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Moving into a new era of growth

- Directions and drivers

Peter Harbison, CAPA – Centre for Aviation

CAPA India Aviation Summit, Mumbai, 30 January 2018


1. Fuel prices: a threat?

2. Evolving airline trends in 2017

• Long haul LCCs – wide and narrowbody

• The Gulf carriers: regrouping?

3. The impact of new aircraft technology on route

network planning and airport city pairs

4. It’s now or never for Indian aviation

Basics in uncertain times


The impact of oil prices


Oil prices are important drivers(Brent Crude prices USD)

One month change

Three months change One year change 2016/17

5 year change 2012/17

Jet fuel prices are up 15% in the

past quarter,

and have risen by nearly one

third in the past 12 months


135

130

125

120

115

110

105

100

95

90

85

80

Passe

nger y

ield

/ Load Fa

ctor / P

asse

nger g

row

th

The influence of oil prices:

Pax growth well above

classic multiples

2011 2012 2013 2014 2015 2016 2017 2018 2019

140

120

100

80

60

40

20

Barr

el price

(U

SD

)

10%

8%

6%

4%

Airlin

e o

pera

ting p

rofit (E

BIT

)

Source: CAPA – Centre for Aviation, IATA

$ Passenger growth

Profit

Load factor

Average ticket price

Oil barrel price

USD70

Jan-2011 = Index 100


Long haul low cost in the ascendancy


2012 2013 2014 2015 2016 2017

180%

160%

140%

120%

100%

80%

60%

40%

20%

0%

-20%

-40%

Long Haul LCC Non-LCC Non-LCC * Gulf carriers ~

2012 2.6% 97.4% 84.0% 13.4%

2013 3.0% 97.0% 82.0% 15.0%

2014 3.6% 96.4% 80.4% 16.0%

2015 4.0% 96.0% 78.5% 17.5%

2016 4.6% 95.4% 76.9% 18.5%

2017 5.1% 94.9% 76.9% 18.1%

Market Share

Seat Growth

Seats


2012 9.7m 368.2m 317.6m 50.6m

2013 11.8m 383.2m 323.8m 59.4m

2014 15.2m 408.2m 340.5m 67.7m

2015 17.8m 430.9m 352.4m 78.4m

2016 22.0m 456.8m 368.4m 88.4m

2017 26.1m 486.4m 393.9m 92.5m

Long Haul = Route greater than 4,000km* Non-LCC excluding Gulf carriers

~ Gulf Carriers = EK, EY, QR & TK


2013 21.7% 4.1% 4.1% 2.0%

2014 28.6% 5.7% 6.5% 5.1%

2015 17.8% 5.9% 5.6% 3.5%

2016 23.6% 6.5% 6.0% 4.5%

2017 18.4% 6.7% 6.5% 6.9%LCCNon-LCC

Non-LCC excluding Gulf carriers

5 years’ global int’l capacity growth

Source: CAPA – Centre for Aviation and OAG

Long haul LCCs have more than doubled market share since 2012


The new order arrives: Existing fleets and orders

Aircraft on order with delivery scheduled to 2028

in servicein service

on order

EuropeI – 5,434

O – 1,913

North

AmericaI – 5,409

O – 1,421

AfricaI – 658

O – 118 PacificI – 440

O – 184

South

AsiaI – 591

O – 825

Central

AsiaI – 117

O – 17

NE

AsiaI – 4,451

O – 1,168

Latin

AmericaI – 1,298

O – 701

Middle

EastI – 1,400

O – 1,035

SE AsiaI – 1,449

O – 1,505

Source: CAPA Fleet Database

SE Asia has

1:1 fleet:orders

South Asia has

1.3:1

The great bulk

of these are

narrowbodies

I = In Service

O = On Order


Long haul narrow body

– allowing connections

between smaller city pairs


A320 neoAirAsiaCitilinkGoAir

HK ExpressIndiGo

Jetstar AirwaysLion Air

Lucky AirPeachScoot

Thai AirAsiaVietJet Air

737 MAXLion AirSpiceJet

9 Air

737MAX

A320neo

0 + 234

24% 30%

Full service LCC

Aircraft on order with delivery scheduled to 2028

54 + 1,105in service

in service

on orderon order

Source: CAPA Fleet Database

LH LCC Narrowbody – in service & on order

Particularly important for

under 5,000km connectivity


The Super-Connectors: losing steam?


10 Year Growth rate: 13% p/aSeats ASKs Flights

Emirates 159.4% 177.6% 91.5%

Etihad 210.4% 296.9% 266.1%

Qatar 253.3% 365.9% 185.7%

Turkish 240.5% 372.8% 186.7%

But in 2017 growth was only 0.5%

Emirates: 2.8% Qatar: 0.8%Etihad: -3.6% Turkish: 1.8%

Source: CAPA – Centre for Aviation and OAG

Seats ASKs Flights

The Super-Connectors: losing steam?


The Super-Connectors: Revising strategies

Previously only organic long haul growth; now to network with

flydubai (and 40 787-10s ordered at the Dubai Airshow for Emirates +

225 737Maxs for flydubai)

Reducing in size, dropping partnership strategy, but no new strategy

yet

(Temporarily?) hamstrung by blockade; strong investments, in IAG,

LATAM and Cathay Pacific

Uncertainty at home; reduced expansion plans; new IST airport next

year


India’s last roll of the dice


India’s aviation industry: time is of the essence

• There is a narrow window of opportunity for the privatisation of

Air India

• India’s government needs to establish a clear and transparent

policy environment for foreign (and local) investment

• India’s airports are fast running out of capacity – and the

replacement clock is ticking

Policy

Infrastructure


Why India needs a liberal aviation policy

The vast majority of new aircraft to

be based in India will be single aisle,

narrowbody aircraft

Many of them will operate on routes

of three to five hours – and longer

This creates enormous opportunities

for international connections to and from

smaller Indian cities, opening up new

business markets

With a liberal policy, India’s missed

opportunity as a hub can be revitalised,

as new aircraft types open up smaller

gateways

Source: Boeing Market Outlook 2018


Air India privatisation. This is the last chance

• It’s now or never for Air India• Industry’s pace of change is accelerating

• The economy is performing strongly

• Overall, conditions are as good as they’ll ever get

• In its current form there is limited prospect of growth – or new employment

• It needs a new impetus for expansion

• As long as it languishes, there can be no healthy domestic market

• To secure the best outcome, financially and operationally, the airline should

remain intact


CAPA Airport Capacity Saturation IndexIndia’s airports are fast running out of capacity – and the replacement clock is ticking

Airport Current Capacity

(mn)

Projected

Capacity

(mn)

Saturation date

@ 10% CAGR

Saturation date

@ 12.5% CAGR

Saturation date

@ 15% CAGR

Delhi 64-72.5 90-100 FY23 FY22 FY21

Mumbai 50-52 50-52 FY19 FY19 FY18

Bangalore 20 50-55 FY27 FY25 FY24

Hyderabad 12 50-55 FY31 FY28 FY27

Chennai 23-26 30 FY21 FY20 FY20

Kolkata 24-26 26 FY23 FY22 FY21

Cochin 10 20 FY26 FY24 FY23

Other AAI 90-92 115-125 FY22 FY21 FY21


Thankyou!

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