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ALSA GROUP OVERVIEW
Javier CarbajoCEO Spain
Madrid, 6th April 2011
o Agenda
o Key company data
o Market and regulatory framework
o Social economic environment and mobility
o Management model
o Opportunities
o Conclusions
ALSA: Investment summary
o Long established market leader with stable management team
o Providing core public service, fundamental to domestic mobility
o Exclusive concession structure, replicable in Continental
Europe
o Limited volume downturn in 2009/10, despite deep recession
o Highly flexible operating model, responsive to demand
variability
o Continued urban bus expansion, with inter-city coach returning
to growth
A high-quality business
Key Data
KEY DATA
o Market
o Bus market share higher than Rail (66% market share)
o Scheduled market, long-term contracts on an exclusive basis
o Business
o Two transport divisions focused on:
o Intercity; long distance, regional transport and international transport
o Urban and suburban; with implementation in Spain and Morocco (Marrakech and Agadir)
o Two divisions providing services (Sales & Marketing and Maintenance & Procurement): through the specialisation of resources we improve quality, optimise costs and gain flexibility.
o We also operate other minor businesses (i.e. fuel transportation, operation in service areas and auxiliary rail activities)
o Leadership position in a highly segmented market
o Acknowledgment and reputation of ALSA brand
189 million passengers carried in 2010
Fleet of 2,400 vehicles
6,800 employees
0
100000
200000
300000
400000
500000
600000
700000
2006 2007 2008 2009 2010
0
20000
40000
60000
80000
100000
120000
REVENUE EBIT
Revenue and EBIT (figures €000)
Key Data
LONG DISTANCE TRANSPORT NETWORK REGIONAL TRANSPORT NETWORK
Key Data
URBAN AND SUBURBAN TRANSPORT NETWORK BUS STATION NETWORK
AGADIRAGADIR
AVDA.AVDA.
AMERICAAMERICA
o ALSA is a renowned Brand with excellent reputation and a good Company to work for:
o One of the Top 100 Spanish companies for BEST CORPORATE REPUTATION, according to the Spanish Corporate Reputation Monitor (MERCO). Moving up the ranking in the last few years.
o One of the top brands for a passenger company: Consumer Preference (El Economista review in 2010)
o Alsa.es is one of the TOP 5 websites in the passenger industry in Spain, above iberia.es
o One of the Top 100 companies PREFERRED TO WORK FOR according to the MERCO PERSONAS 2010 review.
o Excellent value Brand Equity : 50% unaided awareness and 84% of aided awareness (Post-test Summer Campaign 2010)
Strong brand:
Market
o Passenger transport market: road holds a market share higher than rail (66% vs 34%). Market size >€7.7bn
o Passenger intercity services by road are operated on an exclusive basis by private companies;
whereas urban transport services are operated both by public and private companies
o Passenger transport by road is highly segmented, with more than 3,700 companies operating
in the industry. The size of most of the operators is small (average number of buses by
company: 10.9)
o Rail transport is operated only by public companies: RENFE and regional operating companies
c. €7.7bn
Bus-National
5%
Bus-Regional
22%
Bus- Special Use
12%
Rail- Narrow Gauge
6%
Rail- RENFE
28%
Bus- Discretionary
8%Bus- Urban
19%
c. €5,1bn
Urban 29,5%
Discretionary
12,5%
Special Use
18,5%
Intercity National
+ Regional
39,5%
Spanish Transport Market – Overall (2009) Spanish Transport Market – Bus & Coach (2009)
Sources: DBK Transport Consulting, RENFE annual report and
Transport annual report from Ministry of Transport
Scheduled transport for general use (intercity +
urban) amounts to €3.5bn
Social Economic Environment and Mobility
Overall Situation
o In 2010, the Government put in place a number of restrictive measures in the investment and public spending programmes, reducing wages to government officials by 5% and limiting pension increases. 2011 State budget restricted, in line with EU commitments to adjust public deficit to 6% of GDP.
o GDP - In line with expectations, although it improved against the initial forecast and decreased by 0.1% in 2010 (y-o-y variation in the fourth quarter delivered an improvement of 0.6%). Forecast for 2011 expects growth of 0.8%.
o INFLATION - Tax policy (VAT increase), the lack of control in collective bargaining and the increase of oil prices led to an increase in inflation rates of up to 3% in 2010. Forecast average annual inflation of 3.2% (source: FUNCAS).
o UNEMPLOYMENT - The economic policy designed by the Government has not generated expected employment. Unemployment rates increased in 2010 up to 20.4%.
o PAYMENT ARREARS - High level of payment arrears, both from Public Entities to private companies and from particular clients to Banks.
Overall situation
Overall Situation
o Approval of the Sustainable Economy Act:
o Maintenance of regulatory principles (LOTT and ROTT) and EU Regulation 1370.
o Sustainable mobility: encouragement of transport modes with lower environmental and energy impact.
o Efficient planning: rationalisation of investments in transport according to passenger needs.
Overall Situation
o Regulation benchmarks in the labour market:
o Agreement for employment and collective bargaining (February 2010): wage reviews according to the economic climate.
o Reform act of labour market (September 2010): flexibility and management for the amendment of labour conditions.
o Socio-economic agreement for growth, employment and pension guarantees(February 2011): reformation of the collective bargaining system.
o In terms of wider economic activity we observed uneven behaviours dependent on the type of journey.
o Urban and metropolitan transport: in 2010 national urban transport demand dropped by 0.8%, a contrast with sharp volume decreases in 2009.
o In InterCity transport (including suburban, medium and long distance) demanddropped in 2010 by 1.1%, compared to 2009 (source: INE). The highest impact was in long distance services, with a drop of passengers by 4.4%; medium distance services showed a better result, with an annual growth of 1.1%.
o However, in the last few months of 2010, demand showed a slight recovery: in December 2010, urban transport grew by 0.4% and demand in intercity transport increased by 2.1%.
o In 2011 (last figures published by INE are for January) demand improved significantly in all the bus transport areas: o Urban transport grew by 3%;o Suburban transport increased by 1.8%; o Medium and long distance by 2.7% with better performance in long distance.
Mobility - Bus
Mobility - Competitors
o Only air travel increased passenger volume in 2010 (growth in Barcelona, Valencia, Malaga, Seville, etc.) mainly driven by a higher presence of low-cost airlines (RYANAIR, VUELING, EASYJET,…). Domestic traffic increased by 1.6% in 2010 (source: INE).
o Rail was also affected by the passenger drop and by the regulations arising from the EU legislation regarding subsidies to public services. A higher control over subsidies in high-speed and long distance services had an impact on fares and discounts applied by RENFE.
o In 2010, demand for long-distance rail services decreased by 3.9%; drop by 2.3% for the total traffic of railway passengers.
o In January 2011, fall in demand for long-distance services was 5.2% (source: INE).
Management Model
Organisation Structure
o Principles of the Organisational Model
o Better understand the drivers for maximum efficiency.
o Focused on understanding the business. Activity control.
o Hierarchical construction of objectives.
o Ensures swift execution.
Organisational Structure
o Alsa implemented a leaner structure in 2010
o Combined InterCity Transport Division (long distance and
regional).
o Creation of Zone Transport Units of larger size.
o Technical staff placed at Divisional and Zone Management
Level.
o Contract Managements focused on operational excellence and
customer contact.
o Strengthened both the Sales & Marketing Division and
Maintenance & Procurement Division.
Organisational Structure
o Model Advantages
o Limited resource required;
o Transfer of knowledge: Horizontal and Vertical;
o Flexibility and Growth Capacity;
o Easy implementation;
o From strategy to operation in a few steps;
Optimised to existing business need.
Capacity to compete for new businesses.
Capacity to integrate new businesses.
Management Levers
o Cost adjustments
o Matching supply to demand and competitive pressure.
o Reduction of overhead and operational costs:
o Adjustment of structural costs.
Management Levers
o Customer Orientation
o Change in customer behaviours: requesting further improvements in
the quality of services.
o We work in order to have MORE AND MORE SATISFIED
CUSTOMERS.
o Re-designing the roles of operational staff: Service technicians focused on customers.
o Management of our staff values and of our approach to CUSTOMERS:
oTo improve attitude;
oTo encourage sensitivity;
Supporting long-term customer loyalty
Management Levers
o Customer Orientation
We work together with our employees:
o Specific training plans for each group, in order to promote change and improvement of behaviours towards customers
o Evaluation processes
o Recognition and reward plans
o Professional development plans
o Survey of company climate
Business Plan
o These management levers allowed us to:
o achieve high profitability levels in a complex economic
environment; and
o position us well to meet our strategic objectives in the
medium and long term:
o Growth in the national market;
o Opportunities in the international sphere;
o Future positioning in the rail market.
o Continental Europe
o Morocco
o Central and South America
Opportunities
o Spain:
o Privatisation of public companies operating urban transport
networks;
o Tenders for urban transport networks;
o Synergy opportunities in regional and urban transport services;
o Tramway and/or light metro projects;
o Liberalisation of passenger railway transport.
Opportunities
We lead the industry
o ALSA is: o Efficient; result-oriented.o Focused on customer and safety.
o Diversification
o We have growth capacity in other transport modes.
o We cover a total geographical sphere
o Offsets seasonal risks and risks related to local economies.
o We maintain strong relationships with stakeholders.
Conclusion
We base our long-term strategy on
oFlexibility
oGrowth
oProfitability
Conclusion
ConclusionesQ&A
