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To represent, lead and serve the airline industry
The airline business environment in 2012 Brian Pearce Chief Economist, IATA pearceb@iata.org www.iata.org/economcs
Air travel up, cargo stabilizing?
Source: IATA
11
12
13
14
15
16
17
270
290
310
330
350
370
390
410
430
450
2007 2008 2009 2010 2011 2012
FT
Ks
pe
r m
on
th,
bil
lio
n
RP
Ks
pe
r m
on
th,
bil
lio
n
Total air travel and air freight volumesSeasonally adjusted
Source: IATA
Freight (FTKs)
Travel (RPKs)
Impact of Chinese New Year factory closures
Business confidence is starting to turn up
25
30
35
40
45
50
55
60
65
-30
-25
-20
-15
-10
-5
0
5
10
15
20
Confidence I
ndex
% C
hange o
ver
Year
Premium Travel and Business ConfidenceSource: IATA, PMI
Business Confidence
Premium travel growth
World trade is expanding
110
120
130
140
150
160
170
9
10
11
12
13
14
2007 2008 2009 2010 2011 2012
ind
ex o
f w
orl
d t
rad
e, 2000=
100
Billi
on
FT
Ks
World trade in goods and air FTKsSource: Netherlands CPB and IATA
International FTKs(left scale)
World goods trade volumes(right scale)
Source: Netherlands CPB, IATA
Major customers reducing shipments
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
35
40
45
-35
-25
-15
-5
5
15
25
35
45
55
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12
% g
row
th -
Inte
rna
tio
na
l F
TK
s
% G
row
th,
Se
mi-
Co
nd
ucto
r S
hip
me
nts
Semi-Conductor Shipments and Air FreightSource: IATA, SIA
Semi-Conductor Shipments
International FTKs
Source: IATA, SIA
But no business inventory overhang
9
10
11
12
13
14
15
16
17
0.9
1.1
1.3
1.5
FT
Ks (
billio
n)
Inven
tori
es t
o s
ale
s r
ati
o
Inventories to sales ratio
FTKs
Total Business inventories to sales ratio and FTKsSource: US Census Bureau and IATA
Source: IATA, US Census Bureau
Pattern of economic growth driving cargo
China, 35%
India, 12%
Latin America, 9%
US, 9%
MENA, 6%
Euro-zone, 4%
CE Europe, 3%SS Africa, 3%
Share of world GDP growth 2008-2011
Source: Haver
Revival in US confidence points to cargo boost
-35
-30
-25
-20
-15
-10
-5
0
0
20
40
60
80
100
120
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12
Bala
nce e
xpecte
ting im
pro
vem
ent,
net %
Bala
nce e
xpecting im
pro
vem
ent,
index
Consumer confidenceSource: Haver Analytics
China
Europe(right scale)
US
China
Europe(right scale)
US
Source: Haver
Fuel prices new threat to profitability
20
40
60
80
100
120
140
160
180
200Jet Fuel and Crude Oil Price ($/barrel)
(Source: Platts, RBS)
Jet fuel price
Crude oil price (Brent)
Source: Platts, RBS
Close to GDP growth where profits disappear
-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
Wo
rld
GD
P g
row
th
Net
po
st-
tax p
rofits
as %
revenu
es
World economic growth and airline profit margins
Net post-tax profit margin
World economic growth
Source: Haver, ICAO, IATA
Asset utilization strong in passenger business
10
10.5
11
11.5
12
73%
75%
77%
79%
81%
2007 2008 2009 2010 2011 2012
Ave
rage
dai
ly h
ou
rs f
low
n
% A
SKs
Passenger load factor and twin aisle aircraft daily hours(seasonally adjusted)
Twin aisle aircraftutilization(right scale)
Passenger load factor (left scale)
Falling asset utilization problem for cargo
37%
39%
41%
43%
45%
47%
49%
51%
8.0
8.5
9.0
9.5
10.0
10.5
11.0
2007 2008 2009 2010 2011 2012
% a
vaila
ble
fre
igh
t to
nn
e c
apac
ity
Avera
ge d
aily h
ou
rs f
low
n
Freight load factor and freighter aircraft utilization(Seasonally adjusted)
Freight Load Factor
Freighter utilization
Source: IATA, Boeing
Lots of new capacity arriving
0
50
100
150
200
250
300
350
400
2007 2008 2009 2010 2011 2012 2013
Nu
mb
er
of A
ircra
ft
Widebody aircraft deliveries Source: Ascend
Other
Middle East
North America
Europe
Asia Pacific
Source: Ascend
Profitability will weaken but not disappear
-30
-25
-20
-15
-10
-5
0
5
10
15
20
-9.0
-6.0
-3.0
0.0
3.0
6.0
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
F
US
$ b
illio
n
% r
even
ue
s
Global commercial airline profitability
Net post-tax losses(right scale)
EBIT margin(left scale)
Known unknowns and unknown unknowns - risks considered very likely/high impact
Source: World Economic Forum ‘Global Risks 2011’
? ?
?
?
?
?
?
?
? ?
Impact of much higher oil prices in 2012
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
NorthAmerica
Europe Asia-Pacific Middle East Latin America Africa
Regional divergence in net post-tax profits, US$ billion
2011 2012 central forecast 2012 oil price spike
Economic disparities evident past 2 years
70
80
90
100
110
120
2008 2009 2010 2011
Export and import volumes
Emerging economies
Developed economies
Exports
Exports
Imports
Imports
Eurozone competitiveness remain a major risk
80
90
100
110
120
130
140
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Ind
ex e
qu
al t
o 1
00
in 1
99
9
Real exchange rates, based on relative unit labour costs
Germany
IrelandItalySpainGreece
France
30% gap
Source: Haver
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