Outlook for airline markets and industry performance

Transcription

1 Outlook for airline markets and industry performance June 2016 Brian Pearce Chief Economist International Air Transport Association

2 % change over previous year Confidence index. 50 = no change The already weak economic cycle is slowing Global economic cycle indicators 20% International trade growth 15% Industrial production growth 10% 5% % -5% -10% -15% Business confidence % Source: Netherlands CPB, Markit 2

3 PMI, 50 = no change Now both developed and emerging economies weaker Business confidence 60 Developed economies Emerging economies Source: IATA Economics using Markit data 3

4 Globalization is still paused Index (Oct 2008=100) 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 (%) Sources: IATA, Netherlands CPB, OECD-WTO TiVA database 4

5 Change over previous year International trade growth has slowed to a stop 20% Contributions to growth in international trade volumes 15% 10% 5% Emerging economies contribution Advanced economies contribution 0% -5% -10% -15% -20% Source: IATA using Netherlands CPB data 5

6 FTKs billion RPKs billion So cargo is weak but air travel is still booming Air travel and cargo volumes Passenger RPKs Cargo FTKs 7,000 6,000 5,000 4,000 3, ,000 Source: ICAO, IATA

7 % change over previous year World is stuck in a low economic growth path 5 IMF forecasts of global economic growth April 2013 April 2014 April 2015 January 2016 April Source: IMF World Economic Outlook 7

8 % change over previous year Yet air travel growth has remained strong 10 IATA forecasts of global RPK growth Dec 2015 Dec 2014 Dec 2013 Dec Source: IATA Economic Performance of the Airline Industry 8

9 US$ billion US$ billion Cargo revenues significantly lag passenger business Revenues from passengers and cargo Passenger revenue Cargo revenue Source: ICAO, IATA 9

10 Fares, indexed to equal 100 in Jan 2011 Brent oil price, US$ per barrel Cash flows rising despite falling RASK Worldwide average air fare and oil prices Air fare, constant exchange rates Brent oil price Air fare, unadjusted Source: IATA, PaxIS+, Haver 10

11 % ATKs Widening asset utilization gap driving returns Breakeven and achieved weight load factor Achieved LF Breakeven LF Source: ICAO, IATA

12 % operating revenue Revenues per $ of invested capital More productive assets as well as margin gains Capital productivity and operating margins Capital productivity Operating margins Source: McKinsey, ICAO, IATA 12

13 % of invested capital Return on airline capital now rising in most regions 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 13

14 Better performance is spread more widely now 40% 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% Source: IATA calculations from The Airline Analyst ROIC in 2015 by region and airline North America Europe Asia Pacific Average cost of capital Middle East Latin America Africa 14

15 Adjusted net debt/ebitdar Balance sheets improved except in L America Adjusted net debt/ebitdar by region Source: IATA calculations from The Airline Analyst Latin America Asia Pacific Europe North America 15

16 % of invested capital We forecast a 2 nd year of above WACC returns 12.0 Return on capital invested in airlines 10.0 Cost of capital (WACC) Return on capital (ROIC) Source: McKinsey, IATA 16

17 US$ billion Just two years of adding value for investors so far 20 Difference between investing in airlines and investing in similar assets elsewhere Source: McKinsey, IATA 17

18 % revenues US$ billion Net post-tax profits of $39.4 billion forecast this year Global commercial airline profitability EBIT margin Net post-tax Source: ICAO, IATA 18

19 US$ billion Driven largely by N America, but also Europe & Asia 50 Net post-tax profit by region Africa L America Middle East Asia Pacific Europe N America Source: ICAO, IATA 19

20 US$ per passenger Per passenger profit shows wide regional variation Net post-tax profit per departing passenger N America Middle East Europe Asia Pacific L America Africa 20

21 Net profit margins show a rather narrower variation 15% Net post-tax profit margins 10% % 0% -5% -10% N America Europe Asia Pacific Midle East L America Africa 21