industry outlook presentation september 2011
TRANSCRIPT
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To represent, lead and serve the airline industry
Updated outlook for theglobal airline industry
September 2011IATA Economicswww.iata.org/economics
http://www.iata.org/economicshttp://www.iata.org/economics -
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Cash flows are being squeezed
-5%
0%
5%
10%
15%
20%
2005 2006 2007 2008 2009 2010 2011
%revenues
EBITDA as % revenuesseasonally adjusted
USairlines
Asia-Pacificairlines
Europeanairlines
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550
600
650
700
750
800
850
900
40
60
80
100
120
140
160
180
2007 2008 2009 2010 2011
Averagein
ternationalreturnfare,
US$
Jetkero
senprices,US$perbarrel
Fuel prices and average fares
Jet kerosene price
(left scale)
Average return fare
(right scale)
Mainly by the rise in fuel costs
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But also due to faltering asset utilization
7.6
7.7
7.8
7.9
8.0
8.1
8.2
8.3
8.4
8.5
8.6
10.2
10.4
10.6
10.8
11.0
11.2
11.4
11.6
2007 2008 2009 2010 2011
Singleaisleaveragedailyhour
sflown
Twinais
leaveragedailyhoursflown
Aircraft utilization
Twin aisle aircraft
(left scale)
Single aisle
aircraft (right
scale)
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Particularly on freight markets
38%
40%
42%
44%
46%
48%
50%
52%
70%
72%
74%
76%
78%
80%
82%
84%
2007 2008 2009 2010 2011
Freightloadfactor,%AFT
Ks
Passengerloadfactor,%ASKs
Total load factors on passenger and freight marketsSeasonally adjusted
Source: IATA
Passengerload factor
Freightload factor
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Fleet changes adding seats at 8%annualized rate
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
-200
-150
-100
-50
0
50
100
150
%chan
geinairlineseats
Changeinoper
atingfleet(a/cper
month)
Airline fleet developmentSource: Ascend
Deliveries Other factors Storage activity % change in seats m-o-m
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Travel has held up but outlook is weaker
-15%
-10%
-5%
0%
5%
10%
15%
30
35
40
45
50
55
60
65
2006 2007 2008 2009 2010 2011
%
changeoveryear
Index
ofbusinessconfide
nce
Worldwide growth in air travel and business confidence
Growth in RPKs(right scale)
Businessconfidence(left scale)
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Freight markets have stopped growing
11
12
13
14
15
16
17
115
125
135
145
155
165
175
2007 2008 2009 2010 2011
Airfre
ightFTKs,billionspe
rmonth
Worldtradevolume,
200
0=100
Air freight volumes and world trade
World trade
(left scale)
Air freight volumes
(right scale)
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Global growth slowing towards critical level
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
-6%
-5%
-4%
-3%
-2%
-1%
1%
2%
3%
4%
5%
6%
1970 1975 1980 1985 1990 1995 2000 2005 2010
WorldGDPgrowth
Netpost-taxprofitsas%revenues
World economic growth and airline profit margins
Net post-
tax profitmargin
Worldeconomicgrowth
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Financial markets expect defaults in Europe
0
2
4
6
8
10
12
14
16
18
Jan-2007 Jan-2008 Jan-2009 Jan-2010 Jan-2011
Government bond yields in Europe
Greece
Ireland
Portugal
Spain
Italy
France
UK
Germany
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The euro zone crisis
Continue to muddle through?Modest haircuts for investorsAgreement to meet FR/IR/PO borrowing needs
If multi-year reforms/austerity implemented
Insufficient to restore solvency
Failed to stop contagion to Italy and SpainECB intervening directly in bond markets
Inflation risk or recession if intervention stopped
An orderly debt default?Need to recapitalize banks in periphery and coreEFSF designed for needs of small group
A disorderly debt default?Contagion/banking crisis
Unilateral action required trigger for Euro breakup?
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Will reinforce medium-term geographicalshifts driven by growth of middle incomes
Global middle class in 2009 and prediction for 2030
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And the potential to better connect largecities, particularly in ASPAC and LATAM
Source: UN, SRS Analyser
5-10 mln
10-15 mln
15-20 mln
> 20 mln
Urban Popn. 2015
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Short-term will add to growth disparities
-1
0
1
2
3
4
5
6
7
8
9
Euro area US Japan Latin America MENA Asia ex Japan
EIU's forecasts for GDP growth
2010
2011
2012
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20
40
60
80
100
120
140
2007 2008 2009 2010 2011 2012
Brent crude oil price and forecasts, US$/b
Futures
19 Sep
Highest
Bloomberg
forecast
Lowest
Bloomberg
forecast
Fuel costs expected to stay relatively high
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0
10
20
30
40
50
60
70
80
90
100
M
ar2006
S
ep2006
Apr2007
Oct2007
Apr2008
Oct2008
Apr2009
Oct2009
Apr2010
Oct2010
Apr2011W
eighte
dScore(50=N
oChange)
Last Three Months
Next Twelve Months
Airline profit expectations weak but positive
Do you expect profitability to improve, decline or not change?
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0
10
20
30
4050
60
70
80
90
100
Mar2006
Sep2006
Apr2007
Oct2007
Apr2008
Oct2008
Apr2009
Oct2009
Apr2010
Oct2010
Apr2011
Weighted
Score
IATA survey of CFOsVolumes - next 12months
Yields - next 12months
Expectations for slower volumes, soft yields
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In this environment we expect profits to bepositive but not strong
-30
-25
-20
-15
-10
-5
0
5
10
15
20
-9.0
-6.0
-3.0
0.0
3.0
6.0
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011F
2012F
US$billion
%
revenues
Global commercial airline profitability
Net post-tax losses(right scale)
EBIT margin(left scale)