Airline Industry Recent Trend Update
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MITMIT Airline Industry Recent Trend ICATICAT Update (October 2006) Prof. R. John Hansman With the help of the Faculty and Students of the MIT Global Industry Study Traffic Source: Sage Analysis courtesy Prof Ian Waitz [email protected] MITMIT ICATICAT RPK by Region Scheduled Revenue Passenger-Kilometers by Region 1400 1200 North America 1000 Europe 800 Asia and Pacific (billion) Latin America K 600 P & Caribbean R Middle East 400 Africa 200 0 1970 1980 1990 2000 2010 Data source: ICAO, scheduled services of commercial air carriers MITMIT ICATICAT Freight Trends by Region Freight Tonne-Kilometers by Region 60 50 North America 40 Europe Asia and illion) b 30 Pacific ( Latin America & Caribbean FTK 20 Middle East Africa 10 0 1970 1980 1990 2000 2010 Data source: ICAO, scheduled services of commercial air carriers MITMIT ICATICAT U.S. Domestic RPMs 50 Billions 45 40 35 30 25 2000 2001 2002 2003 2004 2005 2006 20 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: ATA Monthly Passenger Traffic Report Data source: ATA, US member airlines, scheduled mainline service MITMIT U.S. Domestic Average ICATICAT Load Factor 85.0% 80.0% 75.0% 70.0% 65.0% 60.0% 55.0% 50.0% 45.0% 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Data source: ATA, US member airlines, scheduled mainline service (average of first 9 months for 2006) MITMIT U.S. Domestic ASMs and RPMs ICATICAT 700 s n ASM s llio i 600 B 500 400 RPMs 300 200 100 - 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Data source: ATA, US member airlines, scheduled mainline service (projection based on first 9 months for 2006) MITMIT ICATICAT U.S. Domestic Load Factors 90.0% 85.0% 80.0% 75.0% 70.0% 65.0% 60.0% 55.0% 2000 2001 2002 2003 2004 2005 2006 50.0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: ATA Monthly Passenger Traffic Report Data source: ATA, US member airlines, scheduled mainline service MITMIT ICATICAT U.S. Average Domestic Yield 16.00 15.00 14.00 ) e l i m / s t 13.00 cen ( d el i Y 12.00 11.00 10.00 2000 2001 2002 2003 2004 2005 2006 Data source: ATA Monthly Passenger Revenue Report, 7 US major airlines excluding Southwest (WN). MITMIT Spending on Air Travel Has Fallen as % of U.S. Economy ICATICATRecent Quarters’ Modest Recovery Still $28B Short of Historical Norm 1.05% 1.00% ≅ $28B 0.95% of Nominal GDP* % 0.90% e as 0.85% Historical Band er Revenu 0.80% 0.75% Passeng e 0.70% stemwid Sy 0.65% 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 *Four-quarter rolling passenger revenue derived from government filings of U.S. passenger airlines Sources: ATA, ATA Passenger Airline Cost Index; Bureau of Economic Analysis; U.S. Department of Transportation MITMIT Historic Yield Trend ICATICAT 1995-2006 16 Latin 15 Domestic 14 13 12 11 10 Yield (c/mile) 9 Atlantic 8 Pacific 7 6 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 July 3-Jul 4-Jul 5-Jul 6-Jul 2-Jul 2-Jan 3-Jan 4-Jan 5-Jan 6-Jan Jul-99 Jul-00 Jul-01 Jul-02 Jul-03 Jul-04 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 January Data source: ATA Passenger Yield Report, 7 US major airlines excluding Southwest (WN). MITMIT ICATICAT Airline Profits including +23B reorganization items $300 $(100) 2000Q1 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 s n $(500) io ll i m in ) $(900) s s o L ( e m $(1,300) American o c United In t Delta e N Northwest $(1,700) Continental Southwest 9/11 Attacks JetBlue America West $(2,100) Alaska ATA US Airways $(2,500) -17B Data source: Airline quarterly reports, profits and losses including reorganization items including reorganization items MITMIT Cargo Operations Remain ICATICAT Profitable $1,600 West Coast UPS FedEx Dock Strike SARS Iraq War $1,200 9/11 Attacks in millions $800 me o Inc t e N $400 $0 2000Q1 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 Data source: Companies’ annual reports MITMIT Market Cap: US Majors, ICATICAT 20-October-2006 Pinnacle Delta Air Lines 0.5% 0.7% Midwest Airlines Republic Airways Frontier Airlines 0.4% 1.8% 0.8% AirTran Airways Mesa Air Northwest Airlines 2.6% 0.8% 0.2% Mesa Air Group, Inc. Alaska Airlines 0.8% 4.9% Southwest Airlines Skywest 34.4% 4.5% Continental Airlines 8.0% United Air Lines 9.6% JetBlue Airways 5.1% American Airlines US Airways 15.3% 9.6% Total Market Cap: $36.6 billion Data source: Yahoo Finance. MITMIT Market Cap: US Majors, ICATICAT 26-May-2005 American West Airlines United Air Lines 0.9% 0.6% Midwest Airlines Republic Airways Mesa Air 0.2% 2.0% 0.9% US Airways Frontier Airlines 0.2% Pinnacle Atlantic Coast Airlines 2.1% 1.0% 0.2% Delta Air Lines Northwest Airlines Midway 2.6% 2.2% 0.0% Alaska Airlines 3.7% AirTran Airways 4.1% Continental Airlines 4.2% Southwest Airlines 54.3% American Airlines 9.9% JetBlue Airways 10.9% Total Market Cap: $21.2 billion Data source: Yahoo Finance. MITMIT Current Market Cap vs. RPM Share US Majors (RPMs: July 2006 / Market Cap: ICATICAT October 20th 2006) Source: Yahoo! Finance and Bureau of Transportation Statistics US Airline Net Profit Model MITMIT Best Fit of Undamped Oscillation ICATICAT Cycle Period = 11.3 yr eFolding Time = 7.9 yr 30 s n illio 25 B 20 Estimates from 9 airlines* for Q1 & Q2 2006 and projection** for full year 15 ) 10 ($ t i f o r 5 t P Ne 0 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 -5 -10 Data from ATA (www.airlines.org) -15 Data from airline financial quarterly reports Projection -20 * American Airlines, Delta Airlines, United Airlines, Northwest, Continental, Southwest, JetBlue, America West, Alaska. ** The projection for the full year is computed as 2 times the loss for Q1 & Q2 combined MITMIT US Airline Net Profit Model ICATICAT Apparent 1 year phase advance in cycle 30 ons i l l i 25 B 20 Estimates from 9 airlines* for Q1 & Q2 2006 and projection** for full year 15 ) 10 ($ t i f o r 5 t P Ne 0 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 -5 -10 Data from ATA (www.airlines.org) -15 Data from airline financial quarterly reports Projection -20 * American Airlines, Delta Airlines, United Airlines, Northwest, Continental, Southwest, JetBlue, America West, Alaska. ** The projection for the full year is computed as 2 times the profits for Q1 & Q2 combined MITMIT Low-Cost Carrier Envy ICATICAT Emergence of LCCs Canada (7, 1 in 2004) Europe (60, 3 in 2004) CanJet Westjet Aer Arann Baboo Fare4U Sun Express HMY Airways Zip Air 2000 Basiq Air German Wings Swedline JetsGo Airlines Canada West Air Baltic Bexx Air Germania Express ThomsonFly Tango Airlines Air Berlin BMI Baby Globespan V Bird Air Finland British European Hapag Lloyd Express Virgin Express USA (19, 4 in 2003/2004) Air Luxor Lite BudgetAir Hellas Jet VLM Airlines AirTran Spirit Airlines Air Polonia Corendon Helvetic Airways VolareWeb Allegiant Air Song Air Scotland Deutsche BA Iceland Express Windjet Vola American West Sun Country Airlines Air Southwest EasyJet Ryanair Smart Wings ATA USA 3000 Airlines Air Wales Evolavia Snalskjutsen Wizz Air Frontier Airlines Vacation Express Alpi Eagles Excel Airways SnowFlake Airlines Hop Interstate Jet Ted Azzurra Air Fairline Austria Sterling JetBlue Airways Independence Air Hi Fly Monarch Midwest Express Virgin USA Fly Me My Air Asia/Pacific (20, 8 in 2004) Pan American Fly Nordic Scand Jet Air Arabia ValuAir Southeast Airlines Air Service + Transavia Air Asia Virgin Blue Southwest Airlines Blue1 Vueling Air Deccan Air Blue Athena Air Services Air One Inter continental LCCs Blue Air Inter Sky Legend: Citilink BackpackersXpress Air Madrid Central WingsJet 2 New in 2003 / 2004 Freedom Air Jetstar Condor Dau Air LTU New in 2005 / 2006 Lion Airways Nok Air East Jet Iceland Express Meridiana One-Two-Go Pacific Blue LTU Martinair South America (3) Skymark Airlines SkyAsia Skynet Asia Airways Tiger Airways Zoom Airlines Bra Africa (2) Gol Aero Asia Bangkok Air Spring 1Time U Air Awair Origin Pacific Kingfisher Kulula Spice Jet Jazeera Airways Source: http://www.etn.nl/lcostair.htm, airline news MITMIT Low-Cost Carrier Envy (or not) ICATICAT Emergence of LCCs Canada (7, 1 in 2004) Europe (60, 3 in 2004) CanJet Westjet Aer Arann Baboo Fare4U Sun Express HMY Airways Zip Air 2000 Basiq Air German Wings Swedline JetsGo Airlines Canada West Air Baltic Bexx Air Germania Express ThomsonFly Tango Airlines Air Berlin BMI Baby Globespan V Bird Air Finland British European Hapag Lloyd Express Virgin Express USA (19, 4 in 2003/2004) Air Luxor Lite BudgetAir Hellas Jet VLM Airlines AirTran Spirit Airlines Air Polonia Corendon Helvetic Airways VolareWeb Allegiant Air Song Air Scotland Deutsche BA Iceland Express Windjet Vola American West Sun Country Airlines Air Southwest EasyJet Ryanair Smart Wings ATA USA 3000 Airlines Air Wales Evolavia Snalskjutsen Wizz Air Frontier Airlines Vacation Express Alpi Eagles Excel Airways SnowFlake Airlines Hop Interstate Jet Ted Azzurra Air Fairline Austria Sterling JetBlue Airways Independence Air Hi Fly Monarch Midwest Express Virgin USA Fly Me My Air Asia/Pacific (20, 8 in 2004) Pan American Fly Nordic Scand Jet Air Arabia ValuAir Southeast Airlines Air Service + Transavia Air Asia Virgin Blue Southwest Airlines Blue1 Vueling Air Deccan Air Blue Athena Air Services Air One Inter continental LCCs Blue Air Inter Sky Legend: Citilink BackpackersXpress Air Madrid Central WingsJet 2 New in 2003 / 2004 Freedom Air Jetstar Condor Dau Air LTU New in 2005 / 2006 Lion Airways Nok Air East Jet Iceland Express Meridiana One-Two-Go Pacific Blue LTU Not Operating Martinair South