The document discusses the current state of the US economy and airline industry. It suggests that:
1) Based on historical patterns, the current economic expansion may be peaking in the first half of 2017, marking the end of the business cycle that began in 2009.
2) This business cycle has seen relatively slower GDP growth and lower consumer sentiment compared to past cycles. However, airline profitability has been high, with margins approaching 14% in 2015.
3) Changes in the industry like online ticket sales and low-cost carriers have altered the relationship between GDP growth and airline revenue/profits. Capacity discipline and unbundling of fees have also contributed to improved financial performance this cycle.
North American Industrial Outlook Q4 13Coy Davidson
This document discusses trends in the North American industrial real estate market in Q4 2013. It notes that vacancy rates declined slightly to 7.69% due to strong absorption in the US market. While construction of new industrial space increased, absorption exceeded new supply, indicating no overbuilding risk. The document advocates thinking in "3D" by considering factors beyond traditional supply and demand like the impact of e-commerce, changing manufacturing processes, and transportation infrastructure on industrial real estate.
This document provides a summary of current economic and printing market trends through 2011 to aid in planning for 2012-2013. It finds that while the economic recovery continues, growth has been sluggish. Printing shipments increased in 2010-2011 but the number of plants and employment continued to decline. Digital printing grew faster than conventional printing, driven by customer preferences for smaller runs and personalization. Printing trends generally mirror broader economic indicators such as GDP and employment. The recovery is expected to continue into 2012-2013 but printing may not reach pre-recession levels until 2014-2016.
1) Germany has shifted from an economy reliant on net exports to one more dependent on domestic consumption in recent years. This is due to strong private household spending supported by factors like low unemployment, rising wages, and government spending on refugees.
2) However, this shift may not be sustainable long-term as unemployment could rise again and income growth may slow. Germany also still has a large current account surplus, indicating domestic investment needs to increase to balance savings.
3) For the shift to domestic demand to last, Germany needs active policies to encourage more business investment rather than savings to boost productivity and competitiveness as labor costs rise.
The document discusses several key US economic reports that are closely watched by gold traders as they can significantly impact gold prices. These include non-farm payrolls, average work week, average hourly earnings, unemployment rate, jobless claims, GDP, and trade balance. Specifically, non-farm payrolls measuring employment and unemployment claims tracking new jobless benefits are seen as important indicators of consumer spending levels which fuel the US economy and gold demand.
This document provides an overview of the dynamic AD-AS macroeconomic model. It describes the key components of the model - the Solow curve, which shows potential GDP growth based on productivity and supply factors; the Aggregate Demand curve, which plots inflation and GDP combinations consistent with a given money supply and velocity of money; and the Short-Run Aggregate Supply curve, which shows the relationship between inflation and GDP due to price adjustment dynamics. The document uses the model to analyze the effects of changes in money supply, confidence, productivity, and policy tools on inflation and GDP growth. It explains that while monetary and fiscal policy can boost demand in the short-run, they cannot increase GDP permanently above potential in response to a negative
Monetary and fiscal policy ppt @ becdomsBabasab Patil
The document discusses monetary and fiscal policies used to address short-run economic fluctuations. It introduces the aggregate demand and supply model and explains how shifts in these curves can cause changes in output and price levels. Monetary policy, by adjusting the money supply, and fiscal policy, by changing government spending or taxes, are used to shift aggregate demand to counter recessions or stabilize prices.
Fundamentals Of Aggregate Demand And Aggregate SupplySaurabh Goel
The document summarizes the aggregate demand and supply model, which studies output and price level determination. It outlines the determinants and properties of aggregate demand and supply curves. Specifically, it discusses how fiscal and monetary policies can cause shifts in the aggregate demand curve, and how aggregate supply behaves in the short-run versus long-run.
Salesforce.com Inc. (NYSE: CRM) is a leading provider of cloud-based customer relationship management software and services. The analysts recommend holding Salesforce stock. Salesforce has experienced strong revenue growth in recent years and aims to continue gaining market share. The analysts expect Salesforce's cash, net income, and earnings per share to grow significantly in the coming years, driven by continued expansion and an increasing number of companies adopting cloud computing and data analytics solutions. Overall economic indicators point to continued moderate U.S. economic growth in 2016, which should support further growth at Salesforce.
North American Industrial Outlook Q4 13Coy Davidson
This document discusses trends in the North American industrial real estate market in Q4 2013. It notes that vacancy rates declined slightly to 7.69% due to strong absorption in the US market. While construction of new industrial space increased, absorption exceeded new supply, indicating no overbuilding risk. The document advocates thinking in "3D" by considering factors beyond traditional supply and demand like the impact of e-commerce, changing manufacturing processes, and transportation infrastructure on industrial real estate.
This document provides a summary of current economic and printing market trends through 2011 to aid in planning for 2012-2013. It finds that while the economic recovery continues, growth has been sluggish. Printing shipments increased in 2010-2011 but the number of plants and employment continued to decline. Digital printing grew faster than conventional printing, driven by customer preferences for smaller runs and personalization. Printing trends generally mirror broader economic indicators such as GDP and employment. The recovery is expected to continue into 2012-2013 but printing may not reach pre-recession levels until 2014-2016.
1) Germany has shifted from an economy reliant on net exports to one more dependent on domestic consumption in recent years. This is due to strong private household spending supported by factors like low unemployment, rising wages, and government spending on refugees.
2) However, this shift may not be sustainable long-term as unemployment could rise again and income growth may slow. Germany also still has a large current account surplus, indicating domestic investment needs to increase to balance savings.
3) For the shift to domestic demand to last, Germany needs active policies to encourage more business investment rather than savings to boost productivity and competitiveness as labor costs rise.
The document discusses several key US economic reports that are closely watched by gold traders as they can significantly impact gold prices. These include non-farm payrolls, average work week, average hourly earnings, unemployment rate, jobless claims, GDP, and trade balance. Specifically, non-farm payrolls measuring employment and unemployment claims tracking new jobless benefits are seen as important indicators of consumer spending levels which fuel the US economy and gold demand.
This document provides an overview of the dynamic AD-AS macroeconomic model. It describes the key components of the model - the Solow curve, which shows potential GDP growth based on productivity and supply factors; the Aggregate Demand curve, which plots inflation and GDP combinations consistent with a given money supply and velocity of money; and the Short-Run Aggregate Supply curve, which shows the relationship between inflation and GDP due to price adjustment dynamics. The document uses the model to analyze the effects of changes in money supply, confidence, productivity, and policy tools on inflation and GDP growth. It explains that while monetary and fiscal policy can boost demand in the short-run, they cannot increase GDP permanently above potential in response to a negative
Monetary and fiscal policy ppt @ becdomsBabasab Patil
The document discusses monetary and fiscal policies used to address short-run economic fluctuations. It introduces the aggregate demand and supply model and explains how shifts in these curves can cause changes in output and price levels. Monetary policy, by adjusting the money supply, and fiscal policy, by changing government spending or taxes, are used to shift aggregate demand to counter recessions or stabilize prices.
Fundamentals Of Aggregate Demand And Aggregate SupplySaurabh Goel
The document summarizes the aggregate demand and supply model, which studies output and price level determination. It outlines the determinants and properties of aggregate demand and supply curves. Specifically, it discusses how fiscal and monetary policies can cause shifts in the aggregate demand curve, and how aggregate supply behaves in the short-run versus long-run.
Salesforce.com Inc. (NYSE: CRM) is a leading provider of cloud-based customer relationship management software and services. The analysts recommend holding Salesforce stock. Salesforce has experienced strong revenue growth in recent years and aims to continue gaining market share. The analysts expect Salesforce's cash, net income, and earnings per share to grow significantly in the coming years, driven by continued expansion and an increasing number of companies adopting cloud computing and data analytics solutions. Overall economic indicators point to continued moderate U.S. economic growth in 2016, which should support further growth at Salesforce.
- McCormick & Company is a large spice, seasoning, and dressing manufacturer with dominant market share and strong competitive position.
- The company has high potential for growth, expanding revenue and new product development continuously.
- McCormick provides reliable bottom-line growth and regular returns to investors through dividends and stock buybacks.
- The economic environment and industry outlook are generally positive, ensuring continued growth opportunities for McCormick.
A2 & AS Economics: UK Economy Revision Briefingtutor2u
The UK economy suffered a deep recession from 2008-2009 and recovery has been slow and fragile with growth below 1% in most years since. Weak private sector demand from falling real incomes and low business investment have held back growth. Export growth has also slowed in recent years. The government has pursued fiscal austerity measures and spending cuts to reduce large budget deficits, further weighing on growth. Restoring stronger growth and rebalancing the economy away from debt-fuelled consumption toward exports and investment will require boosting productivity, business investment, and improving the supply of credit. Potential growth rates are estimated to have declined significantly in recent years due to factors like low R&D spending and business investment.
This chapter discusses debates around stabilization policy. It considers whether policy should be active or passive in response to economic fluctuations, and whether policy should be set by rule or allow discretion. Arguments for active policy include reducing economic hardship, while arguments for passive policy cite lags in policy effects. Rules are argued to increase credibility and avoid time inconsistency, while discretion allows flexibility. Overall there is no clear consensus from history on the best approach.
The document analyzes potential unemployment scenarios in the United States over the next decade. It first examines current unemployment data and trends, finding the unemployment rate at 10% with 17.3% underemployment. It then presents three scenarios: 1) unemployment peaking in late 2010 and returning to pre-recession levels by 2013, based on historical patterns; 2) unemployment declining more slowly due to factors like declining consumer credit, part-time work, and low labor participation; 3) unemployment remaining elevated for years due to challenges across many industries in creating sufficient new jobs.
Hypothesis of secular deterioration of terms of tradeRitika Katoch
The document summarizes the Prebisch-Singer thesis, which argues that terms of trade tend to deteriorate against primary commodities and in favor of manufactured goods over time. It presents the key assumptions of the thesis, including that income elasticity of demand is greater for manufactured goods than primary products. As a result, as incomes rise in developed countries, demand shifts away from primary commodities exported by developing countries towards manufactured goods produced in developed nations. This leads to a long-term decline in terms of trade for developing country exports.
Monetary policy aims to control the money supply and credit in an economy to achieve objectives like full employment, investment growth, price stability, and balanced trade. Central banks use quantitative tools like bank rates, open market operations, and reserve requirements as well as qualitative tools like margin requirements and moral persuasion to influence monetary conditions. Economic indicators provide statistical data on the current state of the economy and can be leading, coincident, or lagging based on whether they change before, with, or after the overall economy. Coincident indicators reflect present conditions while leading indicators predict future performance and lagging indicators trail overall economic changes.
Quarterly Update on Colombia's Economy as at 30/09/2015 Actualización Trimestral sobre la economía colombiana (30/09/2015) Enjoy reading and please get in touch for any comments or suggestions. Disfruten y por favor ponganse en contacto si tienen comentarios o sugerencias.
The document discusses macroeconomic equilibrium in the short run and long run. It explains that in the short run, equilibrium occurs at the intersection of aggregate demand (AD) and aggregate supply (AS) curves, determining real GDP and the price level. It then defines and compares short-run situations: a recessionary gap where output is below potential and an inflationary gap where output exceeds potential. The long run equilibrium exists where output is at potential GDP and unemployment is at the natural rate. It also discusses how changes in AD or AS can shift short-run equilibrium.
These are our views (macro, technical as well as quantitative) on the financial markets for the month to come...
FinLight Research is a quantitative cross-asset research firm with an expertise in real assets analysis and a focus on some specific issues: risk budgeting, asset allocation, trading systems and business intelligence.
From here, we are rethinking, day after day, the investment paradigm, preparing optimally for what lies ahead… This is our pretension!
Aggregate Demand and Aggrgate Supply ModelAndrew Tibbitt
1. The document discusses the aggregate demand and aggregate supply model used in macroeconomics to analyze the relationship between inflation, growth, and unemployment.
2. It explains the Keynesian and neoclassical versions of the AD/AS model, how aggregate demand and supply curves are determined, and how shifts in these curves impact macroeconomic variables.
3. The document provides examples of factors that can cause aggregate demand and supply to shift, and analyzes the macroeconomic effects of these shifts according to the AD/AS framework.
The document discusses various concepts related to inflation including: the classical model of money and prices which states that increases in the money supply lead to equal percentage increases in prices; how governments can raise revenue through printing money which leads to inflation and imposes an "inflation tax"; and how hyperinflation can occur in a self-reinforcing cycle if a government prints too much money. It also covers moderate inflation, disinflation, the output gap, and the relationship between output and unemployment.
The retail market report summarizes 2015 trends in the Phoenix metro area. It notes that 65,700 jobs were added in 2015, home starts increased 70% year-over-year, and these economic gains are boosting consumer confidence. Retail vacancy rates declined to 9.3% while net absorption was 1.77 million square feet. Average rental rates increased to $14/sqft, up from $13.62/sqft in 2014. The report concludes that with continued job and housing growth, the retail sector is poised for growth in 2016.
The document discusses aggregate demand and aggregate supply models. It provides explanations of:
1) Why economists model the economy using AD/AS curves to understand business cycles and potential policy solutions.
2) The components that can cause shifts in aggregate demand and aggregate supply such as consumer spending, investment, government spending, input costs, and technology.
3) How the AD and AS curves interact to determine equilibrium output, unemployment, and inflation in both the short-run and long-run.
The document discusses balance of payments accounts, which track a country's international transactions. It has a current account for trade in goods/services and factor income, and a financial account for asset transactions. The current and financial accounts must sum to zero. Capital flows are determined by differences in investment opportunities (demand) and savings rates (supply) across countries, with funds flowing from low return to high return economies. However, two-way flows also occur for risk diversification and business strategy reasons.
The document provides an overview of key economic concepts including the business cycle, indicators of economic health, and the evolution of the US economy. It discusses the four stages of the business cycle - prosperity, recession, depression, recovery. It also outlines some common economic indicators used to measure the health of the economy, such as GDP, unemployment rate, inflation rate, and national debt. Finally, it provides a brief history of the changing nature of the US economy from colonial times to the modern information economy.
This document discusses inflation in India. It defines inflation and describes different types like disinflation and stagflation. It then outlines several measures used to track inflation like the Producer Price Index, Commodity Price Index, GDP Deflator, and Consumer Price Index. The document discusses the retail sector in India and provides examples of major retail companies and their reach. It also gives consumer price inflation rates from December 2015 to February 2016. The document notes steps taken by the government to control inflation through measures like moderating price increases and facilitating imports. It lists fiscal and monetary measures as well as other steps like price control, rationing, and wage policy used to curb rising inflation. In conclusion, it notes that low steady inflation
Long run aggregate supply is determined by factors that affect an economy's potential output over the long run, including: labor supply and quality, capital investment, productivity, technology advances, and institutions. An outward shift of the LRAS curve represents an increase in potential output and real economic growth. Productivity, defined as output per hour worked, is the main driver of the UK's potential output growth in the long run according to forecasts.
The document is a study guide containing questions about macroeconomic concepts related to fiscal and monetary policy, government budgets, debt, and central banking. It tests understanding of topics like the federal budget balance, cyclically adjusted budget balance, debt-to-GDP ratio, crowding out effect, and tools of monetary policy like open market operations and the federal funds rate.
The document summarizes trends in the information technology sector seen in the fourth quarter of 2014. It notes an increase in large enterprise license agreements being pushed by software sales representatives and warns that these agreements can result in vendor lock-in and overpaying if not carefully evaluated. The summary recommends that organizations carefully assess projected demand before agreeing to large commitments, ensure rights are used, and consider contractual risk and contingencies to avoid potential downsides of enterprise license agreements.
This document provides a market update from Mullins Investment Management for January 2015. It includes summaries of key economic indicators, market indexes, commodity prices, and bond yields as of December 31, 2014. It also analyzes the performance of domestic and international markets in 2014 and provides an outlook on the US and global economies for 2015.
Unlike the runways of the world, the growth trend line in the aviation sector has never been straight. Long-term growth has been punctuated by demand shocks that rein in investment and impact traffic. With investors in mind, this series of articles looks at the factors that impact aviation growth, transactions, infrastructure needs, and ultimately drive air connectivity. More: http://pwc.to/1uEPT4e
The latest quarterly strategic report that gives a summary of top market trends impacting major spend categories, and gives actionable insights to drive strategic value for your organization.
- McCormick & Company is a large spice, seasoning, and dressing manufacturer with dominant market share and strong competitive position.
- The company has high potential for growth, expanding revenue and new product development continuously.
- McCormick provides reliable bottom-line growth and regular returns to investors through dividends and stock buybacks.
- The economic environment and industry outlook are generally positive, ensuring continued growth opportunities for McCormick.
A2 & AS Economics: UK Economy Revision Briefingtutor2u
The UK economy suffered a deep recession from 2008-2009 and recovery has been slow and fragile with growth below 1% in most years since. Weak private sector demand from falling real incomes and low business investment have held back growth. Export growth has also slowed in recent years. The government has pursued fiscal austerity measures and spending cuts to reduce large budget deficits, further weighing on growth. Restoring stronger growth and rebalancing the economy away from debt-fuelled consumption toward exports and investment will require boosting productivity, business investment, and improving the supply of credit. Potential growth rates are estimated to have declined significantly in recent years due to factors like low R&D spending and business investment.
This chapter discusses debates around stabilization policy. It considers whether policy should be active or passive in response to economic fluctuations, and whether policy should be set by rule or allow discretion. Arguments for active policy include reducing economic hardship, while arguments for passive policy cite lags in policy effects. Rules are argued to increase credibility and avoid time inconsistency, while discretion allows flexibility. Overall there is no clear consensus from history on the best approach.
The document analyzes potential unemployment scenarios in the United States over the next decade. It first examines current unemployment data and trends, finding the unemployment rate at 10% with 17.3% underemployment. It then presents three scenarios: 1) unemployment peaking in late 2010 and returning to pre-recession levels by 2013, based on historical patterns; 2) unemployment declining more slowly due to factors like declining consumer credit, part-time work, and low labor participation; 3) unemployment remaining elevated for years due to challenges across many industries in creating sufficient new jobs.
Hypothesis of secular deterioration of terms of tradeRitika Katoch
The document summarizes the Prebisch-Singer thesis, which argues that terms of trade tend to deteriorate against primary commodities and in favor of manufactured goods over time. It presents the key assumptions of the thesis, including that income elasticity of demand is greater for manufactured goods than primary products. As a result, as incomes rise in developed countries, demand shifts away from primary commodities exported by developing countries towards manufactured goods produced in developed nations. This leads to a long-term decline in terms of trade for developing country exports.
Monetary policy aims to control the money supply and credit in an economy to achieve objectives like full employment, investment growth, price stability, and balanced trade. Central banks use quantitative tools like bank rates, open market operations, and reserve requirements as well as qualitative tools like margin requirements and moral persuasion to influence monetary conditions. Economic indicators provide statistical data on the current state of the economy and can be leading, coincident, or lagging based on whether they change before, with, or after the overall economy. Coincident indicators reflect present conditions while leading indicators predict future performance and lagging indicators trail overall economic changes.
Quarterly Update on Colombia's Economy as at 30/09/2015 Actualización Trimestral sobre la economía colombiana (30/09/2015) Enjoy reading and please get in touch for any comments or suggestions. Disfruten y por favor ponganse en contacto si tienen comentarios o sugerencias.
The document discusses macroeconomic equilibrium in the short run and long run. It explains that in the short run, equilibrium occurs at the intersection of aggregate demand (AD) and aggregate supply (AS) curves, determining real GDP and the price level. It then defines and compares short-run situations: a recessionary gap where output is below potential and an inflationary gap where output exceeds potential. The long run equilibrium exists where output is at potential GDP and unemployment is at the natural rate. It also discusses how changes in AD or AS can shift short-run equilibrium.
These are our views (macro, technical as well as quantitative) on the financial markets for the month to come...
FinLight Research is a quantitative cross-asset research firm with an expertise in real assets analysis and a focus on some specific issues: risk budgeting, asset allocation, trading systems and business intelligence.
From here, we are rethinking, day after day, the investment paradigm, preparing optimally for what lies ahead… This is our pretension!
Aggregate Demand and Aggrgate Supply ModelAndrew Tibbitt
1. The document discusses the aggregate demand and aggregate supply model used in macroeconomics to analyze the relationship between inflation, growth, and unemployment.
2. It explains the Keynesian and neoclassical versions of the AD/AS model, how aggregate demand and supply curves are determined, and how shifts in these curves impact macroeconomic variables.
3. The document provides examples of factors that can cause aggregate demand and supply to shift, and analyzes the macroeconomic effects of these shifts according to the AD/AS framework.
The document discusses various concepts related to inflation including: the classical model of money and prices which states that increases in the money supply lead to equal percentage increases in prices; how governments can raise revenue through printing money which leads to inflation and imposes an "inflation tax"; and how hyperinflation can occur in a self-reinforcing cycle if a government prints too much money. It also covers moderate inflation, disinflation, the output gap, and the relationship between output and unemployment.
The retail market report summarizes 2015 trends in the Phoenix metro area. It notes that 65,700 jobs were added in 2015, home starts increased 70% year-over-year, and these economic gains are boosting consumer confidence. Retail vacancy rates declined to 9.3% while net absorption was 1.77 million square feet. Average rental rates increased to $14/sqft, up from $13.62/sqft in 2014. The report concludes that with continued job and housing growth, the retail sector is poised for growth in 2016.
The document discusses aggregate demand and aggregate supply models. It provides explanations of:
1) Why economists model the economy using AD/AS curves to understand business cycles and potential policy solutions.
2) The components that can cause shifts in aggregate demand and aggregate supply such as consumer spending, investment, government spending, input costs, and technology.
3) How the AD and AS curves interact to determine equilibrium output, unemployment, and inflation in both the short-run and long-run.
The document discusses balance of payments accounts, which track a country's international transactions. It has a current account for trade in goods/services and factor income, and a financial account for asset transactions. The current and financial accounts must sum to zero. Capital flows are determined by differences in investment opportunities (demand) and savings rates (supply) across countries, with funds flowing from low return to high return economies. However, two-way flows also occur for risk diversification and business strategy reasons.
The document provides an overview of key economic concepts including the business cycle, indicators of economic health, and the evolution of the US economy. It discusses the four stages of the business cycle - prosperity, recession, depression, recovery. It also outlines some common economic indicators used to measure the health of the economy, such as GDP, unemployment rate, inflation rate, and national debt. Finally, it provides a brief history of the changing nature of the US economy from colonial times to the modern information economy.
This document discusses inflation in India. It defines inflation and describes different types like disinflation and stagflation. It then outlines several measures used to track inflation like the Producer Price Index, Commodity Price Index, GDP Deflator, and Consumer Price Index. The document discusses the retail sector in India and provides examples of major retail companies and their reach. It also gives consumer price inflation rates from December 2015 to February 2016. The document notes steps taken by the government to control inflation through measures like moderating price increases and facilitating imports. It lists fiscal and monetary measures as well as other steps like price control, rationing, and wage policy used to curb rising inflation. In conclusion, it notes that low steady inflation
Long run aggregate supply is determined by factors that affect an economy's potential output over the long run, including: labor supply and quality, capital investment, productivity, technology advances, and institutions. An outward shift of the LRAS curve represents an increase in potential output and real economic growth. Productivity, defined as output per hour worked, is the main driver of the UK's potential output growth in the long run according to forecasts.
The document is a study guide containing questions about macroeconomic concepts related to fiscal and monetary policy, government budgets, debt, and central banking. It tests understanding of topics like the federal budget balance, cyclically adjusted budget balance, debt-to-GDP ratio, crowding out effect, and tools of monetary policy like open market operations and the federal funds rate.
The document summarizes trends in the information technology sector seen in the fourth quarter of 2014. It notes an increase in large enterprise license agreements being pushed by software sales representatives and warns that these agreements can result in vendor lock-in and overpaying if not carefully evaluated. The summary recommends that organizations carefully assess projected demand before agreeing to large commitments, ensure rights are used, and consider contractual risk and contingencies to avoid potential downsides of enterprise license agreements.
This document provides a market update from Mullins Investment Management for January 2015. It includes summaries of key economic indicators, market indexes, commodity prices, and bond yields as of December 31, 2014. It also analyzes the performance of domestic and international markets in 2014 and provides an outlook on the US and global economies for 2015.
Unlike the runways of the world, the growth trend line in the aviation sector has never been straight. Long-term growth has been punctuated by demand shocks that rein in investment and impact traffic. With investors in mind, this series of articles looks at the factors that impact aviation growth, transactions, infrastructure needs, and ultimately drive air connectivity. More: http://pwc.to/1uEPT4e
The latest quarterly strategic report that gives a summary of top market trends impacting major spend categories, and gives actionable insights to drive strategic value for your organization.
The report summarizes trends seen in major categories of corporate spending in Q1 2015. For logistics spending, it notes that unprecedented volatility in oil prices and other market factors has required logistics teams to adapt rapidly to changing conditions. For IT spending, it highlights that mobile data usage is exploding due to increased adoption of smartphones and data-heavy mobile apps, creating challenges for enterprises in managing rising mobile telecom costs. The report provides insights and recommendations for how organizations can optimize spending in these and other categories in the current market environment.
The document summarizes the 2016 U.S. Goodwill Impairment Study. It finds that 2015 saw record levels of both goodwill added ($458 billion) and goodwill impaired ($57 billion) among U.S. public companies. Goodwill impaired more than doubled from 2014 levels, driven by increases in the energy, information technology, consumer discretionary, industrials, and utilities industries. The study also reports that 59% of public company respondents in a survey now use the optional qualitative goodwill impairment test, up from 29% in 2013. Furthermore, 82% of survey respondents supported proposed FASB changes to simplify the goodwill impairment test.
The document summarizes the key procurement trends for 2015 based on a report by GEP. Major trends include lower oil prices reducing transportation and commodity costs; economic slowdowns in China and Europe increasing supply chain risks; a focus on sustainability initiatives and renewable energy; demands for faster delivery of value to customers; and increased use of cloud, mobile, analytics and e-commerce technologies. The report recommends strategies for procurement leaders to capitalize on these trends such as renegotiating transportation contracts, implementing sustainability requirements for suppliers, ensuring agile procurement processes, and leveraging new technologies to drive decisions.
Every year PSMJ does a forecast of the various architecture, engineering, and construction (A/E/C) markets. This year, we present PSMJ’s A/E/C Market Outlook: How do the A/E/C Markets Look in 2016 and Beyond? This report covers A/E/C industry and market trends for 2015 and 2016.
We begin by looking at trends in the overall economy–especially those trend that affect A/E/C firms. Next, we detail what is happening specifically in the A/E/C industry right now.
Then we present our outlook for next year and beyond—what we think is going to happen in the various market sectors. We look at which markets are up and which markets are down.
And finally, we conclude with recommendations on what A/E/C firms should to do to be successful in 2016 and beyond.
It is about economic analysis for US from 2014-2016Review my paper.docxBHANU281672
It is about economic analysis for US from 2014-2016
Review my paper and correct some grammers.
Besides, correct the wrong thing and add what the "blue word" suggested.
At the end of the analysis of 2016.
Add some changes and trend after the trump selection.
Part A
Introduction
My name is Yinan Hong. I am your portfolio manager from Trailblazer Investment Advisors. I am a CFA holder, equipped with sufficient financial knowledge. I will help my customers manage their wealth and try my best to gain as much as possible. There are three objectives for my clients, Sam and Amy Kratchman with $1,100,000(on an after-tax basis) inheritance. The first one is having enough money for their life after retirement at age 65. The second objective is raising college tuition for their two children. The last one is to buy a beach house with newfound inheritance.
Economic Analysis
2014
GDP Growth
The economic recovery of United States in 2014 became a light spot in global economy after the 2009 recession. The low price level, decreasing unemployment rate, better development of the estate and manufacturing industry made the economy continuously recover. However, some important indexes like the investment of the real estate, income of residents, manufacturing have not reached to the same level as it performed before the recession. The percentage change in Real Gross Domestic Product in 2014 increased in the former three quarters and then decrease in the Q4.
In the first quarter, the change of GDP was 2.1% negative growth
1
. The most important factor was the abominable weather. The personal consumption expenditures for nondurable goods decreased because
[1]
the inconvenient of buying. The Gross private domestic investment decreased 6.6% because of the huge lower equipment investment
1
. The exports decreased extremely and the imports increased. They all led to the negative growth.
Figure1
[2]
: CCI Index in 2014
The GDP growth reached to 4.0% in the second quarter. By analyzing the components that affected overall GDP growth, personal consumption expenditures and gross private domestic investment played an important role in this significant growth. Consumption contributed 2.56% change in GDP. After the severe weather, the private inventory investment, exports, fixed investment, and non-federal government spending increased. However, 5% more imports negatively impact GDP and offset those positive contributors. Purchasing Managers’ Index (PMI) also indicated that the economic situation would turns better. The overall PMI index was over 50 and kept the upward trend, which represents expansion of the manufacturing sector. Besides, as shown in figure 1, the consumer confidence index had an upward tendency, may because corporates operated better, unemployment rate decreased, and the income of residents increased.
Figure 2
[3]
Unemployment rate continuously went down in 2014, and the job market significantly became better. Businesses have added 10.9 million jobs ...
The document provides an analysis of the Consumer Discretionary sector by the Dragon Fund for the third quarter of 2015. It identifies the Household Durables subsector as one to watch due to increasing housing starts, innovative home furnishings, and positive economic growth supporting home buying. However, risks include tight lending slowing housing demand. Overall, the sector declined in Q3 but outperforms based on fundamentals. Household Durables has above-average growth and trades at a below-sector multiple, making it an attractive investment opportunity.
1. Southwest Airlines has grown to become the largest domestic airline in the US with over 436 jets serving destinations across the country.
2. While other airlines have struggled with rising costs and economic downturns, Southwest has remained profitable through fuel hedging and maintaining low operating costs.
3. Southwest has increased wages for employees and takes steps to lower unemployment in the cities it serves.
Today’s Economic Landscape and What’s on the Other SideSavannah Whaley
SPG Trend Advisors is a boutique consultancy that provides global economic research for business and other decision makers. With fifty years combined experience between the principals, and through its website, SPG Trend Advisors provides insightful analysis and forecasting to prepare senior executives for tomorrows trends.
Possibly the most worrying development was the explosive rise of operating costs. More than half of the professionals responding to the survey reported problems with input inflation. The recovery picked up speed in early 2011 but conditions remain fragile and new challenges have emerged like rising inflation. Confidence improved this quarter but developing countries reported slightly less investment and more layoffs as businesses come to terms with the weaker-than-expected recovery.
Hawthorne Distribution Global Written ReportRyan Spetnagel
This document provides an analysis and recommendations for Hawthorne Distribution, a logistics company. It summarizes the transportation and logistics industry, including key details on local and global markets. Recommendations include developing a mobile app, increasing social media presence, revising business processes, and adding a customer relationship management system to facilitate international expansion while maintaining customer satisfaction.
The document summarizes North American office market indicators for Q3 2014. Vacancy rates declined slightly in both the US and Canada while absorption increased. Job growth drove office demand in both countries, leading to a broadening economic recovery. Office-using employment increased more than total employment, with growth seen across more industry sectors and geographic regions. Transaction volume was also up, reflecting continued strong investor demand.
The document provides an overview and analysis of Q3 2014 office market conditions in North America. Some key points:
- Vacancy rates declined slightly in both the US and Canada, while net absorption and rental rates increased.
- Job and office-using employment growth has broadened beyond just tech and energy markets, driving continued recovery. Demand is widespread across regions.
- The recovery is supported by projections of ongoing economic and employment expansion in both the US and Canada through 2015.
The US economic recovery has been the weakest in over 50 years with little growth in wages or disposable income. However, exports have increased more than previous recoveries due to continued global growth around 4%. While uncertainty remains from Europe, US corporations have benefited from exports and global sales. Investors should focus on downside protection, globally competitive large companies, and income strategies.
The US economic recovery has been the weakest in over 50 years with little growth in wages or disposable income. However, exports have increased more than previous recoveries due to continued global growth around 4%. While uncertainty remains from Europe, US corporations have benefited from exports and global sales. Investors should focus on downside protection, globally competitive large companies, and income strategies.
Business confidence increased significantly in the first quarter of 2016 according to a survey by AGI. The business confidence index rose from 95.9 to 101.9 as businesses experienced some relief and signs of recovery in the quarter. Power supply also improved noticeably, though high costs of utilities, inflation, and taxes continued to place pressure on many companies. While businesses were optimistic about the next quarter, sustained growth would require addressing ongoing challenges around costs and the business environment.
Similar to IVC White Paper (Swelbar) MAY 2016 v2 (20)
1. A PEAK AT THE
U.S. ECONOMY
AND AIR SERVICE
An InterVISTAS White Paper
William S. “Bill” Swelbar
Executive Vice President
MAY 2016
2. A Peak at the U.S. Economy and Air Service 1
The official dates of business cycle beginnings and endings are determined by the National Bureau of
Economic Research (NBER). Business cycles have four distinct phases: expansion, peak, contraction and
trough. Between 1945 and 2009, there have been 11 distinct business cycles in the US with the average
length of a cycle lasting about 69 months, or a little less than six years. The average expansion during this
period has lasted roughly 58 months, while the average contraction has lasted only 11 months.
However, since the 1990s the length of the business cycles looks much different and the current cycle
resembles those. The three business cycles from July 1990 to June 2009 had an average expansion phase
of 95 months compared with the average recession length of 11 months over entire cycle. The current cycle
began during the fourth quarter of 2009 and remains in an expansionary phase today. We are nearing the
80th month of the expansion and may very well have witnessed the peak.
History would suggest that the contraction period would begin sometime during the first half of 2017 which
coincides by the way in a presidential election year or shortly thereafter much like the prior business cycle.
The contraction of the economy would then run through 2017 and thus mark the end of this business cycle.
History seems to support the trajectory of the current business cycle. While still expansionary, the growth
has occurred with macroeconomic crosswinds in place and geopolitical uncertainties in nearly every corner
of the world present. Beginning in the second half of 2013, macroeconomic crosswinds turned into tailwinds
as the expansion period marched toward a yet to be determined peak.
Slower Relative Real GDP Growth Defines This Cycle
In addition to Real Gross Domestic Product, two other indicators have demonstrated strong correlation with
US airline industry health. They are the Institute for Supply Management’s (ISM) manufacturing index
which has been trending lower and the University of Michigan’s Consumer Sentiment Survey which trended
higher throughout 2015. As can be seen, the Consumer Sentiment Survey in 2015 correlates closely with
the industry earning it highest margins during this business cycle.
40
2,040
4,040
6,040
8,040
10,040
12,040
14,040
16,040
18,040
Average =
6,501.3
Average =
8,011.7
Average =
10,793.4
Average =
14,101.8
Average =
15,489.5
3. A Peak at the U.S. Economy and Air Service 2
A Strong Directional Correlation Between
Consumer Sentiment and Airline Profitability Exists
Source: University of Michigan
What is interesting to note is that during the expansionary period of the current cycle, the consumer has
been less of a story than in the past and that is because macroeconomic indicators have not been as
bullish, as home prices just now coming close to recapturing lost values and other commodity prices have
been decreasing while growth in incomes persist.
Consumer Confidence in This Business Cycle:
Lower on average than that since the first business cycle
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
0
20
40
60
80
100
120
Consumer Sentiment Pre-Tax Margin
Consumer
Sentiment
Profit Margin for
Airline Industry
40
50
60
70
80
90
100
110
120
Average = 67.7 Average = 90.9 Average = 93.7 Average = 83.4 Average = 78.3
4. A Peak at the U.S. Economy and Air Service 3
This is evident in the University of Michigan’s Consumer Sentiment reading. In fourth quarter of 2013, the
index measured 76.9, a decrease of nearly 5 points from the prior quarter. Importantly, consumers are not
considered bullish until the index measures over 90. For the first time since July of 2007, the index achieved
values in the 90’s for all four quarters of 2015. This is yet another indicator that the economy is still in an
expansionary mode but may be at or near its peak. Further, it is this indicator that suggests why mixed
news about the macro economy are variegated.
It used to be that the health of the US airline industry was inextricably tied to the health of the US economy.
If one had a good real GDP forecast, forecasting US airline industry revenue was a pretty straight forward
exercise. Historically, revenue equated to an average of .90 percent of Real GDP plus or minus four
percent. That is no longer the case, with the internet as a ticket distribution vehicle, permitting price
transparency shopping for the air travel consumer. In addition, the growth of the low cost and ultra-low cost
carrier sector pushed prices down, and created vigorous price competition, forever changing the
relationship of GDP and airline revenue beginning in the second half of 2000.
Passenger Revenue and Ancillary Fees
as a Percent of Gross Domestic Product
Like many things, this business cycle is harder to read based purely on macroeconomic indicators than at
any time in the past. Unbundling and re-bundling the product in return for ancillary fees is part of the new
revenue vernacular. Dated mindsets in commodity-emulating industries suggest that the only way to earn
new revenue was to add supply in order to win a share of the newly created revenue. Now capacity
discipline is the mantra leading to a profit-driven operating mentality for carriers of all ilk. The US airline
industry looks very different in this business cycle than in any of the four that preceded it since deregulation.
As growth in capacity has slowed over the past two business cycles, load factors has increased 15 points.
0.5%
0.6%
0.7%
0.8%
0.9%
1.0%
Pax Rev
Pax Rev + Ancillary Fees
($29.3 B)
Average = 0.71%
Average = 0.90%
Average = 0.76%
5. A Peak at the U.S. Economy and Air Service 4
Capacity Growth Across the Business Cycles:
Load factors grow nearly 15 points over the past two cycles
Data Source: A4A Airline Cost Index Tables
Whereas in the past, growth in capacity has been faster than the growth rates in Real GDP, that is simply
not the case in this business cycle. While we are seeing growth in excess of Real GDP in the nation’s
largest markets, the same cannot be said for the smaller markets who are still realizing modest decreases
in frequencies and seats. Connectivity is being lost on the margin. The fact that capacity grew faster than
the economy in the past was a major contributing influence to the industry performing poorly from a financial
perspective.
Capacity Growth Faster Than Real GDP:
Making sustainable profitability a difficult proposition
Notes: SAAR, 2009 Chained Dollars; Business cycle 1 = 100
40%
45%
50%
55%
60%
65%
70%
75%
80%
85%
0.00
200,000.00
400,000.00
600,000.00
800,000.00
1,000,000.00
1,200,000.00
1978:4 - 1982:4 1983:1 - 1991:1 1991:2 - 2001:4 2002:1 - 2009:3 2009:4 - Present
Average Load Factor
Average Annual Revenue Passenger Miles (000)
Average Annual Available Seat Miles (000)
0
50
100
150
200
250
1978:4 - 1982:4 1983:1 - 1991:1 1991:2 - 2001:4 2002:1 - 2009:3 2009:4 - Present
Available Seat Mile Index
Real GDP Index
6. A Peak at the U.S. Economy and Air Service 5
As capacity grew faster than real GDP, unit revenue, whether in passenger revenue per revenue passenger
mile (Yield) or per available seat mile (Unit Revenue) did not come close to keeping pace with inflation.
The industry has done a good job of managing controllable costs relative to inflation, particularly labor costs.
But rising labor costs in the past have been a good barometer that the industry is nearing a peak and that
is certainly the case today.
Unit Revenue Does Not Keep Pace With Inflation:
Despite recent increases, a great consumer bargain remains
Note: SAAR, 2009 Chained Dollars; Business cycle 1 = 100
This was the rule and not the exception until the current cycle. Only in the current cycle did we see yield
and unit revenues growing at significant rates. Through the first half of the current business cycle, domestic
passenger yield increased year over year in 35 of the 38 months averaging 6.6% where data is available.
During the second half of the current cycle domestic passenger yield increased in 22 of the 38 months
averaging .2%, or at a rate 6.4 points slower than the first half. Truly a tale of two halves of the cycle is
evident as domestic unit revenue has now declined year over year for the past 12 months. International
trends look similar.
0
50
100
150
200
250
300
0
50
100
150
200
250
300
1978:4 - 1982:4 1983:1 - 1991:1 1991:2 - 2001:4 2002:1 - 2009:3 2009:4 - Present
Consumer Price Index
Passenger Yield (with Ancillaries)
Passenger Unit Revenue (with Ancillaries)
7. A Peak at the U.S. Economy and Air Service 6
Over The Last 12 Months…
The consumer has realized lower prices from jet fuel price declines
We have discussed certain catalysts that caused/forced the US airline industry to change its ways of doing
business for fear they would end up in the graveyard like icons Eastern, Pan Am and TWA to name a few.
But no catalyst was more significant than the rapid rise in the price oil commencing in 2004 and culminating
in a nearly $148 price per barrel in July of 2008. For the most part, the price of oil was an irrelevant cost
center during most the first four business cycles of a deregulated business. With little fluctuation in the cost
of jet fuel, the industry would simply grow as this uncontrollable cost center was well under control averaging
$25 per barrel and a $5 crack spread.
An Uncontrollable Cost:
Fuel was the catalyst the industry needed to change its game
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
Domestic Yield Change International Yield Change
0%
5%
10%
15%
20%
25%
30%
35%
40%
1978:4 - 1982:4 1983:1 - 1991:1 1991:2 - 2001:4 2002:1 - 2009:3 2009:4 - Present
Labor Expense as a Percent of Total Op Expense
Fuel Expense as a Percent of Total Op Expense
8. A Peak at the U.S. Economy and Air Service 7
Encouraging signs are on the horizon however. It is important to note that it has become less the absolute
price of oil and more about the volatility that troubles the industry. Whereas volatility was the rule from
2004 through 2011, instability in the price of jet fuel moderated for two years then volatility again has
become an issue albeit at a much lower price point. Moreover, virtually every futures forecast at the time
suggested that the price of oil would remain at or $100 per barrel or may even trend down modestly. There
was even one long-time aviation observer that believed that the price of oil would drop to $40 per barrel in
2017. While that seemed unrealistic just two years ago given the many geopolitical uncertainties in the
world, it underscores the difficulty in predicting the price of jet fuel as an input cost.
Fueling the Reinvestment
Yet today’s jet fuel expense remains the industry’s largest
Certainly the escalation in the price of oil had a profound effect on the airline business and as a result, the
airport business. The sector most impacted is the regional business where the simple rise in the price of
oil made the 50-seat airframe uneconomic. But there is more to come in the regional sector and this will
impact airports large and small. And with oil at $40 per barrel, which in turn would make the 50-seat platform
economic, this issue is even more prevalent.
A structural issue has presented itself with regard to the number of qualified pilots available to meet the
demand for licensed airmen. That tempest is a combination of regulation and chronological age. 1500
hours is now required to get a license to fly commercially (can be less if hours are gained at a recognized
university for example); new flight time/duty time regulations require that each airline have more pilots on
hand to do the same amount of flying previously done; and the fact that the mainline airlines face a
significant number of pilot retirements from now until 2024 which will also increase demand. All things point
to a regional sector getting even smaller over the coming years as many markets will not be able to support
a trend toward larger airframes, as well dealing with the structural issue, impacting pilot supply. Since 2010,
the average seat size of an aircraft in the domestic market has increased 14%. The average size of a
regional aircraft is now 53 seats, much greater than a decade ago.
$1.74
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
Average = $0.69
Average = $2.18
9. A Peak at the U.S. Economy and Air Service 8
The bottom line also presents a very different result in this business cycle. Whereas the industry had lost
a cumulative $44 billion between the time the industry was deregulated and the first quarter of 2010, this
cycle is much different. The magnitude of the losses was but one factor that caused the majority of industry
to file for bankruptcy protection in order to restructure their operations. In 2015, pre-tax margins will
approach 14 percent. Finally the industry is earning profit margins like US industry and the airline
companies are actually earning profits and re-investing a portion of those profits back into the business.
This is very different than cycles in the past where the industry was merely clinging for survival. No longer
can it be said that the industry has lost money since it was deregulated. As of the fourth quarter of 2015,
the industry has made back all of the historic losses and now shows a profit of $200 million.
The Current Business Cycle Is Something Different:
The latest margins are on par with US industry
Data Source: A4A Airline Cost Index Tables
0
50
100
150
200
250
300
2004 2007 2010 2013 2015
Mainline
51-99 Seat RJ
50 Seat RJ
Other Small RJ & Turbo
51 Percent of 50-seat and Less Departures Cut Since 2000
Frequencies
2004 = 100.0
86 Million 50-seat and Less Seats Cut Since 2004
Departed Seats
2004 = 100.0
0
50
100
150
200
250
300
2004 2007 2010 2013 2015
Mainline
51-99 Seat RJ
50 Seat RJ
Other Small RJ & Turbo
-0.8%
1.5%
3.1%
-1.2%
11.1%
-1.2%
0.1%
1.8%
-6.2%
4.0%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
1978:4 - 1982:4 1983:1 - 1991:1 1991:2 - 2001:4 2002:1 - 2009:3 2009:4 - Present
Operating Profit Margin Pre-Tax Profit Margin
CUMULATIVE
OPERATING
MARGIN
4.0%
CUMULATIVE
PRE-TAX
MARGIN
0.1%
10. A Peak at the U.S. Economy and Air Service 9
THE LANDSCAPE – ARE WE PEAKING AND ARE THE CHANGES LONG LASTING?
The concentration of the industry has certainly been an important factor in increasing the barriers to entry
and the pricing environment in the US domestic marketplace. In addition to consolidation, the availability
of capital (or lack of), high and volatile fuel prices, general lack of facilities in the nation’s largest markets
and simply a mature market have all worked to increase those barriers. And now a scarcity of qualified
pilots presents itself. On the international side however, barriers to entry have been reduced as Open Skies
Agreements create and present opportunities for international entry.
Today the Big 4 U.S. Airlines
Hold 80% of the Domestic Market
Past airline management behaviors have been changed by the new guard. In the past, capital was merely
recycled among and between industry stakeholders, with the exception being the shareholders. That is not
the case today. In the past the industry competed away found economic gains, and efficiencies, largely in
the name of low and lower air fares. That is not the case today. Yesterday’s airline industry emulated other
capital intensive, commodity-like industries by over-expanding during the up cycles and not removing
inefficient capacity in the down cycles. This is certainly not the case today as the industry has actually been
removing capacity and/or growing capacity at a slower rate than GDP during the expansionary phase of
the current business cycle in the name of capacity discipline.
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
American
American West
US Airways
TWA
Southwest
AirTran
United
Continental
Delta
Northwest
11. A Peak at the U.S. Economy and Air Service 10
This Business Cycle Defines Capacity Discipline:
Domestic seat growth that is less than the growth in Real GDP
Source: US DOT T-100 database, via Diio online portal. BEA
Going forward, the number of dots on the airline map will be fewer. This will have some impact on airports
of all sizes with the disproportionate impact being felt at the smaller markets. Given the mindset of current
managements, profitability across the entire business cycle will remain the mantra and this cycle sets the
bar very high. Prices to the air travel consumer will likely have to increase to maintain margins and will test
the elasticity for an increasing number of flyers. Ultra-low cost carriers Spirit, Frontier and Allegiant will
continue to find opportunities to grow by taking advantage of the cost spread they enjoy over the network
carriers.
As costs at the network carriers creep up; and as the network carriers test the incremental consumer’s price
elasticity; and if fuel prices are to remain relatively low as compared with 2008 with little volatility; there may
indeed by some new competition that finds its way into the US domestic market before 2020. The
transatlantic market will look more and more like a domestic transcon market as lower cost carriers begin
to put their toes into transoceanic waters.
History suggests that this business cycle will peak in 2016 or early 2017. This business cycle will end
sometime in 2017 or early 2018 at the latest. Lower fuel prices will either bail out the incumbent network
carriers or give capital sufficient comfort to fund start-ups again much like the last cycle which saw the low
cost carriers grab 20 points of domestic market share. For the 12 months ending September 2015, the fuel
savings versus the prior 12 months explained 97% of the pre-tax profit improvement. A scary proposition
it seems is to realized improved profitability on fuel savings alone.
-8%
-6%
-4%
-2%
0%
2%
4%
6%
Year-over-year % Changes in U.S. GDP and Domestic Seat Departures
YOY % Chg GDP YOY % Chg Domestic Seats
12. A Peak at the U.S. Economy and Air Service 11
Fuel Explains 97% of the Year Current Profit Improvement
Balance sheets, shareholders and employees benefit
ARE WE PEAKING? HISTORY SUGGESTS YES.
Whether it be the macroeconomic indicators; or the fact that US companies have experience declines in
profits for three consecutive quarters – the worst since the Great Recession; or the fact that labor rates are
increasing at significant rates; or the fact that the industry has significant new aircraft on order; or the fact
that merger and acquisition activity is likely to slow with another potential; or the fact that airlines are again
growing capacity in at least the largest markets trying to increase revenue on volume over unit price; many
indicators show eerily similar to points in the past when economic contraction begins. All of the above data
points define cycle peaks not to mention that 2016 is a presidential election year.
The financial condition of the industry is light years better than past slowdowns as debt has been reduced
and significant capital expenditures are being funded with improved profits and free cash flow. In every
prior business cycle passenger load factors increased and this cycle is no different. In every other business
cycle hub and spoke systems came and went and this cycle is no different. In at least the past three
business cycles the LCCs/ULCCs became increasingly prevalent and this cycle is no different particularly
as the ULCCs penetrate large metropolitan areas.
Where this cycle is different is that fares have trended up although the past 12 months have proven to be
a most difficult pricing environment. And this cycle is different in that small community air service saw
meaningful benefits primarily from the construction of hubs and spokes to airframes that could seat more
and enhance competition by flying to points longer that the 400-mile limit of the turboprop aircraft.
To put things into perspective for those who suggest that the industry is gouging the consumer in the form
of high and higher fares, it is important to understand that even today; base airfares alone produce only a
modest operating profit per enplaned passenger. If not for ancillary revenue, what the passenger pays per
enplanement does not pay the bills. Yes some costs like cargo are included but they are modest and do
not change the story. The most recent 12-month period looks very different than the cycle in its entirety in
8,778
-3,951
-1,114
1,100 375
3,866
19,50810,454
Prior Year
Pre-Tax Profit
Increased
Labor
Expense
Increased
Non-Labor
Expense
Increased
Passenger
Revenue
Increased
Ancillary
Revenue
Other
Improved
Revenue
& Expense
Initiatives
Decreased
Fuel
Expense
Current Year
Pre-Tax Profit
13. A Peak at the U.S. Economy and Air Service 12
a number of ways like fuel per enplanement is down $15 as compared to the cycle in total but labor rates
are up $10 per enplanement. It really does feel like the beginning of the end of this cycle.
Income Statement Based on Passenger and Ancillary Revenue ONLY
Revenue and expense metrics are per enplanement
What about air service in a macroeconomic slowdown or even a recessionary period? If pilot supply is an
issue, then forced retirements at age 65 do not change the calculus nor does the trend toward larger aircraft.
The mainline carriers may slow down some deliveries however the demand for pilots just to stay the same
size for the mainline carriers basically remains the same. The same pressure on the regional sector shows
no signs of relief. Historically we have always seen some pulldown in capacity during recessionary periods
and I am confident that the next one will be no different. The network carriers continue to make significant
changes in frequencies and seats at small and non-hub airports. Those airports that are losing frequencies
and seats in 2016 versus 2015 should feel some vulnerability as clearly they are underperforming markets
relative to others on the respective networks. And then there is the 37:97 proposition.
1978:4 - 1982:4 1983:1 - 1991:1 1991:2 - 2001:4 2002:1 - 2009:3 2009:4 - Present
12 Mos. Ending
Sept. 2015
Quarters in Business Cycle 17 33 43 31 24
Enplanements (000) 1,252,134 3,390,017 6,111,368 5,331,409 4,184,772 777.8
Passenger Revenue $ 92.48 $ 108.68 $ 130.45 $ 134.89 $ 167.45 162.97
Labor Expense $ 38.34 $ 40.34 $ 49.02 $ 46.95 $ 43.72 $ 53.31
Fuel Expense 29.21 21.33 17.46 38.19 55.11 40.22
Commission Expense 6.02 10.78 11.15 2.31 1.98 1.64
Landing Fee Expense 1.83 2.19 2.93 3.56 3.84 3.67
All Other Expense $ 29.58 $ 44.05 $ 59.12 $ 61.13 $ 66.44 $ 63.93
Total Operating Expense X TR $ 104.98 $ 118.69 $ 139.68 $ 152.15 $ 171.10 162.78
Total Operating Profit/Loss $ (12.50) $ (10.01) $ (9.23) $ (17.25) $ (3.65) $ 0.19
Ancillary Revenue $ 0.18 $ 0.36 $ 2.15 $ 2.47 $ 8.75 8.66
Op after Ancillary Revenue $ (12.32) $ (9.65) $ (7.07) $ (14.79) $ 5.10 $ 8.85
Interest Expense /1 $ 4.79 $ 3.71 $ 3.83 $ 5.72 $ 3.11 $ 3.11
Pre-Tax after Acillary Revenue $ (17.11) $ (13.36) $ (10.90) $ (20.51) $ 1.99 $ 5.74
14. A Peak at the U.S. Economy and Air Service 13
A Hard Fact: The 37:97 Proposition
37 percent of mainland airports produce 97% of demand
Source: US DOT, DB1B database, YE3q 2015, via Diio online portal.
Top 150 Airports
Airports #151-416
3%
97%
Percent of Domestic Demand
15. A Peak at the U.S. Economy and Air Service 14
APPENDIX
1978:4 - 1982:4 1983:1 - 1991:1 1991:2 - 2001:4 2002:1 - 2009:3 2009:4 - Present 12 Mos. Ending Sept. ‘15
Quarters in Business Cycle 17 33 43 31 24 4
Nominal Gross Domestic Product 2,981.4 4,835.1 8,319.0 13,122.6 16,316.6 17,809.8
Consumer Price Index 84.5 114.1 156.7 197.7
229.0
237.0
Real Gross Domestic Product 6,501.3 8,011.7 10,793.4 14,101.8 15,469.5 16,345.0
Consumer Confidence 67.7 90.9 93.7 83.4 78.3 93.0
Total Enplanements (000) 1,252,134 3,390,017 6,111,368 5,331,409 4,184,772 567,964
Total Revenue Passenger Miles (000) 1,080,596 3,134,033 6,234,878 5,804,170 4,996,789 889,596
Total Available Seat Miles (000) 1,803,746 5,078,606 9,110,513 7,506,932 6,037,407 1,067,066
Load Factor (Percent) 59.9% 61.7% 68.4% 77.3% 82.8% 83.4%
Regional Available Seat Miles (000) 72,880 39,678 165,290 569,357 554,380 90,125
Regional ASMs as pct. Of Total
ASMs
4.0% 0.8% 1.8% 7.6% 9.2% 8.4%
Total Operating Seats 6,315,646 16,785,887 29,531,638 23,698,807 18,903,263 3,286,815
Passenger Yield (cents per RPM) 10.72 11.76 12.79 12.39 14.02 14.25
Passenger Yield with Ancillaries 10.74 11.79 13.00 12.62 14.76 15.01
Passenger Unit Revenue (cents per
ASM)
6.42 7.25 8.75 9.58 11.61 11.88
Passenger Unit Revenue with
Ancillaries
6.43 7.28 8.90 9.76 12.21 12.51
Cost per Available Seat Mile
(x Trans Rel)
7.29 7.92 9.37 10.81 11.86 11.87
Cost per Available Seat Mile
(xTR and Fuel)
5.26 6.50 8.20 8.09 8.04 8.93
Labor Cost per Available Seat Mile 2.66 2.69 3.29 3.33 3.03 3.89
Labor Cost per Operating Seat 30,401.67 32,583.73 40,575.77 42,246.48 38,714.89 50,465.93
Fuel Cost per Available Seat Mile 2.03 1.42 1.17 2.71 3.82 2.93
Fuel Cost per Operating Seat 23,165.01 17,228.58 14,450.22 34,366.72 48,799.37 38,068.54
Non-Labor Cost per Available
Seat Mile
2.60 3.81 4.91 4.76 5.01 5.05
Total Operating Seats 6,315,646 16,785,887 29,531,638 23,698,807 18,903,263 3,286,815
Total Passenger Enplanements (000) 1,252,134 3,390,017 6,111,368 5,331,409 4,184,772 567,964
Average Full-Time Equivalents 333,020 380,662 476,335 424,896 384,568 391,711
Total Passenger Revenue (Millions) 115,792 368,424 797,247 719,158 700,748 126,760
Total Ancillary Revenue (Millions) 226 1,225 13,160 13,160 36,613 6,734
Total Operating Revenue (Millions) 133,150 417,332 904,026 910,941 938,528 169,464
Total Labor Expense (Millions) $48,001.55 $136,737 $299,567 $250,298 $182,959 $41,468
-- as a percent of total Op Expense 35.8% 33.3% 34.2% 27.1% 21.9% 28.5%
Total Labor Expense per FTE $33,915.34 $43,540.28 $58,502.32 $76,010.27 $79,292.14 $105,864
ASMs per FTE (000) 1,276 1,614 1,779 2,293 2,612 2,723
Total Fuel Expense (Millions) $6,575 $72,299 $106,685 $203,613 $230,617 $31,281.1
16. A Peak at the U.S. Economy and Air Service 15
1978:4 - 1982:4 1983:1 - 1991:1 1991:2 - 2001:4 2002:1 - 2009:3 2009:4 - Present 12 Mos. Ending Sept. ‘15
-- as a percent of total Op Expense 27.2% 17.6% 12.2% 22.1% 27.6% 21.5%
Total Gallons of Fuel Consumed 43,655 106,279 171,569 124,694 94,750 16,410
Price per Gallon $0.84 $0.68 $0.62 $1.63 $2.43 $1.91
Total Commissions Paid (Millions) $7,533 $36,549 $68,152 $12,342 $8,292 $1,275
Percent of Passenger Revenue 6.5% 9.9% 8.5% 1.7% 1.2% 1.0%
Landing Fee Expense (Millions) $2,296 $7,420 $17,915 $18,966 $16,089 $2,099
Transport Related Expense (Millions) $2,784 $8,643 $22,768 $110,776 $118,414 $18,790
Total Operating Expense (Millions) $134,229 $410,992 $876,404 $921,927 $834,428 145,398.50
Total Operating Profit (Millions) $(1,078) $6,340 $27,622 $(10,986) $104,100 $24,065
-- Operating Margin -0.8% 1.5% 3.1% -1.2% 11.1% 14.2%
Pre-Tax Profit (Millions) $(1,609) $389 $16,528 $(56,894) $37,701 $19,508
-- Pre-Tax Profit Margin -1.2% 0.1% 1.8% -6.2% 4.0% 11.5%
17. Prepared by
William S. “Bill” Swelbar
Executive Vice President
InterVISTAS Consulting Inc.
1150 Connecticut Avenue, NW
Suite 601
Washington, DC 20036
Tel:
+1-202-688-2220
Fax: +1-202-688-2225
www.intervistas.com