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IATA Opening Remarks Aleks Popovich Senior Vice President, Financial and Distribution Services (FDS), IATA
Opening Plenary
Welcome Address by Principal Airline Sponsor Keeping on Course Jerry Foran Head of Product Delivery, Revenue Management, British Airways
Opening Plenary
100 years of commercial aviation, what’s next? Tony Tyler Director General and CEO, IATA
Opening Plenary
Economic outlook: Where does the industry come from? Where is it going? Julie Perovic Senior Economist, IATA
Opening Plenary
The demand cycle has been turning up
Source: CPB Netherlands, Markit
Source: Thomson Reuters Datastream
Global industrial production, trade and business confidence
04 05 06 07 08 09 10 11 12 13 1430
35
40
45
50
55
60
65
70
-20%
-10%
0%
10%
20%
International Trade Industrial ProductionPMI Business Confidence
Source: CPB Netherlands, Markit PMI
PMI index level, 50=no change % change o
Air travel growth has been robust
-15%
-10%
-5%
0%
5%
10%
15%
2008 2009 2010 2011 2012 2013 2014
World industrial production and RPK growth
RPK growth
Industrial production
growth
Source: IATA, Netherlands CPB
Variation among regions, but solid overall
Source: IATA
80
90
100
110
120
130
140
150
160
170
2010 2011 2012 2013 2014
Inde
xed
to 1
00 in
May
201
0RPKs by region of airline registration
Middle East
Cycle peak for market total
Middle East
Africa
EuropeAsia Pacific
North America
Cycle peak for market total
Latin America
Passenger business has supported industry revenues
30
40
50
60
70
80
90
150
200
250
300
350
400
450
500
550
600
650
2000 2002 2004 2006 2008 2010 2012 2014
US$
billio
n
US$
billio
nRevenues from passengers and cargo
Passenger revenue
Cargo revenue
Source: IATA, ICAO
But financial performance has been mixed
Source: IATA, Airline Analyst
-15% -10% -5% 0% 5% 10% 15% 20%
ThaiGaruda
Korean AirLan Airline
SIAGOL
Air France - KLMAvianca
LufthansaJapan Airlines
Air CanadaBritish airways (IAG)THY - Turkish Airlines
AirAsiaUnited Airlines
Jet BlueAmerican Airlines
Delta Air LinesRyanair
Southwest AirlinesCOPA Airlines
Operating margins
2014Q2
2013Q2
Part of the difference is capacity
Source: IATA
120
130
140
150
160
170
180
190
200
210
2008 2009 2010 2011 2012 2013 2014
ASKs
billio
nASKs by region of airline registration
Asia Pacific airlines+38%
European airlines+18%
N America airlines+2%
Ancillaries are also making a difference
Source: IdeaWorks, Airline Analyst, IATA
0%
5%
10%
15%
20%
25%
-10% -5% 0% 5% 10% 15% 20%
Ancil
laries
as a
% of
reve
nues
Operating margin, % revenue
Ancillaries and operating profits as a % of revenues
Ryanair
Southwest
DeltaAmerican
Garuda
AirAsia
United
JetBlue
Turkish
Air Canada
JAL
Lufthansa
AF-KLMKorean
LAN
GOL
Overall the picture is improving
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
2000 2002 2004 2006 2008 2010 2012 2014F
% o
f inve
sted
capit
alReturn on capital invested in airlines and their cost of capital
Inadequate returns
Cost of capital (WACC)
Return on capital (ROIC)
Source: IATA
Source: IATA, ICAO
Our passenger forecast service
Source: IATA, Tourism Economics
A joint partnership between:
www.iata.org/pax-forecast
Growth in air travel depends on Asia-Pacific
Source: OECD, Standard Chartered Research
Middle Class in 2009 and projected for 2030
The outlook for China is fragile
Source: IMF
• The IMF still expects the Chinese economy to expand by 7.4% in 2014
• But there are concerns over:
• Sharp decline in house prices • Unregulated borrowing
• A slowdown in China will impact the entire region
Trade and economic openness is important
100
200
300
400
500
600
700
800
900
1000
1100
1200
1300
1400
1500
1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010
Inde
xed
to e
qual
100
in 1
970
Air cargo, air travel, world GDP and world trade
World trade
World air travel (RPK)
World GDP
World air cargo (FTK)
Source: ICAO, Haver, IATA
And impacts business travel growth
Source: IATA, CPB Netherlands
Source: Thomson Reuters Datastream
Premium Passengers and World Trade Growth% Change over year
2008 2009 2010 2011 2012 2013 2014-30%
-20%
-10%
0%
10%
20%
Premium Passengers GrowthWorld Trade Growth
Source: IATA, Netherlands CPB
Trade was expanding faster than local output
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
% ch
ange
over
year
World trade and domestic industrial production growth
World trade
Industrial production
Source: Netherlands CPB, IATA
But the relationship has broken down
Source: Netherlands CPB, IATA
0.5
0.6
0.7
0.8
0.9
1
1.1
1.2
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Ratio of World Trade to Domestic Industrial Production
The event for a century of aviation and beyond Eric Leopold Director, Transformation, IATA
Opening Plenary
More choice and transparency?
Non-Air Air Air Air core
Air un-bundled
Air Value-add
Non-Air
Preferred seating
In-flight meals
Air examples
Early boarding
Checked bags Hotel revenue & commissions
Car rental commissions
Non-Air examples
FFP miles sales
Towards door-to-door?
Door Door
Flight(s) Bus - Train
Bike - Car
Bus - Train
Bike - Car
to
Trip planning Fulfillment – intermodal Delivery – Pax & Bag Real-time
information
Relevance today?
Years of travel history
FFP preferences
Shopping behavior
Business & leisure patterns
The first 10 years of StB
Enhancing passenger end-to-end journey
Shopping Departure Flight Arrival
Tickets
Boarding passes
Bags
Check-in kiosks
Airline self-service
Receipt for misc. orders
Security check-point
Product differentiation
100 years of flying; 50 years of reservation and customer service systems Gary Doernhoefer Consultant, former IATA General Counsel Bryan Wilson Director, Industry Architect, Transformation, IATA
Opening Plenary
1. First computer reservations systems 2. Expansion of reservation systems to travel agency desktops 3. Failure of joint industry efforts leading to the ‘arms race’ fueled by
deregulation 4. Use of CRSs as competitive weapons which attracted government
regulation 5. CAB’s choice not to follow DOJ’s advice on who should pay for CRS use 6. Expansion of CRSs into Global GDSs 7. Combination of ETs and the Internet leading to Direct Sales 8. OTAs to support industry shoppers 9. “Full Content” negotiations
Summary of last 50 years
Aviation: “The Invisible Highway” Brian Terwilliger Film Director, Terwilliger Productions
Opening Plenary
100 years of aviation and beyond: The lense of the customer
Moderator: ↗ Rajan Datar, Correspondent, BBC
Panelists:
↗ Steven J Peterson, Thought Leader, IBM's Global Business Services Travel & Transportation ↗ Brett Snyder, President, Cranky Flier LLC ↗ Brian Terwilliger, Film Director, Terwilliger Productions ↗ Ben Schlappig, Founder and Blogger, One Mile at a Time ↗ James Gichuru Kirubi, CEO, Belvoir Holdings Limited ↗ Jonathan Lieberman, Recruitment Specialist, Allstate Insurance Company of Canada
Opening Plenary
100 years of aviation and beyond: The lense of the customer
Moderator: ↗ Rajan Datar, Correspondent, BBC
Panelists:
↗ Steven J Peterson, Thought Leader, IBM's Global Business Services Travel & Transportation ↗ Brett Snyder, President, Cranky Flier LLC ↗ Brian Terwilliger, Film Director, Terwilliger Productions ↗ Ben Schlappig, Founder and Blogger, One Mile at a Time ↗ James Gichuru Kirubi, CEO, Belvoir Holdings Limited ↗ Jonathan Lieberman, Recruitment Specialist, Allstate Insurance Company of Canada
Opening Plenary
From exclusivity to commodity, is flying still glamorous?
Moderator: ↗ Rajan Datar, Correspondent, BBC
Panelists:
↗ Thella Bowens, President and CEO, San Diego County Regional Airport Authority ↗ José Luis Garza, CEO, Interjet ↗ Christoph Mueller, CEO, Aer Lingus ↗ Marty Salfen, General Manager, Global Travel & Transportation Industry, IBM ↗ Otto de Vries, CEO, Association of Southern African Travel Agents(ASATA)
Opening Plenary