dominican republic: passenger trends, airports and airlines
DESCRIPTION
Passenger trends for the top 7 airports. Information includes airline and airport market share from the late 90s, in addition to country GDP growth rates and estimatesTRANSCRIPT
Dominican Republic Airport and Airline Passenger Trends
Vaughn Cordle, CFA Ionosphere Capital, LLC
Airports: Scheduled Service
Airport Market Share
Total passengers % (scheduled & charter)
LA ISABELA
CATEY
LA ROMANA
PUERTO PLATA
SANTIAGO
LAS AMERICAS
PUNTA CANA
0.3%
1.2%
1.7%
7.2%
10.4%
29.9%
49.3%
11 months ending Nov 2013
Source: Dominican Civil Aviation Institute & Ionosphere Capital, LLC
Airport Market Share
Total passengers (scheduled & charter)
LA ISABELA
CATEY
LA ROMANA
PUERTO PLATA
SANTIAGO
LAS AMERICAS
PUNTA CANA
32,097
109,450
163,891
687,945
983,309
2,836,139
4,678,683
Source: Dominican Civil Aviation Institute & Ionosphere Capital, LLC
11 months ending Nov 2013
Airport Market Share
Scheduled + charter = over 10 million passengers
Source: Dominican Civil Aviation Institute & Ionosphere Capital, LLC
Punta Cana (PUJ)
Total passengers – 12 month average
20012001200220032003200420052005200620072007200820092009201020112011201220132013 1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
5,500,000
Punta Cana12 month moving average ending Nov 2013
Source: Dominican Civil Aviation Institute & Ionosphere Capital, LLC
Punta Cana (PUJ)
Total passengers – monthly average
200020002000200120012001200220022002200320032003200420042004200520052005200620062006200720072007200820082008200920092009201020102010201120112011201220122012201320132013
-
100,000
200,000
300,000
400,000
500,000
600,000 565,551
270,389
PUNTA CANATotal passengers per month / 12 month moving avg thr Nov 2013
Source: Dominican Civil Aviation Institute & Ionosphere Capital, LLC
Las Americas (SDQ)
Total passengers – 12 month average
2001 2001 2002 2003 2003 2004 2005 2005 2006 2007 2007 2008 2009 2009 2010 2011 2011 2012 2013 2013 1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
Las Americas12 month moving average ending Nov 2013
Source: Dominican Civil Aviation Institute & Ionosphere Capital, LLC
Las Americas (SDQ)
Total passengers – monthly average
200020002000200120012001200220022002200320032003200420042004200520052005200620062006200720072007200820082008200920092009201020102010201120112011201220122012201320132013
100,000
150,000
200,000
250,000
300,000
350,000
318,166
227,411
LAS AMERICASTotal passengers per month / 12 month avg thr Nov 2013
Source: Dominican Civil Aviation Institute & Ionosphere Capital, LLC
Source: Dominican Civil Aviation Institute & Ionosphere Capital, LLC
La Romana (LRM)
Total passengers – 12 month average
2001 2001 2002 2003 2003 2004 2005 2005 2006 2007 2007 2008 2009 2009 2010 2011 2011 2012 2013 2013 -
100,000
200,000
300,000
400,000
500,000
600,000
La Romana12 month moving average ending Nov 2013
Source: Dominican Civil Aviation Institute & Ionosphere Capital, LLC
La Romana (LRM)
Total passengers – monthly average
2000 2000 2001 2002 2002 2003 2004 2004 2005 2006 2006 2007 2008 2008 2009 2010 2010 2011 2012 2012 2013 -
10,000
20,000
30,000
40,000
50,000
60,000
70,000
74,781
23,999
5,395
LA ROMANATotal passengers per month / 12 month avg thr Nov 2013
Source: Dominican Civil Aviation Institute & Ionosphere Capital, LLC
Scheduled airlines
Top 10 Airlines – scheduled service into Dominican Republic
Scheduled airlines
Top 10 airlines - % share
36 airlines Top 5: 54.3%Top 10: 72.3%
Punta Cana (PUJ)
Airline passenger share
Top 5 share: 43%Top 10 share: 65%Top 20 share: 90%Total airlines: 34
Notes: American includes US Airways
Punta Cana is a below average concentrated airport. The HHI is a very low 619. This means that there is a high intensity of rivalry and low and competitive fares on average. This is likely the reason passenger traffic has grown fast over the last decade.
Las Americas (SDQ)
Airline passenger share
Top 5 share: 73%Top 10 share: 89%Top 20 share: 99%Total airlines: 25
Notes: American includes US Airways
Las Americas is a below average concentrated airport. The HHI is a low 1,508. This means very competitive fares for the airport
La Romana (LRM)
Airline passenger share Top 5 share: 86%Top 10 share: 100%Total airlines: 12
Notes: American + American Eagle account for 21.7% of the share.
La Romana has low to moderate concentration. The HHI is 1,925. Jetblue has competitive fares and American Eagle and American have lowered labor and other costs in bankruptcy. The merger with US airways will result in more competitive fares as they integrate operations.
Regional Share of Airport Traffic
Scheduled Passenger Service
66%15%
9%
7%3%
Scheduled Passenger Share
North America
Europe
Central Amr/Caribbean
South America
Eurasia
Regional Share of Airport Traffic
Charter Passenger Service
46%
39%
4%5%
5%
Charter Passenger Share
North America
Europe
Eurasia
South America
Central Amr/Caribbean
Regional Share of Airport Traffic
Charter airlines Arrival Airline Passengers Share
1 THOMPSON FLY 73,226 14.5% 2 SUNWING AIRLINES 70,428 13.9% 3 AIRTRAN AIRWAYS, INC. 40,401 8.0% 4 FRONTIER AIRLINES, INC. 39,574 7.8% 5 CANJET AIRLINES 27,691 5.5% 50% 6 TUI AIRLINES NEDERLAND 21,849 4.3% 7 MIAMI AIR INTERNATIONAL, S. A. 21,418 4.2% 8 ORENBURG AIRLINES, JSC. 18,905 3.7% 9 SUN COUNTRY AIRLINES 15,815 3.1%
10 CALIMA DE AVIACIÓN, S. L. 13,751 2.7% 68% 11 EDELWEISS AIRLINES 13,548 2.7% 12 WHITE AIR 12,126 2.4% 13 XL AIRWAYS FRANCE 11,645 2.3% 14 THOMAS COOK AIRLINES 11,418 2.3% 15 CARIBBEAN SUN AIRLINES 10,556 2.1% 80% 16 INSEL AIR INTERNACIONAL, INC. 8,965 1.8% 17 ALITALIA 7,662 1.5% 18 CASINO EXPRESS AIRLINE 7,467 1.5% 19 AIR GUYANE EXPRESS 6,354 1.3% 20 SERVICIOS AÉREOS PROFESIONALES 6,165 1.2% 87% 21 AEROLINEA PRINCIPAL CHILE, S. A. 5,280 1%
159 charter airlines and various operators fly into the Dominican Republic airports.
# 159 is NetJets
Regional Share of Airport Traffic
Scheduled & Charter Passenger Service
63%17%
9%
7%3%
Scheduled & Charter Passenger Share
North America
Europe
Central Amr/Caribbean
South America
Eurasia
Top Passenger Routes
Origin airports to Dominican Republic
88 routes
Top 5: 48% share Top 10: 68% shareTop 20: 87% share
Top City Pairs
230+ City-pairs
Top 5: 29% share Top 10: 44% shareTop 15: 56% share
Top JFK City-Pairs & Airline Share
High Concentration on these city-pairs
Jetblue is the only airline operating from JFK to POP, LRM and AZS . 100% market share = 10,000 HHI
U.S. to Latin America
Passenger fares to Latin America
Country Market Share
Origin countries to Dominican Republic Schedule Service DR arrivals Market Jan-Nov 2013 Passengers Share 1 USA 2,283,798 54.91%
2 Canada 501,956 12.07%
3 Panama 282,619 6.79%
4 Germany 203,101 4.88%
5 France 185,694 4.46% 83%
6 Spain 171,050 4.11%
7 Russia 137,479 3.31%
8 Brazil 62,462 1.50%
9 Peru 61,970 1.49%
10 Colombia 56,687 1.36% 95%
11 Venezuela 49,484 1.19%
12 Netherlands Antilles 27,368 0.66%
13 Italy 24,942 0.60%
14 Argentia 14,644 0.35%
15 United kingdom 13,644 0.33%
Sub Total 4,076,898 98.0%
Total DR Pax 4,159,518 100.0%
Top 10 countries represent 95% of all passengers into Dominican Republic.
US + Canada: 67%
Top 15: 98%
Economic Outlook
Country GDP Growth Rate Estimates
2012 2013 2014 2015 USA 2.8 1.9 2.8 3.0 Canada 1.7 1.7 2.2 2.4 Panama 10.5 7.5 6.9 6.9 Germany 0.9 0.5 1.6 1.4 France 0.0 0.2 0.9 1.5 Spain –1.6 –1.2 0.6 0.8 Russia 3.4 1.5 2.0 2.5 Brazil 1.0 2.3 2.3 2.8 Peru 6.3 4.9 5.5 5.9 Colombia 4.2 4.0 4.3 4.2 Venezuela 5.5 0.7 0.5 1.7 Netherlands Antilles -1.3 0.3 Italy –2.5 –1.8 0.6 1.1 Argentia 1.9 5.0 2.8 2.5 United kingdom 0.3 1.7 2.4 2.2
* Weighted Average 2.8 2.0 2.7 2.9 Dominican Republic 3.9 2.5 3.9 4.9
2012 2013 2014 20151.5
2.0
2.5
3.0
Weighted Average GDP Growth Rates
Economic tail winds will lift passenger volumes in Dominican Republic airports – all else held constant. In turn, Dominican Republic’s economic growth is boosted by higher volumes of passengers.
It should be noted that GDP forecasts have been too rosy every year for the last 5 years. FED tapering will result in currency devaluation in developing countries, and this in turn will increase airline operating costs in those regions.
* Weighted average is based on holding passenger market share constantSource: IMF, World Bank, Conference Board & Ionosphere Capital, LLC
US Economic Outlook
2013 2014 2015
Year Year Year
Real GDP 1.9 3.0 2.8
Real Consumer Spending 2.0 2.6 2.4
The Conference Board Updated: January 15, 2014
Percentage change, seasonally adjusted annual rates
Airline growth is not expected to exceed the growth rate in consumer spending.
3Q 4Q 1Q 2Q 3Q 4Q2013 2013 2014 2014 2014 2014
1.5
2.0
2.5
3.0
3.5
4.0
2.4
3.1
The U.S. Economic Forecast
Consumer Spending
GDP Growth
The Conference Board, updated January 15, 2014
Oil and Jet Fuel Outlook
Lower oil and fuel costs
20102010
20112011
20122012
20132013
20142014
20152015
$2.00
$2.20
$2.40
$2.60
$2.80
$3.00
$3.20
Jet Fuel Refiner Price to End UsersPer quarter and in $/gal
Source: EIA (Jan 2014) & Ionosphere Capital, LLC
2012 2013 2014f 2015f 2016f
Oil Price (US$ per barrel) 105.0 104.1 103.5 99.8 98.6
Oil price (percent change) 1.00 -0.90 -0.60 -3.50 -1.20
Source: World Bank
Lower energy costs boost economic output and air travel expenditures, in addition to lowering airline operating costs. As an example, the U.S. passenger airlines burned 15.5B gallons (368M barrels) of jet last year.
A $4 swing in in a barrel of oil lowers costs by ~ $1.6 billion, which is equivalent to lowering fares by 1%. This in turn would boost passenger volumes by about .6% - all else held constant. Of course rarely is all else held constant, especially in the airline industry.
The current assumption is that oil will be about $4 (4.4%) lower in 2015 from 2013’s levels and that jet fuel will be 6% lower. Crack spreads are expected to fall and this is why jet will fall faster than oil.
Jet Fuel Costs & Airline Fares
2010 2011 2012 2013 2014 2015
Airline Ticket Price Index 278 304 305 313 320 324
% change 9.3% 0.3% 2.8% 1.9% 1.3%
Jet Fuel (cents per gal) 220 305 310 298 289 280
% change 38.6% 1.6% -4.0% -3.1% -3.1%
Jet fuel costs are expected to fall by 18 cents a gallon (6%) by 2015 from 2013’s $2.98.
Based on our (Ionosphere Capital) forecast of $163 billion in passenger revenue in 2015, it is assumed that fares will be about 1.7% lower than would be the case if fuel costs did not fall as forecasted.
Given the expected price elasticity of demand, we estimate passenger volumes will be higher by approximately 1% because of the lower fuel costs.
Of course there are other factors and forces that must be considered, but directionally the relationships between fuel, fares, and passenger volumes have been very consistent over a full business cycle.
Source: BEA, EIA, & Ionosphere Capital, LLC
Passenger Growth Follows GDP Growth
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
20122013
2014e2015e
-4%
-2%
0%
2%
4%
6%
-10%
-6%
-2%
2%
6%
10%
Passenger Demand Follows GDP
Real GDP Growth Passengers (RIGHT)
Source: Ionosphere Capital, LLC
Airfares Impact Passenger Demand
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
20122013
2014e2015e
-10%
-5%
0%
5%
10%
15% -10%
-6%
-2%
2%
6%
10%
... Passenger Growth Follows Airline Fares
Airline Ticket Prices (LEFT & Inverted) Passengers (RIGHT)
Source: Ionosphere Capital, LLC
Jet Fuel Costs Drive Airfares
All U.S. Airlines, yr-over-yr percentage change
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
20122013
2014e2015e
-10%
-5%
0%
5%
10%
15%
-60%
-40%
-20%
0%
20%
40%
60%
80%
Airline Ticket Prices Follow Fuel Costs
Airline Ticket Prices (LEFT) Jet Fuel Costs (RIGHT)
Source: Ionosphere Capital, LLC