international civil aviation organization 22/5/92 … · international civil aviation organization...

INTERNATIONAL CIVIL AVIATION ORGANIZATION

ASSEMBLY - 29TH SESSION

ECONOMIC COMMISSION

A29-WP/15 EC/2 22/5/92

Agenda Item 29: Review and outlook for air transport

MEDIUM-TERM OUTLOOK FOR THE AIRLINE INDUSTRY 1992-ll994

Summa !:X_

In response to requests at the 26th and 27th Sessions, this paper . presents the first set of medium-term forecasts prepared by the Secretariat of world airline passenger traffic, in total and by region of registration, and, in general and global terms, of world airlinE~ finances. The longer-term outlook for airline traffic and aircraft movements is presented separately in Circular 237-AT/96. The Assembly is invited to note the paper.

ReferE!nces: Doc 9547, A27.lEc, Report and Minutes of the Economic Commission.

(58 pages)

A29~WP/56, Programme Budget of the Organization for 1993, 1994 and 1995. Circular 237-AT/96, Outlook for Air Transport to the Year 2001.

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MEDIUM -TERMI OUTLOOK-

FOR THE.AIRLINE~ INDUSTRY

1992- 1994

Prepared under the authority of the Secretary General

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FOREWORD

1. At the 26th Session· of the Assembly, it was suggested that the Council should study the possibility of including 1n its Annual Reports "three-year forecasts of traffic and financial results for airlines of the world". The 27th Session noted that the Council had been unable to complete this task during the 1987-1989 triennium because of lack of resources,. but had included it as a high priority task in the Work Programme for the 1990-1992 triennium. The Assembly left it to the Council to decide on the most appropriate t1m1ng and means of publication of the forecasts concerned (Doc 9547, A27-EC, para. 23:2).

2. This study, prepared by the Secretariat, is the initial result of the work concerned and the first medium-term forecast prepared by ICAO. The study presents information on the present economic and airline environment and year-by-year forecasts for the period 1992-1994 of world airline passenger traffic, in total and by region of registration, and, in general and global terms, of world airline finances.

3. The Council has retained medium-term forecasting as a high priority recurring task in the Programme Budget for the forthcoming· triennium and, subject to the continuing availability of the necessary resources, intends that medium-term forecasts be issued through inclusion in a new annual publication' entitled "The World of Civil Aviation". This publication, to be prepared by the Secretariat and published under the authority of the Secretary General, forms part of a rationalization of various publications of the Organization 1n the a1r transport field which was adopted by the Council in 1991~

4. The new publication, to be issued for the first time in 1993, will contain much of the material traditionally appearing in Chapter I of the Annual Report of the Council and some material from the former triennial circular, "The Economic Situation of Air Transport", as well as the medium-term forecasts. Concurrently, starting from cove~rage of the year 1992, Chapter I of the Annual Report will be revised into summary form to be linked with the present "Highlights" section. The triennial circular has been replaced by a series of long-term forecasting circulars, expanding the scope to include global aircraft movement forecasts, as well as major route group forecasts, the first of which, "Outlook for Air Transport to the Year 2001" (Circular 237-AT/96), is being presented to the current session of the Assembly. At the same time, the Statistical Yearbook is being expanded to accommodate, inter alia, other data formerly appearing in the triennial circular.

(i)

I.

II.

III.

IV.

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TABLE OF CONTENTS

S':lllllila t;Y • ._ ••••••••••••••••••••••••••••••••••••••••••••••••

World Economic Environment

World Airline Traffic Trends:

Historical Historical Traffic 1.n

Passenger Growth F-reight and Mail Growth 19 91 •••••••••••••••••••

World Airline Financial Trends:

Operating Revenues and Expens~s •••.••. Revenue Yields .••••••••••. Unit Costs •••.••••.•• Yield and Cost Prospects ••••••••••

. ....

V. World Airline Out l-ook:

VI.

Passenger Traffic Forecast •••••••••••••••••••••••• Financial Forecast ••••••••••••••••••••••••••••••••••••

Airline Trends and Outlook by Region:

Africa Asia/Pacific

Go ••••• ·-· •••••••••••••••••••••••••••••••••••••••• Europe Middle East North America Latin America and Caribbean

Appendix: Methodology for Traffic Forecasts

( ii)

1

2

5 9 9_

10 15 16 18

20 22

24 29 34 39 44 49

54

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I - SUMMARY

1. During the period 1980-1990, world gross domestic product (GDP) measured l.n real terms increased at an average annual rate of 2.7 per cent. Between 1983 and 1989, the world economy achieved its longest period of sustained progress since the second world war.

2. During the same 1980-1990 period, (domestic and international) measured in performed (PKP) increased ~t an average annual terms, the pattern of traffic growth reflected over the same period.

world airline scheduled traffic terms of passenger-kilometres rate of 5.7 per cent. In broad the economic growth experienced

3. World scheduled airline operating revenues and expenses (not including domestic operations in the Russian Federation) both increased at an annual rate of 8.5 per cent during the period 1980-1990. Positive operating results were achieved in each year from ll983 to 1989, while negative results were experienced from 1980 to 1982 and again in 1990.

4. Total airline scheduled passenger traffic 3.5 per cent in 1991 as compared with 1990. Total (not including domestic operations in the Russian expected to rise by about 2 per cent to give a result at 0.5 per cent of operating revenues.

decreased by approximately operating revenues in 1991 Federation) were, however, further negative .operating

5. For the forecast period 1992, 1993 and 1994, world economic (GDP) growth is expected to increase by 1.7, 2.8 and 3.4 per cent. respectively ~fter a decline of 0.3 per cent in 1991.

6. On the assumption of this economic growth, the present ICAO forecasts indicate world airline scheduled passenger traffic to increase at 4, 5 and 6.5 per cent respectively for the years 1992, 1993 and 1994. World scheduled airline revenues (including revenues from freight, mail and other sources) are estimated to increase in the order of 7, lll and 12 per cent respectively over the same years. Airline yields are expected to increase at a slightly higher rate than unit costs for the period concerned.

7. Over the 1992-1994 forecast period, the passenger traffic of airlines in the Asia/Pacific region is expected to grow at rates significantly higher· than the world average, while that of airlines in Europe is expected to grow at rates lower than the world average.

Historical Perspective

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II - WORLD ECONOMIC ENVIRONMENT

1. The demand for air passenger travel is primarily determined by several economic variables, income levels and demographics, and particu.larly by the cost of air travel. World energy demand, supply and prices are critically important both to economic progress and to the cost of travel. Hence, the airline industry is highly vulnerable to economic cycles and to fuel prices.

2. Between 1980 and 1990, the aggregate world economy measured in terms of Gross Domestic Product (GDP) grew at an average annual rate of 2.7 per cent in real terms. ·Following the recession of 1980-1982, the world economy experienced its longest period of sustained progress since the second world war during 1983-1989, achieving an average annual growth rate of 3.6 per cent before a slow-down in 1990 due J?rimarily to fuel price increases in the wake of the situation in the Gulf in the second half of the year.·

3. However, these incre~ses did less damage to the world economy than previous ones 1.n 1973-1974 and 1979. The price increases were relatively smaller than in the earlier cases and the capability of the economies of the industrialized countries to cope with the oil price increases was greater because of reduced energy dependency and the effects of structural reforms in the 1980s. They also lasted for a shorter period, both crude oil and jet fuel prices returning to pre-crisis levels by March 1991.

4. World economic growth measured in terms of real GDP declined from almost 3.5 per cent in 1989 to 0.7 per cent in 1990 again due primarily to the Gulf situation in the latter half of the year. Some major economies, including those of United States, United Kingdom and Canada entered into a recession in 1991 and a slow-down was observed in Germany and Japan. As· a result of the c.ontinued weakness· of these economies, world ·economic growth was expected to decline by 0. 3 per cent for 1991, the most difficuit year for the global economy since 1982.

So The industrialized countries experienced a rise in inflation rates in 1990 due mainly to the sharp increase in oil prices in the second half of the. year. Globally, inflation wa·s expected to decline from almost 5.5 per cent in 1990 to 4.5 per.cent in 1991 and to moderate further to about 3.5 per cent in 1992.

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6. World population growth between 1980 and 1990 increased at an average annual rate of 1.7 p_er cent. Hence, growth of the world's GDP per capita between 1980 and 1990 increased at an average annual rate of 1.1 per cent, significantly lower than the growth of GDP itself, a.s indicated in Figure 1.

FIGURE 1

WORLD GOP, GOP PEIR CAPITA GROWTH REAL TERMS, 1980 - 1990

Per Cent

5~==========~------------~--------------·------------------~

4

3

2

(1)

(2)

150(1 GDP PER ~CAPITA

1980 1981 1982 1983 1984 1985 1986 1987 '1988 1989 1990

Source: IMF, Wharton Econometrics Services

7. As regards the historical trends . in the different regions used m this study, the GDP growth rates between 1980 and 1990 varied from a high of 5.1 per cent for Asia/Pacific to a low of 0.8 per cent for the Middle East, as described on a region-by-region basis in Section VI of this study.

Growth Prospects

8. There appears to be some consensus amongst economic forecasters that global economic activity will recover at some point 1n 1992 ·after an exceptionally long slow-down occurred·. For example, the inost recent International Monetary Fund (IMF) and Organization for Economic Co-operation and Development (OECD) forecasts anticipate a noticeable increase in world trade and GDP growth in most major economies. However, a full recovery in the. over-all global economic activity is not anticipated until factors such as lower in~lation and interest rates fully work through the major economies. As a result, world real GDP is expected to incJrease by about 1. 7 per cent in 1992 followed by 2.8 and 3.4 per cent for the years 1993 and 1994.

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9. As regards the economic prospects· by region, Table 1 depicts real average annual GDP growth rates for the years 1990 to 1994.

TABLE 1

ECONOMIC GROWTH (GDP) BY REGION* .(Real Average Annual Growth Rates, Per Cent)

Region Actual Estimate Forecast ..

1990 1991 1992 1993 1994

Africa 2.5 2.2 2.8 2.6 3.5 Asia/Pacific 5.3 5.0 4. 7 5.6 6.1 Europe -1.2 -3.0 -0.2 1.0 1.5 Europe (Excl. Eastern Europe

and the Russian Federation) 2.9 0.8 2.2 .3 .o 2.7 Middle East· 0.7 -1.2 2.9 2.9 3.9 North America 0.9 -:-0.7 1.9 3.1 3.1 Latin America and

Caribbean -0.1 2.5 1.0 2.8 4 .• 2

World 0.7 -0.3 1.7 2.8 3.4

* ICAO estimates based on World Bank, International Monetary Fund Wharton Econometrics Services and other econom1.c sources.

( IMF),

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III - WORLD AIRLINI': TRAFFIC TRENDS

Historical Passenger Growth

1. .The volume of the world seheduled · international and domestic passenger air traffic in terms of ]passenger-kilometres performed (PKP) increased from some 1 089 billion in 1980 to 1 893 billion in 1990. The average annual growth rate was 5. 7 per ct~nt, with rates varying from a low of 2.1 per cent in 1982 to a high of 9.4 per cent in 1987, as depicted in Figure 2.

FIGURE 2

WORLD SCHEDULED PASSENGER TRAFFIC GROWTH

(PKI,s) PerCent 1980 - 1990

10 ~------------------------------~------·------------------------------~------------~

. 9

8

7

6 1980-1990 AVERAGE

5

4

3

2 ~~------~---~-----~------~----~------~------~---~------~------~~ 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

Source: JCAO Reporting Form A-1

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2. During the same .1980-1990 period, passenger;...kilometres performed in international services increased at an average annual growth rate of 6 • 7 per cent, from 466 mil.lion to 894 million. Domestic traffic during the corresponding period increased at an ave·rage annual rate of 4.9 per cent, from 623 million to almost 1 000 million, as illustrated in Table 2.

TABLE 2

WORLD SCHEDULED PASSENGER TRAFFIC (PKP IN MILLIONS~

YEAR ·TOTAL GROWTH INTERNATIONAL GROWTH DOMESTIC GROWTH (%) (%) (%)

1980 1,089,128 2.7 466,493 6. o· 622,635 0.4 1981 1,119,067 2.7 494., 435. 6.0 624,632 0.3 1982 1,142,017 2.1 496,501 0.4 645,516 3.3 1983 1,189,767 4.2 510,758 2.9 679,009 5.2 1984 1,278,176 7.4 555,968 8.9 722,.208 6.4 1985 1,367,348 7.0 590,190 6.2 777,158 7.6 1986 1,452,054 6 .·2 6·03' 137 2.2 848,917 9.2 1987 1,589,220 9.4 687,584 14.0 901,636 6.2 1988 1,706,008 7.3 761,992 10.8 944,016 4.7 1989 1,782,413 4.5 825,476 8.3 956,937 1.4 1990 1,893,099 6.2 893,506 8.2 999,593 4.5

Average annual 5.7 6.7 4 .·9

Source: ICAO, Reporting Form A-1

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3. In broad terms, the pattern of traffic growth over the 1980-1990 period was a reflection of economic conditi~ns experienced over this period as depicted in Figure 3," the relatively weak air traffic performance in 1980-1982 giving way to a period of rapid growth lasti.ng. until 1990. The economic recession in the early 1980s was associated with a more than doubling of aviation fuel prices which was an. additional factor depressing air traffic. The economic downturn which began in the middle of 1990 had an advers.e affect .on travel. Traffic declined in virtually all markets in the second half of 1990.

FIGURE 3

WORLD GOP AND SCHEDULED TRAFFIC GROWTH 1980 - 1991 .

Per Cent 12r-----~--------~------------~----------------------------~------------------------~

. I A~P _"t:_K_P_, . , ,, .. . 9

6

3

··························································:···················'-:·················································~·············~···································································· '. ., ' ., ..........

,' ' , ~, , '\ , ' , ' . .-' '

.....••••.....•.•.......••.••.•..••....•..••••.••...••..••••. 11 •••.••.•...••••......••...... ~ •••••.••..••.. -:~ •.••...•.••...•............•••••••••••..•..•..•••.•••• ~., ............................................ .

,' '_....,-- '---- ... ~ , ,

:':': .. ~ .. ~ . .'7: .. :':.~ .. -.c.;.··············'-················· . ... , ... ,

' ................... ~ ........ ····················'··················

\ \

' or----~------~~--------------------------------------~------------------~~,~~

\ \

' (3) ···············:···················· ................................................................................................................. , ........................................... , ..... .

1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991

Sources: IMF, Wharton Econometrics Services ICAO, Reporting Form A-1

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4. The regional distribution of scheduled passenger traffic for the years 1980 al).d 1990 is depicted. in Figure 4. Tl:J.e airlines of the Nor.th American and European regions dominate, contributing 74.4 per cent of the total traffic in 1980, and 72.5 per cent in 1990. Passenger traffic performed by airlines registered in the Asia/Pacific region increased from 14.7 per cent of the total world traffic in 1980 to about 18.2 per cent in 1990., Other regions contributed 10.8 per cent of the traffic in 1980 and 9.3 per cent in 1990.

FIGURE 4

REGIONAL DISTRIBUTION OF SCHEDULED PASSENOER TRAFFIC.

40.9%

1980 1 ; 089 billion

SOIJrce: ICAO, ReportmgFormA~l·

(PKPa)

41.3%

1990 1,893 billion

[]AFRICA

. ELJ ASINPAC

~EUROPE

• MIDDLE EAST

EJ NORTH AMERICA

0 LATIN AMERICA

Historical Freight and Mail Growth

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5. During the period 1980-1990, freight and mail traffic measured in terms of tonne-kilometres performed (TKP) increased at an average annual growth rate of 6.9 per cent. International TKP for the period concerned increased at an annual rate of 8.4 per cent while domestic TKP increased by 3.3 per cent as illustrated in Table 3.

YEAR

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

Average annual

TABLE 3

WORLD SCHEDULED FREIGHT AND MAIL TRAFFIC (TKP IN MILLIOINS)

TOTAL GROWTH INTERNATIONAL GROWTH DOMESTIC (%) (%)

33,059 5.1 21 ,7'70 7.0 11,289 34,676 4.9 23,2''70 6.9 11,406 35,414 2.1 24,2164 4.3 11,150 39,112 10.4 26,900 10.9 12,212 43,978 12.4 30,7'73 14.4 13,205 44,238 0.6 31,243 1.5 12,995 47,733 7.9 34,109 9.2 13,624 53,004 11.0 38,16:33 13.3 14,371 58,191 9.8 43,1•11 11.6 15,080 62,312 7.1 47,040 9.1 15,272 64,179 3.0 48,5078 3.3 15,601

6.9 8.4


Traffic in 1991

GROWTH (%)

1.8 1.0

.(2.2] 9.5 8.1

(1.6) 4.8 5.5 4.9 1.3 2.2

3.3

6. Preliminary estimates prepared by ICAO indicate that total passenger traffic (passenger-kilometres) of the world's scheduled airlines decreased by some three and a half per cent in 1991 as compared with 1990. International traffic declined by 4 per cent while domestic traffic experienced a smaller drop of about 3 per cent. Total freight and mail traffic in 1991 also declined by approximately 3 per cent in terms of TKPs.

7. The economic downturn which began in 1990 gathered pace in· 1991 in most regions of the world, with adverse c:onsequences for air travel demand for the airlines of these regions. The Gulf war had an additional negative impact which was particularly serious for traffic in the Middle East and African regions but was also felt much further afield.

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IV - WORLD AIRLINE FINANCIAL TRENDS

Operating Revenues and Expenses

1. From 1980 to 1990, expressed in terms of current United States dollars, the total operating revenues of the world's scheduled airlines from all their services (scheduled and non-'scheduled, international and domestic, but excluding domestic operations in the Russian Federation) increased at an average annual rate of 8.5 per cent, from 87 6 76 million to 198 700 million. During the same period, the corresponding operating expens~s also increased at an av~rage annual rate 6~ 8~5 ~e~ ~ent, from_88 310 million t~ ·200 ioo million, as depicted 1n Figure 5.

Million U.S.$

FIGURE 5

WORLD SCHEDULED AIRLINE OPERATING . . . REVENUES AND EXPENSES

1980-1990

250,000r-------------------------------------~-------------------------------------,

200,000 t-·············

150,000 t-···············

50,000

0

fJJ] OPERATING PQq OPERATING [lliJ REVENU~S ~ EXPENSES

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

Source: ICAO, Reporting Form EF-1 Note: Excluding·domestic operations in

the Russian Federation.

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2. Positive operating results were achieved· throughout the period 1983-1989, while oper_ating losses were experienced during the period 1980-1982 and in 1990 (see Figure 6). The best result, 6.1 per cent of operating revenues was attained in 1988. In 1990,. op~r~ting revenues increased by ~ppr~ximately 11 per cent from 1989, whet·eas the corresponding operating expenses increased by about 17 per cent, resulting in an operating loss of 0.8 per cent of operating revenues. Preliminary estimates for 1991 _indicate increases over 1990 of some 2 per cent in both operating revenues and costs, for an operating loss of 0.5 per cent of operating revenues.

FIGURE 6

WORLD SCHEDULED AIRLINE OPERATING RESULTS 1980 - 199()

Million U.S.$ 12,000 .---------------·-----~-------,

10,000 !-··----·······

8,000 1---·····----··································································--·····-- ............................. .

6,000

4,000

2,000 ..................................................

(2,000) 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

Source: ICAO, Reporting Form EF1 Note: Excluding domestic operations in


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3. The ·biggest contributor to the operating revenues of world airlines during the 1980:-1990:period was the-North American region •. The airlines of the-

. North American region accounted . for 40.6 per cent of world-wide operating revenues in 1980 and 39.5 per cent in 1990, those of Europe accounted for 30.5 and 30.3 per cent respectively and those of Asia/Pacific 14._7 and 19.6 per cent. The shares of airlines f:rom other regions were significantly lower ranging from 3.9 per cent for Africa and 6.3 per cent for Latin America in 1980 and from 3.0 pe·r cent for the Middle East to 4.3 per cent for. Latin America :m 1990 (see Figure 7}.

FIGURE 7

REGIONAL DiSTRIBUTION OF SCHEDULED AIRLINE OPERATING REVENUES

1980- 1990

3.9%

6.3%

40.6%

1980 U.S. $87,676 million

Ell] AFRICA f22j ASINPAC

II MIDDLE EAST 1:-:!:::::::::::"1 NORTH AMERICA

Source: ICAO, Reporting Form EF-1

Note: Excluding domestic operations in the Russian Federation.

3.4%

4.3%

39.5%

1990 U.S. $199,199 million

~EUROPE

0 LATINAMERICA

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4. The regional distribution of total operating expenses over the 1980-1990 period is similar to that of opE~rating revenues as illustrated in FigureS.

FIGURE 8

REGIONAL DISTRIBUTION OF SCHEDULED AIRLINE · OPERATING EXPENSES

1980- 1990

40.4% 40.3%

1980 1990 U.S. $88,310 million .. u.s. $200,400 million

[7:8 AFRICA E2J ~ASIA/PAC

II MIDDLE EAST 1::::::::::::::::1 NORTH AMERICA

Source: ICAO, Reporting Form EF-1 Note: Excluding domestic operations in


~EUROPE

D LATINAMERICA

YEAR

1980

1981 1982 1983

1984

1985

1986 1987

1988

1989

1990

Average

share

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5. The . distribution of operating revenue~ amongst world airline scheduled passenger, scheduled freight and mail, and non-scheduled services/incidental revenues is depicted in Table 4. Scheduled passenger revenues averaged 77.8 per cent of the total revenue of the airlines over the peri~d 1980-1990.

TABLE 4

WORLD SCHEDULED AIRLINE REVENUE EARNINGS BY CATEGORY

NON-SCHEDULED SERVICES

TOTAL SCHEDULED SERVICES AND· INCIDENTAL REVENUES

OPERATING Pax.& Share of Freight Share of Share of

REVENUES excess total &mail total total

baggage revenues revenues revenues

($ millions) · ($ millions) (%) ($ millions) (%) ($ millions) (%)

87,676 69,290 79.0 10,713 12.2 ·7,673 8.8

92,992 73,795 79.4 _11 ,033 11.9 8,164 8.8

93,240 75,045 80.5 10,720 11.5 7,475 8.0 98,300 77,600 78.9 12,300 12.5 8,400 8.5

105,400 81,720 77.5 14,060 13.3 9,620 9.1

1_12,200 87,000 77.5 15,0~0 13.4 10,200 9.1

124,600 94,900 76.2 17,000 13.6 12;700 10.2 147,000 111 ,6·oo 75.9 19,330 13.1 16,070 10.9

166,200 127,250 76.6 21,430 12.9 17,520 10.5 179,000 137,200 76.6 21,150 11.8 20,650 11.5

198,700 153,290 77.1 . 20,760 10.4 24,650 12.4

77.8 12.4 9.8


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Revenue Yields

6. Historically, airline fares have reflected trends in operating costs. and changing competitive conditions. The t:edu~tions in fares, expressed in real terms, whic;h occurred between 1980 and 1990 are reflected in dec 1 ines in the ·revenue yield per passenger-kilometre and contributed substantially to passenger traffic growth. Figure 9 illustrates the annual ~hanges . in. average passenger yield over the 1980-1990 period (again excluding domestic operations in the Russian Federation). During this period, average world passenger yields measured in real terms (and expressed in U.S. cents per PKP) decreased at a rate of 2.3 per cent per annum.

FIGURE 9

WORLD SCHEDULED PASSENGER YIELD -ANNUAL CHANGE U.S. CENTS PER PKP (REAL TERMS)

1980 -199Qi

Per Cent

8 ~-----------------------------------~----~---------------,

6

2

(2)

(4)

(6)

(8) 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

Source: ICAO, Reporting Forms A-1 and EF1 Note: Excluding domestic operations in

the Russian Federation

7.. As regards airline yields by region of registration, the Middle East experienced the highest average annual declin,e, 4.6 per cent. Latin America and the Caribbean region experienced an iverage annual decline of l.7 per cent, North America 2.7 per cent, Europe 1.8 per cent, Africa 1.6 per cent and Asia/Pacific 1.1 per cent.

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8. During the same period, freight and mail yields measured in terms of real U.S. cents per tonne-kilometre decreased at a rate of 4. 9 per cent per annum.'

Unit Costs

9. For the purpose of this analysis, unit costs have been determined as the cost per available tonne-kilometre (ATKs). Measured in real terms and expressed in U.S. cents, the operating costs per available tonne-kilometre (ATK) of world's scheduled airlines declined by 1.9 per cent per annum between 1980 and 1990, as illustrated in Figure 10.

FIGURE 10

WORLD SCHEDULED AIRLINES UNIT OPERATING COST U.S. CENTS PER ATK (REAL TERMS)

1980 -1990 t-'er Cent

6

4

2

0

(2)

(4)

(6)

(8)

(10) 1980 1981' 1982 1983 1984 1985 1986 1987 1988 ~1989 1990

Source: ICAO, Reporting Forms A-1 and EF-1 Note: Excluding domestic operations in·


10. As regards unit operating costs by region of airline registration, the largest decrease, 4.2 per cent, was observed for the Middle East region, followed by a 4.0 per cent decline. for L?tin America/Caribbe-an, 2.1 per. cent for Europe~ 1.8 p~r tent for Asia/Pacific and 1.3 p~r cent for each of Africa and North America.

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11. Airline operating costs are heavily influenced by jet fuel p_rices. Due to large increases in oil prices in 1979, unit costs rose sharply in 1980 and 1981 with fuel costs accounting· for almost 29 per cent of total costs of scheduled airlines. Unit costs declined during the period 1982 to 1988 primarily as a result of declining fuel prices. In 1988, fuel costs accounted for only 13.3 per cent of total operating costs, as depicted in Figure 11.

FIGURE 11

WORLD SCHEDULED AIRLINES SHARE OF FUEL AND OIL IN OPERATING f.XPENSES

PerCent 1980-1990

30 r-------------------------~-------------------------------~

25

20

15

10

5

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

Source: ICAO, Reporting form EF-1

12. Fuel costs vary widely among reg;Lons., as discussed in Section VI below.

13. In addition to aircraft fuel costs, aircraft utilization, seating capacity and density have an impor~ant impact on unit costs.

Yield and Cost Prospects

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14. The year-to-year trends in yields and operating costs between 1980 and 1990 are depicted in Figure 12.

U.S. Cents

FIGURE 12

WORLD SCHEDULED AIRLINE REVENUE PER TKP AND COST PER ATK (REAL TERMS)

1980 -1990

100 r---------------------~--------------------------------~ REVENUE COST PER TKP PER ATK

80

60 ········· ·······························································································-····································································-························

--- -- -----·-- ... 40 ··································································:···-~--~ .. :-:.~.~--~-~--------·-·-·"'··""·-~--~-~--~.::.~--~--~ .. :::.::-.. : .. : .. : .. ::-.. ~.:::.~.~--~-~--~---

Sourc~ ICAO, .Reporting Forms A-1 and EF-1 Not~: Excluding domestic operations in


15. As previously discussed, operating revenue · in.creases. m 1990. were lower than operating cost increases, large increases in costs occurring in fuel prices and insurance costs during the latter half of the year. Operating expenses per ATK increased by 9.3_ per cent in 1990 in current terms, whereas the yields•measured in terms of revenue per tonne-kilometre performed increased only by 5. 7 per cent, which resulted in an operating loss for 1990. This trend was expected to reverse in .1991 with unit costs increasing at a slower rate than yields because of· a closer tailoril}g _of capacity to demand and the pos~t~ve effects of fue'l price reductions. :However, a ·small operating loss is expected for 1991 because of the estimated decline in traffic.

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16. In order to estimate. future yield and cost prospects, it is important to assess the trends in fuel prices. ICAO doE!S not make its own predictions of fuel prices but follows the opinions of experts in the field. It is apparent. that the underlying factors that influence crude . oi.l and hence jet fuel prices are _often subject to unpredictable politieal events which do not enable forecasts to be made with a . high degree of accuracy. Oil prices. are also extremely sensitive to small variations in output. However, for th~ medium. term, it is expected that the oil prices adjusted for inflation are likely to remain around $20 per barrel.

17. On that assumption, unit costs of scheduled airlines are expected to increase at a rate somewhat below inflation in 1992, followed by increases equal to inflation for the. years 1993 and 199·4. T'he scheduled passenger yields of airlines are expected to increase at the 1rate just below inflation for the year 1992, followed by increases somewhat .higher than inflation for the years 1993 and 1994.

Passenger Traffic Forecast

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V - WORLD AIRLINE OUTLOOK

1. As a· bas is for the traffic forecasts for this study, . econometric analyses were carried out ·to . determine the historical relationship between airline passenger traffic~ economic cycles and airline yield levels. These analyses were ·used to trans late the expect at ions of future global· economic development and yield levels into annual projections of traffic demand for the years 1992;' 1993 and 1994 according to the methodology described in the Appendix. These forecasts were then reviewed in the light of prospective chang'es in other relevant factors which could not be incorporated into the econometric models.

2. While at a global level these models appear to provide reasonably robust results, they have been less adequate at a micro or. r.egional level because of the influence of unique factors and uncertainties ~n the air transport industry during 1990 and 1991.

3. Based on the economic projections presented in Section II above and the airline yield and cost prospects given in Section IV, the following year-by-year traffic forecasts have been developed for the period 1992, 1993 and 1994.

..

Region of Airline

Registration

Africa As is/Pacific

·Europe Middle East lbrth Anerica Latin Anerica/ Caribbean

W:Jrld

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TABlE 5

IQ\0 SCUFDUI.ED PASSEtu:R TRAFFIC FO.RFX.:AST FOR 1992-1994 (Passenger-Kila~Etres PE!rforued)

Actual Estimated Forecast

Average Annual

1980 1990 Growth 1991 Growth 1992 Growth 1993 (Millions) (%) (Hill ions) (%) (Millions), (%) (Millions)

29 724 42 026 3.5 41 150 -2.1 43 850 6.5 45 950 160 120 344 103 8.0 346 980 0.8 374 750 8.0 408 450 365 221 590 358 4.9 549 820 -6.9 558 050 1.5 568 100 28 366 46 951 5.2 .43 151 . -8.1 46 050 6.7 48 550

445 538 782 305 5.8 757 382 -3.2 787 700 4.0 ·833 350

60159 87 356 3.8 87 567 0.2 . 92 400 5.5 97 200

1 089 128 1 893 099 5.7 1 826 050 -3.5 1 902 800 4.2 2 001 600.

Growth 1994 Growth (%) (Millions) (%)

4.8 49 000 6.6 9.0 451 350 10.5 1.8 590 250 3.9 5.4 52 200 7.5 5.8 881 700 5.8

5.2 105 100 8.1

5.2 2 129 600 6.4

4. From the table, it can be seen that, after an estimated decline of three and a half per cent in 1991, world scheduled passenger ·traffic is expected to rise and, in the year 1992, to be slightly above the 1990 level. World scheduled passenger traffic growth is expected to increase from . 4 · per cent 1n 1992 to 5 per cent in 1993 and over 6 per cent in 1994.

5. For the year 1992, passenger traffic of Asia/Pacific airlines shows the strongest regional growth whereas that of European airlines shows the lowest growth, primarily as a result of the socio-economic transition taking place in Eastern Europe. If Eastern Europe were to be. excluded, the growth rate for the· rest of Europe would be about 5 per cent. Passenger traffic of airlines in Africa and the Middle East are forecast to. increase between 6.5 and 7 per cent in 1992; these regions experienced the steepest declines in 1991.

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6. As regards the regional forecasts for 1993 and 1994, continued strong growth is forecast for airlines of the Asia/Pacific region. Airlines of the European region are expected to achieve continued relatively slow but increasing growth, while those of Africa, Latin -America/Caribbean and the Middle East are expected to have reduced growth rates in 1993, but substantial growth in 1994. Airlines of the North American region are anticipated to achieve higher growth rates in both 1993 and 1994 as compared with 1992. Further details of the regional forecasts are provided in Section VI below •.

Financial Forecast

7. Financial trends in the airline industry are much more difficult to ascertain than traffic trends, because they are composed of a number of variables and airlines are able, for example, to adjust capacity and manage yields through fare adjustments at relatively short notice to respond to (or to create) changes in demand. In addition, ICAO receives airline financial data only on an annual basis, the period between transaction and reporting is .much greater than for traffic data, and there are significant gaps in reporting. Hence, only global estimates are presented in this study (and exclude domestic operations in the .Russian· Federation, for which no data were available), and these global estimates should themselv.es be regarded as indicative rather than definitive.

8. As regards operating expenses, these depend on forecasts of capacity· (in terms of ATK) and of unit costs (per ATK). Future capacity depends in turn on the response of airlines. to the expected recovery in traffic demand. Because of the emergence of spare capacity in 1991, the growth in capacity in 1992 is expected to be around 1. 5 per cent, which is well below expected traffic growth. The rate of growth of capacity is expected to increase progressively .in 1993 and 1994 towards the forecast· traffic growth rate. The future development of unit costs was discussed in Sect ion IV where it was assumed that they would grow slowly in the short term and more rapidly later. in the forecast period. Together with the assumptions for capacity growth, this implies a growth in operating expenses of about 4 per cent in 1992, 1993 and 1994 (or above the rate of inflation in 1992 and close to it in 1993 and 1994).

9. As regards operating revenues, these have been developed from the scheduled passenger traffic forecasts above and the assumptions in passenger yield presented above, adjusted to reflect traffic and revenues from other sources (such as freight, mail and non-scheduled operations). On this basis, it is estimated that world airline revenues (excluding domestic operations in the Russian Federation) will increase from 203 billion U.S. dollars in 1991 by 7 per cent, 11 per cent and 12 per cent respectively in 1992, 1993 and 1994 (4 per cent, 7 per cent and 8 per cent in constant dollars).

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10. The operating result for the world's scheduled airlines is the difference between operating revenues and expenses, which are both subject to significant margins of error, and cannot therefore be forecast with. any reasonable degree of certainty. Nevertheless, th~ ~hove estimates of operating revenues and expenses imply some improvement over the period 1992 to 1994 in the operating result of -0.8 per . cent of operating revenues 1n 1990 and estimated -0.5 per cent in 1991•

AFRICA

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VI - AIRLINE TRENDS AND OUTLOOK BY REGION

Economic Environment

1. During the 1980-1990 period, the aggregate African economy grew at an average annual rate of 1. 7 per cent, although GDP per capita fell at 1.4 per cent. The year-to-year changes in the region's GDP and GDP per capita are illustrated in Figure 13.

Per Cent 8

FIGURE 13

GOP, GOP PER CAPITA GROWTH· AFRICA REAL TERMS, 1980 - 1990

Source: I M F, Wharton Econometrics Services

2. Economic conditions in this region continued to be adversely affected by the external environment, particularly slower growth in export ma~kets and declining terms of trade, and the region has faced increasing difficulties in foreign debt servicing.

3~ ·For 1991, the real growth of GDP was expected to be around 2.2 per cent. In 1992, an improved external environment is expected, reflecting the recovery of world markets, the restoration of trade with the Middle East after the Gulf crisis and a slight increase in non-fuel commodity prices. The economy of the African region is projected to increase at 2.8, 2.6 and 3.5 per cent for the years 1992, 1993 and 1994 respectively.

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Airline Traffic Trends

4. Over the 1980-1990 period, scheduled passenger traffic of airlines of the African region increased at an average annual growth rate of 3.5 per cent in terms of passenger-kilometres performed (PKPs) compared with the world annual average of 5. 7 per cent. The year-to-year traffic growth comparison between world and African airlines is illustrated in Figure 14.

FIGURE 14

SCHEDULED PASSENGER TRAFFIC GROWTH (PKPs)

1980-1990 PerCent

15 ~------------------------------------------------------~

10 ...... ~~-~-. ·································· ····························•·•··•••······· ··························•············•••···•·············•·······

" " ······~····························· ············;~·····························································

' " .. ... 0 ~----------------------------~-----~r-----------------__,

(5)

(1 0)

" ' ' I

" I ·······································································································~·········································································

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990


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Airline Financial Trends

5. During the 1980-1990 period, operating revenues of the scheduled airlines of the African region increased at an average annual rate of 7.1 per cent, compared with an average annual growth rate of 8.5 per cent for the world·. Operating expenses for the same period increased by 6.8 per cent per annum. Positive operating results were achieved in 1983 and from 1988 to 1990, as illustrated in Figure 15.

6,000

5,000

4,000

3,000

2,000

1,000

FIGURE 15

SCHEDULED AIRLINE OPERATING REVENUES AND EXPENSES

AFRICA, 1980 - 1990 .

-··········································································································································-·

s

1980 1981 1982 1983 1984 .1985" 1986 .1987 1988 . 1989 1990

SoUJrce: ICAO, Reporting Fonn EF-1

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6. For the 1980-1990 period, average scheduled passenger ·yields for airlines of the region measured in terms of cents per PKP declined at an average annual rate of 1.6 per cent in real terms compared with a 2.3 per cent decline for the world •. · The year-to-year -comp9risons of the changes in passenger yield of African and world airlines are illustrated in Figure 16. Throughout the period concerned, the region's airlines achieved a higher average yield level in comparison with the world average.

Per Cent

FIGURE 16

SCHEDULED PASSENGER YIELD -ANNUAL CHANGE. U.S. CENTS PER PKP (REAL TERMS)

1980-1990

20~----------------~~--------·----------------------~------~

10 ' \

, ,

. .. ···············································~·'!. .... ~., ..................................... .

, , .... , , ,

,

0~--~--------------~----------~-.~~----~~------~----~~~~~~~

(10) ' , , \ I

.................... \ ..... ,. .............................................. \··,··· ............ , .......................... , ........................................................................................... .. ,, ' \ I

I \ I

\ I

•

Source: ICAO, Reporting Forms A-1 and EF-1

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7. Figure 17 illustrates year-to-year changes in the unit operating cost of scheduled airlines of the region compared with those for world airlines. For the 1980-1990 period, cost/ATK expressed in US cents and measured in real terms, declined at. an average annual rate of 1.3 per cent for African airlines compared with the world average decline of 1.9 per cent. In general, the unit cost/ATK for African airlines was significantly higher than the world average. The share of fuel costs in the total operating costs of African airlines varied from a high of about 35 per cent in 1981 to a low of 16 per cent in 1988. In general, fuel costs are higher for African airlines than for any other regional grouping.

FIGURE 17

SCHEDULED AIRLINES UNIT OPERATING COST- ANNUAL CHANGE U.S. CENTS PER ATK (REAL TERMS)

1980-1990

PerCent 20~-----------------------------------------------------------------------------,

15 I~ -~R~~I

······································································································································································· \ , ... ...

I ' 10 .... \. .................................................................................................................... , ............... , ........................................................................ :

\ ,' ' - - ~ - - -----~ ", \ ., '

5 ........ 1 .................................. : ........................................................................ .1 ......................................................................... ~ .................... . \ I \

I \ I

(5)

(10) .

Source: ICAO. Reportin~Forms A-1.and Ef-1

Airline Passenger Traffic Forecast

B. As illustrated in Table 5 in Section V, the scheduled passenger traffic for the airlines of the African region is expected to increase by about 6.5, 5 and 6.5 per cent respectively for the years 1992, 1993 and 1994, compared with world airline growth of 4, 5 and 6.5 per cent.

ASIA/PACIFIC


9. During the at an average annual year-to-year changes illustrated in Figure

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1980-1990 period, the aggregate Asia/Pacific economy rate of 8.0 per cent, the highest regional groWth. in the region's GDP and GDP per capita growth

18.

FIGURE 18

GOP, GOP PER CAPITA GROWTH- ASIA/PACIFIC REAL TERMS, 1980-1990

Per Cent

grew The are

8 ~-----------------------------------------------------------------------,

6

4

2

0

1980 1981 1982 1983 1984 198!5 1986 1987 1988 1989 1990


10. The medium-term outlook for the region features marked differences in performance between several rapidly growing economies and· the rest of the region. The economic growth of Japan is anticipated to slow to 2.9 per cent in 1992 and 3.6 per cent in 1993 compared with an estimated 4.5 per cent in 1991. The economies of the Pacific basin are expected to continue to ·expand. Australian and New Zealand economies, after experiencing a significant slow-down during 1990 and 1991, are forecast to recover during 1992 and achieve growth rates over 3 per cent annually during the years 1993 and 1994.

11. The expected real economic growth of the Asia/Pacific region as a whole was 5.3 per cent for 1991. For the years 1992, 1993 and 1994, the real growth in GDP is expected to be 4.7, 5.6 and 6.1 per cent respectively.

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12. Over the 1980-1990 period, airlines in the Asia/Pacific achieved the highest average annual growth rate in· scheduled. passenger traffic of any region, 8.0 per cent in terms of passenger-kilometres performed (PKPs), which compares with a 5. 7 per cent average annual growth rate for the world as a whole. The year-to-year traffic growth comparison between world and Asia/Pacific airlines is illustrated in Figure 19. The slow-down. in traffic growth in 1989 reflects the slower economic growth in the region in that year.

FIGURE 19

SCHEDULED PASSENGER TRAFFIC GROWTH (PKPe)

1980 -1990

PerCent 16~------------------------------------~---~------------------------------~-.

12

8

4

ASIA/ WORLD PACIFIC ,

,--- --' I I

. , ' .............................................................................................................................................. , ....................... _. ...... , ......................................... .

' , I' I

\ I ',. I

, ,

.................................................................................. .J ............. :"., .............................. ., ...... .

\ , ' , ' I

\ \

'

I \

' \ I

' I ················v·······················7···

' ' \ I I ............................................ .-...... :~......... . ..... ! ...................................................................................................................... , ... 1 .................... .

' , v

1982 1983 1984 1985 1986 1987 1988 1989 1990


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13. During the 1980-1990 period, operating revenues for the scheduled airlines of the Asia/Pacific region increased at an. average annual growth rate of 11.7 per cent, the highest growth amongst the regions. Operating expenses for the same period increased at an average annual rate of 11.4 per cent. Throughout the period concerned, airlines of the region achieved a positive operating result ranging from a low of 1.3 per cent of operating revenues m 1980 to a high of 9.6 per cent in 1988, as illustrated in Figure 20.

Million U.S.$

FIGURE 20


ASINPACIFIC, 1980 - 1990

50,000 r----------------------------,

40,000

30,000

20,000

10,000

0

fi] OPERATING ~ OPERATING LiJ REVENUES ~ EXPENSES

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990


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14. During the 1980-1990 period, average scheduled passenger yields for airlines of the region measured in terms of U.S. cents per PKl' declined at an average annual rate of 1.1 per cent in real terms, compared with a 2.3 per cent per annum decline in yields for the world. The year-to-year comparisons of changes in passenger yield of Asia/Pacific and world airlines are illustrated in Figure 21.

Per Cent

FIGURE 21

SCHEDULED PASSENGER YIELD -ANNUAL CHANGE U.S. CENTS PER PKP (REAL TERMS)

1980-1990

15~---------------------------------~----------------------------------------------, ASIA/

WORLD PACIFIC

10 ..................................................................................................................................................................................................................... .

5

.. , .. I ''

I '' .... ................................................................................................................... 1. ........................ .''!" .. ...:······························································ . , .. , \ ,

, ' , I \

0 ~---~---------~---~.---------------------------~~~------------------~~~~~~~

(5)

(10)

(15)

' ' ' I

, I

\

\ ... ... ..

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

Source: ICAO, Reporting Form A-1 and EF-1

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15. Figure 22 illustra~es year-to-year changes in the unit operating cost of schedule.d airlines of the region compared with those for world airlines. For the 1980-1990 period, cost/ATK expressed in US cents and measured in real terms, declined at an average annual rate of 1.8 per cent for Asia/Pacific airlines compared with the world average decline of 1.9 per cent. In general, unit cost/ATK for Asia/Pacific airlines was significantly lower than the world average. The share of fuel costs in the total operating costs of Asia/Pacific airlines varied from a high of about 32 per cent in 1981 to a low of 15 per cent in 1988.

FIGURE 22

SCHEDULED AIRLINES UNIT OPERATING COST- ANNUAL CHANGE U.S. CENTS PER ATIK (REAL TERMS)

1980-1990 Per Cent

10 ~-----------------------------------------·--------------------------------------------,

5

(5)

(10)

(15)

, .. , , , \

, \ ························································································································~····························\·························································

\ \ ,

····~····························7··· \

\

\ , , ,

,

···············'·········#··············· ·········································································································································································· \ ,

\ , \

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

Source: ICAO, Reporting Form A-1 and EF-1

Airline Passenger Traffic Forecasts

16. As illustrated in Table 5 in Section V, the scheduled passenger traffic for the airlines of the Asia/Pacific region is expected to increase by about 8, 9 and 10.5 per cent respectively for the years 1992, 1993 and 1994, compared with world airline growth of 4, 5 and 6.5 per cent. This is the highest growth forecast for any region foi the period concerned.

EUROPE

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17. During the 1980-1990 period, the aggregate European economy, including Eastern Europe and the Russian Federation, grew at an average annual rate of 1.8 per cent. The year-to-year changes in the region's GDP and .GDP per capita are illustrated in Figure 23.

Per Cent

FIGURE 23

GOP, GOP PER CAPITA GROWTH· EUROPE REAL TERMS, 1980 - 1990

4.6 .------------------------------,

3

1.6

. (1.6)


150<! GDPPERI b6J CAPITA

18. GDP was expected to decline by almost 3.0 per cent in 1991. The economy is projected to decline marginally, by 0.2 per cent, in 1992, but grow by 1.0 and 1.5 per cent respectively in 1993 and 1994.

19. The economic growth for Western Europe is anticipated to be approximately 0.8 per cent in 1991. The economy is forecast to increase by 2.2, 3.0 and 2.7 per cent in 1992, 1993 ·and 1994 respectively. The slow-down in the Western European economy in 1991 can be attributed to high real interest rates and weaker export market growt~.·

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20. Over the 1980-1990 period, scheduled passenger traffic of European airlines increased at an average annual :rat.e of 4.9 per cent in terms of passenger-kilometres performed (PKPs) compared with .the world annual average of 5. 7 per cent. The year-:to-year traffic growth comparison between world and European airlines is illustrated in Figure 24.

FIGURE 21~

SCHEDULED PASSENGER TIRAFFIC GROWTH (PKPe)

1980 -1990 Per Cent

10r-----~==========~------------·--------------~--------------------~~

I W~D E~~~~E I ,, 8

4

2

..................................................... ··~·· ......................................................... \'..... . ... ·;'· ..... ~.' ................................... :::.:;.: ·,;.;.· .,.,. ·""· .. .

... ~, ' \ .................. ""'"~"

\

~-----,

' - ., ' '

, I

I

,

········ ,.,,,,,,,,,,,,, ................................. ,. ............... ., ................ . ,

'

I

.................................. , ...... ...................... ,L ................ ................................................................... ·········.······················································· ' , \ , ,

0 r--------------~~~------------------·--------------------------------------~

(2) 1980 1981 1982 1983 1984 1985 . 1986 1987 1988 1989 1990


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21. During the 1980-1990 period, European airlines' operating revenues and .expenses increased at an ~:tveq:tge annual rate of 8. 5 and 8.3 per cent respectively, close to those of the world airlines. The region achieved positive operating results during 1982-1989, ranging from a high of 7.1 per cent of operating revenues in 1988 to a low of 1.4 per cent of operating revenues in 1982 as illustrated in Figure 25.

FIGURE 25


EUROPE, 1980-1990 Million U.S.$ 70,000 .------------------~-------------.

60,000 IT:J1 OPERATING ~ OPERATING

............................ ································· .!.l!@l. ~~~IJ.E.~. --~--~~.':'!~~-~--- .................................................. .

50,000

40,000

30,000

20,000

10,000

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990


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22. For the 1980-1990 period, average scheduled passenger yields for airlines of the region measured 1n terms of cents per PKP, declined at an average annual rate of 1. 8 per cent in real terms compared with 2.3 per cent decline for the world. The year-to-year comparisons of the changes 1n passenger yields of European and world airlines are depicted in Figure 26. The average yields achieved by European airlines were significantly higher than those of world airlines as a whole during the entire period. The increase of over 17 per cent in European airline yields in 1986 can be attributed to an exchange rate difference resulting from the appreciation of European currencies with respect to the US dollar.

Per Cent

FIGURE 26

SCHEDULED PASSENGER YIELD - ANNAUL CHANGE U.S. CENTS PER PKP (REAL TERMS)

1980-1990

20 ~--------------------------------------------------------------------~

I

. I '

I \

'\

\ 10 ······································································· ······················ ................................. ·········································································

' \ ,. ,. - I ~ ., I

I

I

I

I

\

' \ , I

(1 O) ............... , .................... ,~ ................................. ~~------1 ............................................................................................................................. . .... , , ' \ , ,,

(2~ ~----~-----~------~------~------~------~------~----~-------~-----~ 1980 1981 1982 1983 1984 1986 1987 1988 1989 1990


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23. Figure 27 illustrate.s year-to-year changes in the unit operating cost scheduled airlines of the region compared with those fo~. world airlines. For the 1980-1990 period, cost/ATK, expressed in US cents and measured in real terms, declined at an average annual rate· of 2.1 pe:r cent for European airlines compared with the world average decline of 1.9 per cent. As in the case of passenger yields, a significant increase in unit operating costs registered for airlines of the region in 1986 can be attributed to an exchange rate difference resulting from appreciation of major European currencies with respect to the US dollar. The share of fuel costs in total operating costs of European airlines varied from a high of about 26 per cent in 1989 to a low of 11 per cent in 1988.

FIGURE 27

SCHEDULED AIRLINES UNIT OPERATING COST· ANNUAL CHANGE U.S. CENTS PER ATK (REAL TERMS)

1980-1990 Per Cent

15r-~==========~~------------------------~------------~-----------------. I WORLD E~~~~E I . ,'.......... . ................ ~-----:.-=--~-......J ............................................ , ........... .J ...................... ,.,.. ................................................................. . I \ I.

10 \ I

I \ I

................................................................................................................... l ..................................... \; .............................................. ~ ......... . I I

\ I 5

\

(5) ,

.. ~ .....•.....•••...............••.••.••••.............•••••••..............•..••..•.....•••••...........•••.••••.. , -~ ... -_,'

, , ,'

··············-~·c.············\ ....... · ........... ~.~---······················~-~-~---···························································································································· , (10)

---(15) ·······••••·························•••·· ···········•·············•··········•·••·· ···············•••y•························ ····••·••·••·••·················•••·•·•············•··•••••·•••••••······

(20) 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990



24. As illustrated 1n Table 5 in Sect ion V, the scheduled passenger traffic for the airlines of the European region is expected to increase by about 1.5, 2 and 4 per cent respectively for the years 1992, 1993 and 1994, compared with world airline growth of 4, 5 and 6.5 per cent. The relatively low growth, especially in 1992 and .1993, is anticipated primarily due to thP · unsettled economic conditions in Eastern Europe.

MIDDLE EAST

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25. During the 1980-1990 period, the aggregate Middle East economy grew at an average annual rate of 0. 8 per cent, but within a large range, the largest increase being 7.1 per cent in 1982 and the largest decline 7.7 per cent in 1981. The year-to-year changes in the region's GDP and GDP p~r .capita are illustrated in Figure 28.

Per Cent

FIGURE 28

GOP, GOP PER CAPITA GROWTH~ MIDDLE EAST REAL TERMS, 1980 - 1990

10~--------------------------------~--------~----~

5

0

(5)

(10)

(15) 1980 1981 1982 1.983 1984 1985 1986 1987 1988 1989


26. For the region as a whole, real GDP was expected to decline by about 1.2 per cent in 1991. The outlook for 1992 remains uncertain and depends on the speed of reconstruction in countries most directly affected by the Gulf war. There are considerable differences in performance within the region. Output in Saudi Arabia, for example, is expected to grow rapidly reflecting an expansion in oil production and increased· expenditures associated with the Gulf war.

27. The economy of the Middle East region is projected to increase by 2.9 · per cent for each of the years 1992 and 1993 and 3.9 per cent for 1994.


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28. During the 1980-1990 period, scheduled passenger traffic of airlines of the Middle East region increased at an average annual rate of 5.2 per cent in terms of passenger-kilometres performed (PKPs), slightly below the world average of 5. 7 per cent. The year-to-year traffic growth comparison between world and Middle East airlines is illustrated in Figure 29. Traffic for the region grew faster compared to the world at the beginning of the decade, achieving over 14 per cent growth in 1983. It slowed in the latter part of the decade and declined by 1.7 per cent in 1990, primarily due to the situation in the Gulf.

Per Cent 20

15

FIGURE 29.


1980 - 1990

WORLD MIDDLE EAST ------

• , ' , ' , . , '

- . , ' ···············································;·~····························"··················: ............................................................................................................... ; .... .

I ', . 10

5 , , ,

, , -~--- .,

• ······ ............................ .

' , , • ....... , , '\,'

0~----------------------------~------------------~~

(5) . 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990


A29-WP/15 EC/2

- 41 -


29. During the 1980-1990 period, operating revenues and expenses of the scheduled airlines of the Middle East region increased by 5.2 and 4.8 per cent per annum respectively-, compared with the 8.5 per cent per annum increase of both revenues and expenses of the world' B airlines. The' region experienced positive operating results during the years 1983 to 1987 and in 1989, ranging from about 0.4 to 1.9 per cent of operating revenues respectively, as illustrated in Figure 30.

Million U.S.$

FIGURE 30


MIDDLE EAST, 1980- 1990

7,000 .----;:::============:::::::;-----------------, 6,000

5,000

4,000

3,000

2,000

1,000

0

p;;] OPERATING ~ OPERATING L1J REVENUES ~ EXPENSES

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990


A29-WP/15 EC/2

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30. For the 1980-1990 period, average scheduled passenger yields for airlines of the region measured in terms of cent.s per PKP declined at an average annual rate of 4.6 per cent, compared with a 2.3 per cent decline for the world. The year-to-year comparisons of the changes in passenger yields of Middle East and world airlines are illustrated in Figure 31. Except for the last three years of the . decade concerned, the Middle East airlines achieved higher passenger yields compared with the world averages.

FIGURE 31

SCHEDULED PASSENGER YIELD ·ANNUAL CHANGE U.S. CENTS PER PKP (REAL TERMS)

1980-1990 Per Cent 15r-----------------~======~----------------~

WORLD MIDDLE EAST

10

5

\ ··~··································································································································································~·· ···········································

\ \

\ \

........ , ........................... , .......... ·:····· ············ ................ ·················································· ······························································~···· , \ , ,

, , \

' ,

0 ~--~~~L'----~--------------------~~--------------~~~~~~

(5)

(1 0)

(15)

~ , \ , \ , \ I

······························;·~···:············"\'''': ...................... i.l. ........................... . , , .,. ..., I

-~-~----~ \ I

···························································' ············'-··~·················································································'··~, ......... ' ..................................... . \ , I \ , \ , ', '

1980 1981 1982 1983 1984 1985 . 1986 1987 1988 1989 1990


A29-WP I 15 EC/2

- 43 -·

31. Figure 32 illustrates year-to-year changes in the unit operating cost of the scheduled airlines of the region compared with those for world airlines. For· the 1980-1990 period, cost/ATK e~pressed in US cents and measured in real terms, declined at an average annua,l rate of 4.2 per cent for Middle East airlines, significantly greater than the decline of 1.9 per cent achieved by world airlines. As in the case of passenger yields, except for the last three years of the decade concerned, the average unit cost of Middle East airlines was higher than the corresponding unit cost of world airlines. The share of fuel costs in the total operating costs of Middle East airlines ranged from a low of 11 per cent in 1988 to a high of 19 per cent in 1980.

FIGURE 3~

SCHEDULED AIRLINES UNIT OPERATING COST- ANNUAL CHANGE U.S. CENTS PER ATK (REAL TERMS)

1980 -1990 Per Cent

20 .---------------------------------------------------------,

~I DOLE

EAST ----

'

, ................. ~ ....•.................... , (10)

.... ...... , ..... ' , ... ,

(20) 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

Source: ICAO, Repqrting Forms A-1 and EF-1


32. As illustrated in Table 5 in Section V, the scheduled. passenger traffic for the airlines of the Middle E~st region is expected t~ increase by about 6.5, 5.5 and 7.5 per cent respectively for the years 1992, 1993 and 1994, compared with world airline growth o~ 4, 5 and 6.5 per cent.

NORTH AMERICA


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33. During the 1980-1990 period, the aggregate North American economy grew at an average annual rate of 2. 8 per cent. The year-to-year changes in the region's GDP and GDP per capita are illustrated in Figure 33.

Per Cent

9

6

3

0

(3)

(6)

FIGURE 33

GOP, GOP PER CAPITA GROWTH· NORTH AMERICA REAL TERMS, 1980-1990

···························································································································j

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990


34. The recovery of the United States' economy initially expected during the second half of 1991 did not materialize and consumer confidence has fallen. The Canadian economy was expected to recover in the second half of 1992 after negative growth in 1991. These economies together experienced a real GDP decline of almost 0. 7 per cent in 1991. The economy of the North American region is projected to increase at 1. 9, 3.1 and 3.1 per cent for the years 1992, 1993 and 1994 respectively.


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35. Over the 1980-1990 period, scheduled passenger traffic of airlines of the North American region increased at an average annual rate of 5.8 per cent in terms of passenger-kilometres performed (PKPs), almost exactly the same as the world figure. The year-to-year traffic: growth comparison between world and North American airlines is illustrated in Figure 34.

FIGURE 34


1980 -1990 PerCent

12 ~------------------------------·------------------------------~

8

NORTH WORLD AMERICA

.. .. -- ---•················•··· ···································•·•··················

, , , ,

.. ' ,

--------~--'\

' ' , ' , ·····································································································································~···········

' ' , ' , ,

0 r-------~~------------------------------------------------~

---.-. I --, ,

(~ ~----~--~----~--~----.~--~----~--~----~--~ 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990


A29-WP /15 EC/2

- 46 ...


36. During the 1980-1990 period, the operating revenues and expenses of the scheduled airlines of the North American reg:i,on increased at an average annual rate of 8.2 and 8.5 per cent respectively. North American airlines achie~ed a positive operating result in the years 1983-1989 ranging from a low of 1.3 per cent of operating revenues to a high of 2.4 per cent of operating revenues as illustrated in Figure 35.

FIGURE 35


NORTH AMERICA, 1980 - 1990 Million U.S.$ 100,000 .------------------------------.,

80,000

60,000

40,000

20,000

0

ffiTil OPERATING ~ OPERATING L1J REVENUES ~ EXPENSES

··············································•····································· ............... ····························

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990


A29-WP /1.5 EC/2

- 47 -

37. For the 1980-1990 period, average scheduled passenger yields for airlines of the region measured in ternis of cents per PKP declined at an average annual rate of 2. 7 per cent in real terms c·ompared with a 2 ~3 per cent decline for the world. The year-to~year comparisons of the changes 1n passenger yield of North American and world ·airlines are illustrated in Figure 36. The deep decline in North American yields in 1986 can be attributed to depreciation of the US currency with respect to other major currencies. In general, the passenger yields achieved by the region's airlines were lower than those of the world's airlines.

Per Cent

FIGURE 36

SCHEDULED PASSENGER YIIELD -ANNUAL CHANGE U.S. CENTS PER PKP (REAL TERMS)

1980 -1990

15~---------------------------~------------------------,

\

10

5.

(5) I i' ···········································································

. I

(10) 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 . 1990

Source: ICAO,Reporting Forms A-1 and EF-1

A29-WP/15 EC/2

- 48 -

38. Figure 37 illustrates year-to-year changes in the unit operating cost of scheduled airlines of the region compared with those for world airlines. For the 1980-1990 period, cost per ATK expressed in US cents and measured in real terms, declined at an average· annual rate of 1.3 per cent for North American airlines compared with a world average decline of 1.9 per cent. As in the case of passenger yields, unit operating costs were significantly lower than the world average for this region. The share of fuel costs in the total operating costs of North American airlines varied from a high of 31 per cent in 1981 to a low of 14 per cent in 1989.

FIGURE 37

SHEDULED AIRLINES UNIT OPERATING COST- ANNUAL CHANGE . U.S. CENTS PER ATK (REAL TERMS)

1980-1990 PerCent

8 ~---------------------------------------------------,

' 4 ..

' ' \

NORTH WORLD AMERICA

0~~--~--------------------~------~~~====~--__,

(4)

(8)

(12)

\

\ , ,

, ' , ... \ I

········\""'' """"""'i"'

\ I \ I

, I

••••••t~••················

I

1980 1981 1982 1983 . 1984 1985 1986 1987 1988 1989 1990



39. As illustrated in Table 5 1.n Section V, the scheduled passenger t.raffic for North American airlines is expected to increase by almost 4, 6 and 6 per cent respectively for the years 1992, 1993 and 1994, compared with world airline growth of 4, 5 and 6.5 per cent.

LATIN AMERICA/CARIBBEAN


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40. During the 1980-1990 period, the aggregate Latin America/Caribbean economy grew at an average annual rate of 1.0 per cent. The year-to-year changes in the region's GDP and GDP per capita are illustrated 1n Figure 38.

FIGURE 38

GOP, GOP PER CAPITA GROWTH- LATIN AMERICA/CARIBBEAN REAL TERMS, 1980-1990

PerCent 8 ~------------------------------------------------------,

IIT0] f)(QI GOP PER liliill£l GOP ~ CAPITA

6

4

2·

0

(2)

(4)

(6) 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990


41. After a small decline in real GDP in 1990, it is expected that the real GDP in 1991 for the region will increase by about 2.5 per cent. The average inflation for th~ region is estimated to remain around 150 per cent. Growth for the region for 1992 is projected to be about 1 per cent. With the recovery of export markets, trade diversification and somewhat moderated inflation rates, higher GDP increases of 2.8 and 4.2 per cent are anticipated for 1993 and 1994 respectively.


A29-WP/15 EC/2

- 50 -

42. Over the 1980-1990 period, scheduled passe.nger traffic of airlines of the Latin America/Caribbean region increased at an average annual growth rate of 3.8 per cent in terms of passenger-kilometres performed (PKPs), sign{ficantly below the world annual average of 5.7 per cent. The year~to-year traffic growth comparison between world and Latin America/Caribbean airlines is illustrated in Figure 3~.

Per Cart

FIGURE 39


1980-1990

12~----------------------------~-------------------------,

WORLD LATINAMERICA/ CARIBBEAN ' , , \

, \

8 \ \

··~····························································· ................................... ~ ............. 1

\

\

\ .

\ 4 .............. , ····················

\

\ \

\

'

I ............. l ......................... .

I

I

I

I

I

,

\

\

······••··•••••···· ..... , .................... . ' ..

.. .. I

' ' 0 ~--------~~------~~~---------------------------------------------1 .... . ...

(~ LL----L---~--~----~--~----~--~----~--~--~ 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990


A29-WP/15 EC/2

- 51 --


43. For the 1980-1990 period, operating revenues of the scheduled airlines of the Latin America/Caribbean ·region: increased at an average annual rate of 4.5 per cent, compared with an average annual growth rate of 8.5 per cent ·for the world~ Operating expenses for the same period increased by 5.1 per cent per annum compared with 8.5 per cent for the .world. Positive operating results were achieved in 1980 and from 1984 to 1987, ranging from a low of 0.5 per cent of operating revenues for 1985 to a high of 3.2 per cent of operating revenues for 1986, as illustrated in Figure 40.

Million U.S.$

FIGURE 40


LATIN AMERICA!CARIEIEIEAN, 1980-1990 . .

10,000 .-----------------~------------------------------------,

8,000

6,000

4,000

2,000

[]] OPERATING .I)('S(I OPERATING [iJ REVENUES ~ EXPENSES

1980 1981 1982 .1983 1984 1985 1986 1987 1988 1989 1990


A29-WP/15 EC/2

- 52 -

44. For the 1980-1990 period, average scheduled passenger yields for airlines of the region measured in terms of cents per PKP declined at an average annual rate of 3.7 per cent in real terms compared with a 2.3 per cent ·decline for the world. The year-to-year comparison of the changes in passenger yield of Latin America/Caribbean and world airlines are illustrated in Figure 41. In general, during the decade concerned Latin America/Caribbean airlines achieved lower passenger yields in comparison with the world average.

Per Cent

FIGURE 41

SCHEDULED PASSENGER YIELD· ANNUAL CHANGE U.S. CENTS PER PKP (REAL TERMS)

1980 -1990

~r---------~------------------~------------------------~

10

' \ \

WORLD lATIN AMERICN CARIBBEAN

....... ~ .......................................................................... . ' ' '

' \

1\ , \ , \ I

I

I

or---~~~'T---------~r.-----------------~~~----~----~~--~~~~ \

\ I

\ I \ I

(1 0) \ I \ I \1

.......... , ............ , ................. ·····\················~-1 ......... ··············································· ................................... ~ ....................... . \ I ,

\ I \ I

I

1982 1983


\ I

" 1984 1985 1986 1987 1988 1989 1990

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45. Figure 42 illustrates year-to-year changes in the unit operating cost of scheduled airlines of the region compared with those for world airlines. For the 1980-1990 period, cost/ATK expressed in US cents and measured in real terms, declined at an average annual rate of 4.0 per cent for Latin America/Caribbean airlines compared with the world average decline of 1.9 per cent. Except for the first four years of the decade, unit costs were lower for airlines of this region than for those of the world as a whole. The share of fuel costs in total operating costs of Latin America/Caribbean airlines ranged from a high of about 29 per cent in 1981 to a low of 16 per cent in 1988 _and in 1989.

FIGURE 42

SCHEDULED AIRLINES UNIT OPERATING COST· ANNUAL CHANGE U.S. CENTS PER ATK (REAL TERMS)

1980 ·1990 Per Cent 20~--------------------------------------------------------~

10

(10)

(20}

(30)

E LATlN AMERICA/ CARIBBEAN ----

' \

, ' , \ ,,

I \ I ' I . ................................... , ........... ,. .................... 1, ..................... , ..................................................................................................................... . ',-' \ ,' ,' \ ,

\ , .................................................................................. L:/ ....................................................................... , .............................. ; ..... : ............... .

\

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990



46. As illustrated in Table 5 in Section V, the scheduled passenger traffic for the airlines of the Latin American region is expected to increase by about 5.5, 5 and 8 per cent respectively, for the years 1992, 1993 and 1994, compared with world airline growth of 4, 5 and 6.5 per cent.

A29-WP/15 EC/2

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APPENDIX

METHODOLOGY FOR TRAFFIC FORECASTS

1. Short or medium-term air transport forecasting methods depend heavily on careful analysis of recent trends in the aviation industry and of the operating environment as well as economic and demographic factors affecting air travel and the cost of air travel itself.

2. As a basis for the development of traffic forecasts, econometric analyses were carried out which established a relationship between passenger traffic demand, GDP, GDP/capita and airline yields. Several econometric models were developed at global and regional levels. While at a global level, these models appear to provide reasonably robust results, they have been less adequate at the regional level.

3. Based on forecasts of economic developments and expectations of yield, traffic forecasts for the years 1992, 1993 and 1994 were estimated using the econometric models. The forecast traffic growth rates were then reviewed in the light of recent trends in the airline operating environment and prospective changes in other factors which could not be accommodated in the econometric analyses.

4. The basic model form used for the global analysis is described below:

where:

Y = Passenger-Kilometres Performed (PKP)

X1 Gross Domestic Product in real terms (GDP)

X2 Passenger revenue per passenger-kilometre in real terms (PYIELD)

5. The a, bl and b2 are constant coefficients whose values were obtained by statistical estimation procedures using econometric analysis. b1 and b2 are equal to the elasticities of demand with respect to corresponding x1 (GDP) and x2 (PYIELD), i.e. elasticities of income and price.

6. Using logarithmics, the above relationship was transformed into the equivalent linear relationship ln Y = a + b1lnx2 + b2lnx2. Annual data covering a period of 30 years were used in the subsequent econometric (least squares regression) analysis, with the following results at the global level.

ln PKP = 1.60 + 2.08 ln GDP - 0.66 ln PYIELD (24.7) (6.3)

R = Coefficient of correlation

S.E. = Standard error of the estimate

R2 = 0.999 S.E. = .026

( ) = "t" values of the corresponding coefficient estimates

-END -

international civil aviation organization 22/5/92 … · international civil aviation organization...

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