first power point presentation
TRANSCRIPT
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Welcome to our Investment Proposal
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Agenda • Strategy and Product
• Markets and Network
• Marketing
• Fleet and Revenue
• Human Capital
• Operations
• Financials
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Our Creed We provide guests with an effortless and unique journey,
using state-of-the-art technology, a distinctive and comfortable environment and convenient city-centre
airports
We aim to bring back the Golden Age of flying
Our Vision Creating a niche airline, capturing a very targeted
and lucrative segment: the discerning business and affluent leisure traveller seeking a higher level of
convenience and service from his air transport experience
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Business Model • Medium-haul, point-to-point,
full-service
• Connecting main business centres’ city airports of Asia
• FIRST connects TAIWAN to: • Japan • South Korea • Singapore • Hong Kong • Mainland China
Taipei Songshan
Singapore
Hong Kong
Seoul Gimpo
Shanghai Hongqiao Haneda
5
Strategy Product Forecast Network Market Marketing Fleet Revenue HR Operations Finance
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Product
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Strategy Product Forecast Network Market Marketing Fleet Revenue HR Operations Finance
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Effortless Travel Process
• Tailored service in every stage of the travel process
Booking Journey to
Airport
Airport Welcome &
Check-In Boarding In-Flight
Arrival & Destination
Strategy Product Forecast Network Market Marketing Fleet Revenue HR Operations Finance
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Strategy Product Forecast Network Market Marketing Fleet Revenue HR Operations Finance
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Convenience & Speed • TSA
• City Centre Airports => Total Journey Time
3.84
6.47
3.58
5.33 4.67 4.67
7.30
4.38
6.67 6.50
Hong Kong Singapore China Japan South Korea
TSA TPE
Strategy Product Forecast Network Market Marketing Fleet Revenue HR Operations Finance
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Engaging the Connected Traveler • NFC (Near Field Communication) Tags
• Mobile Phone Application
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Market Forecast
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Strategy Product Forecast Network Market Marketing Fleet Revenue HR Operations Finance
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East Asia
• IMF GDP: +7%
• Air Travel CAGR: • Boeing: +6.7%
• Airbus: +5.4%
$-
$5,000.00
$10,000.00
$15,000.00
$20,000.00
$25,000.00
$30,000.00
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GD
P p
er
cap
ita
Pas
sen
gers
Mill
ion
s
Year
Demand & GDP East Asia
Passengers GDP
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Strategy Product Forecast Network Market Marketing Fleet Revenue HR Operations Finance
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World Trade
• 31% East Asia
• Driver for Business
• Goldmine for Travel
East Asia
EU
USA South America
Rest of World
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World Trade
• Top Six Trading Nations
• High Foreign Direct Investment
• Largest Generators in Business Travel
$-
$500.00
$1,000.00
$1,500.00
$2,000.00
$2,500.00
Bill
ion
s
Imports Exports
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East Asian Development
• Contribution to GDP
• Agriculture
• Industry
• Service
Taiwan
China
Singapore
Japan
Korea
Hong Kong
Agriculture
Industry
Services
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East Asian Development
• Growth in Trade
• Industry & Service
• Increase Disposable Income
• Tourism Development
• Introduction of LCC
• Increase Leisure Travel
$-
$10,000.00
$20,000.00
$30,000.00
$40,000.00
US
Do
llar
Average Disposable Income per Capita
2009
2010
2011
2012
$-
$10,000.00
$20,000.00
$30,000.00
US
Do
llar
(Mill
ion
)
Country
Tourism Receipts
2009
2010
2011
2012
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East Asian Development
• Resilient Growth
• Sensitivity in Premium Demand
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40
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1,000
1,200
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Firs
t &
Bu
sin
ess
Mill
ion
s
Eco
no
my
Mill
ion
s
Year
Passenger Demand and Forecast East Asia
Economy First&Business
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East Asian Development
• Seasonality
• China & Western Holiday Pattern
0.6
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0.8
0.9
1
1.1
1.2
1.3
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
ASK
s
Bill
ion
s
Month
Seasonality
2004
2005
2006
2007
2008
2009
2010
2011
2012
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Quality Service Index
• Quality Indicators: • Frequency
• Capacity
• Service Offered
• Home Base Factor
• Total Journey Time; Door to Door
• Route Market Shares • Opportunities on Inner-City Airports
• Golden Aviation Circle
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Quality Service Index
20
Fares Weekly
frequency Weekly capacity
TSA- GMP
TPE- ICN
TSA-GMP
TPE- ICN
TSA-GMP
TPE- ICN
Quality Factor
Base Factor
Time factor
A/C Seats
QSI Market share
Asiana Airlines $381 20 2272 1 0.9 0.23 113 1.22 15.2% Cathay Pacific $721 14 2347 1 0.9 0.23 166 0.67 8.3% China Airlines $646 25 3505 1 0.9 0.23 142 1.11 13.8% EVA Airways $636 17 2312 1 0.9 0.23 132 0.74 9.2% Korean Air $336 23 2869 1 0.9 0.23 123 1.75 21.7%
Thai Airways $788 14 2142 1 0.9 0.23 152 0.56 6.9% FIRST $700 14 1400 1 1 1 100 2.00 24.9%
Strategy Product Forecast Network Market Marketing Fleet Revenue HR Operations Finance
• Route Monopoly TSA - GMP
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Quality Service Index
• Route Trend & Qualitative Analysis
0
100
200
300
400
500
600
0
100000
200000
300000
400000
500000
600000
700000
Pa
ss
en
ge
rs
Year
Demand Forecast Taipei - Singapore
Demand BEST WORST AVERAGE Singapore GDP
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East Asia
• Region
• Growth
• Market Size
• Time Sensitive
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Network
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Business Network
• FIRST connects TAIWAN and: • Japan
• South Korea
• Singapore
• Hong Kong
• Mainland China
Taipei Songshan
Singapore
Hong Kong
Seoul Gimpo
Shanghai Hongqiao Haneda
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Competitive market
0
2
4
6
8
10
12
14
0 1000 2000 3000 4000 5000 6000
Yield & Sector Length
Thai
EVA Air
Air China
China Airlines
CX
China Eastern Airlines
ANA Airlines
SIA
China Southern
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Competitive market
0
2
4
6
8
10
12
14
0 1000 2000 3000 4000 5000 6000
Yield & Sector Length
Thai
EVA Air
Air China
China Airlines
CX
China Eastern Airlines
ANA Airlines
SIA
China Southern
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Strategy Product Forecast Network Market Marketing Fleet Revenue HR Operations Finance
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Business Network • FIRST connects
TAIWAN and: • Japan
• South Korea
• Singapore
• Hong Kong
• Mainland China
Taipei Songshan
Singapore
Hong Kong
Seoul Gimpo
Shanghai Hongqiao Haneda
16%
19%
16%
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Strategy Product Forecast Network Market Marketing Fleet Revenue HR Operations Finance
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Business Network • FIRST connects
TAIWAN and: • Japan
• South Korea
• Singapore
• Hong Kong
• Mainland China
Taipei Songshan
Singapore
Hong Kong
Seoul Gimpo
Shanghai Hongqiao Haneda
21%
16%
19%
16%
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Strategy Product Forecast Network Market Marketing Fleet Revenue HR Operations Finance
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Business Network • FIRST connects
TAIWAN and: • Japan
• South Korea
• Singapore
• Hong Kong
• Mainland China
Taipei Songshan
Singapore
Hong Kong
Seoul Gimpo
Shanghai Hongqiao Haneda
21%
16%
19%
16%
28%
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Strategy Product Forecast Network Market Marketing Fleet Revenue HR Operations Finance
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Regulatory Environment
30
Taipei Songshan
Singapore
Hong Kong
Seoul Gimpo
Shanghai Hongqiao Haneda
• Domestic Regulation Ownership requirements Air Operator Certificate Operating requirements
• Air Service Agreement (ASA) for Japan, South Korea and Hong Kong
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Regulatory Environment
31
Taipei Songshan
Singapore
Hong Kong
Seoul Gimpo
Shanghai Hongqiao Haneda
• Domestic Regulation Ownership requirements Air Operator Certificate Operating requirements
• “Open Sky” in 2018 between Taiwan and Singapore
• Air Service Agreement (ASA) for Japan, South Korea and Hong Kong
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Regulatory Environment
32
Taipei Songshan
Singapore
Hong Kong
Seoul Gimpo
Shanghai Hongqiao Haneda
• Domestic Regulation Ownership requirements Air Operator Certificate Operating requirements
• Cross-Strait Air Transport Agreement & Supplementary Agreement (Tax-Free, avoidance for double taxation)
• “Open Sky” in 2018 between Taiwan and Singapore
• Air Service Agreement (ASA) for Japan, South Korea and Hong Kong
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Market
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Task
Time
Milestone
• Register the company
• Secure Taiwanese
Investment
• Apply for AOC
• Apply for operating license
• Apply for Fares and Tariffs
• Schedule Filing
• Filing for Slots
• Employ personnel
• Train personnel
• Negotiate outsource
contracts
• Set up IT
• Marketing
• Preparing Business
• Start of web sales
• Delivery of aircrafts
• Launch of operation
2014-4 2014-5 2014-6 2014-7 2014-8 2014-9 2014-10
Mile
sto
ne
Star
tin
g p
oin
t
Lega
l Du
rati
on
Es
tim
ated
Du
rati
on
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5 Year plan:
• Scale vertically – improving efficiency of the existing routes
• Scale horizontally- additional resources (aircraft, frequencies)
2015
2018
2017
2016
•Frequency to Hong Kong & Shanghai •One more aircraft
•New route to Tianjin •One more aircraft
•New route to Kuala Lumpur •One more aircraft + frequency on Shanghai
•New route to Guangzhou •One more aircraft
Strategy Product Forecast Network Market Marketing Fleet Revenue HR Operations Finance
Scalability
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Market Segmentation
Taiwan - 19%
China - 17.86%
Japan - more than 15% are business travellers
Singapore - more than 38% of Taiwanese
business travellers
South Korea - third largest economy in Asia
Hong Kong - prime business destination, Asia´s world city
Taiwan
Singapore
Hong Kong
South Korea China
Japan
Strategy Product Forecast Network Market Marketing Fleet Revenue HR Operations Finance
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Marketing
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Traditional advertising campaigns
• Mixture of traditional and westernized appeal
• Competitive advertisement is considered impolite
• Media used: • Newspaper advertising, credible and respected
newspapers, ads in both native and English languages
• Magazine advertising: Business and luxurious magazines, in order to target our guests
• Billboards: Tradition extended through the Asian market, raise brand awareness
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Social Media
• Engaging them towards social media helps FIRST to keep costs at minimal, as few people can keep contact with lots
• For Internet users in Taiwan, social networking sites have become a source of information that is just as influential as any other form of media
• Lot of people said they would trust their friend’s recommendations on social network sites and would be more likely to go for the same product
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Social Media
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Launch Campaigns
• Treasure Hunt at the airport
• Events in city centers: Showcase of FIRST main features
• “Seat for a Seat Campaign”
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“A Seat for a Seat”
• Passengers with a ticket from one of our peers in the market can have the opportunity to show up at the airport and travel with FIRST for free if there is any seat available at the moment of departure
• Taipei – Singapore: Singapore Airlines and EVA Air
• Taipei – Seoul: Korean Air and EVA Air • Taipei – Hong Kong: Cathay Pacific and EVA Air
• Taipei – Tokyo: ANA Airlines and EVA Air
• Taipei – Shanghai: China Eastern and EVA Air
• Is an opportunity to improve the brand awareness via media coverage and get to know FIRST’s product
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Fleet Selection
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Fleet Selection
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Fleet Selection
45
E195 Availability
25 deliveries listed for 2014 in the world,
including 11 with lessors
Embraer 195 Advanced Range Version
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Cabin Configuration
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Business Class 12 Recliner Seats
1-2 Layout 42.0’’ Seat Pitch
19.0’’ Seat Width
Economy Class 88 Standard Seats
2-2 Layout 33.0’’ Seat Pitch
18.25’’ Seat Width
Dual-class-cabin configuration:
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• Highest economy class seat width & pitch among main
competitors
• Highest business class seat pitch among competitors’
narrow-body aircraft
* Airlines operating wide-body aircraft
Seat Comfort Comparison
0
5
10
15
20
25
Economy Class Business Class
Ave
rage
se
at w
idth
(in
che
s)
Seat width comparison
FIRST Singapore Airlines China Airlines EVA Air Cathay Pacific* *
0 10 20 30 40 50 60 70
Economy Class
Business Class
Average seat pitch (inches)
Seat pitch comparison
FIRST Singapore Airlines China Airlines EVA Air Cathay Pacific* *
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Revenue Management
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Fare Structure Strategy Product Forecast Network Market Marketing Fleet Revenue HR Operations Finance
49
Online Fare
Tour Operator
Fares
General Booking
Fares
+20 +20 Corporate Fares
VFR Fares
Payable by the customer
Fuel Surcharge
Monday/Friday Surcharge
Security / Airport Tax
+
+
+
+
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Booking Classes
50
• Child/infant discount
• One-way fares
• Same-day return tickets
• Seasonality-based fare
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Fares
51
• Highly regulated market
Economy TSA - SHA LHR - CDG
01.09.14 - 31.12.14, 1.1.15 - 19.1.15, 4.2.15 - 30.6.15,
01.09.15 - 23.12.15
633 182
01.07.15 - 31.08.15, 30.3.15 - 12.04.15
567 182
24.12.14 - 02.01.15, 20.1.15 - 3.2.15
689 230
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Human Capital
52
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CEO
SVP Finance
Accounts & Expenditure
Leasing & Purchasing
SVP Human Capital
Recruitment
Employee Development
Payroll
Staff Loyalty Programme
Staff Management
SVP Flight Operations
Chief Pilot
Training
Intergrated Ops Control
Crew Scheduling
SVP Technical
QA & HS
Fleet Management
Engineering
SVP Commercial
Strategy
Operations Research
Revenue Management
Pricing
Scheduling
Marketing
SVP Guest Hospitality
Cabin Crew Management
Ground Hospitality
Guest Service
SVP Technology
IT
IS
SVP QA & HISS
Management Assistance
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Outsourced Elements • Start-up Airline, Avoid Costly Investments During Start-up
• Ensure High Quality Service
• Import Knowledge
• Request for Proposal (RFP) to All Potential Partners in Region
• IT
• Catering
• Maintenance
• Ground Handling
• Legal Services
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Staff Cost
Flight Crew
Cabin Crew Flight Operations
Engineering
Ground Crew
Commercial
Flight Crew
Cabin Crew
Flight Operations
Engineering
Ground Crew
Commercial
Other
Finance
Technology
Guest Hospitality
Human Resources
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Staff Numbers
0
2
4
6
8
10
75
95
115
135
155
175
195
215
2014 2015 2016 2017 2018 2019
Nu
mb
er o
f A
ircr
aft
Staf
f
Year
Number of Staff Aircraft
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Operations
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Aircraft Maintenance • Outsource to avoid costly in-house investment
• E-195 capabilities • Evergreen Aviation Technologies
Corp.
• Tender to all companies in the
region for more options
• Block program
• Stagger maintenance
Year Aircraft January September October November DecemberE195_1
E195_2
E195_3
E195_4
E195_5
E195_1
E195_2
E195_3
E195_4
E195_5
E195_6
E195_1
E195_2
E195_3
E195_4
E195_5
E195_6
E195_7
"B" Check (2 days) "C" Check (5 days)
"A" Check is due over night
20
14
20
15
20
16
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Flight and Cabin Crew • Flight time limitations based on the Taiwanese CAA
• Cabin Crew
• 1 Cab. Crew per 50 pax.
• Flight Crew
• Max of 1,000 FH and
a min of 750 FH for
12 months
• FIRST average of
800 FH
0
10
20
30
40
50
60
70
2014 2015 2016 2017
No
. of
Cre
w
Year
Flight/Cabin Crew
Flight Cabin
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Schedule • Aircraft average utilisation of 10 Block Hours per day
SHA – Shanghai HKG – Hong Kong GMP – Gimpo, Seoul HND – Haneda, Tokyo
SIN – Singapore CAN – Baiyun, Guangzhou TSN – Tianjin KUL – Kuala Lumpur
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Aircraft1
Aircraft2TSA-SINAircraft3
Aircraft4
Aircraft5
00:00 00:30 #
T T T
T
T
T T TTSA-GMP T TGMP-TSA T
05:3004:00 04:30 05:00 11:3006:00 06:30 07:00 07:30 08:00 08:30 09:00 09:30 10:00 10:30 11:00 17:3012:00 12:30 13:00 13:30 14:00 14:30 15:00 15:30 16:00 16:30 17:00 23:3018:00 18:30 19:00 19:30 20:00 20:30 21:00 21:30 22:00 22:30 23:00
T
T
T
T
T
T
TTSA-SIN
TSA-HKGTSA-HKG
T
T
T
T
TT
TT
HKG-TSA
T
T
T
T
SIN-TSA
TT
TSA-HKG
SIN-TSA
TSA-HND HND-TSA
TSA-HND HND-TSA
SHA-TSATSA-SHASHA-TSATSA-SHA
TSA-GMP GMP-TSA
T
T
T T
TSA-SIN
T
TT
T
T
Type Startyear Flighttime WeeklyFrequency
E195 2014 TSA-SHA 14
E195 2014 TSA-HGK 14
E195 2014 TSA-GMP 14
E195 2014 TSA-HND 14
E195 2014 TSA-SIN 14
E195 2015 TSA-CAN 14
E195 2016 TSA-KUL 14
E195 2017 TSA-TSN 14
CAN
TSN
KUL
04:30
SIN
00:30 01:00 01:30
GMP
02:00 02:30 03:00 03:30 04:00
HND
SHA
HKG
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Finance
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Financing Structure
• FIRST is a partnership between existing directors and Taiwanese and foreign investors
• Maximum foreign ownership limited by law to 50%
• An investment of US$15 million is sought to close the last stage of the financing
• Total financing of US$35 million • US$33 million
minimum capital required to apply for Taiwanese AOC
• Provides 5% cash buffer before operational phase
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Investment Vehicle
• 428 000 class A convertible preferred shares • Convertible to class C common stock on 2:1 ratio
• Right to a 15% annual non-cumulative dividend
• Right to a 40% special dividend upon reaching a profitability threshold of 20% in a financial year
• Right of first refusal/Co-sale, ‘’Tag-along’’ and anti-dilution
• Restriction on share transfer to outside investors
• Restriction on transfer to non-Taiwanese nationals
• Shareholder 5-year lock-in
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Tax-Mitigation Structure
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Economics
• FIRST leverages its unique business model, presence in the fast-growing Asian market and monopolistic status on key business route to outperform the market
Year
2014 2015 2016
Revenue Growth
177% 29%
Net Profit Growth
641% 22%
Net Margin
RASK 25% 66% 63%
CASK $0.21 $0.12 $0.12
Passenger Load Factor
58% 67% 62%
2014 2015 2016
REVENUES $166,904,129 $461,914,762 $596,883,786
Scheduled Passenger Services
99.93% 95.44% 91.24%
Ancillary Revenues 5.00% 9.54% 13.69%
Cargo 0.33% 0.28% 0.34%
EXPENSES $125,747,220 $156,769,208 $223,674,572
NET PROFIT $41,156,908 $305,145,553 $373,209,214
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Investment Appraisal
• Profitability
• FIRST generates a substantial profit due to:
• Unique nature of its product
• Network of high-yielding destinations
• High aircraft utilization
Profitability
2014 2015 2016
Operating Ratio 75.34% 33.94% 37.47%
Net Profit Margin 24.66% 66.06% 62.53%
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Investment Appraisal
• Return to Shareholders • Venture presents shareholders with abnormal returns
above market averages
• Financing structure optimizes cash in/out flows to maximize shareholder return
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2014 2015 2016
ROE 55% 55% 55%
EPS $16.45 $148.45 $182.48
Fully-Diluted EPS $14.86 $134.10 $164.84
DPS $16.45 $148.45 $182.48
Dividend Payout Ratio 1 1 1
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Investment Appraisal • Net Present Value (NPV)
Year 1 Year 2 Year 3 Year 4 Year 5 Apr-14 Jul-14 Oct-14 Mar-15
Initial Equity Investment -$2,000,000 -$4,000,000 -$9,000,000
Preferred Dividend (15%) $2,250,000 $2,250,000 $2,250,000 $2,250,000 $2,250,000
Profit Margin 25% 66% 63%
Special Preferred Dividend (40%) $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000
Total -$2,000,000 -$4,000,000 -$9,000,000 $8,250,000 $8,250,000 $8,250,000 $8,250,000 $8,250,000
NPV (9% Discount Rate) -$2,000,000 -$3,914,744 -$8,620,437 $7,568,807 $6,943,860 $6,370,514 $5,844,508 $5,361,934
Accrued Value -$2,000,000 -$5,914,744 -$14,535,181 -$6,966,373 -$22,513 $6,348,000 $12,192,508 $17,554,442
Payback Period (Years) 5
Total Return 117.03%
Return per Year 23.41%
IRR 35.64%
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Investment Appraisal
• Highly attractive and profitable investment • FIRST annualized return outpaces market return for
similar risk-adjusted position
• Return on equity covers virtually any investor’s cost of capital
• Preferred convertible share structure offers both the security and priority of a debt instrument with the capital appreciation potential of common stock
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Risk Analysis
• Sensitivity Analysis
Effect on Net Profit of a 1% Change in
2014 2015 2016
Fuel Cost -4.54% 0.70% 0.75%
Passenger Load Factor
-8.03% -3.00% -3.17%
Lease Rate -3.70% -0.57% -0.60%
Maintenance Cost -3.48% -0.56% -0.59%
Staff Cost -0.12% -0.02% -0.02%
Cost of Services -3.24% -0.51% -0.54%
Cost of Ancillaries -0.44% -0.19% -0.27%
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Risk Analysis
• Resilience Analysis
Bottom-Line Resilience Analysis
Net Profit with 2014 2015 2016
With 100% Revenues - $305,145,553 $373,209,214
With 75% Revenues - $189,126,506 $223,264,439
With 50% Revenues - $74,802,603 $75,535,701
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Exit Strategy
5 Year Horizon
Within the restrictions imposed by regulations
Through the share tender mechanism and exercise of coat tail rights
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Invest FIRST!
• A unique business model
• A lucrative and niche market segment
• An incremental growth protential in Asia
• Outstanding innovations
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Thank you very much!
Maxime Leveille Montreal, Canada
Yang Baksa Seoul, Korea
Heshan Karunaratne Delphine Wermeister
Paris, France Cherie Lu Taipei, Taiwan
Gloria Elena Guevara Nieto Saltillo, Mexico
Sylvain Gloux London, UK Vincent Chow
Hong Kong
Norbert Lambriex Tilburg, The Netherlands
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CSR and Environment • CSR
• Women in Aviation International • Sponsor Jingmei Girls' Senior High School in Taipei • Sponsor the Tug-of-War team in Jingmei
• Environment • GREEN comes FIRST
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Exit Strategy
• Initial Public Offering (IPO) • Timeframe: 5-7 years from start of operations
• Public Float: 25-50% of FIRST common stock
• Stock Listing on Taiwan Stock Exchange with cross-listings on: • Hong Kong Stock Exchange
• Singapore Exchange
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