Airline industry outlook 2019

Transcription

1 Airline industry outlook 2019 Brian Pearce Chief Economist 12 December 2018

2 Million barrels a day US$ per barrel Are the markets signalling recession ahead? Business confidence (left scale) FTSE World Equity price index (right scale) Bloomberg commodity price index (right scale) Source: Datastream, Markit

3 % change year-on-year Trade wars damaging but not expansion stoppers No escalation Escalation 25% tariffs US-China trade war Source: IMF, Citi US-China Tariffs-Limbo on the Verge of Trade Wars 3 December 2018

4 trillion, 2016 prices Brexit chaotic but slows rather than stops long-term No Brexit Deal + Backstop -2.8% Deal + FTA (proposal) -3.9% Orderly No Deal -5.5% Source: Oxford Economics, NIESR Brexit Impacts Report 26 th November 2018

5 % change year-on-year PMI index Forecasters still expect economic growth in Global GDP growth Business confidence Source: Markit, IMF World Economic Outlook October

6 Air travel has certainly got a lot of momentum Mid East intl. Brazil dom. NA intl. US dom. Europe intl. Africa intl. Latam intl. A-P intl. Russia dom. China dom. India dom. RPK growth, Jan-Oct 2018 % contribution to global growth % change year-on-year 6 0% 5% 10% 15% 20% 25% Source: IATA Statistics

7 % change over previous year Expect slower travel growth, but still above trend 20 RPK and FTK growth versus trend RPK growth 5 20-year trend FTK growth Source: IATA Statistics, IATAs own forecasts

8 Million barrels a day US$ per barrel Jet fuel price lower as market over-supplied US oil supply (left scale) Jet fuel price (right scale) Brent crude oil futures price 4 Dec (right scale) Source: Datastream, Platts

9 % revenues Relieving the downward pressure on margins 16% Airline industry operating margin 14% 12% 10% 8% Seasonally adjusted 6% 4% 2% 0% As reported -2% 9-4% Source: IATA Economics using data from The Airline Analyst

10 % ATKs Breakeven stabilizing and asset utilization rising 72 Breakeven and achieved load factor 70 Achieved Breakeven Source: ICAO, IATA Statistics, IATA forecasts

11 % of invested capital Airlines return on capital should stabilize in Return on capital invested in airlines and their cost of capital Return on capital (ROIC) Cost of capital (WACC) Source: McKinsey, The Airline Analyst, IATA forecasts

12 % revenues US$ billion Stable margins and 10 th consecutive year of profit Global commercial airline profitability EBIT margin Net post-tax profit Source: ICAO, IATA Statistics, IATA forecasts

13 Number of unique city-pairs US$/RTK in 2014US$ Increasing value for consumers and businesses Unique city-pairs and real transport costs Unique city-pairs Inflation-adjusted airline yield Source: SRS Analyser, ICAO, IATA Statistics, IATA forecasts

14 Million $ billion More revenues for governments and more jobs Tax revenues and global supply chain jobs supported Tax revenues Supply chain jobs supported Source: ATAG Benefits Beyond Borders 2018, Oxford Economics, IATA forecasts

15 % change over year earlier However, rising non-fuel costs are a challenge 20% Airline industry growth in unit costs and unit revenues 15% 10% Unit cost growth 5% 0% -5% -10% Unit revenue growth -15% 15-20% Source: The Airline Analyst

16 GDP relative to full capacity,% % labour force It will take a recession to stop cost pressures rising Spare capacity in the OECD economies and labour markets Unemployment rate (right scale) Spare capacity in the economy Source: OECD Economic Outlook October

17 Interest rates will be pushed higher 10 year government bond yields, % China 3.5 US Eurozone Source: Datastream

18 Index to equal 1 in 2008Q1 Problems from a strong US$ likely to continue 1.60 Exchange rates, US$ per unit of local currency China Japan Eurozone Indonesia India Brazil Turkey Argentina Source: Datastream

19 Debt adjusted for operating leases/ebitdar Debt remains an issue for airlines in some regions 8 Adjusted net debt/ebitdar Latin America Middle East Asia Pacific Europe North America Investment grade Source: The Airline Analyst

20 % of revenues Performance will continue to diverge by region 12% Net profit margin by region 10% 8% 6% 4% 2% 0% -2% -4% -6% N America Asia Pacific Europe L America Middle East Africa 20-8% Source: ICAO, IATA Statistics, The Airline Analyst, IATA forecasts

21 Thank you Brian Pearce