Transportation & Logistics

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.

Spirit and its competitors have seen their EV/EBITDA decrease in the last six months due to the fear of a large increase in available seat miles.

For the seventh consecutive year, Alaska Airlines held the top spot in Customer Satisfaction among the Traditional Network Carriers survey conducted by J.D. Power.

Spirit (SAVE) ranks first in profitability among seven airlines in the United States. The main driver for this ranking comes from its exceptional ability to manage costs.

Spirit Airlines (SAVE) follows a simple business model of reducing base airfares as much as possible. All its other services are charged separately.

Southwest is known to be the pioneer of low cost travel in the industry. Its 42-year record of profitable operations is enough to prove the success of the company’s business model.

Smaller ETFs that provide exposure to the courier services industry include Buyback Achievers (PKW), the First Trust Capital Strength ETF (FTCS), and the MSCI Industrials Index ETF (FIDU).

The US has witnessed the emergence of a number of regional carriers such as OnTrac and Eastern Connection, which are providing cheaper, faster delivery options.

Over the past few years, the global courier services industry has managed to recover from the global economic slowdown.

The e-commerce industry is poised to grow rapidly in the future. With this growth will come the need for package delivery.

Some of UPS’s key strengths that keep it ahead of its competitors include an integrated global network, leading-edge technology, a strong brand name, a strong culture, and impressive financials.

In the recent past, there has been a surge in the use of e-commerce across the globe. The impact of this new form of commerce has been felt in each and every industry.

Standard courier services involve collecting the parcels, sorting the parcels, and transferring the parcels to the closest depot to the delivery location.

UPS has the highest sales among its peer group with $58.2 billion in sales in 2014. Rival FedEx wasn’t far behind with $47.45 billion in sales.

United Parcel Service is the world’s largest package delivery company and a leading global provider of specialized transportation and logistics services. It forms the largest holding of 7.6% in IYT.

United Parcel Service (UPS), originally called American Messenger Company, was founded in 1907 by 19-year-old James E. Casey with $100 borrowed from a friend.

FedEx was formed with a vision to change the way delivery services worked prior to 1971. It established a new industry and it has been leading its peers since then.

FedEx has been in the marketplace for over 40 years. It has established a huge network spread across more than 220 countries and territories worldwide.

Salaries and employee benefits form the highest cost for FedEx. They account for ~36% as a percentage of revenue. Salary costs rose 6% for fiscal 2015.

FedEx’s (FDX) financial performance during the last few years has been extraordinary. It successfully bounced back from the recessionary downturn.

By 1983, FedEx (FDX) had become the strongest delivery business in the nation. It started a string of acquisitions in order to grow more.

Currently, FedEx is the global leader in the express delivery market. It offers delivery to and from individuals and businesses. It has various business units.

Capacity utilization has improved from the lows of ~57% in the 1970s to ~76% in 2014 and 81.88% in year-to-date 2015.

A strengthening dollar led to improved profitability for US airlines in 1Q15 while subduing profitability for non-US airlines. This further increased the industry’s performance gap across the globe.

Southwest Airlines posted excellent financial performance metrics in 1Q15, including ~6% growth in available seat miles.

UTC offers some products and services through UTC Building & Industrial Systems, a combination of two segments, Otis and UTC Climate, Controls & Security.

The Boeing 737 is the best-selling commercial airliner in history. Reliable and economical, the 737 dominates the short- and medium-haul markets.

Wide-body aircraft fly transoceanic routes, can accommodate 200–500 passengers, and often transport commercial cargo across the globe.

When Boeing bought McDonnell Douglas in 1996, the acquisition helped Boeing overtake Lockheed Martin as the largest defense contractor.

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.

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.

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%.

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.