CHARTER AND CARGO - NICHE AVIATION BUSINESSES DELIVERING LOW RISK, HIGH MARGIN REVENUE - MERREN MCARTHUR CHIEF EXECUTIVE VIRGIN AUSTRALIA REGIONAL ...
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Charter and Cargo - Niche aviation businesses delivering low risk, high margin revenue Merren McArthur Chief Executive Virgin Australia Regional Airlines and Virgin Australia Cargo
OUTLINE
Charter and Cargo – Virgin Australia Group Strategy
Charter
‒ The story of Virgin Australia Regional Airlines
‒ Charter Operations v RPT Operations
‒ Riding the Resources Boom/Bust cycle
Cargo
‒ Story of a Start Up
‒ Cargo Network
2
CHARTER AND CARGO – DIVERSIFYING THE GROUP
REVENUE BASE
Charter / Cargo
Domestic Mainline
Freighter Business (Bellyspace on pax aircraft)
Low Medium – High
Volatility of Demand High
(Long Term Contracts) (Some Long Term Contracts)
Low n/a
Supply Side Risk1 Medium to High
(Capacity contracted by customer) (Dictated by Pax Business)
Low
Capital Investment High Nil
(Older Aircraft)
Investment Planning
3 – 5 years 6 – 9 months n/a
Horizon
Margins 0 – 10%2 6% - 12% 80% +
Niche aviation businesses leveraging mainline to deliver low risk, high yielding revenue stream
1 Risk that capacity will exceed demand
3
2 Based on Australian Aviation Industry margins 2012-2017
VARA– TRANSFORMATION OF A 50 YEAR OLD AIRLINE
Apr A320 fleet size to
Jun
17 18 increase from 2 to 3
Resources
Feb F50 fleet
Jul 16
downturn
16 decommissioned
Dec
Jul 16 ATRs transferred to
15
VAA
Fe
b
Sep 14
May F100 fleet size grew
15
16 from 10 to 14
May
Mar Airline re-branded as
13
16 VARA
Virgin AustraliaApr
Cargo offers an innovative, reliable and responsive cargo solution to our customers
Virgin Australia
13
acquires Skywest
4
CHARTER VS RPT MODEL
Key Attributes RPT Charter
Certainty of demand Volatile / Discretionary Contracted / Essential
Visibility of demand 1mth 6 mths
Aircraft procurement lead time 2-3 years 3-6 mths
Capital Cost of aircraft (B737 v F100) > $90m < $4m
Fuel cost Volatility of market pricing and hedging policies Pricing volatility passed through to customers
High utilisation required to deliver return on
Schedule Low utilisation tailored to customer needs
capital investment
Clients Diverse - corporate and retail Predominantly resource sector
Charter = low risk, high yielding revenue stream, reliant on resource industry cycles
5
FIFO MARKET – THE PERCEPTION
Aerodromes lacking in facilities
Charter = low risk, high yielding revenue stream, reliant on resource industry cycles
Small, 20 seat aircraft Dirt Runways
6
THE REALITY - EVOLUTION OF THE FIFO AIRPORT
Old Onslow Terminal
Charter = low risk, high yielding revenue stream, reliant on resource industry cycles
New Onslow Terminal
7
THE REALITY – CHARTER AIRCRAFT
Charter = low risk, high yielding revenue stream, reliant on resource industry cycles
8RIDING THE RESOURCES CYCLE-
FIFO WEEKLY DEMAND PATTERN
60 2009 2013 2014 2015 2016 2017
50
40
30
20
10
0
Mon Tue Wed Thu Fri
Tuesday to Thursday requirements dominate the weekly schedule
Charter
Monday and Friday = lowhave
requirements risk,increased
high yielding revenue stream, reliant on resource industry cycles
9RIDING THE RESOURCES CYCLE –
FIFO DEMAND OUTLOOK- WA
400
Charter RPT
350
300
250
200
150
100
50
0 1
-50
-100
2015 2016 2017 2018 2019 2020
Volumes are large, with some customers having more than 300,000 passengers per year
Forecast decline in size of resources sector workforce, but demand is expected to remain high due shorter operational roster cycles
Charter
313,000 incremental = lowexpected
FIFO workers risk, high yielding
to utilise Perthrevenue stream,
Airport annually reliant on
by 2020 resource industry cycles
Note: Increment on 2014 levels
Source: 2015-2025 Western Australian Resources Sector Outlook, 13 November 2014 10VIRGIN AUSTRALIA CARGO – STORY OF A START UP
Prior to Virgin Australia Cargo Entry
Qantas holds a virtual monopoly in domestic cargo market
Jun
Jun
Toll carries most of its cargo on its own freighters 200 trading accounts
17
17
No choices available to other major customers (TNT / DHL etc)
Market is poised for disruption Jul TNT contract
Jul 16
16 commenced
Jul Freighter network
Jul 16 16 launched
Fe
b
May 14
May 100 trading After launch of Virgin Australia Cargo
16
16 accounts
Real choice to cargo customers in airport-to-airport cargo market*
Mar 5-year exclusive cargo services agreement signed with TNT
Mar 16 TNT contract signed More than 200 trading accounts with in excess of 60 in the
16
pipeline
Oct
Virgin Australia Cargo offers
Virginan innovative,
Australia Cargo reliable and responsive cargo solution
Improved utilisation to
of our
Virgincustomers
Australia’s mainline belly space
15 launched capacity
*: No competitive alternative since 2001 11VIRGIN AUSTRALIA CARGO NETWORK
Current Freighter Network
Freighter Network
‒ 3 x BAe 146
‒ 1 x B737 – 300 CAIRNS
TOWNSVILLE
‒ Goal to transition to low noise, fuel efficient B737NG fleet,
subject to Sydney Curfew Amendment
Existing Virgin Australia Passenger Network
‒ Leverage capabilities of ~ 3,700 passenger flights to 43 domestic BRISBANE
and 15 international destinations PERTH
SYDNEY
Innovative Booking Portal ADELAIDE
‒ First cargo business to make the booking portal (iCargo) available AIRWORK MELBOURNE
on mobile devices PIONAIR BAE146-200QT
PIONAIR BAE146-200QT
LAUNCESTO N
Virgin Australia Cargo offers an innovative, reliable and responsive cargo solution to our customers
12QUESTIONS
13You can also read
