What sets us apart

We have developed a precise metric to measure and benchmark the competitiveness and strategic positioning of airlines. Our clients benefit from such metrics by enabling them to pursue sophisticated airline stock trading strategies and improved risk management. Every month, we calculate anew the quality of each airline’s competitive and strategic position without drawing on historical trends (i.e. without using machine learning, neural networks, or other “curve-fitting” or “self-learning” systems). Avinomics uses more than 150 key performance indicators to position each airline in a matrix depicting three strategic factors: transfer quality (i.e. number and speed of an airline’s transfer connections), efficiency (e.g. the simplicity of its fleet), and “best practice” (e.g. capacity utilization of its aircraft).
Our calculations are based on the constant stream of operating data published by the industry. We look at the timetables of all airlines bookable worldwide, airport passenger statistics, and a host of other sources. Our data reach back to 2000, which has allowed us to robustly stress test our models, even for periods of crisis. We also look at financial data, although we do so fully aware they are the result of a carrier’s performance, not its drivers.

AVINOMICS’ AIRLINE TRADING STRATEGIES

Avinomics enables it clients to conceive and test any number of trading strategies (risk, return, market neutrality). These are all based on airlines as a general asset class, and do not distinguish between business models or different regional focuses. Our approach is based on a simple principle – that the weighting of any airline stock in a portfolio is determined by the quality of the airline’s competitive and strategic position. Our premise is that, like any other company, a carrier with a superior ranking usually achieves a higher stock-market valuation.

Airlines usually change their strategies only slowly; implementing strategic decisions can take months or years. As a result, monthly changes in competitive and strategic positioning are generally very small. This means portfolio adjustments based on our monthly recalculations are infrequent and limited in volume – and investors’ ensuing transaction costs generally modest. Insolvencies are the only exception, which is why we use our proprietary indicators to detect insolvency risks as early as possible, allowing our clients to sell a stricken airline’s stock in good time. With Avinomics, there’s no need to catch a falling knife.

AVINOMICS AIRLINE RISK INDICATORS

Avinomics’ airline risk indicators highlight risks usually overlooked by traditional assessment methods. We look at things that cause risks before these risks become apparent. Our risk indicators detect subtle changes in strategic direction, and identify any sustained erosion of or sudden drops in competitiveness. This allows us to identify risks well before they trigger full-blown crises that become all too apparent in financial performance. Our indicators detect unexpected changes in passenger demand as easily as shifts in competitive rivalry. These metrics are based entirely on competitive and operational data. We make no use of financial data as we consider them to be lagging rather than leading indicators of risk. Testing our risk indicator against historic airline default data has shown that in 90 percent of airline defaults our method raised a red light in the twelve months before that event.