Mr Koon, thank you for your comment. I believe that for airline business to eventually become viable, the cost of producing aircrafts has to come down first. Currently, the aircraft manufacturing business is dominated by 2 giants, i.e. Boeing and Airbus, who enjoy high returns on equity (partly because they borrowed so much money!) and have no incentive to reduce production costs. Will there be a third force out to disrupt them (somebody like Elon Musk)? We shall wait and see, hopefully in my lifetime.
1. Sensitive customers Price sensitive, little brand loyalty, goes for lowest fare
2. High fixed cost Airline has high fixed cost from purchasing aircraft to maintenance & capex.
3. Perishable product An empty seat in the air is a lost in revenue. Airlines are inclined to cut price in order to fill the seat to cover their high fixed cost, which leads to price war.
3. Government/Politics Airline industry employ large workforce and most have union. When an airline decided to layoff it normally face a strong resistance from union and government. Slow down in layoff means industry is bloated with supply which fuel even more price war.
4. Low barrier of entry An aircraft has a life span of 20-30 years. It is relatively easy for a new company to lease a plane and begin operation. Any profitable route will soon be filled with competitors enough to erode profitability.
dont bs jtyeo!barrier to entry for airlines is high.high opex,capex and government regulations deter new entrants.dont remarks economic structure with your own thought compiled from internet.
2 stocks. China aviation oil listed in sgx, the largest fuel jet trader in Asia Pacific, and Sam engineering, which should benefit from Pratt and Whitney's expansion in Singapore.
Well too bad if you dont believe. It is written on metric called ROE
Post a Comment
People who like this
New Topic
You should check in on some of those fields below.
Title
Category
Comment
Confirmation
Click Confirm to delete this Forum Thread and all the associated comments.
Report Abuse
Please Sign In to report this post as abuse.
Market Buzz
No result.
Featured Posts
MQ Trader
Introducing MY's First IPO Fund for Sophisticated Investors!
MQ Chat
New Update. Discover investment communities that resonate with your ideas
MQ Trader
M & A Value Partners IPO Equity Fund has been launched - Targeted 13% Return p.a
Latest Videos
0:17
New IPO: The onshore and offshore support services provider for the O&G industry, Steel Hawk Bhd aims to list on the Ace Market!
MQ Trader 3334 views | 3 d ago
0:17
New IPO: The largest mini-market player and a leading groceries retailer in Malaysia, 99 Speed Mart Retail Holdings Bhd aims to list on the Main Market!
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
fung9815
41 posts
Posted by fung9815 > 2016-02-17 09:29 | Report Abuse
Mr Koon, thank you for your comment. I believe that for airline business to eventually become viable, the cost of producing aircrafts has to come down first. Currently, the aircraft manufacturing business is dominated by 2 giants, i.e. Boeing and Airbus, who enjoy high returns on equity (partly because they borrowed so much money!) and have no incentive to reduce production costs. Will there be a third force out to disrupt them (somebody like Elon Musk)? We shall wait and see, hopefully in my lifetime.