Beruflich Dokumente
Kultur Dokumente
2009 OUTLOOK
Presented
Presented by:
by:
Deborah Meehan
SH&E,
SH&E, COO
COO
1
2009 – Worst Year Ever? Sept. 9, 1974
“The U.S. is afflicted by a
June 1, 1970 massive economic migraine, and
more than 200 million Americans
“On Wall Street, the know too well just how much it
most unnerving hurts. Their incomes, savings
stock market and life-styles are being assailed
reports since the by a whole group of aches and
Depression 1930s pains. . . . The stock market has
became daily more scarcely been so shaky since
dismal.” 1929.”
Nov. 2, 1987
“[T]he unimaginable Oct. 15, 1990
happened: a collapse on a “I want to say we’re
scale never seen before—no, in a recession, but
not even in 1929. Prices went that’s not a strong
down, down, down, swiftly enough word. In
wiping out an entire year's some regions it’s a
spectacular gains. ‘I just can’t depression.”
believe that this is happening,’
moaned one trader, as he
took nonstop sell orders.” Source: TIME Magazine and Weston Wellington at
Dimensional Fund Advisors (DFA).
2
Global Recession and Tight Credit Markets Have Challenged
Airlines in 2009 With Distinct But Related Effects
3
These Are Challenging Times, But Not Uniquely So (Yet)
4%
2%
0.1%
0%
-2% -0.5% -0.2%
-4% Recessions Since 1973** Current Recession***
-6%
-5.8% -5.8%
-8%
Major US Airlines US Inflation US Real GDP US Unemployment
Net Profit Margin*
* Only includes data starting 1977 through Q3 08. Goodwill impairments of DL, NW & UA have been adjusted out
** Past recessions: Nov 73-March 75, Jan 80-Nov 82, July 90-March 91, March 2001-Nov 2001
*** Current Recession: Dec 2007-current
Source: Form 41, Bureau of Economic Analysis, Bureau of Labor Statistics, US Inflation Calculator
4
Long Term, Air Traffic Growth Has Been Remarkably Resilient,
Briefly Interrupted by Economic Shocks and Recessions
Historical
Historical World
World Traffic
Traffic and
and GDP
GDP Growth
Growth
Indexed Indexed:
Indexed: Base:
Base: 1970
1970 == 100
100
RTKs GDP
RPKs Growth
1,200 9%
SARS,
2nd Gulf War RTKs
1,000 U.S. 8%
Deregulation
Oil Crises Asian Crises RPKs
800 6%
Recession 1st Gulf War
600 5%
Sept. 11
400 3%
200 2%
0 0%
'70 '75 '80 '85 '90 '95 '00 '05 ‘07 ’09F
Source:
Source: IATA
IATA Economics
Economics Briefing,
Briefing, December,
December, 2008;
2008; Airline
Airline Monitor,
Monitor, July,
July, 2008;
2008; Boeing
Boeing
and
and International
International Monetary
Monetary Fund
Fund (“IMF”)
(“IMF”) World
World Economic
Economic Outlook,
Outlook, October
October 2008.
2008. 5
U.S. Carriers Dramatically Cut Capacity Ahead of the Expected
Demand Drop, But Other Regions Have Not Responded in Kind
Note: U.S. network carriers include AA, CO, DL, NW, UA, and US; U.S. LCCs include B6, F9, FL, and WN.
European network carriers include BA, LH, and AF/KL; European LCCs include AB, FR and U2.
Asian Pacific Rim carriers include CX, KE, NH, JL, SQ; India/China carriers includes 9W, AI, CA, CZ, HU and MU.
Source: OAG.
6
As a Result, Many Forecasts Now Expect the U.S. Industry to Post
Profits in 2009, While Other Regions Take Longer to Catch Up
$12
$8
$4.3 $3.9
$4 $1.1
$0
Europe
16%
($4) $0.7 Bn
($8)
($12)
($16)
10%
8%
Economy
Massive Premium Traffic and
6%
4%
Yield Declines in High-Value
2%
International Markets
0% Premium Yields Are Down
-2%
-5.3%
an Estimated 9%
-4%
-6% North Atlantic -8.8%
-8%
Within Far East -25.1%
-10% Premium -13.3%
-12% North/Mid Pacific -19.7%
-14%
Jan Apr Jul Oct Jan Apr Jul OctNov
Within Europe -16.3%
2007 2008
Source: IATA Premium Traffic Monitor: http://www.iata.org/whatwedo/economics/ptmarchives.htm, Rothwell, Steve, “British Airways to Report Loss on Traffic,
Currencies.” Bloomberg.com, Brothers, Caroline, “European airlines’ decline in premium ticket sales hurts earning.” International Herald Tribune. Q4 2008 UAL
Corporation Earnings Conference Call 8
Recent U.S. Data Shows Traffic On Short-Haul Business Routes
Falling More Rapidly Than On Long-Haul and Leisure Routes
Change in Change in
Routes Response Passengers1 Seats1 Net Effect
East Coast
BIZ (17.6%) (7.0%) (10.6%)
Shuttle Traffic down
much more
Dallas- than capacity
BIZ (17.0%) (7.1%) (9.9%)
Houston
132
– At the end of Q3 2007 Lufthansa
JetBlue 127 held about 100 days
119
American 110
– High fuel prices in summer 2008
79 Q3 2007 depleted some reserves: at end
Delta 60 Q3 2008, U.S. carriers’ holdings
110
Q3 2000 were approx. 90 days
Continental
84
Hawaiian 71
101
Even in good times, this cash
United
120 is expensive to carry – roughly
74
$1.5b per year for this group
110
Southwest
61
161
US Airways 69
Source: Form 41. Cash position calculated as the sum of cash and near-cash assets (cash, short-term investments, notes
receivable, accounts receivable and pre-paid expenses). Cash expenses calculated as the sum of operating expenses and net
interest expense less depreciation and amortization. Cost of cash estimate based on a WACC of 8%. 11
However, the Cash Position of U.S. Airlines Has Severely
Diminished in the Last Two Quarters
JetBlue 78.7
69.2
Southwest 66.0
66.0
Continental 68.7
64.1
American 55.8
48.6 Restricted and Unrestricted
60.1 Days of Cash
AirTran
47.8 Unrestricted Days of Cash
United 36.3
35.3
US Airways 49.7
29.4
0 50 100 150 200
Source: SEC Filings as of December 2008, except Air Canada from their latest Annual Report
12
High Cash Balances Are Critical to Survival
13
On Average, Traffic at U.S. Airports Declined by 3.3%
from 2007 to 2008
-1%
-2%
-3%
-2.8%
-4% -3.4% -3.3%
-5%
-6%
-5.4%
Large Hubs Medium Hubs Small Hubs Total
Total
Note: Includes: May Not Include All Airports in Each Hub Grouping, But Includes All Major Airports (30 large, 30 medium and 32 small hubs)
Source: Airport Records
14
Among the Largest Airports, Traffic Has Declined Further
-0.8%
-3%
-2.7%
-6% 2.8%
-6.1% -5.8% Standard for
Large Hubs
-9%
-12% -10.6%
-12.4%
-15%
-10%
-8.7%
-13.2%
-20%
-24.3% -24.2%
-30% -28.1%
-34.1%
-40%
-3%
-6%
-6.0%
-6.9%
-9% -8.4%
-9.0%
-10.3%
-12% -11.1% RPMs ASMs
-15%
19
So, Where Are
We Going?
20
No End In Sight – Latest Reports Show Unemployment
Worsened
Underemployment – Devastating!
9.0M
3.2M
8.5%
694K
“Fears ebb”
Dow ends above 8000 in best
four-week run since 1933
22
What’s to Come?
“Airlines Hopeful of
Summer Upturn”
Air Canada
Likely to Need
Court Protection
23
24
25
No End In Sight – Latest Reports Show Unemployment
Worsened
Underemployment
– Devastating!
13.2M
9.0M
8.5%
694K