2012 Annual Conference THE HEAT IS ON! A New World Competition

Transcription

1 2012 Annual Conference THE HEAT IS ON! A New World Competition Airlines: Overcoming High Hurdles and their Impact on the Hospitality Industry Bob Harrell President Harrell Associates, LLC InterContinental Buckhead ISHC Atlanta, Annual Georgia Conference THE HEAT IS ON! September 20-23, 2012

2 Discussion Outline Recent Airline Performance Supply - ASMs & Oil Prices Demand - RPMs & Load Factors Pricing - Yields & RASM Profits Relationship to Hospitality Relationship to RevPAR Relative City Pricing

3 Domestic ASMs 60,000,000 DOM ASMs 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 (000)

4 Domestic RPMs 60,000,000 DOM RPMs 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 (000)

5 Domestic Load Factor (%) 100 DOM Load Factor (%) %

6 Domestic Yield (cents/rpm) 16.0 DOM Yield Cents/RPM

7 Domestic RASM (cents/asm) 14 DOM RASM Cents/ASM

8 Domestic Fuel Cost (cents/gal) 400 DOM Fuel (cents/gal)

9 Airline Profits Industry Profits (Billions) $5.0 $0.0 ($5.0) ($2.9) $2.2 $0.6 ($1.1) ($10.0) ($15.0) ($20.0) ($25.0) ($30.0) $ Bil ($24.5) H 2012

10 Ancillary Revenue $7.0 $6.5 $6.0 $5.5 $5.0 $4.5 $4.0 $3.5 $3.0 $Bil Ancillary Revenue ($Bil) $6.7 $6.8 $6.5 $5.8 $

11 Domestic Hotel RevPAR DOM REVPAR $80.00 $75.00 $70.00 $65.00 $60.00 $55.00 $50.00 $45.00 $40.00 $35.00 $30.00 Source: STR

12 Airline RASM and Hotel RevPAR REVPAR DOM RevPAR (Left Axis) DOM RASM (Right Axis) Correlation: 62% RASM

13 Tale of 8 Cities $0.15 $0.14 CPM -- Medium Length Flights ( Miles) $0.14 $0.14 $0.14 $0.13 $0.12 $0.11 $0.10 $0.10 $0.12 $0.10 $0.12 $0.11 $0.09 $0.08 Cents/RPM Source: Harrell Associates City 1 City 2 City 3 City 4 City 5 City 6 City 7 City 8

14 Domestic Yield H/A Forecast Cents/RPM Correlation: 92% DOM Yield H/A Combined Correlation: 95% H/A Predicted

15 About Harrell Associates, LLC Company Profile and Brief Biography Harrell Associates, LLC focuses in two areas: Airline and Airfare Industry Consulting and Travel Industry Public Relations. It is currently providing benchmarking and media relations consulting on the travel and airline industries to a number of major financial institutions including: American Express, Goldman Sachs and Merrill Lynch. Harrell Associates also engages in ad hoc consulting and market research projects in the travel industry. Recent projects and studies cover: Contract, Benefit, and Economic Analysis As related to Northwest Airlines bankruptcy. Airfare Benchmarking -- Top routes to track pricing trends in a multi-dimensional manner. Internet Pricing Analysis -- In conjunction with Consumer Reports Travel Newsletter. Internet Travel Industry White Paper under Consumer WebWatch grant. Global Travel Management -- Model of techniques and international market structures. Hotel Distribution System Analysis Market Research on hotel back office systems. Airline Yield Forecasting Forecasts for major airline equity analysts and investors. Travel Loyalty Program Analysis Cost reduction and program enhancements. Liberalization of the Airline Industry in Europe Original study and updates. Yield Management -- Educational video for Corporate Travel Managers. Expert Witness Available for case/document review, deposition, trial, arbitration. Bob Harrell Harrell Associates, LLC 89 Washington Place New York, NY Telephone: Fax: Bob@HarrellAssociates.com Website: Bob Harrell, principal, is a nationally recognized travel expert in the United States and has been in the industry more than 20 years and is often quoted in the national press as an expert on the Travel and Airline Industries. Mr. Harrell has extensive experience both with the distribution and supplier side of the travel industry. At American Express, where he worked as a vice president for more than 7 years, he was responsible for the Airfare Management Unit and Airline Supplier Relations. Prior to that, he was with Pan American Airways for more than 15 years. Other Significant Accomplishments Managed the start up of the Airfare Management Unit, which provides purchasing and negotiating expertise to large business travel clients. Developed the Airfare Index, which has become the definitive source for airfare benchmarking around the world. Developed the first Short Haul Airfare Index, designed to analytically measure the impact of new low cost airlines on the U. S. airline industry and was a featured speaker at the FAA Annual Forecasting Conference to present this concept. Developed the first and only comprehensive system to maximize travel agent commissions based on preferred supplier sales management techniques. Managed the European marketing and sales function for Pan Am, in London. Managed foreign exchange in approximately 180 currencies and served as the worldwide Chairman of the IATA Currency Sub-Committee. Mr. Harrell has an MBA in finance and marketing from The Amos Tuck School at Dartmouth College and a BS in Aerospace Engineering from the University of Virginia.

16 Acknowledgements Harrell Associates, LLC acknowledges and is grateful to the following: Mike Derchin, CRT Capital Group LLC, Stamford, CT, for his guidance and long time support The Airlines for America, A4A, for statistical support Bobby Bowers, Smith Travel Research, STR, for his long time referrals of people who call him about airline pricing, and visaversa.