1.13k likes | 1.14k Vues
Global Airlines. Presented By: Parveen Rai Dan Wurst Amar Leekha Aman Sandhu. Overview of Presentation. Industry Overview Current State Trends Key Statistics Regional Overviews Europe, North America & Asia-Pacific British Airways Singapore Airlines SouthWest Conclusion.
E N D
Global Airlines Presented By: Parveen Rai Dan Wurst Amar Leekha Aman Sandhu
Overview of Presentation • Industry Overview • Current State • Trends • Key Statistics • Regional Overviews • Europe, North America & Asia-Pacific • British Airways • Singapore Airlines • SouthWest • Conclusion
Characteristics of the Industry • Very cyclical, moves with strength of economy • Low Profit Margins….and falling • Economic growth • Asset intensive industry • Investments in aircraft, facilities & equipment • Labour constitutes largest cost • Jet fuel costs second largest expense • Strategic Alliances to defend against competition • Technology • E-tickets • Online Vendors
Future Outlook • Recovery of US economy • Confidence in President Bush • Fuel Prices? • Government Funding • National security • Subsidies • High tax burden & Regulations • Cost structure • Increase buying power of customers • Customer demands • Personal & Business customers
Macroeconomic Forces • Slow Economy • Airlines lost $2.5 billion in 2003 (IATA) • Total 2001-2003 losses: $23.2 billion • External Factors Leading to Losses: • September 11th • Costs of implementing new security measures at airports • Severe Acute Respiratory Syndrome (SARS) • Increased insurance premiums • Rising fuel prices in 2003
Trends • Growth in Traffic • RPM’s grew 2.3% in 2003 • Average industry load factor reached record 73.4 % • Increase in cargo volume • Large Layoffs • Increased competition from low-cost carriers • Westjet, Southwest and other clone airlines • Increased borrowing to cover losses from macroeconomic effects
European Market • Slower growth for major European carriers: • Increase of “no frill” carriers • Deregulation • Worldwide Economic downturn • Structural problems of overcapacity • Threats of terrorism* ***Carriers exposed to US market***
Trends: Euro Market • No-frills airlines growing rapidly • Traffic levels within Europe have remained strong • Account for 1/3 of UK domestic services and routes between the UK and Europe • Increase in amount of planes & routes • Deregulations reduce barriers to entry • Likely to be followed by industry consolidation • Further Growth expected • Future focus on other Euro hubs • Alliances and Strategic Partnerships
North American Market • Most mature market • 1978 Deregulation: emergence of “no-frills” market • Followed by consolidation of industry • “No-frills” make up 20% of US domestic market • Southwest leading low-cost carrier • Sending major carriers into bankruptcy
North America (cont) • Major Domestic Airlines expanding international presence • US signing of “open skies” agreement • Unrestricted capacity and frequency • Factors depressing air travel • September 11 • 2001 Recession • Fall of US Airways & United: currently restructuring
Asia-Pacific Market • Relatively immature airline market • Strong growth in airline travel • 1997-98 Asian crisis temporarily halted growth • Restructuring • Disposal of non core assets • Termination of loss making routes • Wide ranging cost reduction programs
Asia-Pacific • Asian carriers look to form alliances with European and N. American carriers • Affected by US economy downturn (2001-2002) • Less sever on air travel industry compared to US • Growth rate expected to be greater than that of western airline markets • Rapid growth in large domestic markets (China) • Most regulated region for air travel • Competitive Advantage: closer to home
Profitable Strategies • Recovery of airline industry helps other industries • Carriers must demonstrate: • “Comfortable” Security • Customer service • Productivity • Government Involvement: • Cooperation with airports and airlines • Encourage travel • Minimize hassles • Airport fees • Alternatives for short Hauls
Profitable Strategies • Airport – Airline Relationship • Work together with final customer in mind • Ticket Prices • Low cost carriers • Increased competition • Price conscious business customers • Labour Productivity • Consolidation of Industry • Mergers/Strategic Alliances
Growth Constraints: Fuel Costs • Fuel Efficiency: 43.6 pm/gallon • Hedging
Growth Constraints: Taxes • Taxes: • 1972: Taxes = 7% of ticket price • 2004: 26% of ticket
British Airlines • Listed and Traded on the London Stock Exchange • Trading symbol: BAY • Also Trades as an ADR on the TSX and NYSE • Symbol: BAB • 1 ADR = 10 Shares
British Airlines • As of Market Close on November 2, 2004 • Bid: 218.75 Pents ($4.93 CDN) • Ask:219 Pents ($4.94 CDN) • Volume 28,551,043 • Outstanding Shares: 1,070,077,000
Background • One of the leading airlines in Europe • Second biggest in Europe by passengers carried • Operating Bases • Heathrow • Gatwick • British Airways is a public limited company • Employed approximately 49,072 employees in 2004 • It operates 291 aircraft • Flies to 550 destinations in 133 countries
A Quick History Lesson • Successors: • Aircraft Transport and Travel Limited (Daimler Airways) • Instone • Handley Page • British Air Marine Navigation • Smaller Airlines (1935 merged into British Airways Limited) • Merged In 1939 • British Overseas Airways Corporation • Trading of BA shares began in 1987
Alliance • Member of Oneworld • American airlines • Qantas • Cathay Pacific • Iberia • Finair • Aer Lingus • LanChile
Franchises and Holdings • Franchises • GB airlines • British Mediterranean • British Airlines Citiexpress • Loganair • Sun Air • Holdings • Air Mauritius • Qantas • Spanish Iberia
Stated Objectives • Future size and shape strategy • Achieve a 10% operating margin • Operating margin up 1.6 points from 3.8 points in 2003 • 13,000 reduction in employees since August, 2001 • Fleet and network strategy • Aircraft replacements • Reduced fleet by 39 aircraft • Gatwick moving to point and spoke strategy • Low fares strategy • On 180 shorthaul routes • Compete with no frill competitors • External cost reductions • Hedging strategies • Employee cost saving strategies • Product and service improvements
Main Competitors • Europe Market • Lufthansa • Air France • North American Market • United
Strengths/Opportunities • Strong Brand Equity • Account for over half of flights within UK • New low fares strategy to compete against “no frills airlines” • 37.3% increase in operating profit • Increasing air travel
Weaknesses and Threats • Heavy Competition • Strict Government Regulations • Route flying rights • Fare setting • Airport access • “Slots” availability • New operational standards (security, safety) • Jet Fuel Prices • Terrorism • Demand for travel affected by economic conditions (SARS) • Increased Insurance Costs • Increased Security Costs
Management • Rod Eddinghton • Chief Executive • May 2000 • John Rishton • CFO • September 1994 via controller • Mike Street • Director of customer service and operations • 1997 • Robert Webb QC • General Counsel • 1998 • Martin George • Director Marketing and Communications • 1987 via director of Marketing