CHAPTERGLOBALISATION TRENDS Global Aviation Business Market Trends in Aviation Business Demand for Air Travel
DEMAND FOR AIR TRAVELSource: Tony Tyler, IATA Director General and CEO.EconomyNOW A DAY, the economic threats, such as aEurozone setback, a Chinese hard landing, a USdebt default or an energy price shock have asyet not materialised, with the risk of theseoccurring now also thought to be at a reducedlevel. As a result, passenger air transportationhas again shown its resilience with impressive2013 operating results. Aviation Logistics and Supply Chain Management 034
Demand by Region Old Demand, Passenger demand continued to grow strongly. The increase, is concentrated in emerging markets such as Asia. Airlines in Europe and North America reported a modest expansion compared to the strong growth seen in Africa, the Middle East and Asia. While economic developments in Europe and the US certainly monitoring, most indicators continue to signal further expansion in air travel. Source: Tony Tyler, IATA Director General and CEO.035
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USA pCohpuilantioanpopulation CHINA DEMOGRAPHIC CONCERTRATION COULD LEAD TO MORE CONGESTION Source: IHS Global Insight, Airbus037
THE WORLD OF 2033 WILL BE VERYDIFFERENT FROM TODAYSource: IHS Global Insight, AirbusOLD RICH NEW RICHBEFORE 2013 2013 2023 2033EUROPE 1 US 1 China 1 China 2 USNORTH AMERICA 2 China 2 US 3 India 3 Japan 3 India 4 Japan + 4 Germany 4 Japan 5 Brazil 5 France 5 Germany 6 GermanyAsia-Pacific 6 UK 6 UK 7 UK 7 Brazil 7 France 8 Russia 8 Russia 8 Brazil 9 France 9 Italy 9 Russia 10 Indonesia 10 India 10 Italy GDP ranking based on nominal GDP expressed in US$ Aviation Logistics and Supply Chain Management 038
Demand by Region New Demand, The International Air Transport Association (IATA) announced global passenger traffic results for April showing 3.2% INCREASE IN DEMAND (over the previous April, 2015) Emerging markets are continuing to lead air travel growth, with all regions reporting year-over-year gains.039
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USA pCohpuilantioanpopulation CHINA DEMOGRAPHIC CONCERTRATION COULD LEAD TO MORE CONGESTION Source: IHS Global Insight, Airbus041
THE WORLD OF 2033 WILL BE VERYDIFFERENT FROM TODAYSource: IHS Global Insight, AirbusOLD RICH NEW RICHBEFORE 2013 2013 2023 2033EUROPE 1 US 1 China 1 China 2 USNORTH AMERICA 2 China 2 US 3 India 3 Japan 3 India 4 Japan + 4 Germany 4 Japan 5 Brazil 5 France 5 Germany 6 GermanyAsia-Pacific 6 UK 6 UK 7 UK 7 Brazil 7 France 8 Russia 8 Russia 8 Brazil 9 France 9 Italy 9 Russia 10 Indonesia 10 India 10 Italy GDP ranking based on nominal GDP expressed in US$ Aviation Logistics and Supply Chain Management 042
PASSENGER TRAFFIC There are more than 21,860 passenger aircraft in service, with more than 800 airlines globally. By 2033, this will reach more than 34,800 aircraft. 73% GROWTH THROUGH MULTIPLE CRISES OVER THE LAST TEN YEARS043
PASSENGER TRAFFIC IS OUTPERFORMING August 2014GDP GROWTH Passenger TrafficSource: IHS Global Insight, OAG +5.6%% (Year-over-year)8%6%4%2%0% World real GDP World Passenger traffic-2%-4% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2008 2009 2010 2011 2012 2013 2014 Aviation Logistics and Supply Chain Management 044
WORLD AIRLINE BUSINESS CAN NOT MAKE MONEY Source: IATA, 2015 Profit and loss of airlines worldwide from 2004 to 2015 25 % (in billion U.S. dollars) Profit/ Loss (in Billion U.S. dollars) 30 20 14.7 % 17.3 % 19.9 % 10 5 % 8.3 % 6.1 % 10.6 % 0 -4.6% -10 -5.6% -4.1% -20 -30 -26.1 % 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015045
ANNAUL GROWTH IN GLOBAL AIR TRAFFICPASSENGER DEMANDSource: IATA, 2014Profit/ Loss (in Billion U.S. dollars) 8.1%10 8.8%8 7.1% 6.1%6 5.6% 4.6% 5.3% 5% 42 1.5%0 -1.4%-2 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Aviation Logistics and Supply Chain Management 046
NOT ONLY AIRLINE BUSINESS GROWING Source: IATA Air transport Statistics, 2005 NOT ONLY AIRLINE BUSINESS GROWING BUT BUSINESS ASSOCIATED 315 380 Airlines Airlines Operating Costs 185 Airports 380 54 TOTAL INVESTMENT 38 Manufacturers 51 Maintenance on airline business 26 The total revenue in airlines business 40 315 REVENUE 18 Lessors from their services 11 Related organisations 9 Freight forwarders 43 293 TOTAL REVENUE in related organisations 8 Ground handling Invested Capital 31 Revenue Less profits for airlines business 6 CRS 22 NET PROFITS 10 4 Catering 11 Travel Agents 4 35 2 Fuelling 7 0 50 150 250 350047
RETURN ON INVESTMENT CAPITALSource: IATA Air transport Statistics, 2005BUSINESS ASSOCIATE% Return on investment capital 302520 Fright forwarder Manufacturers15105 Airports Airlines0 1998 2000 2002 2004 1996 Aviation Logistics and Supply Chain Management 048
AIR TRAVEL FAST GROWING EVENT IN MANY CRISIS Source: ICAO, AIRBUS World annual traffic (PRKs - trillions) GULF ASIAN 9/11 SARS FINANCE CRISIS CRISIS CRISIS OIL OIL CRISIS CRISIS 6.0 5.0 73% 4.0 3.0 2.0 1.0 0.0 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013049
GLOBAL MIDDLE CLASS TOMORE THAN DOUBLESource: Kharas and Gretz, AirbusGlobal Middle class 5,375(Million of people)50004000 3,7403000 2,356 2,782 4,4502000 261 Asia-Pacific 679 North America 1,413 2023 Europe & Russia 7,9001000 264 48% 252 World Population 673 % of world Population 679 2033 2013* 8,500 7,200 33% 63% Aviation Logistics and Supply Chain Management 050
AIR TRANSPORT GROWTH IS HIGHEST INEXPANDING REGIONSSource: AIRBUSAdvanced Emerging/ Developing China 6.2 Yearly RPK growth India 2014-2033 Middle East billion Asia +6.0% Africa people Russia Latin America 2014 Eastern Europe Western Europe 1 +4.2% North America Japan billion people 2014 Billion of people will increasingly want to travel by air051
DRIVERS OF PASSENGER DEMAND Source: Global Market Forecast. 2014Key of drivers forcustomer demand; Economics growth; GDP growth, Income growth. Perspective international business tourism. Perspective leisure tourism. Aviation Logistics and Supply Chain Management 052
EMERGING REGIONS UP % TODAY, air passenger traffic is ten times greater5239% than it was 40 years ago. World level: from 19982003 2013 to 2013, the industry grew by 96%. Passenger air traffic was changed follow geographical position,SHARE OF WORLD RPKs level of economic development, air transport maturity.100% Europe 90% 80% NorthAmerica70%60% Russia50% Africa40% Middle East30% Latin America20%10% Asia-Pacific0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2002
TRAFFIC WILL DOUBLE IN THENEXT 15 YEARSSource: Airbus, GMF, 2014World annual PRK* (trillion) ICAO total traffic Airbus GMF 201416 iAnirthteranffiecxtw1ill5doyuebalres14121086 Air etvraefrfiyc1h5as doubled4 years20 1973 1979 1983 1988 1993 1998 2003 2008 2013 2018 2023 2028 2033 * Revenue Passenger Kilometers Aviation Logistics and Supply Chain Management 054
ASIA-PACIFIC WILL LEAD ORIGIN AND AfricaDESTINATION TRAFFIC WORLDWIDE Middle EastSource: ICAO, Sabre GDD, Airbus GMF 2014 Latin America World annual PRK (trillion) Europe 16 North America 14 Asia-Pacific ICAO total traffic Airbus GMF 2014 12 10 8 6 4 2 00552002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
ASIA-PACIFIC WILL ACCOUNT FOR THE LARGEST SHARE OFORIGIN AND DESTINATION TRAFFIC WORLDWIDESource: ICAO, Sabre GDD, Airbus GMF 2014World annual PRK (trillion) Advanced - Emerging - Emerging - Advanced Advanced Emerging16 2.6% 5.0% 6.8% ICAO total traffic Airbus GMF 20141412 42% 28%10 33% 8 25% Advanced - Advanced 6 4 34% 2 0 Emerging - Advanced 38% Emerging - Emerging2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Aviation Logistics and Supply Chain Management 056
DOMESTIC PEOPLE REPUBLIC OF CHINA WILL BE THE LARGEST ORIGIN&DESTINATION TRAFFIC FLOW IN 2013 Source: Airbus GMF 2014 Billion RPK Domestic PRC Domestic USA Intra Western Europe Western Europe - USA Domestic Asia Emerging Asia Emerging - WesternEurope Domestic India India Sub Continent - Middle East Western Europe - Middle East Domestic Brazil Western Europe - PRC PRC - USA Western Europe - South America South America - USA 500 1,000 1,500 2,000 CHINA 11PDORMECST=IC % OF WORLD RPKs IN 2033057
THE DRIVERS OF AIR TRAVEL Source: Dr,Andreas Wittmer, 2014Key of airline businessdevelopment; Today, biggest airline business set ups. Network building. Strongest market in Asia-Pacific; Economic boom and population growth. Know exchange. Customer value. Customer demand; Needs. Etc. Aviation Logistics and Supply Chain Management 058
Sea Rail INTERNATIONAL TOURISTS ARRIVALS 5% 2% EXPECTED TO REACH 1.6 BILLION 1995 Source: World tourism OrganisationRoad 529 million Air48% tourists 45% 1995 45% CAGR* 1995-2012(%) 582012 %6% AIRTOURISTS TRAVELLING BY Worldwide5% 5.5% international arrivals TO THEIR FINAL DESTINATION4% 4.8% by type of 1600 International tourist arrivals (million) border crossing 14003% 12002% 2.3%1% 1.5% 1.610000% 800 Air Road Sea Rail 600 billion*Compound Annual Growth Rate 400 2020 Sea Rail 200 5% 1%Road 2012 Air36% 58% 1,035 million 1995 2000 2005 2010 2015 2020 tourists History Forecast “ ”Tourists travelling by air, has been achieved while energy costs still increasing059
TODAY AND GOOD OLD DAYSource: Diio Mi, DOT Data bank, 2012 1941 VS 2012 BOSTON LA ROUND TRIPAIRFARE TIME STOP AIRFARE TIME STOP$4,397.52 15HRS15MIN 12STOPS $472.52 6HRS15MIN 0STOPSPer person One-way travel time One-way stops Per person One-way travel time One-way stops Adjusted for inflationAdjusted for inflationAir travel today is much more convenient and affordable than in the past.The good old days not necessarily for air travel. Aviation Logistics and Supply Chain Management 060
Tomorrowland The world’s biggest DJs and electronic like having party between different countries. Music lovers from the whole world gather together to listen to the most famous Djs. It takes place once in a year at Belgium at the town of Boom.061
The scale and madness of Tomorrowland can bejudged from the fact that~185,000 PEOPLES FROM 75 COUNTRIES (around the world) 25 AIRLINES Airlines were organised to bring tourists to the festival from all over the world. Brussels Airlines One of 25 airlines were provided a special flights to bring the music lovers around the world. Aviation Logistics and Supply Chain Management 062
WHERE DO CHINESE TRAVEL FLY TO? Source: Chinese-tourist, 2013 LONDON VANCOUVER NEW YORK PARIS SEOUL TOKYO LAS VEGAS MILAN HONG KONG OSAKA SAN FRANCISCO LOS ANGELES ROME BANGKOK TAIPEI HONOLULU PHUKET KUALA LUMPUR SINGAPORE SYDNEY063
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BEFORE 2013 NORTH AMERICANS AND EUROPEANS ARE MOST WILLING TO FLY Source: Sabre (annualised September 2013 data) IHS Global Insight, Airbus 2013 trips per capita 10.00 1.00 Europe North America 22% 0.10 1.6 trips per capita of the population of the emerging 0.01 China ~1 trip per capita countries took a 0 trip a year in 0.25 trips per capita 2013 India * Passengers originating from 0.06 trips per capita respective country 10 20 30 40 50 60 * Bubble size proportional to population 2013 GDP per capita (thousands $US)065
BUT… 2033, CHINA’S POTENTIAL WILLREACH EUROPEAN LEVELSSource: Sabre (annualised September 2013 data) IHS Global Insight, Airbus2013 trips per capita10.001.00 China 2033 66% India 2033 0.95 trips per capita of the population of the emerging0.10 0.26 trips per capita countries took a trip a year in 20330.01 * Passengers originating from 0 10 20 30 40 50 60 respective country 2033 GDP per capita (thousands $US) * Bubble size proportional to population Aviation Logistics and Supply Chain Management 066
FREIGHT TRAFFIC ONE OF THE KEY DRIVERS for the forecasting of the air freight market is trade volume. Trade was more severely impacted than GDP during the last financial crisis. 2.8%TRADE GREW AT A ANNUAL PACE067
TRADE MORE THAN IMPACTED THAN GDPDURING THE LARST ECONOMIC CRISISSource: IHS Global Insight, Airbus TradeGDP(left axis) and Trade(right axis) evolution(Trillion 2010 $US) GDP160 60 50140 2013-2033 40120 2008-2013 +3.3% / year 30+2.1100 2000-2008 % / year 20 1080 +3.2% / year 06040 2013-203320 2000-2008 2008-2013 +4.3% / year +5.9 +2.8% / year % / year0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 Aviation Logistics and Supply Chain Management 068
EMERGING MARKET WILL REPRESENT 3/4 OF TOTAL AIR FREIGHT TRAFFIC IN 2033 Source: Seabury, Airbus Emerging - Emerging *CAGR +6.2% Advanced - Advanced *CAGR +2.7% AS FOR THE PASSENGER TRAFFIC Advanced - Emerging *CAGR view the future development in the air freight +4.9% market will be the dynamism of the emerging economies. The emerging countries represents Emerging - Advanced *CAGR the largest share on total air freight traffic. +5.0% * Compound annual growth rate069
EMERGING MARKET WILL REPRESENT 3/4OF TOTAL AIR FREIGHT TRAFFIC IN 2033Source: Seabury, Airbus World annual PRK (trillion) 450 400 +6.2% Emerging - Emerging +2.7350 % Advance - Advance +4.9300 % Advance - Emerging +5.0250 % Emerging - Advance 200 150 100 50 0 Aviation Logistics and Supply Chain Management 0701993 1997 2001 2005 2009 2013 2017 2021 2025 2029 2033
PEOPLE REPUBLIC OF CHINA - NORTH AMERICA WILL BE THE LARGEST FLOW IN 2033 Source: Airbus GMF 2014 Billion FPK PRC - North America PRC - Europe Europe - PRC Europe - North America North America - Europe North America - PRC North America - Asia Advanced Europe - Asia Advanced Asia Emerging - North America Europe - Asia Emerging Europe - South America Indian sub - Europe PRC - South America South America - North America 0 5 10 15 20 25 30 35 40 45 CHINA - NORTH AMERICA071
FUTURE FREIGHTER FLEET DISTRIBUTION WILL REFLECTTHE GROWING INFLUENCE OF EMERGING MARKETSource: Airbus GMF 2014, Air freight 977 452775 337 798 Europe & Russia 303North America 4986 170 Asia Pacific 67Asia-Pacific 5.0% 162 Africa Middle EastAfrica 4.6% 74Russia 4.6%Latin America 4.6% Latin AmericaNorth America 3.2% 4.5% WorldEurope 4.3% North America is mainly aMiddle East 4.4% replacement market. But…Asia-Pacific will be triple. Aviation Logistics and Supply Chain Management 072
FTK Freight traffic growth over the next 20 years Freight ton kilometre 4.5% (Billion yearly) In 2013 In 2033 188 435 Freighter deliveries Freighter delivery over the next 20 years Conversion New built 1,500 188 435 1,145 Freighter in 2033 1,000 414 500 731 Small 612 601 612 775 389 Mid-size Business volume 1,242 (Billion yearly) Mid-size Large 212 Large 0 Small Mid-size Large 778 80 130 10t < payload < 30t 30t < payload < 80t payload > 80t073
SMALL FREIGHTER DEMAND Feeders for entrepreneur. Transport over terrain when other modes ofSource: Global Market Forecast, 2014 transport are difficult or impossible. As a link for isolated populations.World deliveries: 612 Asia- Pacific North America 311 86 Europe 81 Russia 7Small Middle EastFreighter 621% of today’s in Latin America Africaservice fleet 82 391,400hours per yearsaverage utilisation Aviation Logistics and Supply Chain Management 074
MID-SIZE FREIGHTER DEMAND Mid-size freighter are used for inter-regional operations, with intra-regional markets Source: Global Market Forecast, 2014 expected to become more significant in the coming years. World deliveries: 1,145 Mid-size freighter are also used by North America entrepreneur who typically need a capacity of aircraft sizes to optimise their networks. 615 Europe Russia 159 35 Asia- Pacific 188 Mid-size Middle East Freighter 53 47% of today’s in Africa service fleet 28 New Build hours per years average utilisation 3,700 Converted hours per years Latin America average utilisation 1,950 67075
LARGE FREIGHTER DEMAND Large freighter are mainly used on long-haul operations between the three main markets:Source: Global Market Forecast, 2014 USA, Europe and Asia.World deliveries: 601 Asia- Pacific North America 220 182 Europe Russia 77 23Large Middle EastFreighter 8132% of today’s in Latin America Africaservice fleet 1 174,000hours per years averageutilisation Aviation Logistics and Supply Chain Management 076
THE EXPRESS MARKET Source: Seabury. 2014 The air cargo express market increased by Express cargo General cargo 5% in 2013, in comparison to a stagnation for general freight. International air freight growth comparison, general cargo VS. express cargo The international express market has been in general more resilient to crises. It has 25% Growth rate 25% grown 50% since 2006. 20% 20% The express market accounts for 16% of total international air freight. 15% 11% 8% 5% 10% 4% 4% 0% High tech products and heavy machinery 5% are the significant areas for the express 0% 1% -1% market. -5% -5% -3% While the domestic express market is -10% -7% increasing very slowly in the US; the -15% -12% express market is booming in China. 2007 2008 2009 2010 2011 2012 2013077
COMPOSITION OF AIR CARGOSource: Air freighter, 2014 Live animals Raw materials industrialConsumer consumables & foods personal Machinery parts, Components, Customer Suppliers &fashion goods manufacturers Land vehicles, World wide & parts air cargoTemperature orclimate control Capital equipment Chemicals products Special HandlingSome of products follow a behaviour High-tech productsNOT directly related Perishables need to be carried quickly enough. Some high value chemicals and pharmaceuticalsto transportation cost: are not transported by sea because of prohibitive insurance costs. Aviation Logistics and Supply Chain Management 078
THE DIFFERENT COMPOSITIONOF AIR CARGOSource: Airbus GMF 2014, Air freightLive animals 10% 29% 15% 27%Consumer personal & 6% 6%household goodsConsumer fashion goods 11% Japan 4% EuropeLand vehicles & parts North America 8% North AmericaTemperature or climate controlCapital equipment & machinery 1% 6% 10% 7% 3% 7% 2% 27% 7% 14% 52% 46%High technology items 1% 6% 12%Secure or special handling 7% 1% 1% Chemical products 20% Asia Machinery parts, Components, North America supplies & manufactures Raw materials, industrial 4% 44% consumables & foods 2%2%079 80%
DRIVERS OF AIRFREIGHT GROWTH Source: Global Market Forecast. 2014Key of drivers for airtraffic growth; Economics growth and trade growth. Globalisation of exchanges and free trade agreements. Expanding middle class demanding higher added value products. Increasing urbanisation. Increasing industrialisation. Aviation Logistics and Supply Chain Management 080
North America The North American cargo fleet is the largest today with 775 units and will remain the largest in 20 years time. Overall the US cargo market is expected to grow at 3.4% yearly. 90% of the US domestic market is performed by express carriers.Asia-Pacific Over 350 dedicated freighters are flown for Asia-Pacific air cargo traffic is expected to grow the domestic US market. at 5.3% per annum over the next 20 years. 77% of the freighter deliveries in North 20 years ago, 25% of air freight was to or from America will be for replacement. Asia-Pacific. In next 20 years, it's will reach 40% Today, 1 billion people are considered as middle classed in Asia-Pacific. By 2033, there will be 3.7 billion middle classed, almost 50% more than today’s total middle class. Asia-Pacific will also develop trade with other emerging regions and countries, faster than with the “west”.081
THE DRIVERS OF AIR AIR TRANSPORTTRANSPORT DEVELOPMENT MARKET Source: Dr,Andreas Wittmer, 2014Key of air transportdevelopment; Technology development Regulation Economic growth Aviation Logistics and Supply Chain Management 082
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