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
For the annual CAPA Business Briefing, OAG's Executive VP John Grant analyses the changes in global capacity, the North American market and how The Big Three can have a major influence in the market.
Washington Dulles International Airport and Reagan National Airport Spring 20...MarketPlaceDevelopment
MarketPlace Development, in conjunction with the Metropolitan Washington Airports Authority (MWAA), invited all local, regional, and national retailers, quick- service food operators, and restaurateurs to learn more about the opportunities that will be available for the thrid phase of leasing at Ronald Reagan Washington National Airport (DCA) and Washington Dulles International Airport (IAD) on March 26, 2014.
NOTE This Industry overview is only a starting point for your an.docxhenrymartin15260
NOTE: This Industry overview is only a starting point for your analysis. Environment and industry issues can change rapidly and some of the information here may therefore be out-of-date.
You MUST supplement this information with additional research.
The Airline Industry
4940- Summer, 2014
Few inventions have changed how people live and experience the world as much as the invention of the airplane. During both World Wars, government subsidies and demands for new airplanes vastly improved techniques for their design and construction. Following World War II, the first commercial airplane routes were set up in Europe. Over time, air travel has become so commonplace that it would be hard to imagine life without it. The airline industry certainly has progressed. It has also altered the way in which people live and conduct business by shortening travel time and altering our concept of distance, making it possible for us to visit and conduct business in places once considered remote.
The airline industry exists in an intensely competitive market. In recent years, there has been an industry-wide shakedown, which will have far-reaching effects on the industry's trend towards expanding domestic and international services. In the past, the airline industry was at least partly government owned. This is still true in many countries, but in the U.S., all major airlines have come to be privately held. The U.S. airline industry has been in a chaotic state for a number of years. According to the Air Transport Association, the airline industry’s trade association, the loss from 1990 through 1994 was about $13 billion, while from 1995 through 2000, the airlines earned about $23 billion and then lost about $35 billion from 2001 through 2005. Against this backdrop of poor financial performance, dramatic changes in industry structure have occurred. Growth in air passenger traffic has outstripped growth in the overall economy and the U.S. airline industry remains in the midst of an historic restructuring. Over the last five years, U.S. network airlines have reduced their annualized mainline costs excluding fuel by more than 25%, or nearly $20 billion.
While some of the cost savings realized in the industry were the product of identifying greater operational efficiencies, most of the savings were generated by renegotiation of existing contractual arrangements with creditors, aircraft lessors, suppliers and airline employees and achieved either through the bankruptcy process itself or under threat of bankruptcy. A portion of industry capacity still operates in bankruptcy. But, it is down from a high of 46 percent in 2005. As a result, several carriers that were near liquidation now have lower cost structures that should allow them to show improved performance.
Economic profile of the Air line industry: The airline industry has always exhibited cyclicality because travelers' demand is sensitive to the performance of the macro economy yet airl.
For the annual CAPA Business Briefing, OAG's Executive VP John Grant analyses the changes in global capacity, the North American market and how The Big Three can have a major influence in the market.
Washington Dulles International Airport and Reagan National Airport Spring 20...MarketPlaceDevelopment
MarketPlace Development, in conjunction with the Metropolitan Washington Airports Authority (MWAA), invited all local, regional, and national retailers, quick- service food operators, and restaurateurs to learn more about the opportunities that will be available for the thrid phase of leasing at Ronald Reagan Washington National Airport (DCA) and Washington Dulles International Airport (IAD) on March 26, 2014.
NOTE This Industry overview is only a starting point for your an.docxhenrymartin15260
NOTE: This Industry overview is only a starting point for your analysis. Environment and industry issues can change rapidly and some of the information here may therefore be out-of-date.
You MUST supplement this information with additional research.
The Airline Industry
4940- Summer, 2014
Few inventions have changed how people live and experience the world as much as the invention of the airplane. During both World Wars, government subsidies and demands for new airplanes vastly improved techniques for their design and construction. Following World War II, the first commercial airplane routes were set up in Europe. Over time, air travel has become so commonplace that it would be hard to imagine life without it. The airline industry certainly has progressed. It has also altered the way in which people live and conduct business by shortening travel time and altering our concept of distance, making it possible for us to visit and conduct business in places once considered remote.
The airline industry exists in an intensely competitive market. In recent years, there has been an industry-wide shakedown, which will have far-reaching effects on the industry's trend towards expanding domestic and international services. In the past, the airline industry was at least partly government owned. This is still true in many countries, but in the U.S., all major airlines have come to be privately held. The U.S. airline industry has been in a chaotic state for a number of years. According to the Air Transport Association, the airline industry’s trade association, the loss from 1990 through 1994 was about $13 billion, while from 1995 through 2000, the airlines earned about $23 billion and then lost about $35 billion from 2001 through 2005. Against this backdrop of poor financial performance, dramatic changes in industry structure have occurred. Growth in air passenger traffic has outstripped growth in the overall economy and the U.S. airline industry remains in the midst of an historic restructuring. Over the last five years, U.S. network airlines have reduced their annualized mainline costs excluding fuel by more than 25%, or nearly $20 billion.
While some of the cost savings realized in the industry were the product of identifying greater operational efficiencies, most of the savings were generated by renegotiation of existing contractual arrangements with creditors, aircraft lessors, suppliers and airline employees and achieved either through the bankruptcy process itself or under threat of bankruptcy. A portion of industry capacity still operates in bankruptcy. But, it is down from a high of 46 percent in 2005. As a result, several carriers that were near liquidation now have lower cost structures that should allow them to show improved performance.
Economic profile of the Air line industry: The airline industry has always exhibited cyclicality because travelers' demand is sensitive to the performance of the macro economy yet airl.
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During the coldest months, Italy transforms into a winter wonderland, providing visitors with a very unique experience. From the Settimana Bianca ski event to the lively Carnevale celebrations, Italy's winter festivities provide something for everyone. Enjoy hot cocoa, eat hearty comfort foods, and buy during winter deals. Explore the country's rich cultural past by participating in Settimana Bianca, and Carnevale, sipping hot chocolate, shopping during winter deals, and indulging in winter comfort foods. Visit our website https://timeforsicily.com/ for more information.
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3. 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
4. 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
5. Airport Market Share
Scheduled + charter = over 10 million passengers
Source: Dominican Civil Aviation Institute & Ionosphere Capital, LLC
14. 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.
15. 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
16. 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.
17. 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
18. 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
19. 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
20. 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
21. Top Passenger Routes
Origin airports to Dominican Republic
88 routes
Top 5: 48% share
Top 10: 68% share
Top 20: 87% share
22. Top City Pairs
230+ City-pairs
Top 5: 29% share
Top 10: 44% share
Top 15: 56% share
23. 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
24. U.S. to Latin America
Passenger fares to Latin America
25. 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%
26. 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
27. 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
28. 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.
29. 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.
30. 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%