Idea Transcript
Trends and Challenges for the Airline Industry Tim-Jasper Schaaf Director Marketing & Sales To represent, lead and serve the airline industry
The value proposition for air travel remains strong It’s safer, it’s greener and it’s still a bargain
Source: Constructed from worldwide data from ICAO and IATA IATA Economics www.iata.org/economics
2
The quality of air service has improved Even in the past 5 years the main facets of airline service have got better
2007
2008
2009
2010
2011
On-time arrival rate* European flights** 77.9% 78.3% 82.1% 75.8% 82.1% US domestic flights*** 73.4% 76.0% 79.5% 79.8% 79.6% Mishandled bags per 1000 passengers Worldwide^ 19 15 11 12 9 Cancelled flights European network airlines^^ 1.40% 1.38% 1.08% 3.43%^* 0.94% US domestic flights^^^ 2.16% 1.96% 1.39% 1.76% 1.91% * % flights arriving within 15 minutes scheduled time ** http://www.eurocontrol.int/articles/coda-publications *** http://airconsumer.ost.dot.gov/reports/; table 1A YTD December figures ^ SITA Baggage Report 2012 ^^ AEA ^^^ http://www.transtats.bts.gov/HomeDrillChart.asp; On time performance - Flight delays at a glance ^* Impacted by airspace closures due to Icelandic volcanic ash cloud
IATA Economics www.iata.org/economics
2012
2013
83.4% 81.9%
83.9% 78.8%
9 1.00% 1.29%
1.23% 1.42%
3
Over $6 trillion of goods annually are now carried by air 35% of world trade is carried by air; a key enabler of globalization
Source: ICAO, IATA, WTO. Value carried by air=world merchandize exports*35% (35% estimated by The Colography Group, 2005) IATA Economics www.iata.org/economics
4
Air connectivity has enabled global supply chains Dell, Apple, Amazon would look very different without rapid air freight
Dell manufacturing plant Austin, Texas
Businesses can set up much more efficient global supply chains
Mexico Keyboards
France Soundcards
Japan RAM Chips CD-ROM Drives
Taiwan Network Cards Monitors Cooling Fans
China Power supplies
Malaysia Floppy Drives
Singapore SCSI Cards Disk Devices
Hong Kong Video Cards Microprocessors
Source: Dell, IATA IATA Economics www.iata.org/economics
5
Aviation plays a major role in most economies Footprint of aviation and tourism measured by the sector’s GVA as % GDP Malta Lebanon Cyprus United Arab Emirates Iceland New Zealand Thailand Singapore Hong Kong Egypt Australia Greece Ireland Canada Jordan Spain United Kingdom United States Turkey Chile Finland Sweden France Kenya Malaysia Luxembourg WORLD AVERAGE Portugal Saudi Arabia South Africa Netherlands Belgium Israel Germany Taiwan Norway Switzerland Philippines Korea Latvia Mexico Peru Austria Ecuador Italy Colombia India Denmark Brazil Hungary Russian Federation China Romania Czech Republic Japan Poland Nigeria
0.0%
5.0% 10.0% 15.0% Aviation and tourism GVA as a % GDP
20.0%
Source: Oxford Economics. http://www.benefitsofaviation.aero/Pages/default.aspx Note: GVA = Gross Value Added which is mainly wages and profits. GDP = Gross Domestic Product IATA Economics www.iata.org/economics
6
Massive expansion ahead for emerging markets Expanding middle classes drive both travel and air cargo flows Serving this demand will require a big expansion of investment Global middle income class in 2009 and prediction for 2030 Europe
North America
Asia Pacific Middle East & North Africa Central & South America
Sub Saharan Africa 100mn 500mn 1bn
2030 2009
Source: OECD, Standard Chartered Bank IATA Economics www.iata.org/economics
7
Periods of profit in the industry are typically short-lived Average 1990-2012 net profit margin for airlines worldwide was 0.0%!
Source: ICAO, IATA IATA Economics www.iata.org/economics
8
Lack of profitability not due to business model or region Airlines generating average EBIT margins of more than 8% during the 2000s Average EBIT margins, 2000-09 L America
INDUSTRY LAN Aegean Southwest Airlines Singapore Airlines Emirates Pinnacle Airlines Aeroflot Turkish Air Arabia GOL Allegiant COPA Republic Airways Ryanair
N America Mid East Asia-Pacific Europe
LCC
Full service long-haul
Regional
0%
5%
10%
15%
20%
25%
EBIT margin %, 2000-2009 Source: IATA Vision2050 report http://www.iata.org/pressroom/facts_figures/Documents/vision-2050.pdf IATA Economics www.iata.org/economics
9
Profitability is very unbalanced across the value chain Airlines sit in the middle of the value chain making the least returns ROIC excluding goodwill of sample, period 2004-2011, % 45 40 35 30 25 20 15 10 5 0
44
20 7
Cost of 9-11 capital
9
11
9-11
7-9
IATA Economics www.iata.org/economics
6
9
6-8
6-8
15
4
7-10
10-11
8-11
7-8
Source: McKinsey
10
Existing and proposed regulation risk significant cost A selection of regulations/policies illustrating industry and market-level costs Policy risk impact
% average ticket price
9% 8%
Total cost for industry $1.5bn
Delhi
7% 6% 5% German tax
4% 3% 2%
LHR congest -ion pricing
Climate fund levy Europe
LHR 2012-14
Austrian tax
1% EU ETS
ACSA
CDG congest -ion pricing
0% Airport regulation
Budget deficits
Passenger rights
Climate change
Congestion policy
Source: IATA IATA Economics www.iata.org/economics
11
Demand for air travel and cargo diverge Air travel and air freight volumes Seasonally adjusted 19 480
440
17
420
16
400
15 Freight FTKs
380
14 360 13
340 320
12
300 2007
11
Source: IATA
FTKs per month, billion
RPKs per month, billion
18
Passenger RPKs
460
2008
IATA Economics www.iata.org/economics
2009
2010
2011
2012
2013 12
Revenue divergence greater than volumes Passenger and cargo revenues 600
90
550
Passenger revenue
80
500 70
400
60
350
50
US$ billion
US$ billion
450
Cargo revenue
300
40 250 30
200 150
20 1993
1995
1997
1999
2001
2003
2005
2007
2009
2011 2013F
Source: ICAO (history), IATA (forecast) IATA Economics www.iata.org/economics
13
Cargo asset utilization under pressure
(Seasonally adjusted)
Average daily hours flown
10.5 10.0
Freight aircraft utilization
53% 51% 49%
9.5
47%
9.0
45% 8.5
43%
8.0 7.5 7.0
Freight Load Factor
41% 39% 37%
% available freight tonne capacity
Freight load factor and freighter aircraft utilization
Source: IATA, Boeing IATA Economics www.iata.org/economics
14
Asset utilization high in passenger business Passenger aircraft utilization 81% Passenger load factor
Average daily hours flown
11.6
80%
11.4
79%
11.2
78% Twin-aisle aircraft utilization
11.0
77%
10.8
76%
10.6
75%
10.4
74%
10.2 2007
73% 2008
IATA Economics www.iata.org/economics
2009
2010
2011
2012
% of ASKs
11.8
2013 15
Ancillary services increasingly important Revenue per departing passenger
190
Fare
180 170 160 150 140 40
Cargo + other
30 20
Ancillaries
10 0 2000
2002
2004
2006
2008
2010
2012
2014
Source: Ancillaries derived from IdeaWorks 2013 report, IATA forecast IATA Economics www.iata.org/economics
16
25%
70 World trade growth
Year-on-year % change
20%
65
15% Industrial production growth
10% 5% 0%
60 55 50
Business confidence (right scale)
-5% -10%
45 40
-15% -20%
35
-25%
30
2007
2008
2009
2010
2011
2012
Confidence index, 50 equal no change
World economy is finally turning up
2013
Source: Netherlands CPB, Markit IATA Economics www.iata.org/economics
17
Jet fuel price to slide to low end of range Jet kerosene and crude oil price, $/barrel 200 180 160 $140/b 140 Jet kerosene price 120 $110/b
100 Brent crude oil price
80 60 40 20 0 2008
2009
Source: RBS, Platts, IATA
IATA Economics www.iata.org/economics
2010
2011
2012
2013
2014 18
Industry profitability almost as good as 2010 Global commercial airline profitability
25
6.0
3.0
EBIT margin (left scale)
15
0.0 -5 -3.0
Net post-tax profit (right scale)
-15
-6.0
-25
-9.0
-35
US$ billion
% revenues
5
Source: ICAO, IATA IATA Economics www.iata.org/economics
19
Better but divergent regional performance Airline net post-tax profit margins 8% 6% N America
4%
AsiaPacific Europe
2% 0% -2% -4% -6% 2007
2008
2009
2010
2011
2012
2013F 2014F
Source: ICAO, IATA IATA Economics www.iata.org/economics
20
IATA Business Intelligence data shows opportunities China-ATH has
PDEW of 113. Currently there is no direct flight. People connect through SVO, IST, DXB, AUH,DOH, FRA 1,85%
1,79% DOH
2,68% 9,19%
IST SVO
2,79%
AUH 5,80%
8,38%
DXB FRA CDG
6,66% 8,08%
PEK MUC
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