Current Airline Industry Trends

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Current Airline Industry Trends

• Peter Morris
• Chief Economist, IATA
• PATA Conference, Bali, April 2003

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Economic and Market Background
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Industry fundamentals- Price and load factor
trends 1970-2000
Load Factor
Yield
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A Turbulent Decade for Aviation
Represented 2.9 return on revenues
Source ICAO, IATA Estimate
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Forecasting Challenges

• Traditional Drivers
• GDP
• Journey Price
• Network/ schedule

• Additional Elements
• Congestion
• Security
• Political / War
• Health
• Uncertainty

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Airline industry early in the evolution cycle?
Source ATKearney
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Key current issues

• Weakness of demand- security, SARS, general
  economic, business travel, regional
• Pressures on industry structure and carrier
  financial stability
• Unstable cost base - fuel, insurance, staff
  costs, user charges
• Solutions demand investment, higher prices,
  reduced capacity, lower costs

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The present...
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Regional Traffic by Class
Number of International Scheduled Passengers,
Change on previous year 2002/01
Source ODS Jan-Dec 02
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TRAFFIC CAPACITY TRENDS
International Scheduled Services Change on
same month previous year (02/01/00)
IATA Aviation Information Research
Source IATA Monthly International Statistics
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PASSENGER LOAD FACTOR
IATA International Scheduled Services
(Est.)
IATA Aviation Information Research
Source IATA Monthly International Statistics
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INTERNATIONAL PASSENGER TRENDS
RPK Performance by Carrier Regional Base of
Operations 2000-present
IATA Aviation Information Research
Source IATA Monthly International Statistics
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INTERNATIONAL CAPACITY TRENDS
ATK Performance by Carrier Regional Base of
Operations
IATA Aviation Information Research
Source IATA Monthly International Statistics
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LABOR PRODUCTIVITYRPMs per Employee per Month
(000)
Source ATA
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Corporate Travel TrendsIATA Internet Survey
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Perception of traffic lost during hostilities-
Business Travellers
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Business travel patterns will return to normal
levels within...
55 say more than 1 year
Source IATA On-line Survey 2002/3
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What would encourage you to fly more frequently?
Security was around 50 in Nov. Survey
Includes hassle factor
Source IATA On-line Survey, 2003
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How to achieve Business Travel cost savings?
Source IATA On-line Survey, 2003
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The Business travel message

• Cautious- and crowded, uncomfortable, tiring
• Regional travel likely to hold up better than
  long haul
• Tactical choices being made, and the horizon of
  recovery receding
• War will deter travel significantly
• but...Travel still a necessity

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The future...
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Actual/Forecast Passenger Growth Rates By Region
2001 - 2006
Index Year 2000 100
Source WATS / IATA Passenger Forecast 2002-2006
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Booking Trends to AsPac from France
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International Industry Scenarios
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Summary

• Carriers cut capacity, routes, staff
• Cash becomes primary business criterion
• Short term co-operation urgently sought from
  governments, regulatory authorities and
  suppliers/ partners (airports/ATC/ manufacturers
  etc) to retain industry stability
• Ongoing need for reliable planning/ forecasting
  information

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Thank you for your attention