Economic performance of the airline industry Mid-year 2017 update. Brian Pearce, Chief Economist, IATA

Transcription

1 Economic performance of the airline industry Mid-year 2017 update Brian Pearce, Chief Economist, IATA

2 % change over previous year Index, 50 = no change in output Performance drivers are now diverging Airlines unit cost growth and global business confidence 10% 5% Global business confidence % 50-5% -10% Airlines' unit cost growth % 42-20% Source: IATA Economics using data from The Airline Analyst and Markit 40

3 EBIT adjusted for operating leases as % invested capital Return on capital performance good in % 18% 16% 14% 12% Return on invested capital North America Europe 10% Industry average 8% Asia Pacific Latin America 6% Middle East 4% Weighted 2% Average Cost 0% Source: IATA Economics using data from The Airline Analyst

4 2016 free cash flow good but more divergent FCF as % invested capital 8% 6% Free cash flow yield (% invested capital) 4% 2% 0% -2% -4% -6% -8% North America Industry average Latin America Asia Pacific Europe Middle East -10% Source: IATA Economics using data from The Airline Analyst

5 Debt adjusted for operating leases/ebitdar Debt still ranges from investment grade to weak 8 Adjusted net debt/ebitdar Middle East Latin America Asia Pacific Industry average Europe Source: IATA Economics using data from The Airline Analyst North America Investment grade

6 % revenues Operating margins still high but declining 18% 16% Airline industry operating margin, % revenues 14% 12% 10% 8% 6% 4% Margins adjusted for seasonality Unadjusted margins 2% 0% -2% Source: IATA Economics using data from The Airline Analyst and airline releases

7 % change over previous year As margins squeezed by accelerating costs 20% Unit revenues and unit costs, % change over previous year 15% 10% 5% 0% -5% -10% Unit cost growth Unit revenue growth -15% -20% Source: IATA Economics using data from The Airline Analyst

8 US cents/asm Cost acceleration driven by fuel, MRO, labour 8.4 CASM 2016Q1 to 2017Q CASM 2016Q1 Source: IATA Economics using data from The Airline Analyst Fuel MRO Labour Infrastructure Other CASM 2017Q1

9 Business confidence 50 = neutral Index of fares, constant FX Signs of a stabilization of yields Worldwide average fares (constant FX) and business confidence Business confidence Average return fare index, constant FX Source: IATA Economics using data from The Airline Analyst and Markit

10 Global airline share price index CFO expectations of airline profits in 12 months, 50 = no change Financial markets and airline CFOs are confident 1,350 1,250 1,150 1, Airline share prices and CFO expectations of airline profitability Airline share prices CFO expectations for change in profits in next 12 months Source: IATA Economics using data from IATA Business Confidence survey and Thompson Reuters Datastream

11 Percentage change or % revenues We ve upgraded our forecasts for Forecast revisions for 2017 Previous forecast Current forecast GDP Pax yields RPKs Freight tonnes ASKs Operating margins Source: IATA Economic Performance of the Airline Industry, Mid-year 2017 and End-year 2016 reports

12 Air travel has started the year strongly % year-on-year Diffusion indices 16% 65 12% 8% Growth in industry RPKs (LHS) Global services PMI index (adv. 2 months, RHS) % 0% -4% -8% Global manufacturing PMI index (adv. 2 months, RHS) % Source: IATA Economics using data from IATA Statistics and Markit

13 Strong growth in domestic markets Apr 2017 Mar 2017 Industry 7.7% 7.4% Domestic Russia Domestic India 14.8% 15.3% 14.9% 16.7% Domestic China 12.7% 15.3% Domestic Japan 6.6% 8.1% Domestic USA 3.4% 4.7% Domestic Brazil 3.0% 6.0% Dom. Australia -2.1% -0.7% -5% 0% 5% 10% 15% 20% Domestic revenue passenger kilometres (% year-on-year) Source: IATA Economics using data from IATA Statistics

14 Load factors (mostly) at all-time highs Industry All-time low All-time high Apr 2017 Apr % 80.4% Europe N. America L. America Asia Pacific Middle East Africa 84.3% 84.2% 81.7% 80.9% 74.7% 72.3% 82.1% 83.4% 79.6% 79.6% 75.4% 67.8% 50% 60% 70% 80% 90% Passenger load factors (% of available seat kms, seasonally adjusted) Source: IATA Economics using data from IATA Statistics

15 Air freight rebound driven by re-stocking % year-on-year Year-on-year change 40% -15% 30% Fall in inventory to sales ratio, increase in FTK growth -10% 20% -5% 10% 0% -10% Global FTKs (LHS) Inventory to sales ratio (RHS, inverted scale) 0% 5% -20% 10% -30% 15% Source: IATA Economics using data from IATA Statistics and Thompson Reuters Datastream *Rolling 3 month periods

16 % ATKs Breakeven point rising but so are load factors Breakeven and achieved weight load factors Achieved Breakeven Source: IATA Economic Performance of the Airline Industry, Mid-year 2017 report

17 % of invested capital Return on capital lower but still good in Return on capital invested in airlines Cost of capital (WACC) Return on capital (ROIC) Source: IATA Economic Performance of the Airline Industry, Mid-year 2017 report

18 US$ billion % revenues 2017 profits down but upgraded Net profits and operating margins Net profits - current Net profits - previous Operating margin - current Operating margin - previous Source: IATA Economic Performance of the Airline Industry, Mid-year 2017 report

19 % revenues US$ billion Regional divergence in profitability remains 9% 7% 5% 3% 1% -1% Net profits by region in 2017 Net profits % revenues N America Europe Asia Pacific L America Middle East Africa Source: IATA Economic Performance of the Airline Industry, Mid-year 2017 report

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