Global commercial airline industry outlook March 2013 update

Transcription

1 Global commercial airline industry outlook March 213 update Brian Pearce Chief Economist To represent, lead and serve the airline industry

2 Monthly RPK (Billions) Monthly FTK (Billions) Travel and air freight markets have diverged Air travel continues to grow but freight stagnated over past 18 months 48 Air freight and passenger volumes, seasonally adjusted RPK FTK Source: IATA IATA Economics 2

3 Freight tonne kilometers, billions Value of goods carried, US $ billion Even so $6 trillion of goods annually now carried by air 35% of world trade is carried by air; a key enabler of globalization 18 Air freight tonne kilometers flown and the value of goods carried 7, Freight tonne kilometers 6, 5, 4, Value of goods carried by air 3, 2, 1, Source: ICAO, IATA, WTO. Value carried by air=world merchandize exports*35% (35% estimated by The Colography Group, 25) IATA Economics 3

4 JP Morgan/Markit index 5=no change Air FTKs, billions Another false dawn for air freight or a durable upturn? Business confidence is a good leading indicator 6 Business confidence and air freight volumes 15 PEAK False dawns 55 Business confidence index? FTKs Source: JP Morgan/Markit, IATA 9 IATA Economics 4

5 % point spread of Spanish over German 1 year bond yields JP Morgan/Markit global business confidence index Upturn depends on stability in the Eurozone Spanish bond spread is a good proxy for Eurozone confidence 6 5 PEAK Business confidence and the Eurozone crisis False dawns Spanish bond spread ? Business confidence Source: Haver, IATA 44 IATA Economics 5

6 Indexed to equal 1 in 2 Recent trade growth has come from emerging markets Aviation not entirely dependent on Western business confidence 25 International trade in goods % Emerging economies % 9 Advanced economies Source: Netherlands CPB, IATA IATA Economics 6

7 Value proposition for air passengers remains strong Fares down in real terms, accidents trending lower, fuel efficiency higher Index (199=1) Fuel efficiency Fares (212 US$) Fatal accidents* * 5-year moving average fatal accidents per passenger departure Source: Constructed from worldwide data from ICAO and IATA IATA Economics 7

8 Weighted survey response score, 5=no change Optimism about the outlook for revenues has improved Survey of airline CFOs shows rising confidence 1 Airline CFO expectations for the year ahead Pax yield growth expectations, year ahead RPK growth expectations, year ahead Source: IATA quarterly survey IATA Economics 8

9 $ per barrel High cost environment set to continue Fuel bill is estimated to rise to $216bn in 213 or 33% of opex Price of jet and Brent crude Jet kerosene price New jet forecast ($13/b) Old jet forecast Brent crude oil price Bloomberg 'consensus' forecast Futures mkt. 15 March Source: Platts, Bloomberg, IATA IATA Economics 9

10 Asset utilization has weakened in the air freight business Weakening utilization has damaged profitability in air cargo % AFTKs Average hours flown per day 53% Asset utilization in the air freight business % 49% 47% 45% 43% Freight load factor % 39% 37% Freighter aircraft utilization % Source: IATA, Boeing IATA Economics 1

11 % ASKs Average hours flown per day High asset utilization key factor in passenger business Lower entry and consolidation have helped boost utilization 81% Asset utilization in the passenger business 8.8 8% 79% 78% Passenger load factor % 76% 75% 74% Single aisle aircraft utilization % Source: IATA, Boeing IATA Economics 11

12 Large airline cash flows are higher than expected Similar to 26 when oil price $4/b lower and GDP growth double 2% Largest 8 airlines, EBITDA as % revenues, seasonally adjusted 15% Asia-Pacific 1% US 5% Europe % -5% Source: Bloomberg, IATA IATA Economics 12

13 % revenues Outlook for profitability improving Margins still below 2s peaks and well below 199s peak E 213F US$ billion Global commercial airline profitability EBIT margin (left scale) Net post-tax losses (right scale) Source: ICAO (history), IATA (212 estimate and 213 forecast) IATA Economics 13

14 Revenue per passenger exceeded cost by just $2.56 Excluding $12 ancillaries revenues would have lagged costs by $1 212 worldwide airline financial results per departing passenger 22 $ $ Ancillary $ Air fare $171.2 Cargo & other $31.3 Revenues Costs $212.4 Costs $2.56 Net profit Source: Ancillary revenues from Idea Works 212 estimate, other data IATA. Costs include operating items and debt interest. IATA Economics 14

15 % of invested capital Still a long way to go before airline returns are adequate Below WACC returns indicate intense competition and fragile financing 1. Return on invested capital in airlines and their WACC WACC Investor value losses ROIC F Source: IATA IATA Economics 15