travelin man
Posts: 3198
Joined: Tue Mar 14, 2000 10:04 am

UBS: CO, BA, And SQ Are Our Top Picks

Fri Jul 07, 2006 2:55 am

I just received a copy of the latest UBS survey of Corporate Travel Managers (of which I was one of the respondants). According to this survey, an airline's network and schedule is the top driver of airline selection by corporate travelers. Since corporate travelers are the least concerned by price (most price inelastic), and tend to buy more tickets in the "front of the bus", airlines in the best position to cater to them will be the most successful.

Per the report:
"Our three preferred carriers -- British Airways, Singapore Airlines, and Continental -- all have strong positions in attractive catchment areas and strong product propositions. This leads us to believe these carriers are well placed to benefit from strong inelastic demand."

Other highlights:

- The Pacific has the most impressive growth prospects for the next 2 years. Given the inferior product of US carriers, and the Japanese carriers downsizing, CX and SQ are in the best positions to take advantage of that growth.

- Middle Eastern carriers such as Emirates will ensure competitive pressure remains high on Europe-Asia routes. However, their effect on the corporate market will be limited because most business travelers will prefer to fly non-stop when possible, rather than via DXB.

- The downsizing of average aircraft size will continue for the forseeable future on longhaul routes. The 777 has replace the 747 as the mainstay of longhaul fleets, and (especially US) airlines are adding 757/767 sized planes to longhaul routes. "The A380 will alter this picture slightly from next year, but with almost 300 B777s on order compared with around 160 A380s, we expect an on-going decline in average aircraft size."

- Network carriers are not dead. LCC's have limited appeal to corporate clients, especially given that network/schedule are the most important things to business travelers. An efficient LCC is just as likely to fail as an inefficient network carrier.

- UA and AA are the most aggressive in competing for corporate clients, with UA best demonstrating the strategy of catering to the corporate client with product differentiation such as PS and Economy Plus. CO is particularly aggressive in catering to corporate clients through its international network.

- SQ is well positioned for the future through its focus on corporate travel, its world-leading product differentiation, and its focus on cost containment and restrained growth. EK presents a moderate challenge to SQ, but SQ should be able to protect its profitability.

- BA has extremely strong premium traffic, and has limited its capacity growth. The lack of slots at LHR is a big advantage, and the market has overplayed the pension issue.

- CO has the "best combination" of earnings leverage, corporate travel focus, network diversity, and growth of all US airlines. CO has one of the best balanced networks domestically and internationally. CO will also be growing its capacity the fastest of any non-LCC in the US. This capacity growth in a healthy fare market will drive its profitability.

----------------------------------------------------------

Anyway, these are some of the highlights of a report that I thought was very interesting. I honestly don't see CO as having a balanced network from a domestic US perspective (UA in my opinion has a better balanced network), but most of the other observations seemed to be accurate.

I think it validates some of the strategies that some of the airlines have pursued, and that have been questioned on these forums. Specifically the int'l expansion by US carriers, the focus on product differentiation to woo corporate travelers (i.e. PS service), and the product focus by carriers such as SQ.
 
SInGAPORE_AIR
Posts: 11619
Joined: Mon Nov 13, 2000 4:06 am

RE: UBS: CO, BA, And SQ Are Our Top Picks

Fri Jul 07, 2006 2:58 am

Congratulations on UBS on such sound financial advise that it gives to clients.

I take it that this report is not available publicly in PDF format and is just for the respondants of the survey?

UBS - "You and Us"
Anyone can fly, only the best Soar.
 
travelin man
Posts: 3198
Joined: Tue Mar 14, 2000 10:04 am

RE: UBS: CO, BA, And SQ Are Our Top Picks

Fri Jul 07, 2006 3:03 am

Quoting Singapore_Air (Reply 1):
I take it that this report is not available publicly in PDF format and is just for the respondants of the survey?

I would think it would be public to some extent. I know I received it for free (via PDF), but since it is giving stock price projections, I am assuming it is for a broader market than just the respondants. It's title is: "UBS Investment Research: Q-Series -- UBS Corporate Travel Survey"
 
flyabunch
Posts: 443
Joined: Fri Nov 05, 2004 1:42 am

RE: UBS: CO, BA, And SQ Are Our Top Picks

Fri Jul 07, 2006 3:03 am

I agree with you on the CO domestic balance issue. I was a happy Platinum Elite flyer on CO for many years until I moved from the Tampa Bay area to Arizona. CO is only balanced if you live east of New Mexico as far as I am concerned. With their hub at IAH, they are not very convenient for western destinations from the west. I'll be damned if I am going to fly to IAH to come back to OAK. It just doesn't make sense.

I have switched to US/America West for convenience but it sure isn't the same as CO. I wish they had a western hub.

Mike
 
slider
Posts: 6806
Joined: Wed Feb 25, 2004 11:42 pm

RE: UBS: CO, BA, And SQ Are Our Top Picks

Fri Jul 07, 2006 3:11 am

Quoting Travelin man (Thread starter):
I honestly don't see CO as having a balanced network from a domestic US perspective (UA in my opinion has a better balanced network), but most of the other observations seemed to be accurate.

I think this alludes to the general sense of balance among CO's flying by entity--there is a keen balance among domestic mainline, regional, international by region (Europe, Latin, Pacific, etc).

Quoting Flyabunch (Reply 3):
I wish they had a western hub.

That's the weakness network-wise in terms of CO's route structure....the circuity is a concern.
 
dynkrisolo
Posts: 1825
Joined: Mon Feb 12, 2001 12:12 am

RE: UBS: CO, BA, And SQ Are Our Top Picks

Fri Jul 07, 2006 3:18 am

Quoting Slider (Reply 4):
I think this alludes to the general sense of balance among CO's flying by entity--there is a keen balance among domestic mainline, regional, international by region (Europe, Latin, Pacific, etc).

That's the way I interpreted it, too. Don't forget, the codeshare flights with NW and DL also increase CO's domestic coverage. Being the only US Major with a New York-area hub where many corporations are based certainly will help CO in this kind of corporate travel survey.
 
ikramerica
Posts: 13762
Joined: Mon May 23, 2005 9:33 am

RE: UBS: CO, BA, And SQ Are Our Top Picks

Fri Jul 07, 2006 3:20 am

Quoting Slider (Reply 4):
That's the weakness network-wise in terms of CO's route structure....the circuity is a concern.

A CO/AS merger would solve this problem. Everyone talks about CO merging with a big carrier, but honestly the only one I see working would be CO+AS, it's rare to find two airlines with more complimentary fleet and route structures and such little direct competition with each other.
Of all the things to worry about... the Wookie has no pants.
 
jacobin777
Posts: 12262
Joined: Sat Sep 11, 2004 6:29 pm

RE: UBS: CO, BA, And SQ Are Our Top Picks

Fri Jul 07, 2006 3:43 am

thanks for the update.. checkmark 
"Up the Irons!"
 
flyabunch
Posts: 443
Joined: Fri Nov 05, 2004 1:42 am

RE: UBS: CO, BA, And SQ Are Our Top Picks

Fri Jul 07, 2006 4:46 am

Quoting Ikramerica (Reply 6):
A CO/AS merger would solve this problem. Everyone talks about CO merging with a big carrier, but honestly the only one I see working would be CO+AS, it's rare to find two airlines with more complimentary fleet and route structures and such little direct competition with each other.

That would indeed make me a happy guy. AS and CO would be a fine mesh for the destinations I need to go to the most. I would switch back in a heartbeat.

Mike
 
travelin man
Posts: 3198
Joined: Tue Mar 14, 2000 10:04 am

RE: UBS: CO, BA, And SQ Are Our Top Picks

Fri Jul 07, 2006 5:13 am

Quoting Slider (Reply 4):
I think this alludes to the general sense of balance among CO's flying by entity--there is a keen balance among domestic mainline, regional, international by region (Europe, Latin, Pacific, etc).

OK, when you interpret it that way I would agree CO is well-balanced. Being a West Coast guy, CO doesn't really provide many options on CO metal.

I agree CO/AS seems like an ideal complementary union. It would give CO the presence it is lacking in the West, while offering very few (if any) overlapping routes.
 
COERJ145
Posts: 1140
Joined: Mon Jun 27, 2005 7:22 am

RE: UBS: CO, BA, And SQ Are Our Top Picks

Fri Jul 07, 2006 7:06 am

Quoting Travelin man (Reply 9):

I agree CO/AS seems like an ideal complementary union. It would give CO the presence it is lacking in the West, while offering very few (if any) overlapping routes.

I think the only route they overlap is the SEA-EWR route.
 
User avatar
STT757
Posts: 13200
Joined: Tue Mar 28, 2000 1:14 am

RE: UBS: CO, BA, And SQ Are Our Top Picks

Fri Jul 07, 2006 10:24 am

Quoting COERJ145 (Reply 10):
I think the only route they overlap is the SEA-EWR route.

I think CO also flies once daily between Seattle and Anchorage.
Eastern Air lines flt # 701, EWR-MCO Boeing 757
 
atmx2000
Posts: 4301
Joined: Wed Oct 13, 2004 4:24 pm

RE: UBS: CO, BA, And SQ Are Our Top Picks

Fri Jul 07, 2006 10:31 am

Quoting Ikramerica (Reply 6):
A CO/AS merger would solve this problem. Everyone talks about CO merging with a big carrier, but honestly the only one I see working would be CO+AS, it's rare to find two airlines with more complimentary fleet and route structures and such little direct competition with each other.

That doesn't sound like a bad idea, but then again AS would be a good merger partner for many airlines with 737NG fleets. Still, AS doesn't give them much of an international network. CO would have to build up transpacific operations. And AS's willingness to be a merger partner is lacking.

[Edited 2006-07-07 03:35:45]
ConcordeBoy is a twin supremacist!! He supports quadicide!!
 
jacobin777
Posts: 12262
Joined: Sat Sep 11, 2004 6:29 pm

RE: UBS: CO, BA, And SQ Are Our Top Picks

Fri Jul 07, 2006 11:30 am

Quoting Travelin man (Thread starter):

- SQ is well positioned for the future through its focus on corporate travel, its world-leading product differentiation, and its focus on cost containment and restrained growth. EK presents a moderate challenge to SQ, but SQ should be able to protect its profitability.

what's intersting about this is that QF's debt was just downgraded because of both SQ and EK..

fair use excerpt:

"He (Moody's senior analyst David Howell)argued that Qantas faced increased competition on its long-haul routes from Middle East-based carrier Emirates as well as Singapore Airlines."

http://www.heraldsun.news.com.au/com...ge/0,5478,19708508%255E664,00.html
"Up the Irons!"
 
ikramerica
Posts: 13762
Joined: Mon May 23, 2005 9:33 am

RE: UBS: CO, BA, And SQ Are Our Top Picks

Fri Jul 07, 2006 11:42 am

Quoting Atmx2000 (Reply 12):
Still, AS doesn't give them much of an international network. CO would have to build up transpacific operations.

CO doesn't need AS to provide international flights. Just LAX, Mexico, Northwest and Alaska coverage, and a complementary fleet. With AS ditching their MD80s and adding more 738s and 739s, it meshes perfectly with CO.

Even the 734s work well, allowing CO to lose their older 733s, as 734s are newer with better CASM.
Of all the things to worry about... the Wookie has no pants.
 
COewrAAtysAZ
Posts: 149
Joined: Sat Jun 10, 2006 10:15 am

RE: UBS: CO, BA, And SQ Are Our Top Picks

Sat Jul 08, 2006 6:14 am

Ya know, call me stupid but I didn't realize until yesterday when looking at CO's financial statements, that they actually recorded a profit in 2003. Go to their website and see their 10-k for 2005 to see what I'm talking about.
Continental Airlines: Trabajar con empe�?��?�±o, Volar con Pasi�?��?�³n