Charter and Cargo - Niche aviation businesses delivering low risk, high margin revenue

Transcription

1 Charter and Cargo - Niche aviation businesses delivering low risk, high margin revenue Merren McArthur Chief Executive Virgin Australia Regional Airlines and Virgin Australia Cargo

2 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

3 CHARTER AND CARGO DIVERSIFYING THE GROUP REVENUE BASE Domestic Mainline Charter / Freighter Business Cargo (Bellyspace on pax aircraft) Volatility of Demand High Low (Long Term Contracts) Medium High (Some Long Term Contracts) Supply Side Risk 1 Medium to High Low (Capacity contracted by customer) n/a (Dictated by Pax Business) Capital Investment High Low (Older Aircraft) Nil Investment Planning Horizon 3 5 years 6 9 months n/a 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 2 Based on Australian Aviation Industry margins

4 VARA TRANSFORMATION OF A 50 YEAR OLD AIRLINE Jun 17 Apr 18 A320 fleet size to increase from 2 to 3 Jul Resources downturn Feb F50 fleet decommissioned May Jul Sep 15 Dec 15 ATRs transferred to VAA Fe b 14 F100 fleet size grew from 10 to 14 Mar May 13 Airline re-branded as VARA Apr 13 Virgin Australia Apr Cargo offers an innovative, reliable and responsive cargo solution to our customers Virgin Australia acquires Skywest 4

5 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 Schedule High utilisation required to deliver return on capital investment Low utilisation tailored to customer needs Clients Diverse - corporate and retail Predominantly resource sector Charter = low risk, high yielding revenue stream, reliant on resource industry cycles 5

6 FIFO MARKET THE PERCEPTION Aerodromes lacking in facilities Small, 20 seat aircraft Charter = low risk, high yielding revenue stream, reliant on resource industry cycles Dirt Runways 6

7 THE REALITY - EVOLUTION OF THE FIFO AIRPORT Old Onslow Terminal New Onslow Terminal Charter = low risk, high yielding revenue stream, reliant on resource industry cycles 7

8 THE REALITY CHARTER AIRCRAFT Charter = low risk, high yielding revenue stream, reliant on resource industry cycles 8

9 RIDING THE RESOURCES CYCLE- FIFO WEEKLY DEMAND PATTERN Mon Tue Wed Thu Fri Tuesday to Thursday requirements dominate the weekly schedule Charter = low risk, high yielding revenue stream, reliant on resource industry cycles Monday and Friday requirements have increased 9

10 RIDING THE RESOURCES CYCLE FIFO DEMAND OUTLOOK- WA Charter 1 RPT 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 = low risk, high yielding revenue stream, reliant on resource industry cycles 313,000 incremental FIFO workers expected to utilise Perth Airport annually by 2020 Note: Increment on 2014 levels Source: Western Australian Resources Sector Outlook, 13 November

11 VIRGIN AUSTRALIA CARGO STORY OF A START UP Prior to Virgin Australia Cargo Entry Qantas holds a virtual monopoly in domestic cargo market Toll carries most of its cargo on its own freighters Jun 17 No choices available to other major customers (TNT / DHL etc) Jun trading accounts Market is poised for disruption Jul Jul TNT contract commenced Mar Oct 15 May Jul Mar Virgin Australia Cargo offers an innovative, reliable and responsive cargo solution to our customers Virgin Australia Cargo launched May Jul 100 trading accounts TNT contract signed Freighter network launched Fe b 14 After launch of Virgin Australia Cargo Real choice to cargo customers in airport-to-airport cargo market * 5-year exclusive cargo services agreement signed with TNT More than 200 trading accounts with in excess of 60 in the pipeline Improved utilisation of Virgin Australia s mainline belly space capacity * : No competitive alternative since

12 VIRGIN AUSTRALIA CARGO NETWORK Freighter Network Current Freighter Network 3 x BAe x B Goal to transition to low noise, fuel efficient B737NG fleet, subject to Sydney Curfew Amendment CAIRNS TOWNSVILLE Existing Virgin Australia Passenger Network Leverage capabilities of ~ 3,700 passenger flights to 43 domestic and 15 international destinations PERTH BRISBANE Innovative Booking Portal ADELAIDE SYDNEY First cargo business to make the booking portal (icargo) available on mobile devices AIRWORK PIONAIR BAE QT PIONAIR BAE QT LAUNCESTON MELBOURNE Virgin Australia Cargo offers an innovative, reliable and responsive cargo solution to our customers 12

13 QUESTIONS 13