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% 2008 2009 2010 2011 2012 2013 2014 2015 Source: Markit, Netherlands CPB 30
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 year-on-year % change But moderately better growth is expected 10 IMF forecasts for economic growth 8 Forecast 6 4 2 0-2 -4-6 Emerging economies Developed economies Source: IMF World Economic Outlook
$/barrel Oil prices now expected to be lower for longer 140 120 Brent spot oil price 100 80 Oct 2014 futures 60 Oct 2015 futures 40 20 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: Datastream
Net impact - air travel demand is strong RPKs billions per month 600 500 400 RPKs per month +5% 2.5x 1.3x 1.6x Jan-Aug 15 Middle East Africa L America Asia Pacific 300 200 1.1x N America 100 Jan 08-Aug 15 1.3x Europe 0 2008 2009 2010 2011 2012 2013 2014 2015 Source: IATA Monthly Statistics
FTKs billions per month Cargo is weak 20 18 16 14 12 10 8 6 4 Air cargo volumes (FTKs per month) 2 Jan 08-Aug 15 1x 0 2008 2009 2010 2011 2012 2013 2014 2015 Source: IATA Monthly Statistics -2% 2.3x 1.6x 1x 0.9 Jan-Aug 15 Middle East Africa L America Asia Pacific N America Europe
New routes expanding faster than frequencies Change in average flight frequency 5% 4% To/from Asia Note: Bubble size indicates the relative size of the market 3% 2% Intra-Europe To/from Europe 1% To/from N.America 0% Domestic Europe Intra-N.America Intra-Asia -1% -2% Domestic N.America Domestic Asia -3% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% Change in number of direct airport connections Source: SRS Analyser, IATA Economics calculations
Operating profits as % revenues Operating revenues/invested capital, US$ Airline capital is more productive and margins are higher 8.0 Revenues per $ invested capital 6.0 1.1 1.2 4.0 2.0 0.0-2.0-4.0-6.0 Operating profit margin 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 1.0 0.9 0.8 0.7 0.6 0.5 0.4 Source: IATA Economics
% ATKs Profits boosted by wider gap above break-even load factors 68 67 66 65 64 63 62 61 60 59 58 Source: IATA Economics Achieved load factor Breakeven load factor 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
% of invested capital Airlines paying investors a normal return for 1 st time 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Source: McKinsey & Company, IATA Economics Cost of capital (WACC) Return on capital (ROIC)
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
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 0 200 400 600 800 1000 1200 1400 1600 1800 Source: IATA/Tourism Economics Air Passenger Forecasts, October 2015, IATA Economics calculations.
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.
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 10,000 0 2005 2010 2015 2020 2025 2030 Source: IATA/Tourism Economics Air Passenger Forecasts, October 2015, IATA Economics calculations. Brazil China Nigeria
Flights per capita* (2013, Multiplier boost to the propensity to fly 10.00 1.00 0.10 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 0.00 0 10 20 30 40 50 60 70 80 90 100 110 120 GDP per capita (2013, US$ '000s) Source: IATA/Tourism Economics Air Passenger Forecasts, October 2015, IATA Economics calculations.
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: 9.9 2011: 10.2 0% 0-5 5-10 10-15 15-20 20-25 25-30 30-35 35-40 40-45 45-50 Weighted Air Liberalization Index (0 = completely regulated, 50 = completely liberalized) 2005 2011 Source: IATA/Tourism Economics Air Passenger Forecasts, October 2015, IATA Economics calculations.
Passenger yields, US$ per RPK Most obviously on short-haul markets 0.19 Passenger yields and average trip length 0.17 0.15 0.13 Within Africa Within South America Within East Asia Within ASEAN 0.11 0.09 0.07 0.05 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
Billion gallons Demand for fuel will rise strongly under most scenarios 180 160 140 120 100 80 60 Commercial airline demand for fuel Markets opened, more globalization +2.3x Current policies +1.8x Closing borders, less globalization +1.4x 40 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 Source: IATA/Tourism Economics Air Passenger Forecasts, October 2015, IATA Economics calculations.