MARITIME TECHNOLOGYIMPLEMENTATION OF AIRLINE

BUSINESS MODEL IN SHIPPINGINNOVATION OR DIFFERENTIATION?

1

Marseille, 2nd July 2013

Olivier DANIEL

SNAPSHOT

(*) Excluding general aviation and air forces(1) Commercial airlines, end 2010(2) Direct revenues, end 2010(3) Airlines staff, end 2010(4) Aircrafts in services end 2010(5) 2010 figures(6) 2010 figures(7) Excluding general aviation and air forces(8) 2008 figures

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Aviation (*) Shipping (**)

Companies 1,568 (1) Over 7,000 (a)

Revenues 539 billions USD (2) 380 billions USD (b)

Employment 2,2 millions (3) 1,90 millions (c)

Fleet 23,844 (4) 55,138 (d)

Trade 2.68 millions passengers (5)

172 billions tons.km freight (6)2.08 trillions passengers (e)

82.5 trillions tons.km freight (f)

Airports / ports 3,846 (7) 4,600 (g)

CO2 emissions 666 million tons (8)

(2% world)870 million tons (h)

(2.7% world)(**) Merchant vessels only above 100 GT(a) Commercial shipping, end 2010(2) Direct revenues, end 2010(c) Seafarers employment, end 2010(d) Vessels in services end 2011(e) 2010 figures(f) 2012 figures(g) Commercial ports(h) 2008 figures

Source: UNCTAD, ATAG, IMO

PART1: BUSINESS MODELS

High-tech modern industry?

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Old conservative industry?

MAIN BUSINESS SEGMENTATION

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Full Service Network Carriers Low Cost Carriers Regional Carriers Freight Carriers

Liner shipping Tramp shipping Marine services Passenger transportation

CYCLICAL INDUSTRIES

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DRIVERS

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AviationShipping

COSTS STRUCTURE

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0%

20%

40%

60%

80%

100%

Shipping

Overhead & administrative

Catering

Cargo handling

Land infrastructure fees

FO

Insurance

Maintenance

Staff

Capital

Aviation

Fixed costs

Voyage costs

ROLE OF LAND INFRASTRUCTURES

Competition for the best locations?

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AIRLINES: EXTERNAL RISKS AND COMPETITIVE FORCES

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Threat of new entrants

Substitution

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s AIRLINES Aircraft manufacturers Fuel suppliers Airports Labor unions

Shippers Travelers

New airlines Other carriers

Helicopters Train Bus, car Shipping

Buyers

Technology

CompositesE-commerce

Revenue managementEnvironmentalDeregulation

Political

Price of energy (oil)Clients incomeCurrency rate

Economy

Leisure (holidays)Video-conferencingSecurity (terrorism)

Social

SHIPPING COMPANIES: EXTERNAL RISKS AND COMPETITIVE FORCES

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Threat of new entries

Substitution

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SHIPPINGCOMPANIES

Shipyard Equipment suppliers Fuel suppliers Ports Labor unions

Shippers Travelers

New players Other carriers

Land transportation Airlines

Buyers

Technology

Alternative fuels Environmental

Political

Price of energy (oil)Finance availability

Currency rate

Economy

Labor shortageSecurity (piracy)

Social

AIRLINE VALUE CHAIN

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technological development

human resource management

firm infrastructure

procurement

inbound logistics operations

outboundlogistics

marketing & sales

service

support activities

primary activities

Crew management and dispatch

Aircraft acquisition and lending MRO servicesCatering services FO Cleaning services

Yield managementE-commerce Inflight system

Flight preparation

Check-in services

AircraftoperationsOn boardservices

Gate operationsBaggage handling

Flight connections

Baggagedelivery

PromotionAdvertising

Ticketing

Lost baggageCar/hotel booking

Accounting - FinanceLegal General management

SHIPPING VALUE CHAIN

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technological development

human resource management

firm infrastructure

procurement

inbound logistics operations

outboundlogistics

marketing & sales

service

support activities

primary activities

Mariners and non-marinersmanagement and dispatch

Vessel acquisition and chartering MRO servicesFood - Consumables and parts

Speed - ComfortOn-board communications

Vehicles & passengers embarking

Voyage planning

Vesseloperations

AccommodationFood processing

EntertainmentCleaning

PromotionAdvertising

Ticketing

Tour operatorShopping

Accounting - FinanceLegal General management

Vehicles & passengers

disembarking

PART2: LEARNINGS FROM AVIATION

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LOGISTICS: HUB SYSTEM

Economies of scale on predominant trade routes Increase origin and destinations Gain market power gain Build barriers of entry on capacity constraints Economies of scope through centralization of maintenance

facilities, personnel and back-up assets.

14Source: Delta

LOGISTICS: GOODS TRACKING

Harmonized tracking is required for: Efficient management of goods movements Fulfilling security policies Expediting customs procedures

RFID technology provide real-time tracking benefits: On-line information for all stake-holders Ease finding of lost goods

15Source: Guard, IATA

TRAFFIC CONTROL

Management of all flights at all time everywhere

16Source: Mer et Marine

Collision avoidance Harbor/channels traffic control Maritime security Search and Rescue

MAINTENANCE

Maintenance strategies recently introduced in shipping and inspired by aviation : (Computer-based) planned maintenance Preventive maintenance & condition based monitoring Non destructive technics

17Source: Man, Inmarsat

Plug & play

Unmanned ships?

Remote maintenance

Acquisition

InstallationCommissioning

Consumables

FO

Inspections RepairOverhaul

End-life

TCO (Life-cycle)

TRAINING

18Sources: ATR, motorship

Aviation processes good practices for implementation consideration in Shipping: In service-training and life-long learning Strict certification process for MRO activities Human element Vehicle specific training vs general courses

ENVIRONMENT: CO2 EMISSIONS

19Sources: ICS, Airbus

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TECHNOLOGY: ERGONOMICS

Not only technology but also about team management:

Aviation philosophy: One pilot flies the plane, the other checks what he does.

Shipping philosophy: Master give orders to Helmsman.

20Sources: Airbus, transas

FINANCING

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Lenders

Asset Owner

Operating company

Client

Loan

Bare-boat

Carriage contract

ManagerServicecontract

Lenders

Lessor

Lessee

Client

Loan

Lease

Manager Servicecontract

Other investors

Equity

Shipping-type financing

Airline-type financing

Carriage contract

Purchase option