Teresa Cederholm

Fuel expense is Delta’s largest expense. It accounted for ~29% of the total operating expense in 3Q14. Fuel consumption per available seat mile decreased by 1.5% during the quarter.

The World Bank estimated Ebola’s impact by analyzing two scenarios—low Ebola and high Ebola. The scenarios are based on the probability of the disease spreading internationally.

Hilton Worldwide Holdings is one of the largest hospitality companies in the world. It was founded in 1919 by Conrad Hilton. The company started when he bought his first hotel in Texas.

Salary, wages, and benefits increased as a result of higher wage rates. Airlines have also had to increase headcount to adhere to the new Federal Aviation Administration (or FAA) regulations on flight, duty, and rest.

Apart from improved operational efficiencies, American has outperformed its peers in pre-tax margin (excluding special items) improvement in the first half of 2014 to 8.7% from 4.1% in the previous year.

Chinese airlines have an advantage of having lower employee costs compared to their counterparts in the US. Operational efficiency of US airlines are comparatively higher.

Increases in share prices and dividends provide direct benefits to shareholders. The increases in share prices give better returns. Share repurchases and stock splits provide indirect benefits. Share repurchases lead to a reduction in outstanding shares. This results in increased EPS.

Brazil is the third largest domestic aviation market. With double-digit traffic growth, Brazil was one of the fastest-growing domestic markets in 2010 and 2011.

Capital expenditure is generally high in the airline industry. Delta manages to keep it low through its strategy of buying used aircraft.

Today, Delta is one of the largest airlines in U.S. providing transportation services for passengers and cargo—it serves almost 165 million customers each year to 225 domestic and 97 international destinations.

Marriott increased its fee income at a ten-year compound annual growth rate (or CAGR) of 7.6% to $1,543 million in 2013—from $742 million in 2003.

United achieved significant fuel cost savings during 3Q14 in the form of lower purchase costs and improved fuel efficiency.

According to the IATA, global air freight volume has increased by 4.5%. Capacity, measured by available freight ton kilometers (or AFTK), increased by 3.5% year-over-year in August 2014.

Alaska’s capital expenditure (or capex) mainly includes investment on aircraft. It increased since 2010. In 2013, ~80% of the total cash used for investing activities was on capital expenditure. The total capital expenditure was $566 million. $487 million was on aircraft and aircraft purchase deposits. $79 million was on flight equipment and other property and equipment.

Load factor measures capacity utilization. It indicates the percentage of total capacity that an airline utilizes. Airlines are capital intensive. They have high fixed costs.

In 2013, almost 57% of United’s (UAL) $37,030 million total operating costs comprised fuel costs (33%) and salaries (23%), compared to Delta’s 46%.

Growing trade activity drove the recovery in cargo traffic in emerging markets in Asia, but it was slightly offset by the slowing European economy.

Gol’s financial assets decreased in 3Q14, but its cash balance increased to 1,942 million real from 1,636 million real in FY13.

Alaska Airlines (ALK) has the lowest yield of $0.148 among all its peers. Its peers include Delta (DAL) at $0.1689, United (UAL) at $0.1614, American (AAL) at $0.1622, and Southwest (LUV) at $0.1602. Revenue management is essential for the airline industry. The industry needs to maximize revenue by selling the most aircraft seats possible to customers at the best price.

The Airline Deregulation Act of 1978 removed all regulations governing the airline routes, airfares, entry, and exit of commercial airlines. Earlier, this was controlled by the Civil Aeronautics Board (or CAB). Airfares and all other factors would be determined by demand and supply market forces.

Southwest outperformed all its peers. Its share price increased 2.6% to $33.77 in September. That said, year-to-date results are positive overall.

JetBlue’s operating revenue increased by 6% to $1,529 million in 3Q14. The company states that its on-time performance was impacted by congestion in the air space.

Global passenger traffic has increased by 5.8% year-over-year during the first eight months of 2014. Europe (29.7%), Asia-Pacifc (29.2%), and North America (25%) comprise ~85% of global market share by passenger traffic.

In 2013, Alaska operated a fleet of 131 Boeing 737 jet aircraft. It had contracts with Horizon, Sky West Airlines, and Peninsula Airways for regional capacity. Horizon operated 51 Bombardier Q400 turboprop aircraft. It sells all of its capacity to Alaska according to its capacity purchase agreements.

During fatal disease outbreaks, rules and restrictions are imposed—especially on air transportation. This includes canceling flights to the affected areas.

The share prices for major airline companies in the U.S. dropped substantially after the news of the first Ebola case in U.S. on September 30, 2014.

Marriott has been expanding its presence in the international market. It added new brands in Europe, Asia Pacific, and the Middle East and African regions.

With 16,000 unique city pairs, connectivity by air is estimated to have doubled in the past two decades. Moreover, although demand continues to rise, the price of travel has fallen.

Established on April 14, 1995, based in Shanghai, China Eastern Corporation Limited is one of the three largest air carriers in China.

Delta Air Lines (DAL) derives 65.8% of its revenue from the passenger segment, 2.5% from the cargo segment, and 10.3% from other sources.

Royal Caribbean International is a global brand offered by Royal Caribbean (RCL). It’s one of the world’s three largest contemporary brands.

Royal Caribbean (RCL) offers all cruise company services, including pre- and post-hotel stay arrangements and air transportation.

Marriott International’s headquarters are in Bethesda, Maryland. The company was founded in 1927 by J. Willard and Alice S. Marriott.

Hilton’s goal is to serve any customer, anywhere in the world, for any lodging need that they have. The company has a portfolio of 11 world-class brands. Hilton’s portfolio allows it to accomplish this goal.

Hotel companies, like Hilton, expand their operations based on the demand for accommodations by location. They also expand based on customer preference for the level of service offerings.

The airline industry contributes to U.S. economic growth. The industry drives $1.5 trillion in U.S. economic activity. It also generates more than 11 million jobs in the U.S.

Short-term outlook above expectations The IATA (International Air Transport Association) has revised its forecast upwards on global airline profitability after the free fall of crude oil prices in the second half of 2014. Global net profit for 2014 is now estimated at $19.9 billion, higher than $18 billion projected in June. Profitability is expected to […]

There was an overall increase in worldwide passenger traffic and capacity in August. Passenger capacity increase of 5.5% year-over-year and was driven by strong growth in the international market.

Revenue passenger miles (or RPM) measures demand for air transport. It’s calculated as the number of revenue passengers multiplied by the total distance traveled.

Now let’s look at certain key operating metrics used in the cruising industry to evaluate operational performance.

The airline industry has contributed to the globalization of the world economy. It connects buyers and sellers. It also transports goods across nations. It breaks the barrier of distance and time. The industry’s future looks bright. Travel expenditure in the U.S. is expected to grow by 4.3% in 2014 and 5.1% in 2015.

The airline industry is widely impacted by regulations and restrictions related to international trade, tax policy, and competition. It’s also impacted by issues like war, terrorism, and the outbreak of diseases—such as Ebola. These issues are political. As a result, they require government intervention.

With the entry into international markets, Southwest’s growth prospects improved substantially, more than doubling its share price.

Southwest Airlines enjoyed a decrease in its operating expenses from $4,042 million in 4Q13 to $4,007 million in 4Q14.

Among the three major competitors in the cruise industry, Royal Caribbean (RCL) had the highest operating margin in 2013.

Costs directly related to operating a cruise ship comprise ~74% of Royal Caribbean’s (RCL) total operating costs.

Apart from operating the largest contemporary global brand, Royal Caribbean offers five additional brands targeting specific markets.

Royal Caribbean (RCL) derives revenue from two sources: passenger ticket revenue and onboard and other revenue.

Royal Caribbean Cruises, founded in 1968 and headquartered in Miami, Florida, is the world’s second largest cruise company.

Carnival has a stronger financial position than its peers. It maintained a very low debt-to-capital ratio of 28% in 2013 and just 27% in 2014.