asia pacific aviation pacific aviation – combined overview 17 million tonnes of cargo 3,500...
TRANSCRIPT
Asia Pacific Aviation
Regional Update and Developments
Andrew Herdman
AAPA Director General
Willis Asia Pacific Aviation Insurance Conference
Kota Kinabalu, Malaysia, 24-26 February 2009
Navigating through Turbulence
Presentation Outline• Asia Pacific Aviation
• Combined strength• Combined strength
• Historical performance
• Current challenges
• Safety overview
• Brighter skies
Aviation: moving the world
• Air travel delivers global mobility
• 2,250 million passengers
• Outstanding safety record• Outstanding safety record
• Carries 35% by value of global trade
• Wider social and economic benefits
Source: ATAG
• Diverse geographic region
• Home to 4 billion people
• 62% of the world’s population
• Generates 26% of global GDP
•
Asia Pacific
• 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
AAPA Association of Asia Pacific Airlines
• Regional trade association
• Current members include 17 major international airlines based in Asia Pacific
• Open to all scheduled international airlines based in Asia Pacific region
• Committed to promoting sustainable • Committed to promoting sustainable growth of the aviation industry serving both passenger and freight needs
• Permanent secretariat headquartered in Kuala Lumpur, Malaysia
• Representation in Washington and Brussels
always open to new members
AAPA global traffic share
Revenue passenger-kilometres scheduled systemwide
Freight tonne-kilometres scheduled systemwide
AEA 19%
AACO 4%
ALTA 4%
AFRAA 2%AEA 22%
AACO 5%
ALTA 2%
AFRAA 1%
Data: 2007 Source: IATA, AAPA and various
AAPA 17%
ATA 27%Others 20%
PR China 7%
AAPA 32%
ATA 23%
AFRAA 1%
Others 8%
PR China 7%
AAPA + non-member airlines
US$ 145 billion revenue
618 million passengers
422 million domestic196 million international
Asia Pacific Aviation – combined overview
196 million international
17 million tonnes of cargo
3,500 aircraft
Asia Pacific airlines global market share:27% of global passenger traffic40% of global cargo traffic
Data: 2008 estimates Source: AAPA + non-AAPA airlines GMT +5 to GMT +12
Historical performance
AAPA international passenger traffic trends
5%
10%
15%
20%
400
500
600
700
Int'l R
PK
gro
wth
Int'l R
PK
(b
illi
on
)
AAPA international RPK 1998-2008
Source: AAPA
-15%
-10%
-5%
0%
0
100
200
300
98 99 00 01 02 03 04 05 06 07 08
Int'l R
PK
gro
wth
Int'l R
PK
(b
illi
on
)
RPK RPK Growth
AAPA international cargo traffic trends
5%
10%
15%
20%
30
40
50
60
Int'l F
TK
gro
wth
Int'l F
TK
(b
illi
on
)
AAPA international FTK 1998-2008
Source: AAPA
-10%
-5%
0%
5%
0
10
20
30
98 99 00 01 02 03 04 05 06 07 08
Int'l F
TK
gro
wth
Int'l F
TK
(b
illi
on
)
FTK FTK Growth
60
80
100
120
140
160
180
200
Oil prices fall back to earth
Airlines struggled to keep pace with extreme volatility, many now facing hedging losses
Jet Fuel and Crude Oil Price ($/barrel)
2005–2008 Source: Platts, RBS
Jet Fuel price
Crude oil price (Brent)
0
20
40
60
Jul,
2005
Sep,
200
5
Nov,
200
5
Jan,
200
6
Mar
, 200
6
May
, 200
6
Jul,
2006
Sep,
200
6
Nov,
200
6
Jan,
200
7
Mar
, 200
7
May
, 200
7
Jul,
2007
Sep,
200
7
Nov,
200
7
Jan,
200
8
Mar
, 200
8
May
, 200
8
Jul,
2008
Sep,
200
8
Nov,
200
8
Jan,
200
9
Crude oil price (Brent)
Fuel bill accounted for 35% of total costs for Asian airlines in 2008
Signs of the times … changing fortunes
• Sharp slowdown in the global economy
Current Challenges• Sharp slowdown in the global economy
• Slump in international trade
• Weak passenger demand
• Currency volatility
• Higher cost of capital
• Sharp slowdown in the global economy
Current Challenges• Sharp slowdown in the global economy
• Slump in international trade
• Weak passenger demand
• Currency volatility
• Higher cost of capital
-10%
-5%
0%
5%
10%
15%
RP
K, F
TK %
Cha
nge
AAPA international passenger and cargo growth
AAPA international traffic trends 2007-2008
-30%
-25%
-20%
-15%
-10%
Jan-
07
Feb
-07
Mar
-07
Ap
r-07
May
-07
Jun-
07
Jul-0
7
Aug
-07
Sep
-07
Oct
-07
No
v-07
Dec
-07
Jan-
08
Feb
-08
Mar
-08
Ap
r-08
May
-08
Jun-
08
Jul-0
8
Aug
-08
Sep
-08
Oct
-08
No
v-08
Dec
-08
RP
K, F
TK %
Cha
nge
RPK Growth FTK GrowthSource: AAPA
Impact of the global economic slowdown
World growth
2007 5.2%
2008 3.4%
2009 0.5%?
2010 3.0%?
Slowing global economy
Source: IMF
Advanced economies led the decline, but effects felt worldwide
Awful, Brutal or Catastrophic?
A prolonged downturn could mean no growth 2008-2010
Source: IATA Nov 2008
Significant implications for investment and capacity management
Recessions result in losses for airlines
Global airline industry profit margin
Source: IATA Nov 2008
Impact will vary by region and relative strength of individual airlines
The global airline industry: profitability trends
-2
0
2
4
6
8
$ billion
+$3.7 :Industry profits: +$12.9
Source: IATA
-14
-12
-10
-8
-6
-4
-2
2000 2001 2002 2003 2004 2005 2006 2007 2008E 2009F
US Europe Asia
-$13.0 -$11.3 -$7.5 -$5.6 -$4.1 -$0.5 -$5.0 -$2.5
Industry losses:
Airline capital structure by region
11895
12291
40
Debt61
40
60
80
100
120
140
US
D b
illi
on
21 22
Equity45
40
0
20
40
Revenue EV Revenue EV Revenue EV
North America Europe Asia Pacific
EV = Enterprise value = Long-term debt + market capitalisation Revenues 2007; Market Cap as at 28 October 2008
Source : AAPA estimates
Airlines facing sharply higher cost of capital with a US$200 billion debt burden
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 • Grounding surplus aircraft, seeking deferral of new deliveries
• Conserve cash, strengthen balance sheet
• Working with industry partners to reduce unnecessary costs
Another very tough year ahead
Safety overview
Safety
• Flying is by far the safest form of travel
• 25 million flights with 2,250 million passengers
• 17 major accidents with 397 fatalities
• Asia Pacific recorded significant improvement • Asia Pacific recorded significant improvement in safety performance in 2008
• Nevertheless, no room for complacency
• Further need to strengthen regulatory oversight across the region
Aviation Safety Performance Trends
Single Year Major Accident Rates
0.80
1.00
1.20
1.40
1.60
Majo
r Accid
ent R
ate
s (per m
il secto
rs)
Major Accident Rates by Operator Region
2004 - 2008
Dataset: Western-built large jets
0.00
0.20
0.40
0.60
2004 2005 2006 2007 2008
Majo
r Accid
ent R
ate
s (per m
il secto
rs)
World America Europe
ASPAC IATA 5-year average World
5-year average ASPAC
Brighter skies
Long term growth prospects still bright
Source: Boeing
Asia Pacific’s share of world traffic will keep on growing
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
Positive prospects for long term growth
• Growing economic influence of Asia Pacific needs to be reflected in the wider debate on key international policy issues
• Fresh thinking needed on industry regulation and ownership structure
www.aapairlines.org
Andrew Herdman
Director General
Association of Asia Pacific AirlinesAssociation of Asia Pacific Airlines
9/F Kompleks Antarabangsa
Jalan Sultan Ismail
Kuala Lumpur 50250
MALAYSIA
Tel: +60 3 2145 5600
Fax: +60 3 2145 2500