Transportation & Logistics

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.

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.

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.

American’s number one position, in terms of revenue share as shown in the following chart, was replaced by United.

United has partnered with Aviation Partners Boeing (APB) to launch the Split Scimitar winglet. The new winglet is expected to save more than 45,000 gallons of fuel per aircraft per year.

Under United’s MileagePlus program, members earn mileage credits for flights on United, United Express, airlines in Star Alliance, and other airlines that participate in the program.

Frequent-flyer programs are incentives given to customers by airlines to increase customer loyalty by awarding free miles on tickets purchased.

A comparison of the fleet sizes of Delta Air Lines with its competitors reveals that American Airlines group (AAL) has overtaken Delta (DAL) and United (UAL).

Delta leads in many corporate surveys for customer satisfaction. These surveys help companies track their performance and take corrective steps when required.

Delta manages its fuel costs (about 33% of the company’s total operating expense) through purchase agreements, fuel hedging, and operating a refinery.

Paulson took a new position in Verizon Communications (VZ) last quarter. The position accounts for 2.04% of Paulson’s $20 billion portfolio.