World & Regional Capacity Analysis Ali Hajiyev

World & Regional Capacity Analysis Ali Hajiyev Istanbul Technical University Air Transportation Management M.Sc. Program Network, Fleet and Schedule Strategic Planning Module 3: 28 March 2016

Global Capacity Summary Strong passenger demand continues, dynamic macroeconomic environment 2015 passenger traffic grew > 6.5%; 2H was particularly strong with demand noticeably exceeded supply 2016 oil price outlooks ~$40-50/bbl with volatility; boost to consumer disposable income, lower air fares Stronger USD shifting int l passenger purchasing power, airline route networks Winter 2016 capacity growth far above long-term average Airlines further boosting capacity after consecutive quarters of strong demand Global jet capacity up 7.1% YoY in January, frequency growth is the primary driver Single-aisle capacity up 8.7% YoY, CIS and LatAm are only regions with weaknesses Twin-aisle capacity up 6.0% YoY, emerging market airlines leading with +8.2% growth In the past few years, international capacity has grown at a faster pace; this month, international and domestic growth are balanced as US domestic capacity growing at the fastest pace in years Regional, network and fleet trending Global network still fragmenting with 4% growth in airport pairs vs. 2015 Top 25 airline capacity lagging overall market slightly at +6.6%, wide variation between carriers Currency, economy drive different domestic/international growth strategy Copyright 2016 Boeing. All rights reserved. 3

January 2016 vs. January 2015 Share of total routes (airport pairs) dropped/added January 2016 vs. 2015 China/NE Asia-SE Asia -8.4% 31.1% Intra-China Europe-M East Global Intra-Europe N Atlantic Intra-N America -8.4% -8.9% -8.8% -7.3% -1.5% -4.4% 5.9% 12.9% 12.4% 12.1% 10.4% 17.9% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% Dropped Routes New Routes Global network 4% larger vs. 2015, but ~10% route churn European and N. America flows seeing network expansion China/NE Asia to SE Asia are fast expanding with market liberalization and LCC boom Source: Innovata, January 2016 database Copyright 2016 Boeing. All rights reserved. 8

Ranked by year over year seat growth YoY Change in departing seats (% chg) January 2016 v. 2015 Asia Europe N.Amer MidEast Source: Innovata, January 2016 database Copyright 2016 Boeing. All rights reserved. 10

January 2016 vs. January 2015 Overall Capacity Airline capacity (ASKs) to/from/within Europe increased 5.3% from the prior year, trailing the global average by 1.8 percentage points Flow with the most capacity added was intra-europe (4.8B ASKs), while capacity to/from China grew fastest (9%) Turkish, Ryanair, and Emirates added the most capacity overall, while Pegasus, Wizz Air, and Qatar grew the fastest Flow Details Turkish, SAS, and Norwegian grew the fastest on long-haul to/from Europe at over 22% Growth on intra-europe was led mainly by Turkish and independent LCCs, although Norwegian was flat Turkish added the most capacity on the North Atlantic, followed by Lufthansa and Virgin Atlantic Middle East domiciled airlines primarily the Gulf 3 plus Turkish gained significant share from European airlines and others on Europe Middle East CIS Europe is down sharply reflecting recent Russian political and economic turmoil Business Sectors The long-haul low cost sector grew rapidly, with Norwegian s expansion and Lufthansa subsidiary Eurowings entering long-haul flying Copyright 2016 Boeing. All rights reserved. 12

January 2016 vs. January 2015 Airline capacity (ASKs) to/from/within the Middle East increased 10.1% from the prior year, about 1.3x the global average Capacity of the Gulf 3 was up by 11.6%, with growth distributed across many regions and all three networks The region s LCC seat capacity increased by 20.4% in comparison to 2015 Increased 61% frequency to Iran and Iraq due increased operations Capacity changes in the Gulf 3 and the region s LCCs were mapped. Key findings: Emirates did not grow as much compared to Qatar and Etihad by a percentage standpoint, however remains the largest in size relative to seats and flights Flydubai increased flights by 23% and seats by 21% Air Arabia increased flights and seats by 14% Copyright 2016 Boeing. All rights reserved. 21

Seats sum to Destinations to/from/within Middle East January 2016 vs. January 2015 Nominal growth in the United States Decline in Africa Growth in India & SE Asia SOURCE: Innovata, January 2016 database Copyright 2016 Boeing. All rights reserved. 23

Flights sum to Destinations to/from/within Middle East January 2016 vs. January 2015 Nominal growth in the United States Decline in Africa Growth in India & SE Asia SOURCE: Innovata, January 2016 database Copyright 2016 Boeing. All rights reserved. 24

Measured by scheduled monthly seats Seats (000s) and % change to/from/within Middle East January 2016 vs. January 2015 SOURCE: Innovata, January 2016 database Copyright 2016 Boeing. All rights reserved. 25

Measured by scheduled monthly seats Seats (000s) and % change departing from airport January 2016 vs. January 2015 SOURCE: Innovata, January 2016 database Copyright 2016 Boeing. All rights reserved. 28