF, combined with high airport charges, has resulted in substantial losses for Indian airlines estimated at $2 billion for fiscal year 2009. Reducing taxes and duties on ATF to bring prices closer to international levels could help lower airline operating costs by 25% and save 500 crore rupees for the industry. However, lower ATF costs may not be passed on to consumers through reduced fares.
The document discusses how airports can become smarter by embracing new technologies. It describes how instrumentation, interconnectivity, and intelligence can help airports overcome challenges like capacity issues, dissatisfied passengers, and declining revenue. Specifically, it explains how using technologies like RFID, sensors, and mobile devices airports can track passengers, bags, and processes throughout the airport to improve operations and customer service. It also discusses how connecting previously separate airport systems through shared services and control centers allows different stakeholders to work collaboratively and share important information.
Aeromexico is Mexico's leading airline and only full-service carrier. It has the strongest position in Mexico City airport with over 600 daily flights to 80 destinations in 20 countries. Aeromexico has a hub-and-spoke model and strategic alliances with Delta and AIMIA. It focuses on strengthening its network connectivity, securing its position in Mexico City through upgauging, and solidifying its position with a new shuttle product. Aeromexico also aims to maximize revenue through yield management, ancillary fees, and merit a premium over competitors due to its full-service model. It has strong financial performance through cost reduction initiatives and fleet renewal to reduce ownership costs. Aeromexico is well positioned for continued growth
The document is a presentation from Marshall Larsen, Chairman and CEO of Goodrich Corporation, given at the Morgan Stanley Global Industrials CEOs Unplugged Conference on September 10, 2008. The presentation highlights Goodrich's balanced portfolio, growth strategy focused on operational excellence, recent financial results showing sales and margin growth, and opportunities in commercial aerospace, defense, and space markets.
From FAA Forecast Conference, March 2007. Reviews the future of long-haul LCC (Low-cost carrier) business models in aviation. Presents economic analysis of all-economy cabin services and differentiated premium business models.
1) Aeromexico is Mexico's leading airline and only full-service carrier, with the strongest position in Mexico City airport. It has over 80 destinations in 20 countries with 600 daily flights.
2) Aeromexico has a young and modern fleet that provides operational excellence. It focuses on cost reduction initiatives like fleet renewal and labor restructuring to improve profitability.
3) Aeromexico is well positioned for growth with Mexico's strengthening economy and growing middle class driving increased air travel demand. Its hub in Mexico City still has potential for growth despite slot constraints.
Deutsche Bank Roadshow - 15th Annual Latin America Conference CitibankLocaliza
- Localiza is an integrated car rental company operating in Brazil and other South American countries with 145 agencies and over 15,000 vehicles
- In 2006, the company had net revenues of R$1.145 billion, EBITDA of R$313 million, and net income of R$138.2 million
- Localiza has a large integrated platform that provides competitive advantages through economies of scale, bargaining power, and operational synergies
India as an MRO destination myth or realityVivek Vij
The document summarizes India's potential as an MRO destination. It discusses the growth of India's airline industry and fleet size, which is increasing demand for MRO services. However, India faces challenges in becoming an MRO hub, such as high taxes, regulatory issues, and long-term contracts that airlines have with foreign MRO providers. For India to realize its potential as an MRO destination, the government needs to provide policy clarity and tax incentives to attract global MRO companies to set up operations in India.
The document summarizes the 2022 financial performance of the global aviation value chain. It finds that while all subsectors improved over 2021, the overall value chain still recorded significant losses of $69 billion. Airlines remained the biggest drag, with losses of $45 billion. Airports and air navigation service providers also saw large losses due to high fixed costs and low traffic volumes. In contrast, freight forwarders and jet fuel producers were the only profitable segments, helped by increased cargo rates and higher fuel prices. Most subsectors have yet to fully recover to pre-pandemic profitability levels.
Group 1 Automotive is a top five U.S. automotive dealer group with over 170,000 vehicle sales in 2008 and $4.3 billion in annual revenue. In the first quarter of 2009, revenues decreased 32.2% to $1.02 billion compared to $1.5 billion in the first quarter of 2008. Parts and service generates 70% of gross profits and covers 75-85% of fixed costs. The company expects to dispose of some dealerships that do not provide acceptable returns in 2009 but does not plan additional acquisitions.
2002* ApresentaçãO Realizada Na ConferêNcia De AméRica Latina Do Salomon Smit...Embraer RI
This document provides an overview of Salomon Smith Barney's Latin Conference on March 7-8, 2002. It includes forward-looking statements about Embraer's financial performance and expectations. Some highlights discussed are that Embraer is the 4th largest commercial aircraft manufacturer, has a premier global customer base, strong partners, and outstanding financial performance. It provides details on Embraer's commercial jet families, including over 800 orders for the ERJ 135/140/145 family and over 300 deliveries. The E170/190 family has over 300 orders and development costs were partly borne by risk-sharing partners. The presentation discusses industry trends of using regional jets to maintain capacity as demand decreased after 9/11 and rightsizing
Presentation for Salomon Smith Barney Latin Equity ConferenceEmbraer RI
This document provides an overview of Salomon Smith Barney's Latin Conference on March 7-8, 2002. It includes forward-looking statements about Embraer's financial performance and expectations. Some highlights discussed are that Embraer is the 4th largest commercial aircraft manufacturer, has a premier global customer base, and had strong financial performance in 1999-2001. It provides details on Embraer's commercial jet families, including 866 orders for the ERJ 135/140/145 family and 112 orders for the new EMBRAER 170/175/190/195 family. The document also discusses the transition of the airline industry after 9/11, including rightsizing capacity by transferring routes to regional jets.
This document provides a forecast for the turboprop aircraft market from 2016 to 2035. It predicts that the global turboprop fleet will grow from 2,100 to 3,900 aircraft during this period, with 65% of deliveries going to fleet growth and 35% to replacement needs. Half of the fleet growth is expected to come from the creation of over 3,000 new routes, especially in emerging markets in Africa, Asia, and Latin America. The forecast also anticipates strong growth in China's turboprop fleet and operations. Overall, the turboprop market is envisioned to continue playing a key role in connecting communities and promoting regional economic development.
This document provides an overview of Waste Management, Inc. and the waste management industry. Some key points:
- Waste Management is the largest waste management company in North America with $13.4 billion in annual revenues and a 26% market share.
- The waste management industry generates $52 billion annually in North America. Key assets are disposal facilities and landfills which Waste Management has a large share of.
- Waste Management operates in 48 US states, Canada, and Puerto Rico, serving nearly 20 million customers with over 360 collection operations and 273 landfills.
- The company focuses on operational excellence, cost cutting, and consistent strategies around profitable revenue growth and uses of
This document discusses the importance of building a positive public image for airports through excellent customer service. It notes that customer service should be the top priority and drive all airport operations. Ensuring a positive customer experience reduces stress and increases satisfaction, loyalty and revenue. The document also emphasizes engaging and unifying all airport service providers to consistently meet passenger needs and preferences. A tale of two airports is provided as an example of how prioritizing customer service can distinguish one airport from its peers and attract more customers and revenue.
Aeromexico Overview Presentation - September 2014Aeromexico_IR
Aeromexico is Mexico's leading airline with a hub and spoke model and two-class service. It has 80 destinations in 20 countries with over 600 daily flights. The airline is focusing on increasing connectivity and profitability through strengthening its hubs in Mexico City and Monterrey. It aims to improve market share and revenue through network expansion, upgauging aircraft, and increasing connectivity between flights. Aeromexico has a solid financial profile and is focusing on cost control initiatives to improve productivity and profitability.
1) Marshall Larsen, Chairman, President and CEO of Bank of America, spoke at the 35th Annual Investment Conference in San Francisco on September 21, 2005.
2) The document contains forward-looking statements and cautions readers that actual results may differ due to risks and uncertainties.
3) It provides an overview of Goodrich Corporation, describing it as one of the largest worldwide aerospace suppliers with the broadest portfolio of products and over 130 years of operating history.
1) Marshall Larsen, Chairman, President and CEO of Bank of America, spoke at the 35th Annual Investment Conference in San Francisco on September 21, 2005.
2) The document contains forward-looking statements and cautions readers that actual results may differ due to risks and uncertainties.
3) It provides an overview of Goodrich Corporation, describing it as one of the largest worldwide aerospace suppliers with the broadest portfolio of products and over 130 years of operating history.
This document provides a summary of the Airbus Global Market Forecast covering the period from 2009 to 2028. Some key points:
1) Global passenger traffic is expected to increase by 4.7% annually over the period, with over 24,000 new passenger and freighter aircraft demanded.
2) Emerging markets will continue to see strong growth in air travel, while network carriers and low-cost carriers both benefit from new demand. Mega-cities and congestion will influence aviation development.
3) Technological innovation, particularly in alternative fuels, will be critical to developing a sustainable future for aviation. Over 14,000 existing aircraft will need to be replaced by more efficient models to reduce aviation's
This document analyzes Sana'a Airport in Yemen using the BCG matrix. It finds that:
1) Sana'a Airport has a high market share of domestic air traffic in Yemen but a negative growth rate, placing it in the "Cash Cow" quadrant.
2) Other domestic Yemeni airports have lower market shares but Sana'a Airport captures most of the country's air traffic.
3) Expansion plans for a new Sana'a airport aim to improve its growth rate and move it into the "Star" quadrant, generating more cash flow.
Major Role Of Aviation In Development Of Countrymandaramshekar
High oil prices have significantly impacted the domestic air travel industry in India. Aviation fuel (ATF) contributes 40% of airline operating costs in India, but ATF prices are 65% higher on average in India than international benchmarks. This high cost of ATF, combined with high airport charges, has resulted in substantial losses for Indian airlines estimated at $2 billion for fiscal year 2009. Reducing taxes and duties on ATF to bring prices closer to international levels could help lower airline operating costs by 25% and save 500 crore rupees for the industry. However, lower ATF costs may not be passed on to consumers through reduced fares.
The document discusses how airports can become smarter by embracing new technologies. It describes how instrumentation, interconnectivity, and intelligence can help airports overcome challenges like capacity issues, dissatisfied passengers, and declining revenue. Specifically, it explains how using technologies like RFID, sensors, and mobile devices airports can track passengers, bags, and processes throughout the airport to improve operations and customer service. It also discusses how connecting previously separate airport systems through shared services and control centers allows different stakeholders to work collaboratively and share important information.
Aeromexico is Mexico's leading airline and only full-service carrier. It has the strongest position in Mexico City airport with over 600 daily flights to 80 destinations in 20 countries. Aeromexico has a hub-and-spoke model and strategic alliances with Delta and AIMIA. It focuses on strengthening its network connectivity, securing its position in Mexico City through upgauging, and solidifying its position with a new shuttle product. Aeromexico also aims to maximize revenue through yield management, ancillary fees, and merit a premium over competitors due to its full-service model. It has strong financial performance through cost reduction initiatives and fleet renewal to reduce ownership costs. Aeromexico is well positioned for continued growth
The document is a presentation from Marshall Larsen, Chairman and CEO of Goodrich Corporation, given at the Morgan Stanley Global Industrials CEOs Unplugged Conference on September 10, 2008. The presentation highlights Goodrich's balanced portfolio, growth strategy focused on operational excellence, recent financial results showing sales and margin growth, and opportunities in commercial aerospace, defense, and space markets.
From FAA Forecast Conference, March 2007. Reviews the future of long-haul LCC (Low-cost carrier) business models in aviation. Presents economic analysis of all-economy cabin services and differentiated premium business models.
1) Aeromexico is Mexico's leading airline and only full-service carrier, with the strongest position in Mexico City airport. It has over 80 destinations in 20 countries with 600 daily flights.
2) Aeromexico has a young and modern fleet that provides operational excellence. It focuses on cost reduction initiatives like fleet renewal and labor restructuring to improve profitability.
3) Aeromexico is well positioned for growth with Mexico's strengthening economy and growing middle class driving increased air travel demand. Its hub in Mexico City still has potential for growth despite slot constraints.
Deutsche Bank Roadshow - 15th Annual Latin America Conference CitibankLocaliza
- Localiza is an integrated car rental company operating in Brazil and other South American countries with 145 agencies and over 15,000 vehicles
- In 2006, the company had net revenues of R$1.145 billion, EBITDA of R$313 million, and net income of R$138.2 million
- Localiza has a large integrated platform that provides competitive advantages through economies of scale, bargaining power, and operational synergies
India as an MRO destination myth or realityVivek Vij
The document summarizes India's potential as an MRO destination. It discusses the growth of India's airline industry and fleet size, which is increasing demand for MRO services. However, India faces challenges in becoming an MRO hub, such as high taxes, regulatory issues, and long-term contracts that airlines have with foreign MRO providers. For India to realize its potential as an MRO destination, the government needs to provide policy clarity and tax incentives to attract global MRO companies to set up operations in India.
1. Is a Crisis Coming in Regional Aviation?
By Matthew Bennett
One of the most successful sectors of the aviation industry over the past decade
has been regional jet services. In North America, regional airlines such as
SkyWest and Mesa Air, which serve low-density markets, have been embraced
by market analysts and shareholders for their high margins and stable earnings.
Their market strength has been driven by the versatility of regional jets, cost
discipline, and the advent of creative risk-sharing partnerships with major
airlines. The economics of these businesses, however, are poised to shift
dramatically with the introduction of larger regional jets. Major airlines and
their regional affiliates who do not consider the implications now may later face
the consequences of inaction.
A Great Takeoff
Regional jets have proven to be ideal for flying on routes that are too “thin” to
support traditional narrowbody aircraft (e.g., B737) service and, as a result,
regional aviation capacity has expanded rapidly. In 1997, there were fewer than
150 regional jets in North America. By 2002, the number of regional jets had
grown to over 1,000, and more than 2,000 are expected to be in the air by 2006
(Exhibit 1).
Exhibit 1 US Regional Jet Population Growth
(Number of planes)
2,500
2,000 19% CAGR 11%
16%
1,500 22%
28%
1,000
33%
48% CAGR
33%
500 43%
57%
79%
0
1997 1998 1999 2000 2001 2002 2003 2004 2005E 2006E
Source: BACK Aviation, UBS report August 2003.
What sets regional carriers apart, however, has been their consistent
profitability. While the majors continue to flounder in a sea of red ink due to
high operating and labor costs, regionals’ economics are fine-tuned for their
market niche. Their costs are competitive, and their service is targeted at
relatively price-insensitive business customers, producing a healthy profit. For
example, on a typical 500-mile route on which a 50-seat regional jet replaces a
126-seat narrowbody aircraft (known as “downgauging"), the regional jet’s
revenue per available seat mile (RASM) may be over 50 percent higher, while its
cost per available seat mile (CASM) is only 9 percent higher. Additionally, load
factors in many cases are higher on regional aircraft. These factors work
10 Mercer on Transport & Logistics
2. together to raise operating margin significantly for the 50-seater, illustrating
why regional jets are so prevalent today.
Regionals have also benefited from the recent industry downturn, which caused
major airlines to outsource lower-density routes that they could not operate
profitably. This has been done primarily through fixed-fee or cost-plus contracts,
known as capacity purchase agreements (CPAs). CPAs have the attraction of
mitigating earnings risk for the regionals through pre-determined target
margins, while protecting the brand and ensuring the availability of capacity for
the majors.
Under CPAs, network carriers are generally responsible for commercial planning,
revenue management, sales and distribution, and branding and marketing. It is
also customary to assume fuel and insurance risk. The contracted regional
carrier handles labor, maintenance, and operation of the aircraft, as well as
station and ground requirements. Target operating margins range between 10
and 15 percent under most CPAs, and are usually re-priced annually to ensure
revenues and costs are in line with targets.
A Smooth Flight?
The result of the regional aviation boom is that the market value of such
carriers has grown at a compound annual rate of 22 percent over the past eight
years, comparable to the market performance of low-cost carriers such as
Southwest and JetBlue (Exhibit 2). The superior growth and economics provided
by CPAs have made many of these carriers the “darlings” of Wall Street. Given
that the current business model appears to be working so well, analysts are
continuing to predict high growth in this sector, particularly for those carriers
who are beginning to abandon 50-seat planes in favor of more economical
70-seaters. Expectations of 20 to 35 percent earnings growth are commonplace
for the leading regional airlines.
Exhibit 2 Share of Airline Industry Market Value by Segment
(based on quarterly market value)
Market Value
CAGR
100%
Regional
+22%
carriers
80%
60%
Low-cost
+24%
airlines
40%
20%
Mainline
-15%
carriers
0%
Q1-96 Q1-97 Q1-98 Q1-99 Q1-00 Q1-01 Q1-02 Q1-03
Source: Compustat, Mercer analysis.
Mainline = American, Delta, Continental, United, Air Canada, America West, Northwest, US Airways, Midwest Express, TWA, Midway.
LCCs = Southwest, Vanguard, AirTran, Frontier, JetBlue, ATA.
Regional = Mesa, SkyWest, Great Lakes, ACA, Mesaba, Big Sky, ExpressJet.
11 Mercer on Transport & Logistics
3. Equally, major airlines are betting on the continued good performance of
regionals to help them out of their doldrums, with many in the process of
signing new contracts. Regional service has become the cornerstone of several
recovery plans, with the majors transferring an increasing number of routes to
regionals under CPAs.
On the surface, network carrier outsourcing to regionals makes sense, given that
majors remain uncompetitive in many markets despite restructuring efforts.
Flexible work rules also enable regional pilots to fly more than their network
counterparts, positioning regionals to “pick up the slack” on routes with poor
operational characteristics for large planes.
The question is whether this gamble will pay off much longer. There are signs
that the regional business model is already coming under pressure. In particular,
the 50-seat regional jet is likely to provide diminishing returns, as there are few
new markets left that can be served profitably. In fact, Bombardier and
Embraer––the two largest manufacturers of regional jets––face a dwindling
backlog for 50-seaters.
This sector also is likely to see a major struggle between regional and network
carriers over strategic control. Major airlines, particularly those in bankruptcy,
are putting pressure on regional partners to accept reduced margins on new
contracts, together with more expense and revenue risk. They are also
attempting to exert control through allocation of 70-seat regional jet flying to
captive regionals vs. wholly owned subsidiaries. Additionally, the majors would
like to see operational costs reduced in the regional sector, and will continue to
exert downward pressure on margins.
Turbulence Ahead
While all these issues may affect the regional business model to some degree,
none will have the impact of what may be the industry’s next “category killer”:
the introduction of larger, more cost-effective 100-plus seat regional jets
(Exhibit 3). The superior economics of these new jets will enable carriers to enter
traditional regional markets at lower fares, stimulating demand and supplanting
the current fleet of 50-seat jets that require higher fares to operate profitably.
That this will happen––and soon––is evidenced by the interest of low-cost
operators. JetBlue announced last summer that it was buying 100 Embraer ERJ-
190s (100 seats), and had identified nearly 1,000 cities where it could introduce
service. JetBlue expects to start taking delivery of the jets in 2005. And
Southwest has stated that it is evaluating the aircraft’s economics.
The ERJ-190 will offer a significantly better customer experience than the
current fleet of 50-70 seaters (e.g., wider seats, more headroom/legroom, less
noise), and will be able to fly longer routes. It even compares favorably with
narrowbody aircraft such as the B737 in terms of comfort and performance.
Add to this the leather seats and seatback video that JetBlue plans to install on
their regional jets, and you have a radically improved customer experience
compared with what most regional passengers are accustomed to today.
12 Mercer on Transport & Logistics
4. Exhibit 3 New RJs: Filling the “Capacity Gap”
Turbo
props 1 st generation RJs
CRJs Next generation RJs
Narrowbodies
FRJs
ERJs
ERJ-170
ERJ-190
MD -80
B -717
A318/319/320/321Family
B -737 Family
B -757
30 50 70 90 110 130 150 170 190
Seating capacity
Source: Mercer analysis.
Most importantly, the new mid-sized jets are likely to drastically alter the
economics of the regional market. Regional carriers survive by taking only the
highest-yield traffic in low-density markets. Although they have fewer seats and
higher costs per available seat mile, they fly higher loads and charge
significantly higher fares than network carriers. If low-cost carriers enter these
markets with larger, more comfortable jets at stimulative fares, demand for
lower fares will collapse current 50-seat regional jet economics. As a result,
value will migrate to the operators of larger 100-seat regional jets.
To illustrate the impact, we can revisit our initial example of a B-737 route
downgauged to 50-seat regional jet service (Exhibit 4). A carrier entering this
market with a 100-seat regional jet would have 15 percent lower unit costs than
the 50-seat jet. If a carrier such as JetBlue or Southwest were to start selling
tickets at $87 on the 100 seater (a fare that would provide a healthy operating
margin), the 50-seat operator would be forced to drop its average fares from
$158 to $107. This would reduce the revenues on the smaller jet to below
operating costs. Meanwhile, the lower fares in the market would stimulate
demand and drive higher load factors. In the end, the 100-seat ERJ-190 could
achieve a RASM on par with the 50-seat aircraft, with CASM 15 percent lower
than the 50-seater and 8 percent lower than a B737.
Additionally, by filling a critical “capacity gap” between small regional planes
and the large aircraft used predominantly on major routes, larger regional jets
will be able to take advantage of new growth opportunities. Demand can be
better matched with capacity, frequency of operations can be increased on many
city pairs, and more distant markets can be flown, given the planes’ greater
range. Ultimately, carriers that adopt 100-plus seat jets have an opportunity to
shift the customer value proposition and market economics of regional jet
service squarely in their favor.
Unfortunately, the very CPA agreements that proved so valuable in early regional
airline relationships may hamper the ability to respond to this threat. While
CPAs protect regional airlines from revenue risk, they also place them under the
strategic control of the major airline due to pilot contract “scope clauses.” Major
airline scope clauses typically restrict the size and number of jets that their
13 Mercer on Transport & Logistics
5. regional partners may fly, and even restrict routes. Such restrictions on regional
affiliates and the inability of major airlines to economically operate in certain
markets or with certain aircraft would likely bolster the case for new entrant
100-seat operators.
Exhibit 4 Illustrative Economics for Entry of Low-Cost Airlines into
Regional Markets
(stage length of 500 miles)
CRJ-200 CRJ-700 ERJ-190 B737-3
(50 seats) (70 seats) (100 seats) (126 seats)
$10,000
Revenue
Expenses $8,529 RASM 0.147 0.147 0.143 0.129
$8,105 (US$)
Profit
$8,000
$7,147
CASM 0.147 0.138 0.124 0.135
$6,215 (US$)
$6,000
$5,155
$4,833
Yield 0.214 0.214 0.174 0.179
(US$)
$4,000 $3,682 $3,671
Load 69% 69% 82% 72%
$2,000
$932 Passengers 34 48 82 91
$322
$11
$0 Average $107 $107 $87 $89
($424) Fare
($2,000)
Margin 0% 6% 13% 5%
-
CRJ-200 CRJ-700 ERJ-190 737-300
Source: 2003Q3 data from DOT databases T100 and DB1B; Mercer analysis.
Assumptions: Stage lengths from 400-600 miles. ERJ-190 average ticket price reflects cost + 15% premium; 737 average fare reflects 2.5% fare premium over ERJ-190
Holding on to Small Skies
Mercer believes that to win in the evolving regional sector, all players will be
called upon to re-examine their markets. It will also be critical to consider
historical reactions to competition when developing strategic response options.
A number of competitive responses are available to incumbent regionals and
major airlines. A “one size fits all” approach will not work: Each carrier will have
to assess which strategies offer the best fit with their business model and
resources:
! Fly different planes: In the near-term, replacing 50-seaters with 70-seaters
would provide an opportunity to spread out costs and lower fares. Network
carriers could attempt to operate 100-seat jets as part of their own major
fleets, but their economics are unlikely to match those of regionals or low
cost carriers. Carriers could also fly other narrowbody aircraft (e.g., B717s or
A318s) on routes where adequate demand stimulation might exist. AirTran,
for example, is using B717s to enter moderate-density regional routes.
! Fly planes differently: Carriers could evaluate the potential to operate
100-seat jets more economically through higher utilization and a denser
seating configuration. This could potentially be achieved by allowing current
lower-cost subsidiaries (e.g., United’s Ted or Delta’s Song) to manage these
operations.
14 Mercer on Transport & Logistics
6. ! Engage pilots: Network carriers could engage pilots in scope clause
renegotiations, with a goal of enabling regional affiliates to acquire and
operate 100-seat aircraft, or obtaining lower wage rates for these aircraft.
Pilots may not be willing to make more concessions, however, as the
economy rebounds.
! Develop the next-generation CPA: Majors could develop a new CPA which
would allow them to outsource 100-seat jets to regionals, but with network
pilots flying some or all of the planes. The impact on costs for regionals (due
to increased pilot pay) would have to be assessed, as well as the impact on
regionals’ relationships with their own pilots’ union. Initial analysis suggests
that the economics of such a CPA could work with the right structure.
It will likely take at least two years for the full effects of the new 100-seat jets
to be felt in the regional aviation market, giving network and regional carriers a
valuable window of opportunity to get ahead of this issue before it begins to
have an adverse effect.
As a first step, carriers need to assess their current contracts to ensure the
moves they make today will not hamper them down the road for competing
successfully in regional markets. Network and regional carriers together can test
and segment markets to identify which are most vulnerable to encroachment,
and begin working to minimize their exposure to 50-seat aircraft values. Finally,
potential competitive responses need to be evaluated to determine which are
most feasible for a particular carrier and likely to provide lasting value once the
regional market shakeup begins in earnest.
Andrew Watterson and Michael Zea, Directors in Mercer’s Aviation Practice, and Scott Kend
from Mercer’s New York office, also contributed to this article.
15 Mercer on Transport & Logistics