5 World th Financial Symposium 17 20 September 2018 Madrid Marriott Auditorium Hotel & Conference Center
7 th SIS General Meeting 18 th September 2018 Madrid Marriott Auditorium Hotel & Conference Center
Global Industry Update SIS General Meeting 18 th September 2018 Nicole Boussioti Head, Member & External Relations Europe
Source: ATAG AVIATION IS AN ECONOMIC ENABLER
Robust pax volumes growth but some easing for freight Billions per month Billions per month 700 6.2%yoy 21.0 650 600 RPKs, seasonally adjusted FTKs, seasonally adjusted 2.1%yoy 20.0 19.0 18.0 550 17.0 500 16.0 450 2012 2013 2014 2015 2016 2017 2018 15.0 Source: IATA www.iata.org/economics 5
and load factor trends have begun to diverge % of ASKs % of AFTKs 83% 47% 82% 46% 81% 45% 80% 44% 79% 43% 78% Passenger load factor, seasonally adjusted Freight load factor, seasonally adjusted 42% 77% 2012 2013 2014 2015 2016 2017 2018 41% Source: IATA www.iata.org/economics 6
Industry profitability still high and now stabilizing 14% Worldwide average airline operating margin 12% 10% 8% 6% 4% 2% 0% Data adjusted to remove seasonal influences Unadjusted data -2% 2011 2012 2013 2014 2015 2016 2017 2018 Source: The Airline Analyst, IATA www.iata.org/economics 4
Rising costs are a key challenge Year-on-year % change 20% 15% Industry wide growth in unit revenues and unit costs 10% Unit cost growth 5% 0% -5% Unit revenue growth -10% -15% -20% 2011 2012 2013 2014 2015 2016 2017 Source: IATA Economics using data from Platts, ICE www.iata.org/economics 5
and its not only due to oil prices 8.4 8.2 US cents per ASK % contribution to increase in CASK Unit cost changes between 2016 Q1 and 2017 Q4 30% 11% 8% 8.0 51% 7.8 7.6 7.4 7.2 7.0 CASK 2016 Q1 Fuel Labour Infra- structure Other CASK 2017 Q4 Source: IATA Economics using data from Datastream, Markit, Oxford Economics www.iata.org/economics 6
Divergent trends in premium & economy pax yields (base fare) 105 Indices (Jan 2011=100), seasonally adjusted, $US terms 100 95 90 85 Premium-class yield 80 75 Economy-class yield 70 2011 2012 2013 2014 2015 2016 2017 2018 Source: IATA www.iata.org/economics 7
Producing good returns for investors for a 4 th year % of invested capital 12 Return on capital invested in airlines and their cost of capital 10 8 Cost of capital (WACC) Return on capital (ROIC) 8.5 7.7 6 4 2 0 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Source: IATA www.iata.org/economics 11
Industry profits under pressure in 2018, but still high Global commercial airline profitability % revenues US$ billion 10.0 40 8.0 6.0 4.0 2.0 0.0-2.0-4.0-6.0-8.0 EBIT margin (left axis) Net post-tax profit (right axis) 30 20 10 0-10 -20-30 -10.0-40 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: ICAO, IATA www.iata.org/economics 12
Driven largely by N.America (again) plus Europe & Asia 40 US$ billion 35 30 25 Africa L America Middle East Asia Pacific Europe N America 20 15 10 5 0-5 2010 2011 2012 2013 2014 2015 2016 2017 2018f Source: ICAO, IATA www.iata.org/economics 13
Per passenger (net) profit shows wide regional variation 25 US$ Profit per passenger (US$) 20 15 19.56 18.67 15.67 2016 2017 2018(f) 10 5 1.39 1.57 2.95 8.56 7.53 7.58 5.49 6.82 5.10 6.39 4.81 5.89 8.96 9.27 7.76 0-5 -4.66-1.66-1.55-10 Nth America Latin America Europe Asia Pacific Africa Middle East Industry Source: IATA www.iata.org/economics 14
What do you see as the top 3 downside global economic risks over the next two years? Key downside global risks? Brexit-related uncertainty weighs heavily on Europe Rise of populism in the EU (eg Italian populist coalition) What do you see as the top 3 downside global economic risks over the next two years? Oil and commodity price rally accelerates Brexit-related uncertainty weighs heavily on Europe Rise of populism in the EU (eg Italian populist n/a coalition) Heightened foreign policy uncertainty triggers synchronised slowdown Q1 2018 Q2 2018 Q1 2018 Q2 2018 Oil and commodity price rally accelerates Tighter policies in China Heightened foreign policy uncertainty triggers Market turmoil (eg synchronised amid G7 policy slowdown tightening, corporate sector distress) Geopolitical tensions (eg relating to Korea, Russia, Syria) corporate sector distress) Synchronised global growth falters in wake of US rate rises and tapering Russia, of QE Syria) in Eurozone Tighter policies in China Market turmoil (eg amid G7 policy tightening, Geopolitical tensions (eg relating to Korea, n/a Synchronised global growth falters in wake of US rate rises Trade and tapering war hits of global QE in growth Eurozone Trade war hits global growth 0% 10% 20% 30% 40% 50% 0% Percentage 10% 20% of respondents 30% 40% citing as 50% top risk Percentage of respondents citing as top risk Source: Oxford Economics Percentage of respondents www.iata.org/economics citing as top risk 12 n/a n/a