Teresa Cederholm

Carnival’s operating profit increased to $1,792 million in 2014, from $1,352 million in 2013. Its operating margin increased to 11.3%, from 8.7% in 2013.

The growth of demand was the key driver of Carnival Corporation’s revenue growth in 2014. The number of passengers increased by 5% in 2014.

Cruise categories Cruise liners have been successfully providing a wide range of products and services at various price points to suit preferences of passengers from different age groups. Service levels and pricing differ by brand, category of the ship, cabins, season, duration, and itinerary. We can categorize cruise brands into these three categories: contemporary, premium, […]

Two of Carnival Corporation’s (CCL) operating segments comprise almost 98% of the company’s revenue. Carnival also reports a Cruise Support segment and a Tour segment.

Carnival Corporation (CCL) derives revenue from the following three sources: passenger tickets, onboard or other activities, and tours.

The number of Carnival’s cruise passengers has increased at a six-year CAGR of 4.6%. It has the largest market share of cruise passengers at ~47%.

Carnival Corporation (CCL), the largest cruise company in the world, operates 101 cruise ships and has a global market share of ~47%.

Five US airlines are among the top 15 airlines by passenger traffic in 2013. United Continental Holdings ranks first with 287.2 billion revenue passenger kilometers.

Chinese companies are vulnerable to exchange rate fluctuations, especially against the US dollar, and they have a high amount of debt denominated in US dollars.

Rising costs impacted China Eastern’s (CEA) operating margins, which declined from 5% in FY09 to 1.8% in FY13.

More than half of China Southern’s total operating expenses in FY13 were related to flight operating expenses.

The global financial crisis in 2008 hit China’s airline industry after it enjoyed double-digit growth in passenger traffic for more than a decade.

Revenue from JetBlues’ Even More Space grew at a five-year compounded annual growth rate of ~30% from $45 million in fiscal year 2008 to $170 million in fiscal year 2013.

Although trucking is the most widely used mode of transportation, the fastest growing mode of transport is by air.

Using a single aircraft type reduces disruption of operations due to maintenance efficiencies. The airline reduces training costs with standardized pilot training and maintenance routines.

Gol’s operating income turned positive in FY13 after reporting losses for two consecutive years.

SARS was another disease outbreak in 2003. SARS caused a panic similar to the current Ebola outbreak. SARS was a viral respiratory illness.

Marriott (MAR) operated a total of 3,916 hotel properties in fiscal year 2013. Most of these properties were either managed, franchised, or licensed.

Marriott has a diverse portfolio of 18 brands. It describes the brands as “individually distinct and collectively powerful.”

The EV to EBITDAR multiple is used in businesses where there’s significant rental and lease expenses—hotels and airlines. We’ve used this to analyze Marriott’s valuation.

Hilton has operating expenses related to its owned and leased hotels and timeshare properties. This is separate from depreciation and amortization expenses.

RevPAR is calculated by dividing hotel room revenue by the total available room nights. It’s used in the hotel industry to measure the company’s ability to generate greater revenue from each room.

Timesharing—also known as vacation ownership—is a method of getting the right to use a vacation property like a hotel or a resort. The buyer owns “timeshare interests” or intervals.

Timeshare revenue accounted for ~18% of total revenue from segments. The company generates revenue by marketing and selling timeshare interests and managing resort operations.

Hilton’s hotels, resorts, and timeshare properties are spread across 91 countries and territories. On December 31, 2013, Hilton’s portfolio consisted of 678,630 rooms.

Hilton’s growth plans are measured by the number of rooms under construction. Its growth plans rank first in the industry in all its markets—domestic and international.

According to IATA (or the International Air Transport Association), the global airline industry passenger volume and capacity increased by 5.3% year-over-year in July 2014. Freight volume increased by 5.8%. In July load factor (or capacity utilization) for passengers was 82.3%, and for freight, it was 44.4%.

The second largest cost component for airlines is salaries, wages, and benefits. Employment in the U.S. airline industry has increased in the last couple of years when the U.S. economy recovered from the recession and demand for air travel picked up.

Yield is the average fare per passenger per mile. Passenger revenue is calculated by multiplying RPM (or revenue passenger miles) with yield. Yield varies based on demand and supply factors. Since demand for air travel is seasonal, yield is higher during peak seasons.

Load factor is a measure of capacity utilization. It indicates the percentage of total capacity that is utilized by an airline. Since airlines are capital intensive and have high fixed costs, the efficiency with which they utilize their assets is key to generate adequate return on investment.

Available seat miles (or ASM) is the measure of airline capacity. It’s calculated as the total number of seats multiplied by the total distance travelled. While RPM (or revenue passenger miles) is a measure of demand, ASM is the measure of supply.

The airline industry is an important contributor to the U.S. economy’s growth. According to Airlines for America (or A4A), the industry drives $1.5 trillion in U.S. economic activity and more than 11 million in U.S. jobs.

Cyclical industries follow the business cycle, so their revenues are higher during economic prosperity and lower during economic contraction. The airline industry is sensitive to changes in economic growth.

The global aviation industry consumes over 200 million tons of fuel per year. The rising demand for air transport and the rising crude oil prices could impact the industry’s carbon emissions. The environmental impact could also influence sustainability.

Technological advancement has been the driving factor for improving airlines’ operational efficiency. Airlines have been able to reduce costs and improve operations by using advanced aircraft engine technology, IT solutions, and mobile technology. The technology has created better connectivity and enhanced passengers’ travel experience.

The Boston Consulting Group researched the millennial generation’s travel preferences in the business and leisure segment. This will provide a better understanding of how social and demographic factors influence air travel. It will also show how the factors influence company strategies to adopt to the changing trends.

Categorizing generations in the U.S. according to the year of birth provides insight into the changing trends in the travel and tourism industry. The demand for air travel has increased significantly over the years. Demographic factors also play an important role in forecasting demand.

Like most industries, the airline industry is impacted by the economic cycle’s peaks and troughs. The current growth in developed economies—like U.S.—has resulted in a rise in business confidence, industrial production, and international trade.

The Political, Economic, Social, Technological, Environmental, and Legal (or PESTEL) framework covers the six external factors that impact the airline industry. The framework provides a broad perspective on opportunities and threats that surround the industry. The factors can’t be controlled by the industry.

As mentioned in the previous article, break-even load factor is calculated by dividing cost per available seat mile (or CASM) with yield per passenger mile and Southwest has the lowest break-even load factor compared to its peers. In this article we will analyze yield and cost structures of Southwest with its peers’ to determine how […]

Higher aircraft utilization will result in lower fixed costs per unit, as the costs spread across more air trips and passengers and results in lower cost per available seat mile.

JetBlue Airways’ (JBLU) operating revenue has increased at a four-year compounded annual growth rate (or CAGR) of 13.4%, driven primarily by the growth in passenger revenue.

JetBlue has almost equal share in Florida, Latin America, and the transcontinental region which together accounted for about 87% of JetBlue’s total capacity.

JetBlue (JBLU) operates a hybrid business model that caters to the niche market comprising customers that it defines as “underserved customers.”

JetBlue Airways Corporation is the fifth largest passenger carrier in the U.S. based on revenue passenger miles.

Over the last decade, with increasing mergers and consolidation in the U.S. airline industry and reduced competition, air fares were expected to increase dramatically.

LCCs don’t offer all services provided by a legacy carriers like free meals and drinks.

Southwest was instrumental in revolutionizing the industry with a differentiated business model.

As of December, 2013, the passenger segment comprised 94.5% of its revenues, cargo segment 0.9%, and ancillary revenues comprised 4.6%.

Network synergies accounted for almost 50%–85% of the total synergy benefits in the past airline mergers.