global airlines presented by: parveen rai dan wurst amar leekha aman sandhu
Post on 23-Jan-2016
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TRANSCRIPT
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Global Airlines
Presented By:
Parveen RaiDan WurstAmar LeekhaAman Sandhu
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Overview of PresentationIndustry Overview
Current StateTrendsKey Statistics
Regional OverviewsEurope, North America & Asia-Pacific
British AirwaysSingapore AirlinesSouthWestConclusion
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Characteristics of the IndustryVery cyclical, moves with strength of economy
Low Profit Margins….and falling Economic growth
Asset intensive industryInvestments in aircraft, facilities & equipmentLabour constitutes largest costJet fuel costs second largest expense
Strategic Alliances to defend against competition
TechnologyE-ticketsOnline Vendors
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Future OutlookRecovery of US economy
• Confidence in President Bush
Fuel Prices?Government Funding
• National security• Subsidies
High tax burden & RegulationsCost structure
Increase buying power of customers
Customer demands• Personal & Business customers
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Employee Cost
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Profitability
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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
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TrendsGrowth in Traffic
RPM’s grew 2.3% in 2003Average industry load factor reached record 73.4 %Increase in cargo volume
Large Layoffs
Increased competition from low-cost carriersWestjet, Southwest and other clone airlines
Increased borrowing to cover losses from macroeconomic effects
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Capacity Utilization
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Regional Overview:
EuropeanNorth American Asia-Pacific
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European Market Overview
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European Market
Slower growth for major European carriers:
Increase of “no frill” carriersDeregulationWorldwide Economic downturnStructural problems of overcapacityThreats of terrorism*
***Carriers exposed to US market***
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Trends: Euro MarketNo-frills airlines growing rapidly
Traffic levels within Europe have remained strongAccount for 1/3 of UK domestic services and routes between the UK and EuropeIncrease in amount of planes & routes
Deregulations reduce barriers to entryLikely to be followed by industry consolidationFurther Growth expected
Future focus on other Euro hubs
Alliances and Strategic Partnerships
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North American Market
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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 carrierSending major carriers into bankruptcy
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North America (cont)Major Domestic Airlines expanding international presence
US signing of “open skies” agreement Unrestricted capacity and frequency
Factors depressing air travelSeptember 112001 RecessionFall of US Airways & United: currently restructuring
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Asia-Pacific Market
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Asia-Pacific MarketRelatively immature airline market
Strong growth in airline travel
1997-98 Asian crisis temporarily halted growth
RestructuringDisposal of non core assetsTermination of loss making routesWide ranging cost reduction programs
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Asia-PacificAsian 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 travelCompetitive Advantage: closer to home
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Key Measures of Performance
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International Routes (Passengers Carried)
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International Routes (RPK)
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Total Passengers Carried (All Routes)
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Total RPK
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Past YieldsYields
0
5
10
15
20
25
30
1937
1941
1945
1949
1953
1957
1961
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
Yields
Nominal Yields Real Yields
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Industry Growth Trends
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Industry Growth Trends (cont)Forecasted Revenue Passengers (in millions)
100.0
110.0
120.0
130.0
140.0
150.0
160.0
170.0
180.0
190.0
200.0
210.0
220.0
230.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
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Industry Growth Trends (cont)Forecasted RPK's (in millions $)
40,000.045,000.050,000.055,000.060,000.065,000.070,000.075,000.080,000.085,000.090,000.095,000.0
100,000.0105,000.0110,000.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
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Projected Revenue Growth
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What Does the Future Look Like?
Profits/Losses
-15,000,000
-10,000,000
-5,000,000
0
5,000,000
10,000,000
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
***
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Profitable StrategiesRecovery of airline industry helps other industriesCarriers must demonstrate:
• “Comfortable” Security• Customer service• Productivity
Government Involvement:• Cooperation with airports and airlines• Encourage travel• Minimize hassles• Airport fees
Alternatives for short Hauls
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Profitable Strategies
Airport – Airline Relationship • Work together with final customer in mind
Ticket Prices• Low cost carriers• Increased competition• Price conscious business customers
Labour ProductivityConsolidation of Industry
• Mergers/Strategic Alliances
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Growth Constraints: Fuel Costs
Fuel Efficiency: 43.6
pm/gallonHedging
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Fuel Costs: PastPast Fuel Costs
0
0.2
0.4
0.6
0.8
1
1.2
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
$/Gallon
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Fuel Costs: FutureForecasted Fuel Costs
0.600.620.640.660.680.700.720.740.760.780.800.820.84
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
$/Gallon
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Growth Constraints: Taxes
Taxes:1972: Taxes = 7% of ticket price2004: 26% of ticket
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British Airways
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British Airlines
Listed and Traded on the London Stock ExchangeTrading symbol: BAYAlso Trades as an ADR on the TSX and NYSE
• Symbol: BAB• 1 ADR = 10 Shares
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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
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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 companyEmployed approximately 49,072 employees in 2004It operates 291 aircraftFlies to 550 destinations in 133 countries
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A Quick History LessonSuccessors:
• 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 CorporationTrading of BA shares began in 1987
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AllianceMember of Oneworld
• American airlines• Qantas• Cathay Pacific• Iberia• Finair• Aer Lingus• LanChile
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Franchises and HoldingsFranchises
• GB airlines• British Mediterranean• British Airlines Citiexpress• Loganair• Sun Air
Holdings• Air Mauritius• Qantas• Spanish Iberia
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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 reductionsHedging strategiesEmployee cost saving strategiesProduct and service improvements
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Main Competitors
Europe Market• Lufthansa• Air France
North American Market• United
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Cost Structure
30%
9%2%13%7%
8%
13%
8%10%
Employee costs
Depreiction and ammoritization
Aircraft lease costs
Fuel and oil costs
Engineering and other aircraft costs
Landing fees and en route charges
Handling charges, catering and other operating costs
Selling costs
Accomodation, ground equipment costs and currency differences
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Geographic Revenue Distribution
Geographic Distribution of Revenue
Europe The Americas
Africa, Middle East ,and India Far East and Australia
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Strengths/Opportunities
Strong Brand EquityAccount for over half of flights within UKNew low fares strategy to compete against “no frills airlines”37.3% increase in operating profitIncreasing air travel
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Weaknesses and ThreatsHeavy CompetitionStrict Government Regulations
• Route flying rights• Fare setting• Airport access• “Slots” availability• New operational standards (security, safety)
Jet Fuel PricesTerrorismDemand for travel affected by economic conditions (SARS)Increased Insurance CostsIncreased Security Costs
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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
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Management Con’t
Roger Maynard• Director of Investments• 1987 via VP Commercial Affairs N.A
Alan McDonald• Director Engineering• 1966
Lloyd Cromwell Griffths• Director of Flight Operations• 1973 via Chief Pilot
Paul Coby• Chief Info Officer
Robert Boyle• Director of Commercial Planning
Neil Roberts• Director for People
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2004 2003 2002 2001 2000Passenger Load Factor
.73 .719 .704 .714 .696
RPK (Millions)
103,092 100,112 106,270 123,970 127,425
Passengers Carried
36,103,000 38,019,000 40,004,000 44,462,000 18,315,000
ASK (Millions)
141,272 139,172 151,046 17,2524 183,158
Breakeven Load Factor
.636 .639 .65 .644 .659
RTK (Millions)
14,771 14,231 14,362 16,987 17,215
Tons Cargo Carried
796,000 764,000 755,000 914,000 909,000
Operations
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Q1-2004 2004 2003 2002 2001 2000 1999
Current
.922 0.922 .773 .799 .813 .777 .847
NWC -242 -231 -818 -642 -562 -774 -465
Liquidity Analysis
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Q1-2004 2004 2003 2002 2001 2000 1999
Debt/Equity
4.21 5.54 6.15 5.16 4.44 4.53 3.04
Interest Coverage
2.1 1.6 .3 1.7 1
Capital Structure Analysis
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Q1-2004 2004 2003 2002 2001 2000 1999
Price Earnings
7.58 7.62 -10.7 -21.35 14.99 -7.85 3.96
Market to Book
1.56 1.52 .62 1.16 1.34 1.42 1.44
Dividend Yield
0 0 0 .057 .054 .042
Dividend Payout
0 0 0 .852 -.427 .164
Capital Market Analysis
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Q1-2004 2004 2003 2002 2001 2000 1999
ROA 4.38% 3.05% -.87% -.88% 1.64% -3.28% .9%
ROE 20.53% 19.96% -6.21% -5.42% 8.92% -18.11%
3.64%
Profit Margin
5.23% 3.84% -1.32% 4.1% .94%
EPS .370 -.103 -.114 .210 -.420
Profitability Analysis
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2004 2003 2002 2001 2000
Free Cash Flow
£676,000,000
£ 942,000,000
£ 213,000,000
£ 491,000,000
£ 316,000,000
Cash Flow Analysis
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Stock ValuationDiscount Rate
• Beta = 1.98459• Market Return = 7.48% (FTSE 20 yr
average return)• Risk Free = 2.47% (1 Year LIBOR)• Discount Rate = 12.22%• Average Cash Flow = £527,600,000
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PV = £7,789,940,000Market Capitalization = £3,032,128,400Undervaluation = £4,757,811,600
2004 2005 2006 2007 2008 2009 2010 2011 2012
Free Cash Flow
527.6 527.6 527.6 527.6 527.6 527.6 527.6 527.6 527.6
Discounted 470.23
419.1 373.53
332.91
296.72
264.45
235.7 210.07
187.23
Stock Valuation
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Pricing Chart
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Pricing Chart (5 Year)
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Recommendations
Poor operating statisticsLiquidity ProblemsBarely covering interestPoor earnings
Therefore…Sell
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Singapore Airlines
Listed and traded on the Singapore Stock ExchangeShare price as of Nov 3 10.90 SDAlso traded in the US as an ADR: Symbol SPAAFExchange Rate: 1.37414 SD – 1 CAD (As of Nov 3rd) Number of shares issued 1,218,149,660
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Brief HistorySIA began in May 1947, when Malaysian Airways first operated a twin-engined Airspeed Consul between Singapore, Kuala Lumpur, Ipoh and Penang.
1963 – Changed to Malaysian Airlines with formation of federation of Malaysia
1966 – Became Malaysian-Singapore Airlines
1972 – Restructured itself into 2 airlines (Malaysian & Singapore Airlines)
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Stated ObjectivesContinue to offer innovative promotions to attract new customers and maintain competitive advantageCreate new non-stop routes which will connect the East to West. These flights offer quick and efficient non-stop service utilizing SIA’s new Airbus A340-500’s
• After implementing the longest flight in the world from Singapore to Los Angeles and recently creating a new non-stop route from Singapore to New York, SIA plans to create new routes to decrease flight and stop-over time
Provide competitive fares through their low-cost subsidiaries (Tiger, SilkAir and Virgin Airways)Build new terminal in strategic locations to cater for low-cost airlines (i.e. new terminal built in Changi Airport)
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Route Map
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Star Alliance MembersAir CanadaAir New ZealandANAAsian AirlinesAustrianBMILOT Polish AirlinesLufthansa
Singapore AirlinesSpanairThai AirwaysUnitedUS AirwaysVARIGSAS
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Subsidiaries of SIASilk AirSIA Engineering Co.TradewindsSIA Cargo SATS
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Main Competitors
Cathay PacificJapan AirlinesMalaysian Airlines
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StrengthsGreat Reputation for
quality serviceLow Debt Structure
(low interest costs)Addition of new
Airbus A340-500’sNew non-stop routesPartners & AlliancesProfit Sharing Plans Excellent in flight-
service (fleet)
WeaknessesTerrorismJet Fuel PricesSARSWar in IRAQDecrease in load
factorDecline in EPS
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Cost Structure17%
13%
2%
19%11%6%
9%
7%
10% 2% 4%
Staff CostsDepreiction and ammoritizationAircraft lease costsFuel and oil costsAircraft Maintenance and Overhaul CostsAirport and Overflying ChargesHandling charges, catering and other operating costsSelling costsRentals on Leased AircraftCommunication and Information Tech CostsOther Costs
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Geographic Distribution Of Revenue29%
21%
19%
11%
20%
East Asia Europe
Americas South and West Pacific
West Asia and Africa
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Operating Data
Pax Carried 13278000 15326000 14765000 15002000 13872000
ASK882527000
00995659000
00945885000
009264800000
0877283000
00
RPK646852000
00741832000
00699945000
007111840000
0657184000
00
Pax Load Factor 73.30% 74.50% 74.00% 76.80% 74.90%
Pax Break/ Even Factor 72.80% 73.60% 71.10% 70.20% 66.2%
04-03 03-02 02-01 01-00 00-99
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Liquidity Analysis
2004 2003 2002 2001 2000
CurrentRatio
0.9177
0.6871 0.9243 0.8925 0.9432
NetWorking
Capital Ratio
-0.013 -0.0596
-0.0128
-0.0237
-0.0129
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Capital Structure Analysis
2004 2003 2002 2001 2000
D/E 0.3900
0.3952 0.3937 0.3619 0.3547
InterestCoverage
Ratio
13.333
15.159 21.811 50.792 39.352
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Capital Market Analysis
2004 2003 2002 2001 2000
P/E 15.638 10.011 27.746 10.751 17.505
Market-Book
11.802 11.286 10.951 10.738 9.537
Dividend Yield
0.01376
0.01142
0.01597
0.02573
0.01250
Dividend Payout
0.12904
0.17064
0.33528
0.20861
0.19716
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Profitability Analysis Ratio
2004 2003 2002 2001 2000
ROA 4.336%
5.639%
3.462%
9.017%
6.923%
ROE 6.038% 7.863% 4.770% 12.25% 9.172%
Profit Margin
.08700 0.10126
0.06740
0.15772
0.13077
EPS 0.697 0.874 0.519 1.265 0.914
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Quarterly Financial DataQ1 April – June Q2 July – Sept
ROE 0.017679754 0.024443137
ROA 0.012441246 0.01693934
P/E 52.830 37.201
D/E .42105 .44297
EPS 0.212 0.293
P/BV 11.99111 11.98700
2004
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Cash Flow Analysis
2004 2003 2002 2001 2000Free Cash Flow (SGD)
1153.7 Million
94.4 Million
-472.7Million
756.2Million
87.3Million
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Stock Valuation
Discount Rate• Beta = 0.631• Market Return = 5.36% Strait Times
Index (10 Yr Average)• Risk Free Rate = 1.4% (5 Year Bond)• Discount Rate = 3.8988%• Average Cash Flow = 441.08 Million SGD
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Stock Valuation
2004 2005 2006 2007 2008 2009 2010 2011 2012
Free Cash Flow
441.08 Million
441.08 Million
441.08 Million
441.08 Million
441.08Million
441.08Million
441.08 Million
441.08 Million
441.08 Million
Discounted
424.52
408.58
393.26
378.50
364.29
350.63
337.46
324.80
312.62
• Present Value: 3,294,660,000
• Market Capitalization: 13,281,736,011.48 SGD
• Overvalued: 9,987,076,011.48 SGD
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Recommendation
Moderate Buy
Very Liquid Company (high current ratio and large cash on hand)Great track record for exceptional customer service Constant dividend payoutExpanding routes and servicesDiversified risk through low cost subsidiariesVery low levels of debt (low interest payments)
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Southwest Airlines
Share Price: USD$15.96
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Southwest Airlines (LUV)Listed on: NYSESymbol: LUVIndex Member:
S&P 500, DJTA
Market Cap: $12.44BShares Outstanding:
779.58M
Daily Departures: 2,800 flights a day
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Company BackgroundBegan service June 18, 1971 with flights to Houston, Dallas, and San Antonio.
Shorthaul, high-frequency, point-to-point, low-fare service
Most airlines use the hub-and-spoke system
As of December 31, 2003, Southwest served 337 nonstop city pairs.
largest carrier based on scheduled domestic departures.
2003 marked Southwest's 31st consecutive year of profitability.
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Growth and Expansion
nonstop service to: Orlando Fort Lauderdale/Hollywood Manchester Las Vegas Raleigh-DurhamTampa Bay
will begin in the first quarter of 2005
Oakland Phoenix Seattle Providence Philadelphia, and Columbus Los Angeles International
Addition of 16 nonstop flights from Chicago Midway Airport to 13 existing nonstop markets.
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Cost Reducing Strategies
RestructuringConsolidation of reservations operationsElimination of traditional travel agency commissionsFuture fleet of Boeing 737-700 will have fuel-saving Blended WingletsHedging 70-80% of fuel costs at approx. $24/barrel of crude oil
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Mission Statement
“…dedication to the highest quality of Customer Service delivered with
a sense of warmth, friendliness, individual pride, and Company
Spirit.”
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Statement of Objectivesto provide safe, low price transportation
maximum customer convenience
to be the cheapest and most efficient operator In specific domestic regional markets
to provide customers with a high level of convenience and service
Outstanding customer service through highly motivated employees.
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Main Competitors
AMR Corp. (AMR)JetBlue Airways Corp. (JBLU)Delta Airlines Inc. (DAL)
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Strengths/WeaknessesStrengths
Known for superior customer serviceLow-cost, no-frillsDirect one-way travelPoint-to-point efficiencyLargest carrier for domestic serviceOne fleet typeHedge against exposure to fuel prices (80%)Only airline rated investment grade
WeaknessesPoint-to-point creates excessive expenditureToo many locations, administrative costsRisk to shocks in US economy, since it is a domestic carrier
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Cost Structure
41%
15%8%
1%
3%
7%
7%
18%
Salaries, wages & benefits Fuel & oil
Maintenance materials & repairs Agency commissions
Aircraft rentals Landing fees & other rentals
Depreciation & amortization Other operating expenses
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Market Share & Capacity
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System Map
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Boeing 737 Fleet
737 Type Seats Average Age
(Yrs)
# of Aircraft
# Owned # Leased
-200 122 21.2 23 21 2
-300 137 12.6 194 110 84
-500 122 12.7 25 16 9
-700 137 3.3 146 145 1
Totals 9.6 388 292 96
• Plans to retire 23 737-200 by end of first quarter 2005.
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Operating Data($’s in millions) 2003 2002 2001 2000 1999
RPM (000s) 47,943,066
45,391,903
44,493,916
42,215,162
36,479,322
ASM (000s) 71,790,425
68,886,546
65,295,290
59,909,965
52,855,467
Passenger load factor
66.78% 65.89% 68.14% 70.46% 69.02%
Passenger revenue yield per RPM
$0.1197 $0.1177 $0.1209 $0.1295 $0.1251
Size of fleet at year end
388 375 355 344 312
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Financial Data($’s in millions) 2003 2002 2001 2000 1999
Operating revenue
$5,937 $5,522 $5,555 $5,650 $4,736
Operating expense
5,454 5,105 4,924 4,628 3,954
Operating income
483 417 631 1,022 782
Operating margin
8.14% 7.55% 11.36% 18.09% 16.51%
Net income 442 241 511 603 474
Net margin 7.44% 4.36% 9.20% 10.67% 10.02%
EPS (basic) $0.56 $0.31 0.67 0.81 0.63
EPS (diluted) $0.54 $0.30 0.63 0.76 0.59
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Liquidity2003 2002 2001 2000 1999
Current Ratio 1.34 1.56 1.13 0.64 0.66
NWC (million’s)
590 798 281 (466.5) (329.4)
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Capital Structure2003 2002 2001 2000 1999
Interest Coverage
5.31 3.93 9.01 14.59 1.45
D/E 0.96 1.02 1.24 0.93 0.99
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Capital Market Analysis2003 2002 2001 2000 1999
P/E 28.82 44.84 27.58 27.60 17.13
MV/BV 2.52 2.44 3.51 4.82 2.87
Dividend Yield
0.11% 0.13% 0.10% 0.07% 0.13%
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Profitability2003 2002 2001 2000 1999
ROA 4.69% 2.68% 6.53% 9.79% 9.15%
ROE 9.33% 5.71% 13.69% 19.19% 18.13%
Profit Margin
7.44% 4.36% 9.20% 10.67% 10.02%
EPS $0.54 $0.30 $0.63 $0.76 $0.59
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Cash Flow Analysis(dollars in millions)
2003 2002 2001 2000 1999
Cash Flow From Operations
1,336 520 1,485 1,298 1,029
Free Cash Flow
98 (83) 487 163 (139)
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Cash Flow Analysisincrease in operating cash flows in 2003 a result of:
due to higher net income$271 million government grant from the Wartime Act increase in accrued liabilities decrease in accounts and other receivables
Heavy investments result in FCF of $98Mill for 2003
Large cash increase due to exercise stock optionsUse increase in cash flow to repurchase up to $300 million of common stock in the open market
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Stock Valuation
Discount Rate• Beta = 0.852• Market Return = 9.98% Average Return S&P
500 Index (22 Yr Average)• Risk Free Rate = 4.85% (30 Year Bond)• Discount Rate = 9.2105%• Average Discounted Cash
Flow=$96,318,685.20
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Discounted Cash Flow
Present Value: $528,970,792 Market Capitalization: $12.44B
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Net Market Value of Assets
737 Type Seats Average Age (Yrs)
# of Aircraft
# Owned
# Leased
-200 122 21.2 23 21 2
-300 137 12.6 194 110 84
-500 122 12.7 25 16 9
-700 137 3.3 146 145 1
Totals 9.6 388 292 96
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Competitor ComparisonLUV AMR DAL JBLU Industry
Market Cap: 12.44B 1.33B 713.46M 2.45B 635.40M
Employees: 32,847 96,400 70,600 4,704 5.30K
Rev. Growth: 7.50% 0.80% -0.00% 57.20% 10.10%
Revenue: 6.36B 18.50B 14.54B 1.19B 1.46B
Gross Margin: 29.01% 21.18% 7.02% 39.34% 20.71%
EBITDA: 902.00M 1.30B 158.00M 206.19M 158.97M
Oper. Margins: 7.56% -0.09% -7.37% 12.56% 4.24%
Net Income: 284.00M -482.00M -2.86B 64.61M N/A
EPS: 0.349 -3.027 -22.958 0.585 N/A
PE: 45.73 N/A N/A 40.50 15.03
PEG: 2.53 N/A N/A 2.69 0.81
PS: 1.90 0.07 0.05 1.93 0.31
As of Sept. 30, 2004: for trailing twelve months
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Quarterly Financials
3rd Q Sept 30/04
2nd Q June 30/04
ROE 2.21% 4.30%
ROA 1.06% 2.09%
D/E 1.13 1.06
EPS $0.15 $0.14
P/B 2.14 2.58
P/E 90.80 119.79
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Market Trend
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Commitments & Contingencies
contractual obligations and commitmentsfuture purchases of aircraftpayment of debtlease arrangements
primarily of scheduled aircraft acquisitions from Boeing
28 scheduled for delivery in 2005, 22 in 2006, 25 in 2007, and 6 in 2008
$650Mill worth of accrued liabilites in 2003
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Profitability
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Valuation
Investment grade ratingP/E ratio > industryPEG ratio > industryEPS > industryLow D/E ratio (not highly leveraged)Market Cap > DCFCFCurrent ratio, interest coverage, D/E > industry average
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RecommendationHOLDShowing of strong future growthCash Flows are not consistentSeasonal, so expect price to go up during springPretty consistent stock
31st consectutive year of profitabilitySteady dividend for common shareholdersNot very leveraged, hedging of fuel costs limit exposure to risk
Safety in the StockCurrent ratio, interest coverage, D/E > industry average
Senior unsecured debt considered investment grade:
S&P, Moody’s and Fitch