Navigating through Turbulence. Andrew Herdman AAPA Director General IFSA ITCA WAEA Asia Pacific Conference Kuala Lumpur Malaysia, 29 April 2009

Transcription

1 Asia Pacific Aviation Navigating through Turbulence Andrew Herdman AAPA Director General IFSA ITCA WAEA Asia Pacific Conference Kuala Lumpur Malaysia, 29 April 2009

2 Presentation Outline Asia Pacific Aviation C bi d strength Combined h Current challenges Industry response Brighter skies

3 Aviation: moving the world Air travel delivers e global mobility 2,250 million passengers Outstanding safety record Carries 35% by value of global l trade Wider social and economic benefits Source: ATAG

4 Asia Pacific Diverse geographic region Home to 4 billion people 62% of the world s population Generates 26% of global GDP Wide range of income levels Dynamic economies but not immune to the global downturn Aviation recognised as a key contributor to economic and social development

5 AAPA global traffic share Passenger Revenue Passenger Kilometres Scheduled Systemwide Cargo Freight Tonne Kilometres Scheduled Systemwide AACO 4% AEA 19% ALTA 4% AFRAA 2% AEA 22% AACO 5% ALTA 2% AFRAA 1% ATA 27% Others 20% ATA 23% Others 8% AAPA 17% AAPA 32% PR China 7% PR China 7% Data: 2008 Source: IATA, AAPA and various

6 Asia Pacific Aviation US$ 145 billion revenue 618 million passengers 422 million domestic 196 million international 17 million tonnes of cargo 3,500 aircraft Asia Pacific overall market share: 27% of global passenger traffic 40% of global l cargo traffic Data: 2008 estimates Source: Estimates for combined AAPA + non-aapa airlines GMT+5 to GMT+12

7 AAPA customer service leadership AAPA carriers are global l leaders in service quality with world-class premium product offerings Premium cabins generate combined international ti revenues of ~US$ 12 billion 29% of total international passenger revenue Continuous innovation in seat comfort, cabin ambience, inflight entertainment, food and beverage, cabin crew, customer service

8 Competitive dimensions for airlines Revenue enhancement Tailoring products to markets Investing in premium products and services Active yield management Multiple brand strategies Improving cost competitiveness Fuel efficiency Labour productivity Value chain improvement Airports Air Navigation Service Providers Other service providers Airlines need more freedom to compete, just like other industries i

9 Current Challenges Sharp slowdown in the global economy Slump in international trade Weak passenger demand Currency volatility Higher cost of capital

10 Current Challenges Sharp slowdown in the global economy Slump in international trade Weak passenger demand Currency volatility Higher cost of capital

11 Slowing global economy World growth % % %? %? Advanced economies led the decline, but effects felt worldwide Source: IMF

12 Oil prices fall back to earth Jet Fuel and Crude Oil Price ($/barrel) Source: Platts, RBS Airlines struggled to keep pace with extreme volatility, many now facing hedging losses Jet Fuel price Crude oil price (Brent) Sep, 2008 Nov, 2008 Jan, 2009 Jul, 2005 Sep, 2005 Nov, 2005 Jan, 2006 Mar, 2006 May, 2006 Jul, 2006 Sep, 2006 Nov, 2006 Jan, 2007 Mar, 2007 May, 2007 Jul, 2007 Sep, 2007 Nov, 2007 Jan, 2008 Mar, 2008 May, 2008 Jul, 2008 Fuel bill accounted for 35% of total costs for Asian airlines in 2008

13 Weak passenger & cargo demand 15% AAPA international passenger & cargo growth 10% 5% 0% -5% -10% -15% -20% RPK, FTK % Change -25% -30% Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 RPK Growth FTK Growth Source: AAPA Airlines suffer sharp falls in revenues

14 Recessions result in losses for airlines Global airline industry profit margin Impact will vary by region and relative strength of individual airlines Source: IATA Nov 2008

15 The global airline industry: profitability trends Source: IATA

16 Airlines responding to the downturn Trimming route networks and capacity in response to changing demand conditions Implementing wide range of measures to reduce staff costs, retrenchment only as a last resort Grounding surplus aircraft, seeking deferral of new deliveries Conserve cash, strengthen th balance sheet Working with industry partners to reduce unnecessary costs Another very tough year ahead

17 Future growth postponed A prolonged downturn could mean no growth Significant implications for investment and capacity management Source: IATA Nov 2008

18 Long term growth prospects still bright Asia Pacific s share of world traffic will keep on growing Source: Boeing

19 Conclusions Aviation is at the heart of global economic development Nevertheless, airlines will be severely tested by the current downturn Asia Pacific airlines are taking appropriate steps to weather the storm Working with industry partners to identify joint cost savings and revenue opportunities Prospects for long term growth remain good

20 Andrew Herdman Director General Association of Asia Pacific Airlines 9/F Kompleks Antarabangsa JalanSultanIsmail Kuala Lumpur MALAYSIA Tel: Fax: