World Financial Symposium

Transcription

1 World Financial Symposium September 2016 Marina Bay Sands Singapore World Financial Symposium 2014 World Financial Symposium 2016

2 Opening Remarks Aleks Popovich SVP Financial and Distribution Services, IATA Sponsored by World Financial Symposium 2014 World Financial Symposium 2016

3 THANK YOU TO OUR SPONSORS PLATINUM SPONSOR STRATEGY SUMMIT PRINCIPAL SPONSOR INDUSTRY MEETING PLATINUM SPONSOR GOLD SILVER BRONZE SUPPORTING AIRLINES World Financial Symposium 2014 World Financial Symposium 2016

4 Supporting Sustained Airline Financial Health Building High Performing Financial Organization

5 BARCELONA 2015 SINGAPORE 2016 BE HERE TOMORROW TO FIND OUT! ABU DHABI 2014

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7 Industry Specialized Strategy Meetings Summit Tracks

8 Thank You!

9 Welcome to Singapore Kevin Shum Director General Civil Aviation Authority Singapore Sponsored by World Financial Symposium 2014 World Financial Symposium 2016

10 Industry Financial Health Narrowly based and facing challemges Brian Pearce Chief Economist, IATA Sponsored by World Financial Symposium 2014 World Financial Symposium 2016

11 % of invested capital 2016 another year of above WACC returns 12.0 Return on capital invested in airlines 10.0 Cost of capital (WACC) Return on capital (ROIC) 0.0 Source: McKinsey, IATA

12 % of revenue Profits cycle now showing signs of peaking 16% Airline industry average EBIT margin 14% 12% Unadjusted data Adjusted for seasonality 10% 8% 6% 4% 2% 0% -2% Source: IATA using The Airline Analyst, PaxIS+ and Platts data

13 % ATKs Widening asset utilization gap driving returns Breakeven and achieved weight load factor Achieved LF Breakeven LF Source: ICAO, IATA

14 % operating revenue Revenues per $ of invested capital Better capital productivity also driving returns Capital productivity and operating margins Capital productivity Operating margins Source: McKinsey, ICAO, IATA

15 % change over previous year, EBIT as % revenues Margins now less leveraged to economic cycle? World airline EBIT margin and global GDP growth 10% 8% 6% EBIT margin 4% 2% 0% GDP growth -2% -4% -6% ΔEBIT/ ΔGDP Source: IMF World Economic Outlook =1.3x =2.2x =3.6x =0.7x

16 EBIT margin, adjusted EBIT/revenue Industry totals hide enormous diversity ROIC = adjusted EBIT/revenue * revenue/invested capital Jazeera Spring Mesa Ryanair Spirit Thai Allegiant Volaris Alaska PFIZER Hawaiian JetBlue Southwest Air China AMR JAL Delta United Easyjet Aeromexico PIA IAG Qantas Air Canada Cathay SIA ANA LATAM Comair Korean GOL AF-KLM Increasing return on capital (ROIC) Lufthansa WALMART Capital productivity ($ revenue per $ invested capital) Source: IATA calculations from The Airline Analyst

17 It s largely N America driving industry results 15% Net post-tax profit margins 10% 5% % -5% -10% N America Europe Asia Pacific Midle East L America Africa

18 % of invested capital Parts of Europe also performing well but not elsewhere 16% 14% 12% 10% 8% 6% 4% 2% Return on invested capital by region North America Europe Asia Pacific Latin America 0% Source: IATA calculations from The Airline Analyst

19 Adjusted net debt/ebitdar Balance sheets show the diversity of financial health Source: IATA calculations from The Airline Analyst Adjusted net debt/ebitdar by region Latin America Asia Pacific Europe North America

20 US$ billion US$ billion And performance is uneven across markets Revenues from passengers and cargo Passenger revenue Cargo revenue Source: ICAO, IATA 30

21 Globalization paused and threatened? Index (Oct 2008=100) Sources: IATA, Netherlands CPB, OECD-WTO TiVA database World trade/ip ratio vs. measure of global supply chains Ratio of foreign value added to domestic value added in world gross exports World trade/ip ratio Share (%)

22 % change over previous year Air travel growth has surprised on the upside 10 IATA forecasts of global RPK growth Dec 2015 Dec 2014 Dec 2013 Dec Source: IATA Economic Performance of the Airline Industry issues from

23 But world stuck in a low economic growth path 5 IMF forecasts of global economic growth (using market exchange rates) April 2013 April 2014 April 2015 Jan 2016 July 2016 Post- Brexit 'severe' scenario Source: IATA using forecasts from IMF World Economic Outlook issues

24 Sources: IATA using SRS Analyser data Price stimulation from LCC entry in significant markets LCC share of seats flown (% of total) 60% 50% Within Southeast Asia 40% Within Europe 30% 20% 10% 0% Global Within Asia Australasia - Asia Middle East - Asia Europe - Asia North America - Europe North America - Asia

25 Oil price, US$/ barrel Average return fare, US$ Significant price stimulation from fuel cost pass-through 140 Average return fare and Brent crude oil prices Average return fare -20% Brent oil price Source: IATA using PaxIS+ and Haver data

26 % change over previous year Confidence index, 50 equals no change But lackluster economic cycle now seems to be slowing 20% Global economic cycle indicators 70 15% International trade growth 65 10% 5% 0% -5% -10% -15% Global industrial production growth Global business confidence index % Source: IATA using Netherlands CPB and Markit data 30

27 % World awash with savings and short of investment US 10 year Treasury yield and 10 year TIPS real yield Source: IATA using data from Haver 10-year Treasury yield 10-year TIPS real yield

28 US$ trillion Yen trillion Central banks continue to print money Source: IATA using data from Haver Central bank assets US Federal Reserve Bank of Japan

29 Asset price valuations back to pre-gfc levels or more US 10-year Treasury yield Source: IATA using data from Haver US Treasury yields, house prices and equity values US house prices Cyclically-adjusted equity PE ratio

30 % of GDP % of GDP Debt continues to grow, despite Global Financial Crisis Outstanding debt of non-financial sector, % of GDP Developed economies Developing economies Source: IATA using data from BIS

31 % change over previous year Only the consumer is keeping US GDP growth positive 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% Source: IATA using data from Haver US consumer spending and non-consumption GDP growth Non-consumption GDP growth Consumer spending growth

32 % change over previous year Average monthly change, 000s Can payrolls keep growing while corporate profits shrink? 60% 40% US fixed investment growth and change in non-farm payrolls Non-farm payrolls % 0% -20% -40% Corporate profits growth % Recessions % Source: IATA using data from Haver

33 World economy (and aviation markets) at a cross-roads Central banks creating asset bubbles not economic growth Dangerous levels of indebtedness Brexit, support for populism, symptoms of rising inequality Two main scenarios: Pessimistic: renewed debt deflation + protectionism; supply-side damage Optimistic: incumbent governments respond to threats from populism and embrace reflationary policies

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35 Supporting Sustained Airline Financial Health Alexandre de Juniac Director General & CEO IATA Sponsored by World Financial Symposium 2014 World Financial Symposium 2016

36 Networking Break Sponsored by World Financial Symposium 2014 World Financial Symposium 2016

37 THANK YOU TO OUR SPONSORS PLATINUM SPONSOR STRATEGY SUMMIT PRINCIPAL SPONSOR INDUSTRY MEETING PLATINUM SPONSOR GOLD SILVER BRONZE SUPPORTING AIRLINES World Financial Symposium 2014 World Financial Symposium 2016

38 The High Performing Airline Finance Organization: Introducing a 5 th Pillar Supporting Sustained Airline Financial Health Michael Doersam SVP Group Finance, Emirates & Chairman, IATA Financial Committee Sponsored by World Financial Symposium 2014 World Financial Symposium 2016

39 Supporting Airline Industry Achievement of Sustained Financial health 2014 White Paper 2015 Progress Report World Financial Symposium 2016

40 4 Strategic Pillars 1 Smarter Regulations Harmonizing the regulatory framework making it supportive and conducive to sustainable growth 2 Value Chain Optimization Optimizing the value chain, making it reflective of relative risks 3 Innovation Enabling innovative and competitive customer centric products 4 Efficient Processes Enabling Efficient, Secure and Seamless end-to-end industry processes World Financial Symposium 2016

41 Sustained Airline Financial Health Smarter Regulations Value Chain Optimization Innovation Efficient Processes initiatives initiatives initiatives initiatives World Financial Symposium 2016

42 Sustained Airline Financial Health Smarter Regulations Value Chain Optimization Innovation What do we need Efficient Processes to accelerate our achievements in the existing 4 pillars? HIPO HIPO is the 5 th pillar as an initiative led by IATA to support the finance functions capabilities shifting into their new role HIPO HIPO is the foundation as an enabler for change management, speed to market, strategic business partner World Financial Symposium 2016

43 High Performing Finance Organization to support sustained airline financial health

44 Thank You!

45 Impulse What is a High Performing Finance Organization? Matthias Moelleney Head to the Center for Human Relations Management, HWZ University for Applied Sciences in Business Administration Zurich, Switzerland World Financial Symposium 2016 Matthias Mölleney Head of the Centre for HRM & Leadership at the HWZ University for Applied Sciences in Business Administration Zurich Contact: peoplexpert gmbh Seestrasse 110a 8610 Uster (CH) Phone: matthias@moelleney.com

46 Adding Value as a High Performing Finance Organization means to take the Co-Pilot seat next to the CEO. World Financial Symposium 2016

47 From Administration to Value Creation I know my function I manage my function I plan my function Transaction Process Analysis and Plan I create value with my function Integration and Value Creation World Financial Symposium 2016

48 Questions at the Board Table are different Financial Management Level How are we doing compared to budget? Are we compliant regarding our structures and processes? Are we meeting our shareholders financial expectations? How can we reduce our risk exposure? High Performance Level Where do we have untapped potential to achieve our goals? How can we re-align our structure and processes for future success? How can we manage the diverse expectations of all stakeholders? How can we upgrade our risk management into a strategic dimension? World Financial Symposium 2016

49 HIPO: Competency Frame and Key Questions Which are our main business opportunities? How can we maximize our financial performance? How can we maximize our leadership capabilities and performance? COMPETENCY FRAME Value Management How could we develop our organization further in order to meet the future challenges? Which are the main drivers to increase the value of our company and how can we influence them? World Financial Symposium 2016

50 High Performance is not only the Goal of an Individual, but for the entire Finance Team Creating Value High Performance Team We work for each other Managing Collaboration Effective Team We work together with each other Managing Processes Good Team to Work For We work next to each other World Financial Symposium 2016

51 Characteristics of a High Performing Team Process Flexibility Outward Orientation Focus on Value Creation Variable roles, based on individual strengths Learning from success and failure Open for (temporary) extension of the team Active involvement of teamexternal resources Looking for support from all stakeholders involved Open for feedback from other teams and relevant individuals Aggressive goals Fast decisions, based on defined guidelines Open and honest dialogue between members High level of trust and accountability Entrepreneurial mindset World Financial Symposium 2016

52 Where is the focus? World Financial Symposium 2016 Leaders of High performing Organizations are able to manage the potential conflict between the demand at the board level and the loyalty towards the (finance) team.

53 How to build a High Performing Finance Team Identify Define Operate Monitor Identify the business challenge Identify opportunities Identify the team s purpose, aligned with the company s vision and strategy Define the structure, the resources, the responsibilities and the limita-tions Establish guidelines Select the right team leader Select the right team members Select the right coach Let the team provide critical information and analysis to make superior operating and strategic decisions Monitor the team s progress Give feedback and support the team in case of conflicts Empower the team and reward performance World Financial Symposium 2016

54 Summary Members of High Performing Finance Teams have a strong business acumen. They act as value managers rather than just administrative experts. They are not only aligned and committed, they are connected. They are focused on the company as a whole. They provide critical information and analysis to make superior operating and strategic decisions. The CFO should take the co-pilot seat next to the CEO. World Financial Symposium 2016

55 To drive airline financial health, the airline CEO needs a strategic partner - Who? Alan Joyce CEO Qantas Airways Sponsored by World Financial Symposium 2014 World Financial Symposium 2016

56 Moderator: Allan Schulte, Partner & Head of Asia Pacific Airline Practice, Bain & Company Panelists: Alan Joyce, CEO, Qantas Airways Robert Martin, Managing Director and Chief Executive Officer, BOC Aviation Michael Doersam, SVP Group Finance, Emirates & Chairman, IATA Financial Committee Is Finance the Preferred Strategic Partner of the Airline CEO? Rachele Focardi, Sr. Vice President of Employer Branding and Talent Strategy APAC and Global Branding Advisor, Universum Matthias Moelleney, Head to the Center for Human Relations Management, HWZ University for Applied Sciences in Business Administration Zurich, Switzerland World Financial Symposium 2014 World Financial Symposium 2016

57 Networking Lunch Sponsored by World Financial Symposium 2014 World Financial Symposium 2016

58 THANK YOU TO OUR SPONSORS PLATINUM SPONSOR STRATEGY SUMMIT PRINCIPAL SPONSOR INDUSTRY MEETING PLATINUM SPONSOR GOLD SILVER BRONZE SUPPORTING AIRLINES World Financial Symposium 2014 World Financial Symposium 2016