WHAT IS THE COX AUTOMOTIVE INSIGHT REPORT?
How will the new and used car markets perform during the rest of this year? What will become the future fuel of choice? What are the barriers as we drive towards Mobility as a Service (MaaS)?
In this first annual Insight Report from Cox Automotive and Grant Thornton, we go beyond the headlines to provide our view on the future of our market, and what it means for us all.
Lending To Automobile Dealers Credit Risk Issueserikday
Lending to auto dealerships presents several credit risk management issues for lenders. Large dealer groups have greater dollar exposure and complexity due to operating multiple franchises across various regions. Small dealers may offer better returns but also have vulnerabilities due to sole ownership and reliance on local markets. When evaluating loans, lenders must consider factors like a dealer's financial controls, ownership structure, management experience, product mix, and regional economic exposure to understand the risks. Ongoing changes in the auto industry also impact dealers through issues such as high inventory, lower margins, and consolidation trends.
WiseGuyRerports.com Presents “Global Cancer Drugs Market Size, Status and Forecast 2019-2025” New Document to its Studies Database. The report Research Contain 100 Pages with Detailed Analysis.
The Short Tale: Near-Sourcing Trends, in World Trade Magazine, by Benjamin Go...Benjamin Gordon
Benjamin Gordon outlines how supply chains are shifting to near-sourcing, as companies shift manufacturing and logistics to locations that are closer to their customers. Winners are Mexico and Canada, as well as the logistics companies that serve them. Losers could be China and other long-distance sourcing providers.
Mercer Capital's Value Focus: Transportation & Logistics | Q2 2019 | Feature...Mercer Capital
Mercer Capital's Transportation & LogisticsIndustry newsletter provides perspective on valuation issues. Each newsletter also typically includes macroeconomic trends, industry trends, mergers and acquisitions review, and guideline public company metrics.
AMCON Distributing Co. is undervalued based on various valuation methodologies. It has reduced debt significantly over the past four years through paying down its credit facility. AMCON has a strong market presence distributing products to over 4,300 retail outlets across 18 states. The company is led by an experienced management team that has improved operations and financial position. However, AMCON operates on thin margins in a competitive industry and remains dependent on its credit facility.
WHAT IS THE COX AUTOMOTIVE INSIGHT REPORT?
How will the new and used car markets perform during the rest of this year? What will become the future fuel of choice? What are the barriers as we drive towards Mobility as a Service (MaaS)?
In this first annual Insight Report from Cox Automotive and Grant Thornton, we go beyond the headlines to provide our view on the future of our market, and what it means for us all.
Lending To Automobile Dealers Credit Risk Issueserikday
Lending to auto dealerships presents several credit risk management issues for lenders. Large dealer groups have greater dollar exposure and complexity due to operating multiple franchises across various regions. Small dealers may offer better returns but also have vulnerabilities due to sole ownership and reliance on local markets. When evaluating loans, lenders must consider factors like a dealer's financial controls, ownership structure, management experience, product mix, and regional economic exposure to understand the risks. Ongoing changes in the auto industry also impact dealers through issues such as high inventory, lower margins, and consolidation trends.
WiseGuyRerports.com Presents “Global Cancer Drugs Market Size, Status and Forecast 2019-2025” New Document to its Studies Database. The report Research Contain 100 Pages with Detailed Analysis.
The Short Tale: Near-Sourcing Trends, in World Trade Magazine, by Benjamin Go...Benjamin Gordon
Benjamin Gordon outlines how supply chains are shifting to near-sourcing, as companies shift manufacturing and logistics to locations that are closer to their customers. Winners are Mexico and Canada, as well as the logistics companies that serve them. Losers could be China and other long-distance sourcing providers.
Mercer Capital's Value Focus: Transportation & Logistics | Q2 2019 | Feature...Mercer Capital
Mercer Capital's Transportation & LogisticsIndustry newsletter provides perspective on valuation issues. Each newsletter also typically includes macroeconomic trends, industry trends, mergers and acquisitions review, and guideline public company metrics.
AMCON Distributing Co. is undervalued based on various valuation methodologies. It has reduced debt significantly over the past four years through paying down its credit facility. AMCON has a strong market presence distributing products to over 4,300 retail outlets across 18 states. The company is led by an experienced management team that has improved operations and financial position. However, AMCON operates on thin margins in a competitive industry and remains dependent on its credit facility.
RE/MAX had over 4 billion national brand impressions in 2013 through various advertising channels. It spent over $130 million on television advertising alone, reaching 48% of television impressions among major real estate brands. RE/MAX also advertises extensively in print magazines, online, and through social media. As a result, the company has the #1 brand awareness among real estate companies in the US.
The Savills Prime Office Cost (SPOC) Index presents a quarterly snapshot of occupancy costs for prime office space throughout the world as provided by expert, local tenant representation professionals.
Our attempt was to pitch and acquisition of Nordstrom to Macy's to form a retail conglomerate. Emphasizing consumer trends and synergies between the two companies. Data provided from multiple sources mainly Deloitte's, "The Great Retail Bifurcation".
The document analyzes competition in the US airline industry using Porter's Five Forces model. It determines that the industry is an oligopoly, with four major carriers (Delta, Southwest, United, American) dominating the market. Airlines compete on pricing, using dynamic pricing strategies like yield management to adjust prices based on demand, time of booking, and other factors. This allows airlines to practice forms of price discrimination. While competition is present, barriers to entry are high for new airlines due to industry regulations, scale requirements, and brand dominance of the major carriers.
Global Automotive Retail industry profile is an essential resource for top-level data and analysis covering the Automotive Retail industry. It includes data on market size and segmentation, plus textual and graphical analysis of the key trends and competitive landscape, leading companies and demographic information. Scope * Contains an executive summary and data on value, volume and/or segmentation* Provides textual analysis of Global Automotive Retail's recent performance and future prospects* Incorporates in-depth five forces competitive environment analysis and scorecards * Includes a five-year forecast of Global Automotive Retail* The leading companies are profiled with supporting key financial metrics * Supported by the key macroeconomic and demographic data affecting the market Highlights * Detailed information is included on market size, measured by value and/or volume* Five forces scorecards provide an accessible yet in depth view of the market's competitive landscape * Market shares are covered by manufacturer or brand Why you should buy this report * Spot future trends and developments * Inform your business decisions * Add weight to presentations and marketing materials * Save time carrying out entry-level researchMarket DefinitionThe automotive retail sector consists of the revenue accrued from sales at auto dealers, gas stations and retailers of auto components. The auto dealers market consists of new and used passenger registered cars, as well as registered light commercial vehicles, sold through car dealerships or auction-houses within the country. It does not include sales of motorcycles or vehicles over 3.5 tons GVW. The service stations market is comprised of fuel retailing, forecourt shop sales and car wash revenues, but excludes food service and other non-fuel sales outside the shop and car wash. Auto components comprise automotive parts and accessories and tires and rubber. Automotive parts and accessories reflect only the aftermarket sales value. Similarly, the tires and rubber is composed of the replacement tire market for passenger cars and light trucks, and excludes sales to OEMs. All market values are given at retail sales price (RSP), and include all relevant taxes and levies. Market shares are calculated on the basis of company global production volumes of gasoline and diesel oil multiplied by average retail (service station) prices. All currency conversions are at constant average 2009 exchange rates.For the purposes of this report, the global market consists of North America, South America, Western Europe, Eastern Europe, and Asia-Pacific.
This document provides an overview of American Airlines presented by Group 6. It includes sections on the company history, market structure, competitive advantages, game theory/pricing approaches, and industry updates. The presentation covers topics such as American Airlines' founding and expansion in the 1930s-1980s, the impact of deregulation in 1978, their innovation with SABRE and frequent flyer programs, and current industry leaders. It also includes a quiz and bibliography.
Georgia ranks ninth among states for Fortune 500 headquarters locations according to a 2014 Fortune magazine issue. Seventeen companies are headquartered in Georgia on the Fortune 500 list, with 31 on the Fortune 1000 list. Approximately 85% of these companies increased revenue from the previous year. Atlanta ranks third among cities for Fortune 500 headquarters concentration. In recent years, three companies have moved their global headquarters to metro Atlanta from other states. Georgia continues to add more Fortune 500 and Fortune 1000 headquarters locations.
This document summarizes a whitepaper on the global hybrid car market. It discusses how hybrid car sales have grown from 2.5 million units in 2011 to an estimated 3 million units in 2013 and are forecast to reach 4.72 million units by 2017. The US, Japan, and Europe currently make up the largest markets. Toyota leads the industry with 67% market share followed by Ford. Factors driving hybrid market growth include concerns over fuel consumption, emissions, and volatile oil prices. Challenges include higher hybrid costs and competition from electric and other alternative fuel vehicles.
This document provides a global office market forecast for 2014-2015 from Cushman & Wakefield. It summarizes office market conditions, trends, and forecasts across major global regions. In the Americas, the US recovery is gaining strength driven by technology and energy, while Canada faces oversupply. Latin America is mixed with Santiago outperforming. In Asia Pacific, growth will slow but modern supply outpaces demand. European markets show signs of stabilization with divergence between prime and secondary space. Workplace transformation is a key global trend driven by cost, talent, and organizational needs.
This document summarizes a report from NADA on used vehicle prices by age level. It finds that from 2007-2012, prices grew 18% for vehicles 1-3 years old but even more, 21.5% on average, for vehicles 4-10 years old. Recently, prices have softened 1.2% for vehicles under 4 years as new vehicle demand and incentives increase, drawing customers from used vehicles. However, older vehicle prices have remained steady as quality improvements make them more desirable and supply declines. NADA predicts prices will continue to diverge, with newer used vehicles softening 1.5% in 2013 while older models see 1.5% growth or remain flat.
- Harvard University is considering candidates to run its $38 billion endowment fund, as it seeks to improve disappointing investment returns and address frequent leadership changes.
- Harvard's endowment has lagged peers in the Ivy League, with 10-year annualized returns of 7.6% compared to 10% for Yale. It has also suffered from multiple chief executive departures in recent years.
- Choosing a new leader will involve assessing Harvard's "hybrid" investment model, which delegates some responsibilities to external managers while maintaining an in-house team. The next chief will aim to boost performance and stability.
Walmart retained the top spot on the Fortune 500 list of top retailers for 2015, generating $482.1 billion in revenue. Exxon Mobil held the second spot with $246.2 billion in revenue from oil and gas. Apple came in third generating $233.7 billion despite not yet entering the automobile market. Berkshire Hathaway ranked fourth with $210.8 billion in revenue and ownership of companies like GEICO, Dairy Queen, and Kraft Heinz.
An Conghui, president of Zhejiang Geely Holding Group and CEO of Geely Auto Group, explains the future of flying cars and the value of an international brand.
The document analyzes car price trends using data from 2,108 used cars scraped from www.carfax.com. Various regression models were created to predict price based on variables like mileage, engine, fuel type, and MPG. The models were compared using metrics like R-squared, AIC, and BIC. Hypothesis tests found the average Ford Mustang price was not significantly different from $19,000, but the average MPG was significantly lower than 28. Confidence intervals were constructed for price and mileage.
The document discusses the history of incentive use in the automotive industry from the 1990s to present. It notes that incentive spending grew dramatically from the mid-1990s to 2004, helping new vehicle sales reach record highs but also depressing used vehicle prices. Manufacturers began reducing incentive use in the mid-2000s in response to negative impacts on used vehicle values. Incentive spending has declined since but risks rising again with increased production capacity if sales growth levels off.
The document provides an outline and details about the Fortune 500 list. It discusses what the Fortune 500 is, who founded Fortune Magazine, and the four main ranking factors (sales growth, assets, earnings, and capitalization). It then lists the top ten companies in 2013, including Walmart at #1, ExxonMobil at #2, and Chevron at #3. For each top company, it provides the CEO name, headquarters location, brief background on the company's performance in 2012-2013, and revenues and profits for the fiscal year.
Some forecasts about Mergers and Acquisitions for 2018Suzzanne Uhland
Mergers and acquisitions of companies are one of the alternatives within the possible investment strategies that a company may follow in order to fulfill its traditional mandate to maximize the benefit for its shareholders. What can be expected from mergers and acquisitions during the next year? Let's see.
Toyota should expand into the Indian market by marketing its larger vehicles like the Camry and SUVs like the RAV4 to middle and high-income Indian households. Toyota could also introduce electric scooters and motorbikes targeted at rural Indian consumers. A promotional event like a raffle to win a Toyota Camry at an auto show could increase exposure. The target market for such a raffle would be males over 18 earning over $50,000 with a college degree, who make up over 60% of auto show attendees.
This document provides a summary of trends in the North American seaport industry according to a 2019 JLL Research report. It identifies 5 key trends: 1) ports adapting infrastructure to accommodate larger ships with higher TEU capacities, 2) the logistics sector exploring alternatives like rail-served inland ports to address long-haul trucker shortages, 3) uncertainty around trade agreements and their potential impact on the US trade deficit and export volumes, 4) actions ocean carriers may take in response to the 2020 regulation change requiring lower sulfur fuels, and 5) how short-sea shipping can help create a more efficient supply chain as larger vessels cause operational issues at major ports.
What's next for Automotive| North America and the World| January 2019paul young cpa, cga
There are many issues facing automotive around the world. This presentation gives you a brief look at what is happening to automotive across the world.
Final CFA Challenge Trinity University Team SubmissionEmilio Vernaza
1) The document analyzes Southwest Airlines (ticker: LUV) and recommends it as a buy. LUV has maintained low costs through operating a single aircraft type and point-to-point routes.
2) It has grown to be the largest US carrier by passengers while continuing to demonstrate low costs, though its cost advantage over competitors is decreasing. LUV has had 43 consecutive years of profitability.
3) Recent restrictions lifts and acquisitions like AirTran have expanded LUV's scope of operations and potential for market share growth domestically and internationally. However, international operations remain a small portion of its business currently.
Read Case 10 Southwest Airlines. Answer questions 1-4 in a three.docxcatheryncouper
Read Case 10: Southwest Airlines. Answer questions 1-4 in a three to five page APA style paper, and supported with the concepts outlined in your text and from your previous classes.
1. Describe the current state of the airline industry and analyze what an airline can do to be successful in the current industry climate.
2. Perform a SWOT analysis for Southwest Airlines.
3. Assess the competitive position of Southwest Airlines by completing a competitor profile for Southwest airlines and at least two of its major competitors.
4. What alternatives does Southwest Airlines face to address the problem of declining financial performance?
Southwest Airlines 2008
1 In 2008, Southwest Airlines (Southwest), the once scrappy underdog in the U.S. airline industry, carried more domestic passengers than any other U.S. airline. The company, unlike all of its major competitors, had been consistently profitable for decades and had weathered recessions, energy crises, and the September 11 terrorist attacks. In the first quarter of 2008, the company was profitable and experienced record first quarter revenue and a record pas- senger load factor (percentage of available seats sold). However, the earnings release made it clear that the “threat of volatile and unprecedented jet fuel prices” was a major issue that threatened future growth. Operating expenses were rising, and Southwest announced that it would cut 2009 growth in available seats to less than 3%. Over the previous decade, growth had been about 5–10% a year. This cut in planned growth was consistent with previous responses to difficult environments. An insight into Southwest’s operating philosophy can be found in the company’s 2001 Annual Report:
Southwest was well poised, financially, to withstand the potentially devastating hammer blow of September 11. Why? Because for several decades our leadership philosophy has been: We manage in good times so that our Company and our People can be job secure and prosper through bad times. . . . Once again, after September 11, our philosophy of managing in good times so as to do well in bad times proved a marvelous prophylactic for our Employees and our Shareholders.
THE U.S. AIRLINE INDUSTRY
The U.S. commercial airline industry was permanently altered in October 1978 when Presi- dent Carter signed the Airline Deregulation Act. Before deregulation, the Civil Aeronautics Board regulated airline route entry and exit, passenger fares, mergers and acquisitions, aattract and retain the world’s top talent have combined to create a combination of path-dependent resources that are very difficult for even the wealthiest software and Internet companies worldwide to easily emulate, acquire, or accelerate. It will take years for any competitor to develop the expertise, infrastructure, reputation, and capabilities to compete effectively with Google. Coca-Cola’s brand name, Gerber Baby Food’s reputation for quality, and Steinway’s exper- tise in piano manufacture would ta ...
RE/MAX had over 4 billion national brand impressions in 2013 through various advertising channels. It spent over $130 million on television advertising alone, reaching 48% of television impressions among major real estate brands. RE/MAX also advertises extensively in print magazines, online, and through social media. As a result, the company has the #1 brand awareness among real estate companies in the US.
The Savills Prime Office Cost (SPOC) Index presents a quarterly snapshot of occupancy costs for prime office space throughout the world as provided by expert, local tenant representation professionals.
Our attempt was to pitch and acquisition of Nordstrom to Macy's to form a retail conglomerate. Emphasizing consumer trends and synergies between the two companies. Data provided from multiple sources mainly Deloitte's, "The Great Retail Bifurcation".
The document analyzes competition in the US airline industry using Porter's Five Forces model. It determines that the industry is an oligopoly, with four major carriers (Delta, Southwest, United, American) dominating the market. Airlines compete on pricing, using dynamic pricing strategies like yield management to adjust prices based on demand, time of booking, and other factors. This allows airlines to practice forms of price discrimination. While competition is present, barriers to entry are high for new airlines due to industry regulations, scale requirements, and brand dominance of the major carriers.
Global Automotive Retail industry profile is an essential resource for top-level data and analysis covering the Automotive Retail industry. It includes data on market size and segmentation, plus textual and graphical analysis of the key trends and competitive landscape, leading companies and demographic information. Scope * Contains an executive summary and data on value, volume and/or segmentation* Provides textual analysis of Global Automotive Retail's recent performance and future prospects* Incorporates in-depth five forces competitive environment analysis and scorecards * Includes a five-year forecast of Global Automotive Retail* The leading companies are profiled with supporting key financial metrics * Supported by the key macroeconomic and demographic data affecting the market Highlights * Detailed information is included on market size, measured by value and/or volume* Five forces scorecards provide an accessible yet in depth view of the market's competitive landscape * Market shares are covered by manufacturer or brand Why you should buy this report * Spot future trends and developments * Inform your business decisions * Add weight to presentations and marketing materials * Save time carrying out entry-level researchMarket DefinitionThe automotive retail sector consists of the revenue accrued from sales at auto dealers, gas stations and retailers of auto components. The auto dealers market consists of new and used passenger registered cars, as well as registered light commercial vehicles, sold through car dealerships or auction-houses within the country. It does not include sales of motorcycles or vehicles over 3.5 tons GVW. The service stations market is comprised of fuel retailing, forecourt shop sales and car wash revenues, but excludes food service and other non-fuel sales outside the shop and car wash. Auto components comprise automotive parts and accessories and tires and rubber. Automotive parts and accessories reflect only the aftermarket sales value. Similarly, the tires and rubber is composed of the replacement tire market for passenger cars and light trucks, and excludes sales to OEMs. All market values are given at retail sales price (RSP), and include all relevant taxes and levies. Market shares are calculated on the basis of company global production volumes of gasoline and diesel oil multiplied by average retail (service station) prices. All currency conversions are at constant average 2009 exchange rates.For the purposes of this report, the global market consists of North America, South America, Western Europe, Eastern Europe, and Asia-Pacific.
This document provides an overview of American Airlines presented by Group 6. It includes sections on the company history, market structure, competitive advantages, game theory/pricing approaches, and industry updates. The presentation covers topics such as American Airlines' founding and expansion in the 1930s-1980s, the impact of deregulation in 1978, their innovation with SABRE and frequent flyer programs, and current industry leaders. It also includes a quiz and bibliography.
Georgia ranks ninth among states for Fortune 500 headquarters locations according to a 2014 Fortune magazine issue. Seventeen companies are headquartered in Georgia on the Fortune 500 list, with 31 on the Fortune 1000 list. Approximately 85% of these companies increased revenue from the previous year. Atlanta ranks third among cities for Fortune 500 headquarters concentration. In recent years, three companies have moved their global headquarters to metro Atlanta from other states. Georgia continues to add more Fortune 500 and Fortune 1000 headquarters locations.
This document summarizes a whitepaper on the global hybrid car market. It discusses how hybrid car sales have grown from 2.5 million units in 2011 to an estimated 3 million units in 2013 and are forecast to reach 4.72 million units by 2017. The US, Japan, and Europe currently make up the largest markets. Toyota leads the industry with 67% market share followed by Ford. Factors driving hybrid market growth include concerns over fuel consumption, emissions, and volatile oil prices. Challenges include higher hybrid costs and competition from electric and other alternative fuel vehicles.
This document provides a global office market forecast for 2014-2015 from Cushman & Wakefield. It summarizes office market conditions, trends, and forecasts across major global regions. In the Americas, the US recovery is gaining strength driven by technology and energy, while Canada faces oversupply. Latin America is mixed with Santiago outperforming. In Asia Pacific, growth will slow but modern supply outpaces demand. European markets show signs of stabilization with divergence between prime and secondary space. Workplace transformation is a key global trend driven by cost, talent, and organizational needs.
This document summarizes a report from NADA on used vehicle prices by age level. It finds that from 2007-2012, prices grew 18% for vehicles 1-3 years old but even more, 21.5% on average, for vehicles 4-10 years old. Recently, prices have softened 1.2% for vehicles under 4 years as new vehicle demand and incentives increase, drawing customers from used vehicles. However, older vehicle prices have remained steady as quality improvements make them more desirable and supply declines. NADA predicts prices will continue to diverge, with newer used vehicles softening 1.5% in 2013 while older models see 1.5% growth or remain flat.
- Harvard University is considering candidates to run its $38 billion endowment fund, as it seeks to improve disappointing investment returns and address frequent leadership changes.
- Harvard's endowment has lagged peers in the Ivy League, with 10-year annualized returns of 7.6% compared to 10% for Yale. It has also suffered from multiple chief executive departures in recent years.
- Choosing a new leader will involve assessing Harvard's "hybrid" investment model, which delegates some responsibilities to external managers while maintaining an in-house team. The next chief will aim to boost performance and stability.
Walmart retained the top spot on the Fortune 500 list of top retailers for 2015, generating $482.1 billion in revenue. Exxon Mobil held the second spot with $246.2 billion in revenue from oil and gas. Apple came in third generating $233.7 billion despite not yet entering the automobile market. Berkshire Hathaway ranked fourth with $210.8 billion in revenue and ownership of companies like GEICO, Dairy Queen, and Kraft Heinz.
An Conghui, president of Zhejiang Geely Holding Group and CEO of Geely Auto Group, explains the future of flying cars and the value of an international brand.
The document analyzes car price trends using data from 2,108 used cars scraped from www.carfax.com. Various regression models were created to predict price based on variables like mileage, engine, fuel type, and MPG. The models were compared using metrics like R-squared, AIC, and BIC. Hypothesis tests found the average Ford Mustang price was not significantly different from $19,000, but the average MPG was significantly lower than 28. Confidence intervals were constructed for price and mileage.
The document discusses the history of incentive use in the automotive industry from the 1990s to present. It notes that incentive spending grew dramatically from the mid-1990s to 2004, helping new vehicle sales reach record highs but also depressing used vehicle prices. Manufacturers began reducing incentive use in the mid-2000s in response to negative impacts on used vehicle values. Incentive spending has declined since but risks rising again with increased production capacity if sales growth levels off.
The document provides an outline and details about the Fortune 500 list. It discusses what the Fortune 500 is, who founded Fortune Magazine, and the four main ranking factors (sales growth, assets, earnings, and capitalization). It then lists the top ten companies in 2013, including Walmart at #1, ExxonMobil at #2, and Chevron at #3. For each top company, it provides the CEO name, headquarters location, brief background on the company's performance in 2012-2013, and revenues and profits for the fiscal year.
Some forecasts about Mergers and Acquisitions for 2018Suzzanne Uhland
Mergers and acquisitions of companies are one of the alternatives within the possible investment strategies that a company may follow in order to fulfill its traditional mandate to maximize the benefit for its shareholders. What can be expected from mergers and acquisitions during the next year? Let's see.
Toyota should expand into the Indian market by marketing its larger vehicles like the Camry and SUVs like the RAV4 to middle and high-income Indian households. Toyota could also introduce electric scooters and motorbikes targeted at rural Indian consumers. A promotional event like a raffle to win a Toyota Camry at an auto show could increase exposure. The target market for such a raffle would be males over 18 earning over $50,000 with a college degree, who make up over 60% of auto show attendees.
This document provides a summary of trends in the North American seaport industry according to a 2019 JLL Research report. It identifies 5 key trends: 1) ports adapting infrastructure to accommodate larger ships with higher TEU capacities, 2) the logistics sector exploring alternatives like rail-served inland ports to address long-haul trucker shortages, 3) uncertainty around trade agreements and their potential impact on the US trade deficit and export volumes, 4) actions ocean carriers may take in response to the 2020 regulation change requiring lower sulfur fuels, and 5) how short-sea shipping can help create a more efficient supply chain as larger vessels cause operational issues at major ports.
What's next for Automotive| North America and the World| January 2019paul young cpa, cga
There are many issues facing automotive around the world. This presentation gives you a brief look at what is happening to automotive across the world.
Final CFA Challenge Trinity University Team SubmissionEmilio Vernaza
1) The document analyzes Southwest Airlines (ticker: LUV) and recommends it as a buy. LUV has maintained low costs through operating a single aircraft type and point-to-point routes.
2) It has grown to be the largest US carrier by passengers while continuing to demonstrate low costs, though its cost advantage over competitors is decreasing. LUV has had 43 consecutive years of profitability.
3) Recent restrictions lifts and acquisitions like AirTran have expanded LUV's scope of operations and potential for market share growth domestically and internationally. However, international operations remain a small portion of its business currently.
Read Case 10 Southwest Airlines. Answer questions 1-4 in a three.docxcatheryncouper
Read Case 10: Southwest Airlines. Answer questions 1-4 in a three to five page APA style paper, and supported with the concepts outlined in your text and from your previous classes.
1. Describe the current state of the airline industry and analyze what an airline can do to be successful in the current industry climate.
2. Perform a SWOT analysis for Southwest Airlines.
3. Assess the competitive position of Southwest Airlines by completing a competitor profile for Southwest airlines and at least two of its major competitors.
4. What alternatives does Southwest Airlines face to address the problem of declining financial performance?
Southwest Airlines 2008
1 In 2008, Southwest Airlines (Southwest), the once scrappy underdog in the U.S. airline industry, carried more domestic passengers than any other U.S. airline. The company, unlike all of its major competitors, had been consistently profitable for decades and had weathered recessions, energy crises, and the September 11 terrorist attacks. In the first quarter of 2008, the company was profitable and experienced record first quarter revenue and a record pas- senger load factor (percentage of available seats sold). However, the earnings release made it clear that the “threat of volatile and unprecedented jet fuel prices” was a major issue that threatened future growth. Operating expenses were rising, and Southwest announced that it would cut 2009 growth in available seats to less than 3%. Over the previous decade, growth had been about 5–10% a year. This cut in planned growth was consistent with previous responses to difficult environments. An insight into Southwest’s operating philosophy can be found in the company’s 2001 Annual Report:
Southwest was well poised, financially, to withstand the potentially devastating hammer blow of September 11. Why? Because for several decades our leadership philosophy has been: We manage in good times so that our Company and our People can be job secure and prosper through bad times. . . . Once again, after September 11, our philosophy of managing in good times so as to do well in bad times proved a marvelous prophylactic for our Employees and our Shareholders.
THE U.S. AIRLINE INDUSTRY
The U.S. commercial airline industry was permanently altered in October 1978 when Presi- dent Carter signed the Airline Deregulation Act. Before deregulation, the Civil Aeronautics Board regulated airline route entry and exit, passenger fares, mergers and acquisitions, aattract and retain the world’s top talent have combined to create a combination of path-dependent resources that are very difficult for even the wealthiest software and Internet companies worldwide to easily emulate, acquire, or accelerate. It will take years for any competitor to develop the expertise, infrastructure, reputation, and capabilities to compete effectively with Google. Coca-Cola’s brand name, Gerber Baby Food’s reputation for quality, and Steinway’s exper- tise in piano manufacture would ta ...
There are five key trends expected in the airline industry in 2010:
1. Increasing travel demand as passenger traffic is expected to reach 2007 levels.
2. Airline-supplier consolidation as airlines forge new direct connections with distributors to manage products and inventory.
3. A focus on environmentally-responsible aviation such as using biofuels and carbon offset programs.
4. Incentive trips for top company performers are increasing after declining in 2009.
5. Continued union challenges as unions push for more bargaining power which could increase airline operational costs.
Southwest Airlines And The World Largest Low Cost CarrierMonica Turner
The document discusses the external factors influencing the global airline industry from a European perspective. It analyzes the industry using PESTEL factors from 2003 and how they have changed since. Key factors included terrorism post-9/11 which reduced air travel, economic downturns hurting profits, and rising oil prices. Low-cost carriers emerged as a competitive strategy with their business model discussed. Their future prospects in Europe depend on maintaining low costs while demand and economies recover from challenges like terrorism and recessions.
CASE 16 Southwest Airlines Andrew Inkpen and ex.pdfezycolours78
CASE 16 Southwest Airlines Andrew Inkpen and exit, passenger fares, mergers and
acquisitions, and In 2013. Southwest Airlines (Southwest), the once scrappy routes covered by
only one carrier. Cost increases were of the largest in the world. The company, unlike all of its
were only two market segments: those wio coald afford tn terrorist attacks, and the 2008-og
recession. An insight many new firms to enter the market. The finaticial impact airline rates of
return. Typically, two or three carriers were You are now free to move about the country
provided service in a given market, although there underdog in the US. airline industry, was one
of the larg passed along to customers, and price competition was ere est US airlines and, based
on number of passengers, one almost nonexistent. The airlines operal major competitors, h to fly,
and those who couldn\'t decades and had weathered energy crises, the September ad been
consistently profitable for Deregulation sent airline fares tumbl allowed into Southwest\'s
operating philosophy can be found in on both established and new airlines was eirmous. The fuel
crisis of 1979 and the air traffic controilers strike e company\'s 2001 annual report Southwest
was well poised, financially, to withstand in 1981 contributed to the industry\'s diffiruities, as did
the potentially devastating hammer blow of September ii the severe recession that hit the United
Stales during Why? Because for several decades our leadership phi the early 198os. During the
first decade of deregulation losophy has been: we manage in good times so that our more than
15o carriers, many of them start-up airlines Company and our People can be job secure and
prosper collapsed into bankruptcy. Eight of the u major air through bad times.... Once again,
after September in, our lines dominating the industry in 1978 ended up filing philosophy of
managing in good times so as to do well for bankruptcy, merging with other carriers, or simply
in bad times proved a marvelous prophylactic for our disappearing from the radar screen.
Collectively, the industry made enough money during this period to buy As Southwest entered
its 4and year of service, the two Boeing 747s. The three major carriers that survived company
was facing some major challenges. Legacy intact-Delta, United, and American ended up with
carriers in the United States had become more efficient, 80% of all domestic U.S. air traffic and
67% of trans- Employees and our Shareholders and the recent mega-mergers involving
Delta/Northwest, Atlantic business. Exhibits 1A and iB provide summary Continental/United,
and American/US Airways were shaking up the industry. Smaller companies like jetBlue,
financial data for the major airlines. The rapid growth of Southwest was in stark contrast to the
much slower aska, and Spirit were pressuring Southwest\'s cost growth of its major competitors
advantage and low-fare focus. A major internal c Competition and lower fares led to greatly
expanded of AirTra.
The US airline industry can be characterized as an oligopoly market structure, with a few major players dominating the market. American Airlines, Southwest Airlines, Delta Air Lines, and United Airlines combined control over 50% of the domestic market. Entry of new airlines is difficult due to high capital requirements and costs, inability to access major airports, and established loyalty programs. Airlines engage in competitive pricing strategies and output decisions in response to one another to maintain market share. Expanding the scope to Europe's transportation system would also likely result in an oligopolistic market structure across major modes of transport.
The document provides an overview of the long-term market outlook for commercial airplanes from 2017-2036. It discusses three key drivers of airplane demand: 1) strong growth in demand for air travel driven by economic and income growth, particularly in emerging markets, 2) ongoing regulatory liberalization and infrastructure investment, and 3) commitments by the aviation industry to reduce its environmental impact through new fuel efficiency and emissions standards. The aviation industry has made progress decoupling traffic growth from emissions growth and has set ambitious goals for further reducing emissions by 2050.
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.
1 The Commercial Airline Industry October 17t.docxjoyjonna282
1
The Commercial Airline Industry
October 17th, 2014
Ben Cohen
Z23106977
Global Strategy and Policy
Man 4720
Professor Harry Schwartz
Finance Major
2
In this paper, a Porter’s analysis will be conducted on the commercial airline
industry. The Porter analysis is a means of measuring the intensity of the competitive
forces associated with an industry. The competitive forces consist of threat of new
entrants, rivalry among existing firms, threat of substitute products or services,
bargaining power of buyers, bargaining power of suppliers, and relative power of other
stakeholders. Each of these 6 competitive forces will be analyzed and rated high, medium
or low in strength based on their intensity.
Threat of New Entrants: Low
Companies that are considering or attempting to enter the airline industry will
have extreme difficulty, as a result of the many entry barriers they will encounter. These
entry barriers are why the threat of new entrants in the commercial airline industry is
considered low. Airline companies operating in today’s industry have a large inventory of
aircrafts and offer many flight availabilities. They are able to use economies of scale to
effectively provide flexibility to travelers. The existing airline companies will capitalize
on their economies of scale as a competitive advantage and entice travelers with their
low-cost fares for the same service. This is why in the airline industry many companies
seek to gain strategic alliances with other companies. Forming strategic alliances allows
companies to add new routes and increase sales revenue, without substantially increasing
their capital investment. An example of this is the joint venture agreement between Delta
Air lines and Virgin Atlantic Airways Ltd. This agreement allowed them to form a “fully
integrated joint venture that will operate on a “metal neutral” basis with both airlines
sharing the costs and revenues, from all joint venture flights” (Delta Air Lines, 2012).
This agreement will allow these two airlines to provide a seamless network between
North America and the U.K. for their customers. These alliances have changed the
dynamic of the industry.
Another barrier to entry into this industry is the extremely high capital
requirements. It takes a large amount of initial capital to buy inventory of large
commercial aircrafts. However, it is not just the initial capital that is crucial; it is also the
steady capital needed to maintain these aircrafts. “Domestic carriers spent $11.6 billion
3
last year on capital improvements. Over the past five years U.S. airlines have retired
nearly 1,300 planes” (Mayerowitz, 2014). This is substantial evidence of the financial
intensity associated with entry into this industry.
Another barrier to entry is government policy. Government policy in the past
played a much larger role, how ...
Imc 615-final Creative Strategy & Execution for American Airlines Denisse Leon
American Airlines was founded in 1930 and has since grown to become the 3rd largest airline in the US. It underwent bankruptcy in 2011 due to financial losses from the 9/11 terrorist attacks and rising fuel costs, but merged with US Airways in 2013. The summary aims to convince millennials and Gen X business travelers that American Airlines offers a comfortable and productive travel experience through an energetic, hopeful advertising campaign that appeals to all senses and creates a positive brand association. The tone should empower flyers and convey that flying American is only the beginning of their ability to make a difference through their work.
American Airlines was facing declining profits in the early 1990s despite being the largest carrier in the US. Their costs per seat mile were rising while net income was falling. To address this, in 1992 American introduced a "Value Pricing" strategy that offered lower fares for tickets purchased further in advance, with penalties for changes. This targeted business travelers who accounted for 60% of revenue and were less price sensitive. While short-term losses were expected from advertising, analysis showed the approach would improve profits long-term by better utilizing existing capacity and increasing market share. The strategy also risked losing some leisure travelers, so expanding discount periods was recommended to retain them.
This document summarizes an academic paper about airline deregulation in the United States. It discusses how prior to deregulation in 1978, airlines were tightly regulated by the Civil Aeronautics Board, which controlled prices and routes. Deregulation aimed to increase competition and lower fares by eliminating price controls and lowering barriers to entry for new airlines. While fares decreased overall, deregulation also led to unintended consequences like job losses as airlines cut costs, and the loss of service to some smaller cities. The rise of high fuel costs and the hub-and-spoke system also inhibited competition more than deregulation supporters anticipated. The transition from a regulated to deregulated industry took nearly as long as the period of regulation
JetBlue Airways has differentiated itself from competitors by providing extra amenities like satellite TV and radio on every seat. However, operational issues from unsustainable growth, high fuel prices, and fleet costs led to losses in 2006. While demand for air travel is growing internationally as more countries see rising economies, JetBlue faces threats from fluctuating demand, increasing fuel costs, customer complaints, and strong competition from other major airlines.
Three sentences:
JetBlue is a low-cost airline headquartered in New York serving over 100 destinations. The document analyzes JetBlue's industry, business model, financial performance and risks to value the company. A financial model was created assuming revenue and cost growth rates to estimate JetBlue's stock value at $38.56, an upside of 75% from its current price.
The document provides an overview of the airline industry in India. It discusses the history of the industry from 1912 onwards and how the government established Air India and Indian Airlines in 1953. It also covers key topics like demand drivers, market size, major costs, pricing factors, impact on the economy, major airlines (SpiceJet, IndiGo, Jet Airways), technology, regulations, and competition in the industry. It concludes that India's aviation industry has significant untapped growth potential and stakeholders should collaborate with policymakers to implement decisions that boost the industry.
Similar to Summary Analysis of the Consolidation of the U.S. Air Travel Market (17)
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
Independent Study - College of Wooster Research (2023-2024) FDI, Culture, Glo...AntoniaOwensDetwiler
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
Understanding how timely GST payments influence a lender's decision to approve loans, this topic explores the correlation between GST compliance and creditworthiness. It highlights how consistent GST payments can enhance a business's financial credibility, potentially leading to higher chances of loan approval.
OJP data from firms like Vicinity Jobs have emerged as a complement to traditional sources of labour demand data, such as the Job Vacancy and Wages Survey (JVWS). Ibrahim Abuallail, PhD Candidate, University of Ottawa, presented research relating to bias in OJPs and a proposed approach to effectively adjust OJP data to complement existing official data (such as from the JVWS) and improve the measurement of labour demand.
Summary Analysis of the Consolidation of the U.S. Air Travel Market
1. 1
SILVER ARROW
INVESTMENT MANAGEMENT LLC
SILVER ARROW
INVESTMENT MANAGEMENT LLC
Raji Khabbaz
March 28, 2017
Thoughts on U.S. Airline Companies’ Common Shares
On investing in airlines, Warren Buffet famously said,
“…if a farsighted capitalist had been present at Kitty Hawk, he would have done
his successors a huge favor by shooting Orville down.”
The point of his joke was that investors had poured money into airline shares for a century with
only horrible results to show for the effort. The companies’ equities were the worst of value traps,
according to him, and investors were advised to steer clear of them.
In remarkable turnaround, Buffet made a major investment in the airline sector in late
2016. At a 2017 Daily Journal meeting, Buffet’s long-time partner, Charlie Munger, shared the
following explanation on the change in view on airline stocks,
“railroads are no damn good, too many of them, truck competition.’ We were right
— it was a terrible business for about 80 years. Finally, they got down to four big
railroads, and it’s a better business. Something similar is happening in the airline
business.”
What is Munger talking about?
The railroad industry in the U.S. experienced a large amount of consolidation beginning
in 1980. This industry transformation was a result of the Staggers Rail Act of 1980, which
deregulated the American railroad industry and led to an increase in merger activity. In 1980,
there were 33 Class 1 railroads in the United States; today, there are only 7 (excluding Amtrak
which is a passenger rail company). Class 1 railroads in the U.S. are defined as having annual
revenues of $250 million or greater.
Through railroad mergers, rail-to-rail competition was reduced and railroad market
power increased. For example, today there are two major effective duopolies for grain
transportation in the U.S.; Burlington Northern Rail and Union Pacific dominate the Western
U.S. and CSX and Norfolk Southern dominate the Eastern U.S. The top four Class I railroads
account for 85% of grain and oilseed traffic in the U.S., compared to only 53% in 1980.
2. 2
SILVER ARROW
INVESTMENT MANAGEMENT LLC
SILVER ARROW
INVESTMENT MANAGEMENT LLC
And what did consolidation do for railroad stocks? Let’s look at Union Pacific’s share
price performance from the beginning of 1980 to today. Over this period, the company shares
appreciated nearly 31 times, versus a 19.5 times appreciation in the S&P 500 over the same
period. The other major U.S. railroad companies all saw similar strong share price
outperformance over the same period. That is what Munger is talking about.
In 2016, does the U.S. airline sector represent the same opportunity as the rails in 1980?
Munger said the dramatic consolidation in the airline sector reminded him of what
happened to U.S. railroads. The table below illustrates the significant transformation of the
competitive landscape in the U.S. airline sector. In 1990, there were 12 major U.S. airlines. Today,
there are 6, and the top 4 control 80% of the domestic market.
Number of Major U.S. Airlines
1990 2001 2017
American American American
TWA
U.S.
Airways
United
Continental
U.S. Airways
America
West Delta
America
West Southwest Southwest
Southwest Delta Alaska
Delta Northwest JetBlue
Northwest United
United Continental
Continental AirTran
Eastern JetBlue
Alaska Alaska
Pan Am
3. 3
SILVER ARROW
INVESTMENT MANAGEMENT LLC
SILVER ARROW
INVESTMENT MANAGEMENT LLC
According to a recent Associated Press analysis, today at 40 of the 100 biggest airports in
the U.S., a single airline flies a majority of passenger seats, compared to 34 airports ten years ago.
At 93 of the largest 100 airports, two airlines fly a majority of the seats, compared to 78 ten years
ago.
Can the commercial air travel business be as good a business as the railroads proved to be?
No, we do not think so, but it still can be very good business, following the dramatic industry
consolidation. We list some of the major differences between the railroad shipping and air travel
industries in terms of quality of business.
1) The railroads’ assets; the track and depot network, are far more valuable than airline hub
and spoke route networks. No one is going to build from scratch an entirely new national
or regional rail network. One cannot launch a low-cost railroad in the U.S. in the same
way Spirit Airlines did to provide very low cost air travel. In many markets, rails operate
as effective duopolies.
2) Railroads do face competitive pressure from the long-haul trucking industry, but their
dramatic fuel cost advantage over trucking represents a “wide moat”, giving them almost
insurmountable competitive advantages over trucking over long transport distances.
3) Oil is a lower cost factor for railroads than airlines. Historically(before the sharp collapse
in oil prices that began in September 2014), fuel costs represented 20% of railroads’ cost
structure and one-third to 40% of airlines’ cost structure. Railroads also charge a fuel
surcharge typically based on a lagging two-month index of fuel prices. The surcharges
help offset any increase in the price of fuel (they work in the different direction when fuel
prices are falling), making the rails less sensitive to changes in oil prices than the airlines.
4) Railroads do not face any competition from non-American railroad companies. Airlines
face significant competition across all their international routes. Furthermore, the
international air travel market has not consolidated as is the case with the domestic U.S.
travel market, and operates generally at lower load factors and is more competitive.
The data shows the consolidation has already dramatically improved operating performance
In 2008, U.S. airlines collectively lost $3.3 billion. In 2009, performance improved and the
industry generated $2.5 billion in profit. In 2015, the industry earned $25.6 billion. Obviously, a
major reason for the profit improvement was the sharp drop in the price of jet fuel. However,
looking beyond the change in fuel price, one sees evidence of a dramatically improved competitive
industry structure, which we believe is the byproduct of dramatic consolidation.
4. 4
SILVER ARROW
INVESTMENT MANAGEMENT LLC
SILVER ARROW
INVESTMENT MANAGEMENT LLC
Airline companies operate with a largely fixed cost structures. It costs the same to fly a
plane that is full or empty. Accordingly, small changes in load factor (the industry term for
measuring how full flights are) can produce a large impact on operating profit. In the early 2000s,
the load factor for the commercial airline sector bounced around the low 70s % level. In 2009,
industry load factor was 73%. At the end of 2016, it was 83%.
Beyond the improvement in load factors, the other sign of stronger pricing power is the
growth in non-ticket fees. After 2008, airlines unbundled their services, imposing new fees on
travelers for things like checking in baggage, changing flight reservations, in-flight food, and
access to onboard entertainment. While these changes might seem trivial, they produced billions
of dollars in new revenue for the industry.
The American Airlines and U.S. Airways merger, completed at the end of 2013, capped
off a decade or so of significant consolidation. This transformed the industry into one that now
more and more resembles other highly profitable U.S. industries that are dominated by a handful
of major players, such as the railroads, cable TV, or internet advertising.
Why have the U.S airline companies traded at such low valuations for so long? Are they value
traps?
As a general rule, we would rather pay 15x earnings for a company that should be trading
at 20x, than pay 7x for company that should be trading at 10x. The reason is the adverse selection
bias that exists when investing in companies that trade consistentlyat lowmultiples. Alowmultiple
ofearnings is veryoften an indication ofan inferior business, a heavilyleveraged capital structure,
or an extremely poor management team running the company.
While airline profitability improved significantly from the economic trough of late 2008
and early 2009, the common shares of the three largest airline companies, American Airlines,
Delta Air Lines, and United Continental Holdings, remained confined to a single digit range of
price/earnings multiples over the past three years. Today, the three companies still only trade at
9-10x consensus estimates of 2017 earnings and 8x estimates for 2018. Southwest Airlines trades
at 14x 2017 estimated earnings and at 11x 2018 estimated earnings. Compare that to the S&P
Index, which is now trading at 18x estimated 2017 earnings and 16x estimated 2018 earnings. The
low trading multiples represents a very pessimistic view of the long-term earnings potential for
the airline companies.
Examining other sectors of the market, in the current environment we find companies that
trade at single digit P/E multiples in highly cyclical businesses that are near a potential peak in
their cycle, like autos, or in businesses facing secular decline in demand, as is the case for example
5. 5
SILVER ARROW
INVESTMENT MANAGEMENT LLC
SILVER ARROW
INVESTMENT MANAGEMENT LLC
with Gilead Sciences, a pharmaceutical company facing a multi-year decline in its core Hepatitis
treatment franchise.
Could we be at a peak in demand for air travel? Is the industry facing negative demand
trends sometime in the near future? The table below, which highlights annual growth in global
passenger demand between 2005 and 2016, shows a consistent picture ofdemand growth, stronger
than U.S. GDP growth. During the economic collapse in 2009, the industry saw a relatively small
negative decline of only 1.2%, which in comparison to many other industries was remarkably
resilient. In January 2017, global passenger traffic grew by 9.6% on a year-over-year basis, the
fastest growth in 5 years. Air travel demand by historical measures is not cyclical. Rather, it has
exhibited fairly steady growth.
Year Annual Growth in Global Passenger Demand
2005 +8.9%
2006 +6.9%
2007 +7.9%
2008 +2.4%
2009 -1.2%
2010 +8.0%
2011 +6.3%
2012 +5.3%
2013 +5.2%
2014 +5.7%
2015 +7.4%
2016 +5.9%
Source: IATA
Historically, the problem with the airline business is not travel demand but price
competition.
For decades, the U.S. commercial air travel experienced frequent and aggressive price
wars that wrecked industry profitability. Between 2001 and 2011, the sector lost an incredible $51
billion. Since 1981, the industry lost money in approximately 50% of the years. Six major
6. 6
SILVER ARROW
INVESTMENT MANAGEMENT LLC
SILVER ARROW
INVESTMENT MANAGEMENT LLC
airlines went through bankruptcy between 2000 and 2010. From 1979 (this date is important for
understanding the problem) to 2014, U.S. airlines lost $35 billion. No wonder Warren Buffet
advised investors for years to stay the hell away from the sector.
Why has the industry produced such a dismal record of profit generation? The answer lies
in the complete lack of pricing power enjoyed by the airline companies. From 1978 (again the
1978-1979 period is very important to the case study of the airline business) to 2017, cumulative
consumer inflation, as measured by the CPI index, was 274%. Things that cost $1 dollar in 1978
cost on average $2.74 today. Yet, over this period, airfares in the U.S. fell 50%! Why? One word.
DEREGULATION.
More explicitly, the 1978 Airline Deregulation Act deregulated the airline industry. It
eliminated the federal government’s control over ticket prices, flight routes, and the number of
airplanes operating. It created a free market. Following passage of the Act, the number of flights
greatly increased, ticket prices fell dramatically, and passenger miles flown exploded upwards.
Before 1978, the government determined who, where, and for how much airlines could fly
passengers. With a strict limit to competition, airlines operated with an implicit guaranteed level
of profit. Those were the days of luxurious air travel, involving lavish services, such as silverware
and fine dishware. For a majority of Americans, air travel was unaffordable.
During the energy crisis of the 1970s, airfare pricing rose sharply. In response, the
government began analyzing the case for a less regulated, free market structure in the industry.
The 1978 Airline Deregulation Act was the outcome of that process. The impact of that Act was
dramatic. The number of air travel passenger has more than tripled since 1978. In 1965, less than
20% of Americans had ever flown on an airplane. Today, over 50% have flown on at least one
plane trip a year. In the mid-1970s, the minimum allowed fare for a New York City to Los Angeles
flight was $1,440 dollars. Today, you can find a ticket for the same flight for under $300.
Deregulation of the industry led to an increase in airline companies operating in U.S.,
intensive competition, and a decades long period of vicious price wars. In the words of Robert
Crandal, the former CEO of American Airlines,
“The airline business is the closest thing there is to legalized warfare.”
Will the dramatic airline industry consolidation transform coal into diamonds?
In early January 2012, American Airlines announced its interest in merging with U.S.
Airways. In December 2013, the merger was completed. The deal possibly represents that last
7. 7
SILVER ARROW
INVESTMENT MANAGEMENT LLC
SILVER ARROW
INVESTMENT MANAGEMENT LLC
major airline merger that will be allowed to occur in the U.S., and caps a 13-year period of dramatic
industry consolidation that ends with 4 major airline companies controlling roughly 80% of the
domestic air travel market.
The competitive hell (heaven if you were a passenger paying lower and lower airfares since
1978) unleashed on the domestic airline industry by deregulation should now be more and more a
thing of the past. A less competitive and more consolidated industry has emerged. This industry
transformation is what Munger referenced in explaining Berkshire Hathaway’s amazing reversal
of opinion on investing in airline stocks.
If the U.S. airline industry follows the script that the U.S. railroad industry followed after
it went through dramatic consolidation, then the airline sector could be poised to deliver superior
investment returns over the next decade, and maybe even decades. It is an intriguing possibility to
consider.
If the long-term prognosis above is correct, then when you look out 5 years, 10 years, or
more, both EPS should grow dramatically and the perception of the airline business attractiveness
should improve, resulting in much higher average trading multiples for airline company shares.
That would result in cubic appreciation, rather than just linear appreciation, in share prices. In
other words, a huge investment score.
Why have valuation multiples for airline stocks not improved more than three years after last
mega merger in the sector?
The share price performance for the four major U.S. airline companies, American Airlines,
Delta Air Lines, Southwest Airlines, and United Continental appreciated 103%, 66%, 64% and
120%, respectively, during 2014. The sector appeared to be following script similar to the one on
U.S. railroad consolidation. Ticket pricing was up. Load factors were improving, after the industry
rationalized capacity. Travel demand was strong.
Then something remarkable happened in 2015. Oil prices, which as we discussed earlier
are a major cost for airlines, dropped sharply in early 2015. A decline in oil prices typically results
in a rise in airline share prices, because the decline improves operating profitability. In 2015, the
price of West Texas Intermediate oil fell by approximately 70%. Instead of leading to strong
appreciation in the share prices of airline companies, the sector saw flat to negative share price
performance in 2015.
8. 8
SILVER ARROW
INVESTMENT MANAGEMENT LLC
SILVER ARROW
INVESTMENT MANAGEMENT LLC
There were a number of concerns in 2015 that weighed on the airlines’ shares. First,
investors assumed the sharp drop in oil prices were unsustainable, and likely to recover in
following years. In other words, the gains from the decline in oil price were only temporary. The
reason for that belief was that prices had fallen well below the assumed break-even levels for shale
drilling and offshore drilling (two areas of oil production that had largely contributed to the
dramatic increase in global oil production which caused the supply glut). Shale and offshore
production were expected on a lagging basis to sharply drop, and the subsequent and significant
reduction in oil rigs in operations proved that point.
We are not going to spend any time on the oil market in this summary discussion of the
airline industry, but we have done quite a bit of work on the sector and will address the state of the
energy market in separate research reports. Absent an unforeseen change in the supply market, we
think that it could take years for oil to get back to the $80 - $90 price level. U.S. oil production is
rising again and U.S. stockpiles of oil have, contrary to expectations, risen to new highs following
the implementation of the 1.8 million barrel per day cut by OPEC members.
Second, investors understood labor negotiations were approaching. Given the sharp
improvement in industry profitability, investors correctly assumed labor costs would rise in
following years, negatively impacting operating margins. The airline industry remains a largely
unionized industry.
However, the most important factor hurting the airline sector in 2015 (and again in 2016),
and the real key to unlocking a lasting improvement in investor perception and an upward
revaluation of the airline valuation multiples relates to the issue of industry capacity discipline and
PRASM growth. PRASM is the defined as passenger revenue for available seat miles. It is the
industry’s metric for measuring pricing on comparable basis.
In early 2015 and for most of 2016, the industry grew capacity a little bit in excess of
demand growth. Domestically available seat-miles (ASMs), a measure of industry capacity, on
U.S. airlines grew 2% in 2014. Then they jumped 5% in 2015 and 5% in 2016.
9. 9
SILVER ARROW
INVESTMENT MANAGEMENT LLC
SILVER ARROW
INVESTMENT MANAGEMENT LLC
Year-over-Year Change in Revenue
Passenger-Miles (RPMs)
Year-over-Year Change in ASMs
2014 2015 2016 2014 2015 2016
JAN 1% 4% 6% 0% 6% 5%
FEB 1% 4% 6% -1% 4% 7%
MAR 5% 4% 4% 2% 4% 6%
APR 3% 5% 5% 2% 5% 5%
MAY 3% 5% 6% 1% 6% 5%
JUN 2% 6% 6% 1% 6% 6%
JUL 4% 7% 4% 2% 6% 5%
AUG 4% 7% 3% 1% 6% 5%
SEP 4% 7% 4% 2% 5% 5%
OCT 4% 8% 3% 3% 5% 4%
NOV 2% 7% 4% 3% 6% 4%
DEC 4% 7% 3% 4% 5% 4%
Average Average Average Average Average Average
3% 6% 4% 2% 5% 5%
Source: U.S. Department of Transportation’s Bureau of Transportation Statistics
The capacity growth described above caused panic among investors. The bull case that
consolidation meant the destructive competition and price wars of the past were vanquished to
history was called into question. To the bears, it appeared as if the bad behavior had returned and
investors did not want to reenter Dante’s Inferno. As can be seen in table below which chronicles
quarterly changes in average domestic ticket pricing going back late 2013, pricing fell at
progressively worsening rates through late 2016. This resulted in a negative PRASM environment
and two years of declining industry revenue.
10. 10
SILVER ARROW
INVESTMENT MANAGEMENT LLC
SILVER ARROW
INVESTMENT MANAGEMENT LLC
Quarter Year-over-Year Change in Average
Domestic Airfare
3Q 2016 -8.8%
2Q 2016 -9.6%
1Q 2016 -7.8%
4Q 2015 -8.3%
3Q 2015 -6.2%
2Q 2015 -2.8%
1Q 2015 -1.7%
4Q 2014 +2.0%
3Q 2014 0%
2Q 2014 +2.5%
1Q 2014 +1.0%
4Q 2013 +0.3%
3Q 2013 +5.1%
Source: U.S. Department of Transportation’s Bureau of Transportation Statistics
The declining rate for average domestic ticket pricing in 2015 and 2016 (see above) appears to
support that bearish argument that nothing has changed and the industry is still prone to destructive
price wars.
We think the bearish conclusion above is likely the incorrect. First, available seat-miles
(ASMs), again the industry measure of capacity, did increase faster than revenue passenger-miles
(RPMs), the industry measure of demand, from the beginning of 2015 through the end of 2016,
but the excess growth in capacity was relatively small. Accordingly, the negative impact on
domestic load factors (see table below) was also relatively small. Average domestic load factor
was 84.5% in 2014. It rose slightly to 85.0% in 2015, and then dropped to 84.6%. That is hardly
evidence of an industry with catastrophic excess capacity growth.
11. 11
SILVER ARROW
INVESTMENT MANAGEMENT LLC
SILVER ARROW
INVESTMENT MANAGEMENT LLC
Domestic Load Factors on U.S. Airlines
2014 2015 2016
JAN 84.9% 83.8% 84.8%
FEB 84.9% 85.1% 84.5%
MAR 85.0% 85.2% 83.5%
APR 84.5% 84.3% 84.7%
MAY 84.9% 84.3% 85.2%
JUN 84.4% 84.9% 85.0%
JUL 84.6% 85.0% 84.3%
AUG 84.5% 85.3% 83.6%
SEP 84.3% 85.3% 84.9%
OCT 83.7% 85.8% 85.1%
NOV 84.1% 84.8% 85.2%
DEC 83.9% 85.7% 84.7%
Average Average Average
84.5% 85.0% 84.6%
Source: U.S. Department of Transportation’s Bureau of Transportation Statistics
Furthermore, towards the end of 2016, capacity growth slowed and supply demand came more
into balance. Is that not a sign of a far more rational industry dynamic, where excesses are
corrected and not allowed to get too far out of line.
Second, the decline in average domestic ticket prices from 2015 to 2016 needs to be
understood in the context of the sharper fall in fuel costs in percentage terms. According to the
U.S. Bureau of Transportation, the cost of a gallon of jet fuel fell 52% from $3.05 in 2013 to $1.45
in 2016. If the airline business was still a pure commodity-like business, where profit margins
remain razor thin due to excessive competition, then the dramatic improvement in operating
margins would have been largely eliminated through subsequent competitive price cutting.
In 2015, industry operating profits rose sharply due to the dramatic fall in fuel costs. Those
historically high profits fell 2016, but by a relatively small amount. Two years after the beginning
of the collapse of oil prices, industry profits were significantly above levels seen in 2014. Those
profits are expected to remain significantly above 2014 levels in 2017. If the airline industry was
a pure commodity-like industry with little to zero pricing power, the historic profits generated and
maintained over this period would have disappeared a while ago. Does that not suggest and real
and significant positive change in pricing power in the industry?
12. 12
SILVER ARROW
INVESTMENT MANAGEMENT LLC
SILVER ARROW
INVESTMENT MANAGEMENT LLC
Where are we today with respect to U.S. airline shares?
We are not making any recommendations to buy, sell, or short any individual airline
company shares or the airline sector as a whole in this report, and nothing presented in this report
should be interpreted as a recommendation of any investment action. Nor will we disclose any
portfolio positions that we currently hold. Our views and positions can and do change.
The report focuses on the dramatic consolidation of the U.S. domestic market for air travel
and related long-term implications. The report purposely avoids any real discussion or analysis of
U.S. airlines’ international markets and importance of developments in the oil market and related
impact on the jet fuel market. Both are critical factors to evaluating any investment in the sector.
With that in mind, let us look at the U.S. airline sector stock performance and flow of news since
the November 8th
presidential election last year.
Trump’s victory propelled many stock sectors upwards. That dynamic undoubtedly helped
airline shares appreciate sharply at the end of the year. Additionally, the subsequent disclosure that
Warren Buffet’s Berkshire Hathaway invested over $10 billion in the four major U.S. airline
companies added fuel to the rally in airline shares.
However, the most important development, the one that could set the stage for an extended
period of share price outperformance, was the increasing belief that domestic airline capacity
growth in 2017, in contrast to 2015 and 2016, was finally going to be restrained industry-wide and
come in at levels well below travel demand growth. This would result in improved domestic load
factors, positive PRASM performance, and positive industry revenue growth in 2017, following
two years of declines.
As we highlighted earlier in the report, capacity growth started to slow in late 2016. At the
end of last year, the four major U.S. airline companies in investor presentations and
communications all guided towards more restrained capacity growth in 2017. We will not delve
into the reasons for the restrained guidance nor the company specific guidance here. We will note
that many analysts pointed to the increase in labor costs and the belief that oil prices had bottomed
as factors encouraging capacity discipline for the purpose of improving future PRASM
performance. The end result was the consensus belief that 2017 would mark the return of revenue
growth to the industry.
That belief was greatly undermined recently with the announcement by United Continental
that they were increasing the guidance for 2017 domestic capacity growth to 3.5%-4.5% from
previous guidance of 1.5%-2.5% growth, a 200 basis points jump. United Continental added 47
flights at Chicago’s O’Hare International Airport in February, and American Airlines, which has
a major presence like United Continental at O’Hare, announced the addition of 7 flights there as
of July 5th
in response. American’s competitive response to United’s decision, as well as additional
news that Alaska Airlines, which recently acquired Virgin Pacific, is aggressively adding flights
into the California market, specifically in San Diego and the Bay Area, sparked fears that 2017
was going to another year of excessive capacity growth in the U.S. domestic air travel market.
13. 13
SILVER ARROW
INVESTMENT MANAGEMENT LLC
SILVER ARROW
INVESTMENT MANAGEMENT LLC
Some sell-side analysts have increased their assumptions for industry-wide capacity
growth and downgraded the sector. Others have argued that these decisions reflect local fights and
will not bleed out to the broader industry. They continue to expect industry-wide capacity
constraint in 2017. Separately, there are also growing concerns about the potential negative impact
on U.S. tourism resulting from a number of Trump administration travel policies.
We do not have an opinion on whose view is correct. What we have learned about the
sector is that the short-term data points can change quickly and materially. Capacity guidance does
change frequently and will continue to do so. United Continental’s recent announcement is proof
of that. The noise-to-signal ratio is just too high quarter to quarter to make it effective to connect
such short-term dots to determine whether the long-term outlook has changed.
We also know that January and February sector-wide revenue performance were weaker
than expected, and estimates for the first quarter may be too high. Share prices already fell in
response to those data points, so it is unclear what the impact of the quarterly results will be on
share prices going forward.
If the positive thesis for the long-term prognosis for the U.S. airline sector is correct, and
if exposure to international markets and oil price fluctuations are not overly negative factors, then
it seems like one could invest in the shares today or in the near future, down 10-20% or up 10-20%
and, in both cases, do quite well over the long-term. Over such a longer period, the noise fades and
the signal dominates.
14. 14
SILVER ARROW
INVESTMENT MANAGEMENT LLC
SILVER ARROW
INVESTMENT MANAGEMENT LLC
• Raji Khabbaz graduated from Berkeley and joined the Mergers and Acquisitions
Department of Morgan Stanley & Co. When Eric Gleacher left to start Gleacher & Co. he
asked Raji to join him at the new firm. Following a successful tenure there and graduation
from Harvard Business School, Raji became a founding partner of Highline Capital
Management. Following that, he founded and ran Pierce Street Capital Management before
working as Portfolio Manager at Ivory Capital. He started Silver Arrow with Gary Brode
in January, 2012.
• Gary Brode graduated from the University of Michigan and joined the Mergers and
Acquisitions Department of Morgan Stanley & Co. Following that, he joined Doug Hirsch
at Smith New Court, and was asked by Doug to join him in starting Seneca Capital. He
spent 3 years doing long/short equity investing at Brahman Capital, and then moved to
John Levin & Co. where he had investment discretion. Gary was one of the founding
partners of Akita Capital Management. He started Silver Arrow with Raji Khabbaz in
January, 2012.