Asia Pacific Aviation Industry Perspective Andrew Herdman Director General Association of Asia Pacific Airlines International Aviation Fuel Conference 5 April 2012 Beijing, China
Overview Global Mobility Asia Pacific Aviation Business Outlook Future Growth Sustainable Aviation
Aviation: moving the world Air travel delivers global mobility 2,800 million passengers Outstanding safety record Carries 35% by value of global trade Wider social and economic benefits Source: ATAG www.aviationbenefitsbeyondborders.org
Asia Pacific Diverse geographic region Home to more than 4 billion people 62% of the world s population Generates 27% of global GDP Wide range of income levels Dynamic economies delivering global growth Aviation widely recognised as a key contributor to economic and social development p Political diversity remains challenging: need for multilateral cooperation
World output long term historical trends Source: Maddison (2010) & Conference Board Output measured on PPP basis
Asia Pacific Aviation
Asia Pacific Aviation US$163 billion revenue 655 million passengers 457 million domestic 198 million international 18.5 million tonnes of cargo 4,984 aircraft Asia Pacific carriers overall market share: 24% of global passenger traffic 38% of global cargo traffic Data: 2011 Estimates Source: Combined AAPA + non-aapa airlines GMT+7 to GMT+12
Global Regulatory Influences Asia Pacific Wider impact of US and EU regulations Asia Pacific has limited influence
Current Business Outlook
Global recovery moderates World growth 2010 +5.2% 2011 +3.8% 2012E +3.3% 2013F +3.9% Pattern of two-speed growth maintained Source: IMF
Global passenger and cargo traffic Global international passenger and cargo traffic Passenger traffic continues to expand, but air cargo markets remain weak Source: IATA
Premium and economy traffic Slower recovery in premium traffic Source: IATA
Oil price volatility Persistently high oil prices reflect Persistently high oil prices reflect political risk factors
Historic oil price volatility Macro economic impact of oil price spikes High oil price acts as brake on global economy Source: US EIA
Fuel price impact on airlines US$ billio on / US$ per barre l 250 200 150 100 50 17% 22% 26% 28% 33% 26% 26% 30% CF 34% OH 36% 14% 0 2003 2004 2005 2006 2007 2008 2009 2010 2011E 2012F 2012F Fuel expenditure Jet kerosene price CF: Central Forecast, OH: Oil Price Spike Rising share of total costs Fuel hedging of limited value Impacts aircraft values Influences fleet renewal decisions
Global airline industry profitability Margins squeezed by high oil prices Intensely competitive industry
Future Growth
Growth: complementary business models 2010 Traffic = 4.8 trillion RPK 2030 Traffic = 12.3 trillion RPK Global network carriers expected to thrive Global network carriers expected to thrive despite competition
Asia Pacific traffic will grow significantly Source: Airbus GMF2011-2030
Asia Pacific fleet expansion Source: Boeing CMO 2011-2030
Sustainable Aviation
Aviation sustainable growth? Aviation delivers continuous improvements in fuel efficiency through technology, operations and infrastructure Committed to challenging environmental targets Intensifying efforts to develop alternative fuels As a globally competitive, energy-intensive industry, we would prefer a globally harmonised, sector-specific approach to international aviation emissions under ICAO Travel and tourism industry faces real threat of proliferation of arbitrary taxes and charges EU ETS risks triggering a trade war Governments set the climate change policy framework but there is a collective failure of political leadership on this issue
Aviation industry emissions targets Three Global Industry Targets Ambitious but achievable goals Aviation is already highly energy efficient Fuel represents 30%+ of total costs Committed to further emissions reductions
Aviation emissions reduction roadmap Multi-pillar approach to achieve industry goals Source: IATA
Aviation: alternative fuels Evaluated multiple feedstocks Proven technical feasibility Drop-in fuel using existing infrastructure Certification achieved in 2011 Offers lifecycle CO2 reductions Challenge is to achieve commercial scale and competitive economics Need clear policy framework and support from governments In the shadows: embedded carbon credits
Closing Thoughts Aviation is at the heart of global economic development with bright growth prospects Asia Pacific aviation is already a major global force and set to become even stronger in commercial terms Asia Pacific needs stronger engagement on key international policy and regulatory issues Strong collaboration between airlines, fuel suppliers, and other industry partners needed to respond to future growth opportunities Shared confidence and optimism about the future
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