Thanksgiving Air Travel Forecast and Year-to-Date 2017 Review. John P. Heimlich Vice President & Chief Economist A4A Media Briefing November 1, 2017

Transcription

1 Thanksgiving Air Travel Forecast and Year-to-Date 2017 Review John P. Heimlich Vice President & Chief Economist A4A Media Briefing November 1, 2017

2 U.S. Airline Traffic Flown and Capacity Operated Continue to Grow in 2017 Systemwide Passengers Enplaned Up 2.8% Year Over Year, 13.9% Over Five Years H12 1H13 1H14 1H15 1H16 1H17 Passengers (Mils) RPMs (Bils) ASMs (Bils) Source: U.S. Bureau of Transportation Statistics T1, systemwide scheduled service on U.S. airlines revenue passenger miles (RPMs) and available seat miles (ASMs) 2

3 U.S. Economy and Employment Growing; Household Net Worth at All-Time High 4 Real GDP Growth Rate (% CAGR) 300 Monthly Employment Growth (000) Q16 2Q 3Q 4Q 1Q17 2Q 3Q Income ($000) Personal (per Capita) Household (Median) Household Net Worth ($ Trillion, NSA) Q17 2Q17 Sources: BEA, BLS, Federal Reserve and IHS; U.S. GDP real annual average growth rate (%), U.S. nonfarm payroll employment growth (month-over-month, in 000s, seasonally adjusted), U.S. disposable personal income (BEA) and median household income (Census); U.S. household net worth in current dollars, not seasonally adjusted 3

4 2006E 2007E 2008E 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017F A4A Projects U.S. Airlines to Carry 28.5M Thanksgiving-Period Passengers in 2017 Period = Friday (Nov. 17) Preceding Holiday Through Tuesday (Nov. 28) Following Holiday U.S. Airline Onboard Passengers (Millions) Scheduled Service, 12-Day Thanksgiving Period U.S. airlines will carry 2.38M passengers per day, up ~69K (3%) from 2016 U.S. airlines will offer 2.79M seats per day, up ~86K (3.2%) from 2016 T-giving Day was 2 nd lightest day of CY2016 Sunday return was busiest day of CY2016 Source: A4A analysis of TSA and BTS T100 segment data; volumes from past years are estimates from comparable 12-day period Note: E=estimate; F=forecast 4

5 Fri., 11/17 Sat., 11/18 Sun., 11/19 Mon., 11/20 Tue., 11/21 Wed., 11/22 Thu., 11/23 Fri., 11/24 Sat., 11/25 Sun., 11/26 Mon., 11/27 Tue., 11/28 A4A Projects Daily Thanksgiving Passenger Volumes to Range from 1.61M to 2.88M Expected Busiest Days: Sunday Return, Monday Return and Wednesday Preceding U.S. Airline Projected Onboard Passengers (Millions) Scheduled Systemwide Service #3 #9 #7 #8 #5 #2 #12 #11 #6 #1 #4 #10 Source: A4A, selected sample carriers and DOT T100 segment data * Friday, Nov. 17 through Tuesday, Nov. 28 5

6 How s the Weather Affecting U.S. Airport Operations?

7 Fri 8/18 Sat 8/19 Sun 8/20 Mon 8/21 Tue 8/22 Wed 8/23 Thu 8/24 Fri 8/25 Sat 8/26 Sun 8/27 Mon 8/28 Tue 8/29 Wed 8/30 Thu 8/31 Fri 9/1 Sat 9/2 Sun 9/3 Mon 9/4 Tue 9/5 Wed 9/6 Thu 9/7 Fri 9/8 Sat 9/9 Sun 9/10 Mon 9/11 Tue 9/12 Wed 9/13 Thu 9/14 Fri 9/15 Sat 9/16 Sun 9/17 Mon 9/18 Tue 9/19 Wed 9/20 Thu 9/21 Fri 9/22 Sat 9/23 Sun 9/ , , ,683 1,622 1,488 1,550 1,421 1,213 1,991 1,949 2,872 4,567 Severe Hurricanes Disrupted August-September 2017 Airline Flight Operations Nationwide U.S. Domestic Flight Cancellations 5,000 4,500 4,000 3,500 3,000 2,500 2,000 8/25: Harvey landfall in Texas (PM) 9/10: Irma landfall in Florida Keys (AM) 9/20: Maria landfall in Puerto Rico (AM) 1,500 1, Source: masflight 7

8 U.S. Airline Flight Operations Impacted by 2017 Extreme Weather Events But Baggage Handling Continues to Improve and Denied Boardings Continue to Fall Flight Completion Factor (%) On-Time Arrival Rate (%) 2017 Jan-Aug Jan-Aug Best since Best since Properly Handled Bag Rate (%) Involuntary Denied Boardings* 2017 Jan-Aug H Best ever recorded Best ever recorded Sources: BTS and DOT Air Travel Consumer Report ( * Per 10,000 enplaned passengers 8

9 Pax Traffic Pax Yield (1) Cargo Rev Other Rev (2) Total OpRev Labor Fuel Maintenance Airports Aircraft Other (3) Total OpExp YTD 3Q16 YTD 3Q17 $18.4B $14.7B YTD 3Q17 Revenues Rose 3.8%, But All Major Expenses Rose Further Up 8.1% Profitability (Average Pre-Tax Profit Margin) Fell to 12% Year-over-Year Change (%) in Operating Revenues and Expenses Pre-Tax Profits and Margin (%) Yield = fare per mile (cents per RPM) 2. Sale of frequent flyer award miles to airline business partners, pet transportation, in-sourced aircraft and engine repair, flight simulator rentals, inflight sales, etc. 3. Professional fees, food/beverage, insurance, commissions, GDS fees, communications, advertising, utilities, office supplies, crew hotels, nonfuel payments to regionals Source: A4A analysis of reports by Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit and United 9

10 Chipotle Marriott Airlines* Starbucks Comcast CSX Disney Apple McDonald s In 2017, U.S. Passenger Airline* Profitability Respectable But Below Average YTD 3Q17 Pre-Tax Profit Margin (% of Operating Revenues) * A4A analysis of reports by Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit and United Source: Company SEC filings 10

11 U.S. Passenger Airline Jobs Averaging Highest Level Since 2004 August 2017 Represented the 46 th Consecutive Month of YOY Gains 525 U.S. Scheduled Passenger Airline Full-Time Equivalent Employees (000s) ,367 (27%) YTD17 +45,612 (12%) Jan-Aug Source: Bureau of Transportation Statistics for scheduled U.S. passenger airlines 11

12 ME Sept As Airlines Achieve Economic Profits, Customers Are Seeing More Seats Supply of Seats Departing U.S. Airports at All-Time High Entering ,000 3,500 3,000 2,500 2,000 Daily Seats (000) Departing U.S. Airports in Scheduled Service Domestic International 2017: DOM +3.6%, INT +5.8%, SYSTEM +3.9% 2,846 2,932 2,975 2,772 2,834 2,743 2,823 2, ,567 2,567 2,586 2,558 2,584 2, ,574 2,494 2, ,451 2,292 2,285 2,294 2,259 2,274 2,289 2,366 2,454 2,542 2,577 1,500 1, Source: Innovata (via Diio Mi) published schedules as of Oct. 27, 2017, for all airlines providing scheduled passenger service from U.S. airports to all destinations 12

13 Percent Smaller U.S. Carriers Have Been Growing Far Faster Than the Four Largest Carriers Growth in Systemwide Scheduled ASMs Since Spirit Sun Country Allegiant Hawaiian Alaska JetBlue Southwest Frontier 0 American/Delta/United (50) Source: Innovata (via Diio Mi) published schedules as of Oct. 13, 2017, for selected marketing airlines including predecessors 13

14 Airlines Strongly Support Infrastructure Investment Across the Country Airline-Airport Collaboration Has Paved the Way for Widespread Capital Improvements» Over $100 billion of capital projects have been completed, are underway or approved at the nation s 30 largest airports alone since 2008, including, for example: o New runways at Fort Lauderdale, Washington Dulles, Seattle, and Charlotte o Multiple new runways at Chicago O Hare o New international facilities at Atlanta and Los Angeles o New, expanded or modernized terminals at Miami, Las Vegas, Orlando, Hawaii, Houston, Denver, Seattle, Salt Lake City and San Francisco» Development is also robust at smaller airports, including, for example: o Runway projects at Erie, Columbus, Dayton, Des Moines, Nashville and Sioux Falls o Terminal projects at New Orleans, Eugene, Grand Rapids, Greenville-Spartanburg, Norfolk, Portland (Maine), Reno-Tahoe and Wichita 14

15 J.D. Power: North American Airport Satisfaction Climbs to Record High Overall passenger satisfaction with North American airports has reached an all-time high, as airports of every size have found creative ways to address the challenges of constant construction projects and increased passenger capacity demand [M]ajor city airports that are in the thick of massive construction efforts notably Newark Liberty, LaGuardia, Los Angeles International and Chicago O Hare are still fighting the headwinds of traveler disruption and access challenges that are handicapping their overall satisfaction scores. (Sept. 21, 2017) Notes: Scale = ; study not conducted in 2009/ Six factors (in order of importance): Terminal Facilities* (24%) Airport Accessibility (19%) Security Check (16%) Baggage Claim (15%) Check-In/ Baggage Check (14%) Food / Beverage / Retail (13%) * Concourses, lounges, signage, restrooms, gate areas Notes: The study, fielded Jan-Aug 2017, is based on responses from 34,695 North American travelers who traveled through at least one domestic airport with both departure and arrival experiences (including connecting airports) during the past three months. Travelers evaluated either a departing or arriving airport from their round-trip experience. Source: J.D. Power 2017 North America Airport Satisfaction Study ( 15

16 Strong Credit Ratings Allow Airports to Access Capital Markets at Preferred Rates AA ± ATL BOS HOU* LAS LAX MCO MSP NYC* OMA PDX PHX SEA SNA TPA WAS* A ± ALB ABQ AUS BDL BNA BUR BWI CHS CLE CLT CMH CVG DAL DAY DEN DFW DSM DTW ELP FLL GEG GSO HNL IND JAX LIT MCI MDW MEM MFR MIA MSY MYR OAK OKC ONT ORD PBI PHL PIT PSC RSW SAN SAT SDF SFO SJC SLC SMF STL TYS BBB ± BB ± AGS COS CRP FAT FNT GRR GUM MHT MOB PNS PVD PWM TUL VPS Southwest, WestJet AC ALK ALGT AAL DAL HA JBLU UAL Investment Grade 1 Speculative Grade 2 B ± None 1 Describes issuers with relatively high levels of creditworthiness and credit quality 2 Describes issuers with ability to repay but facing significant uncertainties, such as adverse business or financial circumstances that could affect credit risk Source: Standard and Poor s * HOU = HOU/IAH; NYC = EWR/JFK/LGA; WAS=DCA/IAD 16 airlines org

17 not available U.S. Airports Have Ample/Multiple Resources from Which to Fund Improvements Airport & Airway Trust Fund Revenues ($ Billions) Airport & Airway Trust Fund Unobligated Balance ($ Billions) U.S. Airport Revenues ($ Billions) U.S. Airport Unrestricted Cash & Investments ($ Billions) Airlines/Concessions/Rents AIP* PFC Source: A4A, FAA, U.S. Treasury; PFC collections exclude any compensation received for collecting/handling/remitting * Airport Improvement Program 17

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