What's the best investment an Aircraft Manufacturer, Airline, Aircraft Lessor or Travel Agency?
I'm currently preparing for buyside interviews and know that questions like this are fairly common.
Of the choices, I believe that travel agency is considered the "correct answer", but could someone provide the rationale behind that? Thanks.
Edit: I don't personally have a view on where the best place to invest is in the aviation value chain, I've just heard in interview settings they usually gravitate towards travel agencies. The exhibit below from Mauboussin's Measuring of a Moat seems to suggest that this might be because the travel agents' share of the profit pool was very high.
Why do you think a travel agency would be the one objective "best investment"? I have spent a lot of time in aviation and we have put on huge positions in each one of these verticals over the last two years, and each represented a phenomenal investment at that point in time.
Least capital intensive? But I'd go with the duopoly.
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I'm no Warren Buffett, but "it depends on the price"?
Best business does not equal best investment.
Owning Expedia in 2022 was the right answer?
Knowledge isn't exhaustive but I'll take a (very shallow high level) stab and hope others chime in. I fucking love aviation and would love to learn more.
I don't think travel agency is the correct answer. I feel like the service is commoditized and there are enough self-service options. Sure it's a value add service with minimal capex but I don't see how you can differentiate and hit scale. Maybe my lack of knowledge.
Manufacturing is super interesting because the supply chain is a complex web of sub manufacturers. Boeing makes aircraft but sources components from a shit ton of others, e.g., engines from Pratt & Whitney. P&W sources engine components from a web of other suppliers. One of these specialty component manufacturers could be interesting. Stable, cash flowing manufacturing business with (I would think) supply contracts in place. Downsides are probably customer concentration risk, capital intensity and R&D spend.
Leasing is a cool business, economics are pretty attractive. Especially outside of North America / Western Europe. Know people who make bank facilitating or leasing to low cost / regional airlines in Asia.
I'd add a fourth - servicing. There are enough "end of life" (I don't know the correct terminology) aircraft sold on to smaller carriers that continue to require ongoing maintenance / servicing. E.g., when airlines moved off of previous gen aircraft like DC-10s, a lot of those didn't end up in the graveyard. They were sold on to said smaller carriers. Boeing discontinued servicing, only offering parts from inventory.
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