Transportation

Airline Capacity Additions (Key Industry Trend)

Airline ticket prices have been in a state of flux in a post-Covid world, with airlines struggling to add capacity due to pilot shortages

Fuel (Key Industry Trend)

Airline companies have been investing heavily in upgrading their fleet to more fuel-efficient aircrafts to reduce their biggest cost driver. In addition, Airlines are increasingly adopting SAF, derived from renewable resources, to lower carbon emissions and meet sustainability goals.

• SAF stands for Sustainable Aviation Fuel, a low-carbon jet fuel made from renewable sources like used cooking oil, agricultural waste, and captured carbon dioxide, rather than crude oil.

EV - Electric Vehicles (Key Industry Trends)

Auto manufacturers are all racing to create battery-powered vehicles and the charging infrastructure to go along with them

Autonomous Vehicles (Key Industry Trends)

Semi-autonomous vehicles are widespread and fully autonomous vehicles being piloted. This can cause major disruption to auto manufacturers, public transport, and insurance companies.

Shortage of Truckers (Key Industry Trends)

Transportation companies have been struggling to keep up with the booming demand and a massive shortage of truck drivers, increasing in labor costs. Autonomous trucks and drones are being developed and tested for long-haul and last-mile delivery, potentially mitigating labor shortages.

• Example case: Matt Huang’s YouTube Video (Acing a consulting case live so you can just copy me (Bain R1))

Urban Mobility Solutions (Key Industry Trend)

Electric and autonomous micro-mobility (e-scooters) and public transportation innovations (Hyperloop) are addressing urban congestion and lowering greenhouse gas emissions.

Load Factor (Important Terminology)

Measures the capacity utilization of transportation services and is equal to the average actual utilization divided by the maximum capacity

PRASM - Passenger Revenue per Average Seat Mile (Important Terminology)

The revenue generated per available seat miles in which ASM = number of seats available x number of miles flown

• Passenger Revenue per Available Seat Mile (PRASM) measures an airline's revenue generated for each seat, whether occupied or not, over one mile. It's calculated by dividing total passenger revenue by the total available seat miles (ASM) flown. PRASM is a key performance indicator for airlines, reflecting their pricing and revenue environment, and a higher PRASM generally indicates greater financial strength and profitability. 

Logistics (Important Terminology)

The detailed coordination of complex operations involving many people, facilities, or supplies

3PL (Important Terminology)

Third party logistics companies offer logistics services to other companies. Can be cheaper for some companies to outsource their logistics to 3PLs

LTL and FTL (Important Terminology)

• LTL (Less than Load) - small freight that doesn’t fill a truck which is generally more expensive to ship

• FTL (Full Truck Load) - large shipments that fill a trailer and are thus cheaper to ship

Potential Savings by Switching Equipment (Important Calculations)

Potential Savings = (New Profit - Old Profit)

OR

Potential Savings = { [(New Capacity x Price) – (New efficiency x cost)] – [(Old Capacity x Price) – (Old efficiency x cost)]} ???

Important Considerations

• Gasoline / fuel prices

• Carrying capacity

• Range / distance

• Destination routes

• Maintenance costs

• Depreciation