Aviation

1. Revenue: 3 main streams

• Passenger (leisure-price sensitive & business-high margins) = #aircraft x #average departure/aircraft x #seat/aircraft x #occupancy rate/flight (load factor) 
• Cargo =  #aircraft x #average departure/aircraft x #average weight/departure
• F&B = #passenger x #average spending/passenger

*Sales channel: (1) Online booking; (2) Airline sales team (call, kiosk,..); (3) Travel agents

2. Cost

• Fuel cost: ~30%
• Leasing cost (most airlines borrow their aircrafts due to burden capex)
• Other costs (labor, maintenance, parking…)

To reduce the burden of CaPex cost, budget airlines usually use sale-and-lease back model. Two typical examples are Vietjet and Indigo the fastest growing airline company in the world.

3. Competition analysis

• Competitive rivalry: high. Brands mainly compete on price
• Supplier power (fuel, aircraft and gov): Very high. Oil and aircraft suppliers are consolidated.
• Buyer power: low. As usual in B2C businesses
• Substitute: medium. Ex: video conferencing, replace business travel
• New entrants: low. This industry requires high Capex

4. Challenges

• High dependency on oil price (currency exchange also)
• Macroeconomics affects leisure travellers.
• High fix cost: aircraft, maintenance, airport relationship building,…

5. New trends

• Flyskam -> decrease travel frequency
• Electric flight in the next 10 years
• Product offerings diversification (the driver of profitability – ancillary revenue)

If you want to know about aviation industry, this guy provide insightful videos: Wendover Productions. Thanks one of my blog viewers: Son Nguyen for recommend me this awesome channel!

Reference

1. My article in Jan 24
2. ROSS CASEBOOK 2015. (2015). 1st ed. Ross Consulting Club, p.27.
3. YouTube. (2018). Industry Analysis – Airlines Industry. [online] Available at: https://www.youtube.com/watch?v=byayRpU0l9A&list=PL97s5bSIN9CYK8huIZikQhXph5sbtsA-c&index=4 [Accessed 25 Jan. 2020].