DFWC2021 – The Year of

Recovery?

Patrick LucasVP Economics

ACI World

Outlook 2021

Source: ACI World

The known unknowns

“Reports that say that something hasn't happened are always interesting

to me, because as we know, there are known knowns; there are things

we know we know.

We also know there are known unknowns; that is to say we know there

are some things we do not know.

But there are also unknown unknowns—the ones we don't know we

don't know. And if one looks throughout the history of our country and

other free countries, it is the latter category that tends to be the difficult

ones”Donald Rumsfeld,

former United States Secretary of Defense (Feb 2002)

“We did not know what last year was

going to bring – in Rumsfieldian

terms, we faced an unknown

unknown. This year is different. We

face a known unknown. We know

what the issues are, we just do not

know how to fix them yet.”

Mastering the crystal ball – Outlook 2021The known unknowns

Andrew Charlton,

Aviation Advocacy (Jan 2021)

OutlookGlobal air transport demand

Where have we been?

• A brief history of airport traffic and revenues amidst the pandemic

• Impact of COVID-19

Where are we now?

• Supply side factors

• Demand side factors

• Outlook for 2021

Where are we going?

• Beyond 2021 – Longer term projections & fundamentals

• Industry innovations

The way we were

Source: ACI World

Pre-2020 and 2020 Q1 – Global airport pax traffic

2%

-10%

-56%

Jan-20 Feb-20 Mar-20

5.66.2

6.8

7.7

8.8 9.1

2010 2012 2014 2016 2018 2019

The Good The Bad

Billi

on

pax

YO

Y %

ch

an

ge

Global passenger traffic in 2020

Source: ACI World

-26.3%

-89.4%

-71.1%

-64.1%

Q1 Q2 Q3 Q4

pax

ye

ar-o

ver-

year

%

chan

ge

63% decline as compared to the projected baseline

94.4% pax

decline in

April 9.4 billion pax (projected for 2020)

– 3.4 billion pax (actual for 2020)

6 billion pax loss in 2020

The Ugly

0

1,000

2,000

3,000

Q1 Q2 Q3 Q4

Pax

(mill

ion

s)

-2,124

Baseline

Actual Pax

Global

Estimated airport industry losses for 2020

Revenue losses (billions USD)

28.5

4.513.2 14.8

-10.5

-39.0-34.5 -26.9

Q1 Q2 Q3 Q4

Projected revenues Estimated loss

60 USD112 USD

Total airport industry losses amount to 112 billion USD in 2020 (Largest

losses in Q2 2020)

Source: ACI World

Revenues

What does 112 billion USD in losses look like?

Typical hub airport with over 40 million pax generates 1.3 billion USD per annum

Revenues of the 85 busiest hubs in the world completely wiped out

Source: ACI World

Economics of airports amidst the pandemic

Source: ACI World, Airport Economics Survey n=~900

Collapse in revenues with high fixed costs

60 USD112 USD

Huge airport revenue losses in 2020

(billions USD)

64% decline

55%

>35%

10%

Semi-fixed and

variable costs

Direct fixed

costs

Taxes

Distribution %

of airport costs

Revenues

Global socio-economic impact from COVID-19

Source: ATAG

Pre-COVID versus Post-COVID GDP contribution

In “business-as-usual times”, 57%

of tourists arrive by air – The crisis

has Huge impact on spending and

jobs

Global economic loss from COVID-19

Source: ATAG

$961

$816

$693

$1,000

$491$439

$365 $403

Aviationdirect

Indirect Induced Tourismcatalytic

Bill

ion

s U

SD

Pre-Covid Post-Covid

Pre-COVID versus Post-COVID GDP contribution

$3.5 trillion USD

(pre-COVID)

$1.7 trillion USD

(post-COVID)

LOSS of 1.8

trillion USD

-51.5%

Equates to the GDP of Indonesia and the

Netherlands.

Global job loss from COVID-19

Source: ATAG

Pre-COVID versus Post-COVID jobs supported by aviation

87.7 million jobs

(pre-COVID)

41.7 million jobs

(post-COVID)

LOSS of 46

million jobs

-52.5%11.3

18.113.5

44.8

6.59.7

7

18.4

Aviationdirect

Indirect Induced Tourismcatalytic

Job

s

Pre-Covid Post-Covid

Comparable to the

populations of

Vietnam, DR Congo

and Germany

Direct aviation job loss from COVID-19

Source: ATAG

Pre-COVID versus Post-COVID jobs

4.8 million direct aviation jobs may

be lost due to COVID-19 impact

(-43%)

-34%

Pre-COVID – 55%-60% of jobs with

airport operator or on airport site

• Airlines: -36%

• Airport operators: -34%

• On airport site: -55%

• Civil aerospace: -11%

Where are we now? 2021 Outlook

Source: IATA; Platts, Datastream

Source: IMF, 2020

Real GDP growth

Source: US Bureau of Transportation Statistics

Prices

(fares & inputs)-4.4%

2020

5.2%

2021

Economics of aviation under COVID-19

Demand (income, prices, consumer confidence)

Q3 2020 Air fares

x

Economics of aviation under COVID-19

Consumer confidence (Sense of safety, Vaccine rollout)

Sample of 4,100 respondents

✓Data collection in September 2020

✓Worldwide coverage: 6 regions, 30 countries

76% 60%

Will not travel if self

quarantine needed

COVID-19 infection rates will

dictate travel destinationsSource: ACI World

Pax expectations

Economics of aviation under COVID-19

Demand (income, prices, consumer confidence)

37 24 20 8 2

Phase 1 Phase 2 Phase 3 Limited use Approved (US standpoint)

Source: adapted from New York Times

Pfizer

Moderna

~70% of the population would

need to develop immunity

through exposure or

vaccination to contain the

pandemic and new variants

Vaccine pipeline

Source: adapted from Oxford University, Our World in Data, 30 January

*Vaccination rate on 31st Jan.

% of population

fully vaccinated*

20.7%2.5%

1.7%1.4%1.4%

1.1%1.1%0.9%0.8%0.7%0.6%

0.14%

Israel

United Arab Emirates

United States

Denmark

Iceland

Slovenia

Italy

Malta

Estonia

United Kingdom

Germany

World

4 China

2 Russia

1 Indian

1 UK

Novavax

J&J

Supply side factors

Shrinking supply….Shrinking market

Source: IATA

Capacity reductions

29.7

24.5

2019 2020F

-17.5%

4.5

3.4

2019 2020F

9%

-23%

0.1%

Aircraft fleet

(thousands)Available seats

(millions)

• Fleet reductions in terms of delivery cancelation/deferrals, fleet retirement, lease deferrals

Global capacity for the first quarter

of the year is now standing at

782.2 million compared to 1.258

billion in 2020

38% decline in

scheduled seat

capacity in Q1 ‘21

Source: KAYAK

Economics of aviation under COVID-19Supply side (quarantines, travel restrictions, airline fleet)

The Stringency Index (0-100)

1. School closures

2. Workplace closures

3. Public events canceled

4. Gatherings restrictions

5. Public transport closed

6. Stay at home policy

7. Domestic travel restrictions

8. International travel restrictions

9. Public info campaigns

Source: Hale, Webster, Petherick,

Phillips, and Kira (2020). Oxford

University COVID-19 Government

Response Tracker

Stringency index – Present day Travel restrictions – Present day

Countries with mandatory

quarantines upon arrival are

categorized as partially open

0

5

10

15

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec*

Mill

ion

s

Russian Federation - Domestic

2019 2020

Dec 2020 YTD-24%

0

20

40

60

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec*

Mill

ion

s

China - Domestic

2019 2020

Dec 2020 YTD-31%

0

100

200

300

400

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec*Mill

ion

s (p

ax v

olu

me

s)

2020 2019

-49% -46%

Dec 2020 YTD

-53%

0

100

200

300

400

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec*

Mill

ion

s (p

ax v

olu

me

s)

2020 2019

-87% -86%

Global airport pax traffic –A tale of two markets

Source: ACI World,

*Estimate

International airport pax traffic –

Quarantines and restrictions

Domestic airport pax traffic – Pent up demand?

3%

-10%-63%

-99% -99% -97%-89%

-84% -85% -85%

2%

Dec 2020 YTD

-76%

-11% -51%

-91%-85%

-75%-63%

-56%-52% -50%

India, Japan, Mexico and Thailand

also strengthened domestic pax

Source: ACI World

Baseline scenario – 2023 return

• Effective vaccine(s) mostly distributed

throughout 2021

• Strong rebound in pax confidence and

airlines fleet recovery

Low scenario – 2025 return

• Effective vaccine(s) in 2021 but

complex supply chain requirements

(cold chain)

• Limited vaccine supply with new

variants

• Fear of traveling still present

• Prolonged economic downturn

• Slow airline fleet recovery

Outlook for pax traffic and recovery

Scenario forecasting – Known unknowns

48

63

0

20

40

60

80

100

120

140

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Tota

l Pax

-In

dex

ed

20

19

=1

00

Back to 2019

passenger

Volumes

(Baseline

scenario)

100 25 49 74 93 107 118

2019 2020 2021 2022 2023 2024 2025

International baseline pax forecast(indexed, 2019=100)

100 4674 94 107 117 124

2019 2020 2021 2022 2023 2024 2025

Domestic baseline pax forecast(indexed, 2019=100)

Where are we going? Beyond vaccines, COVID-19,

quarantines, testing, etc.

The demographics of aviation –

~40% of world’s

population

presently resides

in these countries:

China

India

Indonesia

Viet Nam

Fastest growing emerging markets for pax traffic

2020 – 2040

(over 100 million pax per annum) • 80% of the World’s

population resides in

emerging markets and

developing economies

• Growing middle class and

propensity to travel by air

• By 2040, 45% of global

traffic will pass through

airports in the Asia-Pacific

region

Pre-COVID 19 Long term fundamentals still apply

5.8%

5.4%

4.3%

4.1%

4.1%

3.7%

3.6%

3.5%

3.1%

2.9%

Viet Nam

India

China (People's…

Indonesia

Mexico

Russian Federation

Thailand

Turkey

Brazil

Korea (Republic of)Source: ACI World

Impact of COVID-19Innovations have sped up

New Experience Travel

Technologies (NEXTT)

x

Summary –

Impact of COVID-19–

• Immediate impact in 2020: 64% decline in pax; 112 billion USD loss in revenues

• Job loss and economic impact

Demand side factors –

• Consumer confidence hinges on perception of “safety” and vaccine rollout

Supply side factors –

• Travel restrictions, quarantines and airline capacity reductions (short-medium term)

Testing over quarantines to ensure “safe” mobility, connectivity and the benefits of aviation

Vaccine deployment and uptake – The known unknown from a recovery standpoint

Long term fundamentals still apply – markets with burgeoning middle class and working age

populations – Still remains the bedrock for air transport

Industry innovation –

• The seamless and worry-free passenger experience

Thank you

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