challenges and opportunities for regional air connectivity · non-stop routes served international...
TRANSCRIPT
20-22 March 2018
Connecting the Americas through
Sustainable Tourism
Challenges and Opportunities for Regional
Air Connectivity
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agencies with strategic planning
and development of air
services.
Before joining ICF in 2006, Ms.
Mejia worked for AeroMexico
22 years experience
Barbara Mejia
New York | Boston | Washington D.C. | London | Singapore
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ICF offers a global airline client list and network of airline contacts
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ICF proprietary and confidential. Do not copy, distribute, or disclose.
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Boston
Baltimore
Miami
Dallas/Ft. Worth
Denver
LasVegas
LosAngeles
U.S./Canada
Tampa
SaltLake City Islip
SanFrancisco
Ft. Myers
Richmond
Edmonton
Indianapolis
Omaha
San Paulo
LiberiaBogota
Port ofSpain
Medellin
Lima
Latin America and the Caribbean
*
* Mexico includes all airports managed by GAP, and MEX satellite airports
San Jose
San Juan
Quito
Santiago
Rio De Janeiro
Natal
*Spain includes all airports managed by AENA
Manchester
Newcastle
Donetsk
Cairo
Nantes
Stockholm
Istanbul
Birmingham
OmanMedinah
Heraklion
Jeddah Riyadh
Morocco
MoscowHamburg
London
Cheongju
Krasnoyarsk
Asia
SiemReap
ShanghaiKunming
Beijing
Khabarovsk
Hong Kong
Singapore
SeoulICN
Atlanta
Europe / Russia/ Middle East
Montego Bay
ICF proprietary and confidential. Do not copy, distribute, or disclose.
Introduction
It is indisputable that the liberalization of air travel has
made a positive contribution to the growth of connectivity
and tourism
Regional air connectivity is moving in the right direction
However, there are tensions among stakeholders who all
need funding through:
Ticket and hotel taxes
Airport fees to airlines and passengers
Visa issuance fees (and complexities)
Overregulation including restrictive bilaterals
Stakeholders need revenue:
Airports to operate and make capital investments
Hotels to build and promote
Government to operate, create infrastructure, regulate and promote
Airlines to run profitable operations
These tensions work at cross-purposes to achieving the
greater goal, which is sustained economic impact
5
ICF proprietary and confidential. Do not copy, distribute, or disclose.
Both supply and demand factors have contributed to robust passenger traffic growth rates in many countries across the region…
6Source: Airports Council International
Passenger Traffic Growth in Sample Countries, 2011-2016 CAGR
Mexico
+10%
Peru
+15%
Chile
+9% Argentina
+7%
Colombia
+10%
Panama
+20%
Dominican Republic
+8%
Ecuador
-2%
Uruguay
+1%
Brazil
+5%
USA
+3%
Canada
+5%
ICF proprietary and confidential. Do not copy, distribute, or disclose.
…which is also reflected in the growth of tourist arrivals
7
Source: UNWTO (countries not reporting 2016 data excluded)
12%
10%9%
8% 8% 8% 7%7% 6% 6% 6% 6% 6%
4%4%
0%
2%
4%
6%
8%
10%
12%
14%
Growth of Tourist Arrivals 2011 – 2016 CAGR, Top Fastest Growing in LAC
ICF proprietary and confidential. Do not copy, distribute, or disclose.
Regional air connectivity in the Americas is moving in the right direction
8
Improvement in service and traffic growth
Big markets are already
served
Strong Latin American Carriers
Introduction of LCC
6% traffic
international
average
annual growth
in the last 5
years within
the region
The growth in
number of
non-stop
routes served
international
markets within
the Americas
grow by 26%
in the last 10
years
Latin America
Full Service
Carriers are
profitable and
have large
aircraft orders
LCC in Latin
America have
high market
shares or are
gaining market
shares,
especially in
the Domestic
Market
ICF proprietary and confidential. Do not copy, distribute, or disclose.
It is widely recognized that aviation/tourism drives significant economic benefits for the broader regional economy
9
$21.2 millones.
$228 millones.
ICF proprietary and confidential. Do not copy, distribute, or disclose.
Yet many countries still present barriers to air travel and tourism, such as onerous visa requirements, infrastructure deficiencies and bilateral agreements
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Country Score
Argentina 2.7
Barbados 3.8
Bolivia 2.2
Brazil 3.7
Chile 2.7
Colombia 2.8
Costa Rica 3.2
Dominican Republic 2.8
Ecuador 2.5
El Salvador 2.1
Guatemala 1.9
Honduras 2.2
Jamaica 2.4
Mexico 3.7
World Economic Forum
2017 Air Transport Infrastructure Scores
(1 Worst to 7 Best)
Source: World Economic Forum, Travel and Tourism Competitiveness Report 2017
Country Score
Nicaragua 2.0
Panama 4.7
Paraguay 1.6
Peru 2.5
Trinidad and Tobago 4.1
Uruguay 2.1
Venezuela 2.0
Averages:
LAC 2.7
East Asia 4.4
Middle East 3.2
Western Europe 3.8
Sub-Saharan Africa 2.0
World Economic Forum
2017 Visa Openness Index
ICF proprietary and confidential. Do not copy, distribute, or disclose.
In many countries in the region, taxes and airport fees add cost to airfares which could discourage air travel – but the data doesn’t always support that view
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Note: Assumed a base one-way fare of USD 800 (international) to compute VAT, where applicable
Sources: ITA Matrix Airfare Search by Google, UNWTO
$38 $60 $51
$31 $49 $44 $35
$20 $36 $30
$180 $149 $144
$144 $76
$60
$41
$32
$218 $209
$195
$175
$125
$104
$76
$52 $36 $30
$0
$50
$100
$150
$200
$250
BOG UIO PUJ LIM EZE MVD SJO CUN GRU SCL
Airport Departure Fee
Government Imposed Tax
Comparison of Ticket Taxes on One-Way International Airfare (Base fare of USD 800)
10% 6% 7% 8% -1% 1% 6% 8% 4% 12%Growth of Tourist
Arrivals
CAGR 2011-16
ICF proprietary and confidential. Do not copy, distribute, or disclose.
Governments jointly with other stakeholders can help grow air service and tourism via a focused program –resulting in sustainable connectivity
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Stakeholders in a Successful Air Service Development (ASD) Program
Chambers of
Commerce
Regional or
Local Tourism
Entity
Hotel
Association
Specific Industry
Associations
Economic
Growth Agencies
Local
Governments
Airport &
Advisor
ASD programs can consist of:
Market data & recent developments
Specific route proposals
Incentive programs
Marketing & branding support
ICF proprietary and confidential. Do not copy, distribute, or disclose.
Stakeholders must balance conflicting goals for the greater economic impact via holistic aviation and tourism policies
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Visa/Immigration Policy
(National Security)
Airport/Government Taxes
(Need for $$$)
Economic Impact
Passenger Traffic
Tourist Arrivals
Home Country Airline Interest
(Political pressure)
Infrastructure
ICF proprietary and confidential. Do not copy, distribute, or disclose.
Thank you!
For questions related to this presentation, please contact:
Barbara MejiaTechnical [email protected] +1 917.345.3161
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ICF proprietary and confidential. Do not copy, distribute, or disclose.
The Americas have experienced a 6% annual average growth on International Air Traffic within the Region
Source: IATA PaxIS 15
5%
4%
6%
- 10 20 30 40 50 60
North America-North America
Caribbean-North America
North America-South America
South America-South America
Central America-North America
Caribbean-South America
Caribbean-Caribbean
Central America-South America
Central America-CentralAmerica
Caribbean-Central America
Millions
Air Passenger International Traffic within the Americas by Region
CAGR YE Jan 2013- YE Jan 2018 Origin-Destination Passengers (Million)
7%
4%
Central
America-
North
America
North America-
North America
North America-
South America
South America-
South America
Caribbean-North
America
6%
Caribbean-
South America
-2%
Caribbean-
Caribbean
4%Central America-
South America
9%
Central America-
Central America
ICF proprietary and confidential. Do not copy, distribute, or disclose.
Non-stop services in the Americas have increased by 26% in the last 10 years (2.3% annual average)
16Source: SRS Innovata Published Schedules
0
50
100
150
200
250
300
350
400
450
500Mar-08 Mar-18
Number of Direct Markets
The Central-South
America region have
seen the highest growth
with 6% annual average
over the last 10 years
The top destinations are
already well-served
within each region
There is still huge
opportunity to increase
service within the
Caribbean
Comparison Number of Non-stop Routes International Markets within the Americas
2008 vs. 2018 (excludes domestic markets)
ICF proprietary and confidential. Do not copy, distribute, or disclose.
Latin American carriers are stronger with high level or aircraft orders and are providing good service to its customers
-$139.5
$63.0
-$219.3 -$225.0
$44.2 $58.5 $69.2
$339.8
-$300
-$200
-$100
$0
$100
$200
$300
$400
AviancaGroup
AeromexicoGroup
LATAMGroup
CopaAirlines
2015 2016
17Source: CAPA
Million USD
Main Full Service Carriers in Latin America
Net Profit (loss) – million USD
Main Full Service Carriers in Latin America
Confirmed Aircraft Orders
223
61
8066
0
50
100
150
200
250
AviancaGroup
AeromexicoGroup
LATAMGroup
CopaAirlines
Number of Aircraft
ICF proprietary and confidential. Do not copy, distribute, or disclose.
Strong Latin American carriers coupled with the LCC boom that in some countries encompass 60% of the market share in the domestic market
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0%
10%
20%
30%
40%
50%
60%
70%
Year
0
Year
1
Year
2
Year
3
Year
4
Year
5
Year
6
Year
7
Year
8
Year
9
Year
10
Year
11
Year
12
Year
13
Year
14
Year
15
Year
16
Year
17
Year
18
Year
19
Year
20
Canada Brazil Colombia Mexico US
Note: Year 0 defined as the first year with >4% LCC penetration; Aires not included as Colombian LCC
Source: : IATA, OAG
In only 6 years, Mexico’s
low-cost carriers achieved a
60% market share
Brazil took longer than
Mexico and has already
more than 50% of the market
share
US is a mature air market,
where LCC has around 30%
of the market share, similar
case as Canada
Colombia LCCs,
VivaColombia and Wingo,
are growing their market
share with 15% in the last
year
Low Cost Carriers Market Share in the Domestic Market
From First Year of Operation to Latest Year of Operation
ICF proprietary and confidential. Do not copy, distribute, or disclose.
Market sizes within Latin America and Caribbean are still thin, therefore an opportunity for stakeholders to create critical mass
Rank Destination
Annual
Passengers
(‘000)
Passengers
Weekly
Each Way
Served
from
Guyana
Airlines
Providing
Service
Average
Fare
(USD)
1 New York 227 2,188
• Caribbean
Airlines
• Fly Jamaica
406
2 Port of Spain 83 801 • Caribbean
Airlines235
3 Toronto 64 619 • Fly Jamaica 395
4 Miami 54 520 • Surinam
Airways283
5 Kingston 53 513 • Fly Jamaica 315
6 Bridgetown 38 361 • LIAT 233
7 Santa Domingo 17 168 309
8 Panama City 15 148 • COPA 303
9 London 14 144 418
10 Paramaribo 10 96 • Surinam
Airways99
89% of Total
19
Note: Includes both airports in Guyana; Average Fares do not include concessions
Source: PaxIS CY 2017, Innovata Schedules YE March 2018
There is already
service to the top
destinations from
Guyana
Current Average
Fares are high,
however increased in
LCC presence with
intra-region service
would offer more
affordable fares
Top Market from/to Guyana by Air Traffic, CY 2017
ICF proprietary and confidential. Do not copy, distribute, or disclose.
Regions such as Caribbean need to develop a “multi-country” airline that would enable more connectivity within the region and to other destinations
20
Source: CAPA and carriers website
Current Active Fleet for Caribbean Carriers
Schedule Regular Service March 2018 There is lack of global brand
recognition among carriers in the
Caribbean
None of the Carriers in the Caribbean
is part of a Global Alliance
The carriers in the region are typically
small airlines
Etihad Airways has created a multi-
country model with its alliance
“Etihad Partners” covering over 300
destinations worldwide
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