Global economic cycle has slowed

Transcription

1 Year-on-year % change Confidence index, 50= no change Global economic cycle has slowed 25% 70 20% International trade growth 65 15% 10% Industrial production growth 60 5% 55 0% 50-5% Business confidence (RHS) 45-10% -15% 40-20% 35-25% Source: Markit, Netherlands CPB 30

2 year-on-year % change But moderately better growth is expected 10 IMF forecasts for economic growth 8 Forecast Emerging economies Developed economies Source: IMF World Economic Outlook

3 $/barrel Oil prices now expected to be lower for longer Brent spot oil price Oct 2014 futures 60 Oct 2015 futures Source: Datastream

4 Net impact - air travel demand is strong RPKs billions per month RPKs per month +5% 2.5x 1.3x 1.6x Jan-Aug 15 Middle East Africa L America Asia Pacific x N America 100 Jan 08-Aug x Europe Source: IATA Monthly Statistics

5 FTKs billions per month Cargo is weak Air cargo volumes (FTKs per month) 2 Jan 08-Aug 15 1x Source: IATA Monthly Statistics -2% 2.3x 1.6x 1x 0.9 Jan-Aug 15 Middle East Africa L America Asia Pacific N America Europe

6 New routes expanding faster than frequencies Change in average flight frequency 5% 4% To/from Asia Note: Bubble size indicates the relative size of the market 3% 2% Intra-Europe To/from Europe 1% To/from N.America 0% Domestic Europe Intra-N.America Intra-Asia -1% -2% Domestic N.America Domestic Asia -3% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% Change in number of direct airport connections Source: SRS Analyser, IATA Economics calculations

7 Operating profits as % revenues Operating revenues/invested capital, US$ Airline capital is more productive and margins are higher 8.0 Revenues per $ invested capital Operating profit margin Source: IATA Economics

8 % ATKs Profits boosted by wider gap above break-even load factors Source: IATA Economics Achieved load factor Breakeven load factor

9 % of invested capital Airlines paying investors a normal return for 1 st time Source: McKinsey & Company, IATA Economics Cost of capital (WACC) Return on capital (ROIC)

10 But good performance is not widespread ROIC as a % invested capital 2014 return on capital by region 30% 25% 20% 15% 10% Average cost of capital 5% 0% -5% -10% -15% -20% -25% N America Europe Asia Pacific LatA m M E A f Source: The Airlines Analyst, IATA Economics

11 Next 20 years Asia-Pacific is the leading growth region Increase in annual passenger numbers by 2034, million Africa 4.4% pa Middle East 4.6% pa L America 4% pa Europe 2.4% pa N America 3.2% pa Asia Pacific 4.8% pa Source: IATA/Tourism Economics Air Passenger Forecasts, October 2015, IATA Economics calculations.

12 Demographics shifts are a key driver India Indonesia Mexico Turkey Canada USA Brazil UK France China Italy Germany Japan Russia UN population growth forecasts Adjusted for changes in age structure -30% -20% -10% 0% 10% 20% 30% 40% Source: IATA/Tourism Economics Air Passenger Forecasts, October 2015, IATA Economics calculations.

13 Important thresholds reached for living standards 80,000 70,000 GDP per capita forecasts United States 60,000 50,000 Eurozone 40,000 30,000 Middle-higher income threshold 20,000 10, Source: IATA/Tourism Economics Air Passenger Forecasts, October 2015, IATA Economics calculations. Brazil China Nigeria

14 Flights per capita* (2013, Multiplier boost to the propensity to fly Maldives Brazil Seychelles Bahamas Slovenia Russia China Slovakia New Zealand Hong Kong Iceland UK Japan France Austria Singapore USA Denmark Australia Sweden Switzerland Norway Qatar Luxembourg 0.01 Uganda GDP per capita (2013, US$ '000s) Source: IATA/Tourism Economics Air Passenger Forecasts, October 2015, IATA Economics calculations.

15 Proportion of countries in each range (%) Large potential also from further market liberalization 40% Distribution of countries by level of air market liberalization 35% 30% 25% 20% 15% 10% 5% Air markets are less liberal Air markets Median WALI scores 2005: : % Weighted Air Liberalization Index (0 = completely regulated, 50 = completely liberalized) Source: IATA/Tourism Economics Air Passenger Forecasts, October 2015, IATA Economics calculations.

16 Passenger yields, US$ per RPK Most obviously on short-haul markets 0.19 Passenger yields and average trip length Within Africa Within South America Within East Asia Within ASEAN Within Europe ASEAN -E Asia Middle Eastrest of world North-South America North Atlantic Pacific China-North America ASEAN-Africa ASEAN-Europe 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 Average trip length (kms) Source: IATA/Tourism Economics Air Passenger Forecasts, October 2015, IATA Economics calculations. ASEAN-North America Europe- Australia

17 Billion gallons Demand for fuel will rise strongly under most scenarios Commercial airline demand for fuel Markets opened, more globalization +2.3x Current policies +1.8x Closing borders, less globalization +1.4x Source: IATA/Tourism Economics Air Passenger Forecasts, October 2015, IATA Economics calculations.