The outlook for commercial air transport

Transcription

1 The outlook for commercial air transport Brian Pearce Chief Economist To represent, lead and serve the airline industry

2 RPKs per month, billion Demand for air travel and cargo diverge FTKs per month, billion Air travel and air freight volumes Seasonally adjusted Passenger RPKs Freight FTKs Source: IATA 11 IATA Economics 2

3 Index of business confidence % change over year Air travel growth has risen with confidence 65 Worldwide growth in air travel and business confidence 15% % 5% 45 0% Business Confidence Growth in RPKs -5% -10% Source: IATA -15% IATA Economics 3

4 But business/first seat demand shifted down 10.0% Premium passengers as a % of total (seasonally adjusted) 9.5% 9.0% 8.5% 8.0% 7.5% 7.0% Source: IATA IATA Economics 4

5 % change over year Because of weak international trade growth Premium passengers and world trade growth Premium Travel Growth World Trade in Goods Growth IATA Economics 5

6 Air cargo is seeing a switch to other modes Index to equal 100 in Ratio of air cargo tonnes and FTKs to world trade volumes 130 FTK share of world trade Cargo tonnes share of world trade Source: World trade IHS Global Insight, Netherlands CPB Air cargo history ICAO IATA Economics 6

7 But a bigger problem is world trade weakness 1.20 Ratio of world trade to domestic industrial production Source: Netherlands CPB, IATA IATA Economics 7

8 Partly due to rise in protectionism Almost 500 protectionist measures taken in 2012 Number of measures Source: Global Trade Alert IATA Economics 8

9 Bali trade deal positive but more needed Trade facilitation welcome Doha-lite but endorses multilateral system Ratification of MC99 legal framework required Regional deals e.g. Trans-Pacific Partnership Bilateral deals e.g. US-EU IATA Economics 9

10 US$ billion US$ billion Revenue divergence greater than volumes 600 Passenger and cargo revenues Passenger revenue Cargo revenue F Source: ICAO (history), IATA (forecast) 20 IATA Economics 10

11 Average daily hours flown % available freight tonne capacity Cargo asset utilization under pressure Freight load factor and freighter aircraft utilization (Seasonally adjusted) Freight aircraft utilization Freight Load Factor 53% 51% 49% 47% 45% 43% 41% 39% 37% Source: IATA, Boeing IATA Economics 11

12 Asset utilization high in passenger business Average daily hours flown % of ASKs 11.8 Passenger aircraft utilization 81% 11.6 Passenger load factor 80% % Twin-aisle aircraft utilization 78% 77% 76% % % % IATA Economics 12

13 Ancillary services increasingly important Revenue per departing passenger Source: Ancillaries derived from IdeaWorks 2013 report, IATA forecast Fare Cargo + other Ancillaries IATA Economics 13

14 Cash flows are better than expected 20% Largest 8 airlines, EBITDA as % revenues, seasonally adjusted 15% 10% US Asia- Pacific Europe 5% 0% Jet $82/b GDP 4% Jet $127/b GDP 2.1% -5% Source: Bloomberg IATA Economics 14

15 Year-on-year % change Confidence index, 50 equal no change World economy is finally turning up 25% 70 20% 15% 10% 5% World trade growth Industrial production growth % 50-5% -10% -15% -20% Business confidence (right scale) % Source: Netherlands CPB, Markit 30 IATA Economics 15

16 Jet fuel price to slide to low end of range Jet kerosene and crude oil price, $/barrel Jet kerosene price $140/b $110/b 80 Brent crude oil price Source: RBS, Platts, IATA IATA Economics 16

17 Better but divergent regional performance Airline net post-tax profit margins 8% 6% 4% 2% 0% N America Asia- Pacific Europe -2% -4% -6% F 2014F Source: ICAO, IATA IATA Economics 17

18 % revenues Industry profitability almost as good as 2010 US$ billion 6.0 Global commercial airline profitability EBIT margin (left scale) Net post-tax profit (right scale) Source: ICAO, IATA IATA Economics 18

19 % of invested capital Returns up but still inadequate for investors 10.0 Return on capital invested in airlines and their cost of capital Cost of capital (WACC) Inadequate returns Return on capital (ROIC) F Source: McKinsey, IATA IATA Economics 19

20 Margins will remain thin and fragile 2014 worldwide results per departing passenger $ Ancillary $13.66 Air fare $ Cargo & other $30.64 Revenues $ Costs $ Costs $5.94 Net profit Source: IATA IATA Economics 20