Emerging Markets and Evolving International Traffic ... · Emerging Markets and Evolving...
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Emerging Markets and Evolving International Traffic Patterns Airline Industry Consortium Meeting November 4, 2010 William S Swelbar William S. Swelbar Research Engineer MIT International Center for Air Transportation
Transcript of Emerging Markets and Evolving International Traffic ... · Emerging Markets and Evolving...
Emerging Markets andEvolving International Traffic Patterns
Airline Industry Consortium MeetingNovember 4, 2010
William S SwelbarWilliam S. Swelbar Research Engineer
MIT International Center for Air Transportation
What the Numbers Say11
A Strong 2010, Weakness in 2011?
Global Commercial Airline Profitability
8 20
EBIT Margin (Left) Net Losses (Right)
s (P
erce
nt)
S$B
2
4
6
5
10
15g ( ) ( g )
Rev
enu
es US
-2
0
-5
0
8
-6
-4
20
-15
-10
-8'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10F'11F
-20
Source: IATA
Europe Remains Weak; Asia Pacific Outperforming
Airline Net Profits by Region, US$B
6
2
4
-2
0
-6
-4
Europe Asia Pacific North Latin Middle East Africa
Source: IATA, ICAO
Europe Asia Pacific NorthAmerica
LatinAmerica
Middle East Africa
2009 2010 2011
World Trade and Cargo Slowing but Still Above TrendWorld Trade in Goods and Air FTKs
14.0
13 0
170
160
Ks
e, 2
00
0=
10
0
World Goods Trade Volumes
International FTKs
13.0
150
12.0140
Bill
ion
FTK
of W
orld
Tra
de
120
11.0
10.0
130
Inde
x o
1009.0
110
Source: IATA, Netherlands CPB
90
2000
8.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Emerging Economies Will Fare Better in 2011
Forecasts for GDP Growth
8
5
6
7
2
3
4
0
1
US Japan Europe Asia Pacex Japan
MiddleEast/N
LatinAmerica
World
Source: IATA, EIU
ex. Japan East/N.Africa
America
2010 2011
Large Geographical Differences in TravelGrowth in Passenger Numbers by Flight Segment
20%
25%Within Asia
ver-
Yea
r
5%
15%
10% Middle East/Asia
North & Mid-Pacific
h l i
ange
Yea
r-O
v
-5%
10%
0%North Atlantic
Ch
a -10%
-15%
-20%
Source: IATA
2007-25%
2008 2009 2010
Capacity is Returning, but Less than Demand
International Passenger and Freight Capacity – Seasonally Adjusted
27
26
340
330
ons)
ons)
ASKS26
25
320
310
ASK
S (B
illio
AFT
Ks
(Bill
io
24
23
300
290
280
AFTKs
23
22
280
260
270
Source: IATA
212005 2006 2007 2008 2009
2502010
Tighter Capacity Is Helping to Lift Fares
Load Factors and Fares in International Passenger Markets (Seasonally Adjusted)
81%
80%
420
400
ent)
ay F
are
Average One-Way Fare
78%
400
380
79%
ASK
s (P
erce
erag
e O
ne-
Wa
75%
360
340
76%
77%
Ave
Passenger Load Factor
75% 340
32074%
73%
Source: IATA
2006 2007 2008 2009 201030072%
Air Travel Driven by Business Passengers
Premium Passengers and World Trade growth
25
20
Developed Countries Trade in Goods
5
r Y
ear
15
10
Premium Passenger Numbers
% C
han
ge O
ve 0
-5
-10
% -15
-20
-25
30
Source: IATA
1/06 10/064/06 7/06
-30
1/07 10/074/07 7/07 1/08 10/084/08 7/08 1/09 10/094/09 7/09 1/10 4/10
Delivery of New Capacity Set to Rise
Scheduled Deliveries of New Aircraft, Jets and Turboprops
Other1,400
1,600
OtherMiddle EastNorth AmericaEuropeAsia Pacific
1,000
1,200
1,400
veri
es
600
800
An
nu
al D
eliv
0
200
400
2004 2005 2006 2007 2008 2009 2010 2011
Source: IATA, Ascend
So Yield Gains Likely to Stall in 2011
Global Revenues/TKP, Costs/TKP and Fuel Cost/TKP
Forecast35.0
30 0
105.0
100.0 Fuel Cost/TKP
t
Yield
30.0
90.0
95.025.0
Fuel
Cos
t
Cost per TKP
20.0
15.080.0
85.0
10.0
5.070.0
75.0
Source: IATA, ICAO
0.0‘93
65.0‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11
It’s All About the Emerging EconomiesIndustrial Production Levels
110
115
EmergingEconomies
100
100
in 2
008 105
95
DevelopedEconomies
xed
to E
qual
1
90
85
80Inde
x 85
75
Source: IATA, Netherlands CPB
200570
2006 2007 2008 2009 2010
The airport “balance of power” is shifting in terms of airline seatsairline seats
– Among top 100 global airports, 26 gained in relative position• Asia – 9; Middle East – 5; Europe – 5; South America – 4; North
A i 2America – 2– Europe’s gaining airports can be found in highly concentrated LCC markets
– Among top 100 global airports, 29 lost in relative position• North America – 13; Asia – 9; Europe – 6
– Of 9 airports losing in Asia, 5 can be found in Japan
– Big gainers in relative position• Doha, Bogota, Jakarta and Moscow
– Big losers in relative positiong p• Dublin, Fukuoka and Sapporo
Top 20 Airports Ranked in Terms of Available Seat Miles Flown (ASMs in Billions) November 2010November 2010
Amsterdam4.16
London-LHR9.36
New York-JFK6.36
Paris-CDG6.22
Frankfurt5.90
Tokyo NRT
Beijing-PEK4.86 Chicago-ORD
4.32
4.16
San FranciscoSeoul3.62
N Y k EWR
Los Angeles6.64
Dubai6.23Hong Kong
5.76
Tokyo-NRT5.65
Bangkok5.38
Atlanta4.37
4.05 Madrid3.57
Shanghai3.22
New York-EWR3.15
Singapore-SIN5.39
Sydney3.53
15Data Source: Oliver Wyman planestats.com
3.53
Top 20 of 100 Largest Airports in ASM GrowthNovember 2010 v. November 2008
40%Middle EastOceania
25%
30%
35% S. AmericaEuropeAsia
10%
15%
20%
0%
5%
Doh
a
Jaka
rta
Bog
ota
stan
bul
on-S
TN
ow-S
VO
Dub
ai
ngzh
ou
Lum
pur
rlin-
TXL
lo-C
GH
Osl
o
elbo
urne
ng-P
EK
nhag
en
lo-G
RU
enzh
en
heng
du
rcel
ona
yo-H
ND
16
I
Lon
d o
Mos
co Ha
Kua
la L
Ber
Sao
Pau
l
Me
Bei
jin
Cop
en
Sao
Pau
l
She Ch
Bar
Tok
y
Data Source: Oliver Wyman planestats.com
20 of 100 Largest Airports Experiencing Declining ASMsNovember 2010 v. November 2008
0%
-8%
-6%
-4%
-2%
16%
-14%
-12%
-10%
8%USAEuropeAsia
-18%
-16%
Orla
ndo
Seo
ul
Hel
sink
i
San
Die
go
w Y
ork-
EWR
Bru
ssel
s
ondo
n-LG
W
Las
Veg
as
Mila
n-M
XP
Atla
nta
Lond
on-L
HR
Hon
olul
u
Par
is-O
RY
Tam
pa
Man
ches
ter
Fuk
uoka
appo
ro-C
TS
Toky
o-N
RT
Dub
lin
Ban
galo
re
17
New L
o L
Sa
Data Source: Oliver Wyman planestats.com
Top 20 of 100 Airports Gaining in Relative PositionNovember 2010 v. November 2008
25Middle EastOceania
15
20S. AmericaEuropeAsia
5
10
0
Doh
a
Bog
ota
w-S
VV
O
Jaka
rta
lo-C
GH
ngzh
ou
on-S
TN
lo-G
RU
n Te
gel
nhag
en
stan
bul
ow-D
ME
Lum
pur
Man
ila
hang
hai
ssel
dorf
Dub
ai
Osl
o
heng
du
Seo
ul
18
Mos
cow
Sao
Pau
l
Ha
Lon
do
Sao
Pau
l
Ber
lin
Cop
en I
Mos
co
Kua
la L
Sh
Due
s
Ch
Data Source: Oliver Wyman planestats.com
Top 20 of 100 Airports Losing Relative PositionNovember 2010 v. November 2008
0
-10
-5USAEuropeAsia
-20
-15
AsiaOceania C. America
-25
ew Y
ork-
JFK
shin
gton
-IAD
Seo
ul
Che
nnai
Zur
ich
Osa
ka-IT
M
Phila
delp
hia
Bru
ssel
s
Mex
ico
City
Tam
pa
Bris
bane
Par
is-O
RY
Las
Veg
as
Man
ches
ter
Tok
yo-N
RT
San
Die
go
Hon
olul
u
appo
ro-C
TS
Fuk
uoka
Dub
lin
19
Ne
Was
Sa
Data Source: Oliver Wyman planestats.com
Top 20 Airports in Departures and Commensurate 2 Year Growth RateNovember 2010 v. November 2008
35
40 10%
s)
20
25
30
35
0%
5%
s (T
hou
san
ds
wth
Rat
e
0
5
10
15
15%
-10%
-5%
Dep
artu
re
Gro
w
0
Atla
nta
Chi
cago
-OR
D
Dal
las-
DFW
Den
ver
Los
Ang
eles
Cha
rlot
te
Hou
ston
-IA
H
Bei
jing-
PEK
Lond
on-L
HR
Par
is-C
DG
Det
roit
Fra
nkfu
rt
Mum
bai
Mad
rid
Phila
delp
hia
neap
olis
-MSP
Pho
enix
Mun
ich
Ban
gkok
ew Y
ork-
LGA
-15%
C
H
Min
n
Ne
Source: IATA
Asia-Pacific Region22
Asia Pacific Region
▐ Home to 8 of the Top 20 Airports in the world in terms of seats
▐ Balance of Power Shift is Underway▐ Balance of Power Shift is Underway– Less (Much Less?) about Japan and all about China– China’s economy now bigger than Japan– Tokyo’s gateway status to the region in decline
▐ LCC’s in infancy stage, but promise to leave fingerprints on shape of the market
▐ With JAL in bankruptcy, will there be other legacy carriers in the region that succumb to the new market realitiesthe region that succumb to the new market realities
▐ Southeast Asia promises to be a real battleground
▐ Aircraft technology will continue to permit the overfly of▐ Aircraft technology will continue to permit the overfly of traditional points on the region’s map
Domestic Asia Markets: 14% Market Share for LCCs…..and Growing
Domestic China 58% of Asia-Pac
Top 10 Markets (95% of Total Domestic Traffic)
Domestic IndonesiaDomestic India
Domestic AustraliaDomestic Japan
Half of the top 10 markets
Domestic TrafficLCC market share: 3%
Domestic New ZealandDomestic Philippines
Domestic ThailandDomestic Malaysia
Domestic Rep. of KoreaHalf of the top 10 marketsWith a LCC market share >40%
0 100 200 300 400 500 600 700
Domestic New Zealand
Daily Seats (Thousands)
O h S h d l d Ai liLCC Ai li
Source: Airbus, Ascend January 2009
Other Scheduled AirlinesLCC Airlines
Big Cities, Big Demand – Intra-Asia Demand Concentrated
Beijing Travelers Between Asian
Shanghai
SeoulTokyo
Osaka
Travelers Between Asian Countries:
> 46% want to travel between these cities only
B k k
Hong Kong
Taipeithese cities only
> 91% want to travel from or to these cities
Singapore
Kuala Lumpur
Bangkok
Jakarta
Source: Airbus, IATA Paxis – full year 2008
Domestic China: High Concentration and Fastest Growing Cities (Air Traffic)
45% of the domestic traffic from/to these 3 cities
NDG HEK
PEK
PVG
YNZ
TGOTSNWEF
XUZNKG
YIWLYA
LXA
JGN
XNN
LZO
CIFPEKUYN
TYNCIH
HKG
YIWJJN
CGD
SYK
CKG
LZHXIC
LJGBSD
High Concentration of DemandBeijing, Shanghai and Hong Kong
Fastest Growing CitiesAirport pairs expected to grow above average domestic traffic growth
Source: Airbus
Significant Growth Maintained in Asia-Pacific
RPK Growth: Annual Average 2009 - 2018
CIS8 1%
Europe5.2%
8.1%
North America5.5%
ASIA - PACIFIC
Latin America5 9%
Africa8 6%
Middle East6.1%
7.2%
WorldAsia-Pacific
5.9%8.6%
World’09 – ’18
4.6%’19 – ’28
4.8%20 Year Growth
4.7%
Asia Pacific’09 – ’18
6.4%’19 – ’28
5.5%20 Year Growth
5.9%
Source: Airbus
Middle East Region33
Middle East Region
▐ Much like the LCC’s transformed the US domestic market, the competitive actions in the Middle East will disrupt global traffic flows for any number of European, North American and Southeast Asian carriers
▐ Region is highly dependent on negotiating new bilateral rights to▐ Region is highly dependent on negotiating new bilateral rights to further leverage network. Will they be successful?
▐ Big question is whether the region can support three carriers with similar network goals?similar network goals?
▐ Aggressive low cost expansion will also work to stimulate new demand in many new and emerging markets in various regions
The Middle East Has a Geographical Advantage toAccess the Emerging Market Traffic Flows
8,000 nm
4,500 nm86% World Population
63% World GDP
2,500 nm36% World Population16% World GDPSource: Airbus
Middle East Will Sustain Very Strong Traffic Growth
RPK Growth: Annual Average 2009 - 2018
EuropeNorth America8.2%
Europe5.7% CIS
6.0%
MIDDLE EAST
Asia Pacific6.1%Africa
5.2%
Latin America7.9%
WorldMiddle East
Africa8.7%
World’09 – ’18
4.8%’19 – ’28
4.8%20 Year Growth
4.7%
Middle East’09 – ’18
6.4%’19 – ’28
5.4%20 Year Growth
5.9%
Source: Airbus
Latin American Region44
Latin American Region
▐ A region in its infancy– No reported direct traffic to either Asia or the Middle East in 2000
• Yet Middle East – Latin America traffic forecast to grow 7.9% over next 10 years
▐ 50 percent of the region’s activity centered on Brazil and Mexico– Colombia emerging as an important aviation market
• Avianca does strategic merger with TACA in 2009P U d Chil ff i ifi t id• Peru, Uruguay and Chile offer significant upside
▐ In one of the most interesting consolidation announcements in 2010, LAN announces a merger with Brazil’s TAM
Another alliance fight brewing like in Japan?– Another alliance fight brewing like in Japan?
▐ The Mexicana bankruptcy/liquidation should be of no surprise
▐ The low cost carriers in this region will also have a say in market’s▐ The low cost carriers in this region will also have a say in market s ultimate architecture
– GOL and Azul in Brazil
Commonwealth of Independent States55
Commonwealth of Independent States
▐ Home to one of the world’s fastest growing airports in terms of relative importance – Moscowairports in terms of relative importance Moscow
▐ Countries all below world average in terms of trips per capita
▐ Commodity driven economies represent risk– Export driven economy– As world emerges from recession, commodity price riseAs world emerges from recession, commodity price rise
will be an important contributor to growth
▐ Growth areas to watchNorth America and Asia– North America and Asia
CIS Nations Spread Their Wings
199236 International City Pairs>4,000 Monthly Seats
200056 International City Pairs>4,000 Monthly Seats
2008126 International City Pairs>4,000 Monthly Seats, y , y
CIS Air Traffic Will Grow Faster Than World Average
RPKs Growth: Annual Average 2009 - 2018
CIS
5 2%North America
7.1%
5.2%
Middle East
Europe5.3%
Asia Pacific8.1%Africa
6 3%
Latin America7.3%
Middle East6.0%
WorldCIS
6.3%
World’09 – ’18
4.6%’19 – ’28
4.8%20 Year Growth
4.7%
CIS’09 – ’18
5.8%’19 – ’28
5.6%20 Year Growth
5.7%
Source: Airbus
Africa66
Africa
▐ China, India, Middle East and AFRICA – YES AFRICA - expected to lead the world recovery
▐ Second most populated continent after Asia
▐ Like the CIS, a commodity rich continentA dit i i S d t– As commodity prices rise ….. So do prospects
▐ As political tensions wane, increases in tourism and trade– Considerable foreign investment in recent years
The addition of North American services to the continent is significant– The addition of North American services to the continent is significant
▐ LCC presence in North Africa stimulating new demand
▐ African airlines have less than 50 percent of the continent’s▐ African airlines have less than 50 percent of the continent s market
African Traffic to Grow Much Faster than World Average
RPKs Growth: Annual Average 2009 - 2018
CIS6.3%
North America6.7%
Middle East
Europe4.2%
Asia Pacific
AFRICA
6 7%Latin America
Middle East8.7%
WorldAfrica
Asia Pacific9.0%
6.7%Latin America6.7%
Source: Airbus
World’09 – ’18
4.6%’19 – ’28
4.8%20 Year Growth
4.7%
Africa’09 – ’18
5.8%’19 – ’28
5.4%20 Year Growth
5.6%
North America77
North America
▐ Still home to the largest airports– Largest in terms of departures; smallest in terms of averageLargest in terms of departures; smallest in terms of average
seat size– Growth prospects reflect maturing of the market
• Below average growth rates for worldwide traffic
▐ Growth will occur in the Asia Pacific, Middle East and CIS Regions
– Regions where liberalization will lead to new opportunitiesg pp
▐ Significant consolidation activity underway– Low cost carriers failing to find organic growth opportunities
Regional ca ie s combining– Regional carriers combining• Need to alter business approach as 50-seat jets come off of lease
New Markets, New International GrowthNorth America
RPK Growth: Annual Average 2009 - 2018
CISNORTH AMERICA
Europe3.6%
CIS7.1%
1.6%
Latin America3 6%
Africa6 7%
Middle East8.2%
Asia Pacific
WorldNorth America
3.6% 6.7%Asia Pacific5.5%
World’09 – ’18
4.6%’19 – ’28
4.8%20 Year Growth
4.7%
North America’09 – ’18
3.0%’19 – ’28
3.9%20 Year Growth
3.4%
Source: Airbus
Europe88
Europe
▐ More about Central Europe than Western Europe– Watch out for Turkey and its flag carrier, Turkish AirlinesWatch out for Turkey and its flag carrier, Turkish Airlines
▐ LCC’s are prevalent and growing
▐ Most threatened by Middle East airline activity▐ Most threatened by Middle East airline activity
▐ Consolidation activity – Building intra-continental market strength
– Market still remains highly fragmented so more consolidation activity expected
▐ Will Middle East activity facilitate first global merger?▐ Will Middle East activity facilitate first global merger?
Domestic European LCC Operations Primarily Focused on a Small Number of Key Countries Today
Domestic SwedenDomestic NorwayDomestic France
Domestic UKDomestic Germany
Domestic ItalyDomestic Spain
Domestic PolandDomestic SwitzerlandDomestic Ireland Rep.
Domestic DenmarkDomestic PortugalDomestic FinlandDomestic Greece
Domestic Sweden
Domestic BulgariaDomestic Greenland
Domestic IcelandDomestic Israel
Domestic CroatiaDomestic Romania
Domestic AustriaDomestic Poland
LCC Airlines
Domestic Bosnia & HerzegovinaDomestic Estonia
Domestic NetherlandsDomestic Latvia
Domestic CyprusDomestic Slovakia
Domestic Czech Republicg
LCC Market Share: 22%
Other Scheduled Airlines
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0
Domestic LithuaniaDomestic Macedonia Former
Source: Airbus, OAG, Scheduled seats (millions), Sept. 2006
Europe
RPK Growth: Annual Average 2009 - 2018
EUROPE
North America3.6%
CIS5.3%3.4%
Middle East
Asia Pacific5.2%AfricaLatin America
Middle East5.7%
WorldEurope
4.2%4.6%
World’09 – ’18
4.6%’19 – ’28
4.8%20 Year Growth
4.7%
Europe’09 – ’18
4.1%’19 – ’28
4.8%20 Year Growth
4.4%
Source: Airbus
Concluding Thoughts
▐ Today, largest airport markets remain in North America and Europe– Least interesting in terms of growth opportunities– Mature carriers in the markets will face new and vigorous competition for global traffic
flows– Consolidation on both continents are about building strength to grow internationally.
Less about intra-continental markets.
T d i l l t t ti d l t i t k t▐ Trend is clearly to concentration around largest airport markets– Majority to be in the Asia Pacific region in 20 years– Asia Pacific region is forecast to be largest travel market in 20 years– Critical markets of tomorrow will enjoy one-stop access to virtually any point on the
airline map
▐ Just as uneven describes the economic recovery, uneven will describe how the airline map is redrawn tomorrow
