Asia Pacific Airline Training Symposium The Business of Aviation Training: Set for Takeoff (? Or !) 8 September 2009Steve Mann Project Director CAPA AeroPark.

Asia Pacific Airline Training Symposium

Why invest in training? (Answer: To prepare for the unexpected and uncertain)!

8 Sept 09 APATS 2009 Hong Kong 2

Source: http://www.pilotfriend.com/humour/jokes/cartoons.htm

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Aviation Training covers a wide spectrum of disciplines, in an ever-changing environment


Safety & Security

Technical Skills

Commercial Skills “Soft Skills”

Pilot Training

Maintenance Eng.

Customer Service

Aircraft Leasing

Revenue Management

Airline/Airport Management

LeadershipFares and Ticketing

ITAir Traffic MgmtAviation Law

Cabin Crew Training

Safety Management Systems

Sales

Airport Charges

Airline Finance & Accounting

Industry Health

Industry Health

RegulationRegulation

Cost

PressureCost

Pressure

Industry

LearningIndustry

Learning

EnvironmentalEnvironmental

Societal Trends

Societal Trends

Aviation Mgmt1 wk

Aviation Mgmt1 wk

Training caters to different markets, from more expensive, regulated training for the few to short

courses for the many


Cou

rse

Cos

t/Len

gth

Potential No. of Students

CPL Pilot Ab Initio 1 ½ yrsCPL Pilot Ab Initio 1 ½ yrs Lic. Aircraft

Maintenance Eng 2 yrs

Lic. Aircraft Maintenance

Eng 2 yrsATCO Ab Initio 10 mths

ATCO Ab Initio 10 mths

Aviation Degree3/4 yrs

Aviation Degree3/4 yrs

Cabin Crew 3 mths

Cabin Crew 3 mths

Pilot Type Rating 3 mths

Pilot Type Rating 3 mths

Fares & Ticketing

1 wk

Fares & Ticketing

1 wk

Regulated

Airport Operations

3 mths

Airport Operations

3 mths

The industry which supplies training is also fragmented from traditional in-house to external


In-houseIn-house

Advantages of In-house:• Core to product/reputation• Control over quality• Instant access• Lack of scale external providers• Scale provides low cost• Ability to in-source work for revenue

Arguments against In-house:•Do not need to own and run, LCC’s•Not always best quality in-house•Cost of instant access, breeds waste•3rd party providers growing scale•Larger 3rd party volume reduces cost•Lack of commitment, marginal pricing

OEMsOEMs

Specialist TrainingOrganisations

Specialist TrainingOrganisations

ServiceOrganisations

ServiceOrganisations

GovernmentsGovernments

Universities/Trade Colleges/ Academies

Universities/Trade Colleges/ Academies

In-sourceIn-source

After a period of strong growth, the aviation industry responded with unprecedented aggression to the crisis

8 Sept 09 6Source: ICAO, IATA

1971 1975 1980 1985 1990 1995 2000 2005 2010f

Traffic Change

Capacity Change

2008 – 2010 forecast

APATS 2009 Hong Kong

DifferentialTraffic-Capacity

Emerging markets grew strongly in the past decade in line with their economies


CAGR%2000 - 08

10.5% pa10.2% pa

14.5% pa

7.3% pa

Source: Centre for Asia Pacific Aviation Analysis, Boeing, IMF, Indian DGCA

China RPKChina GDP Indexed

India RPK

India GDP Indexed

Emerging markets are strongly represented in recent aircraft deliveries


Source: Centre for Asia Pacific Aviation, Ascend Jun 09, CAT Magazine Annual Training Survey Apr 09 (all sims)

China

India

Brazi

l

UAE

Mex

ico

Training industry development in emerging markets lag their aircraft deliveries


Note: Proxy for training industry development, sims per aircraft ordered from Jan 06 – Jun 09; Does nottake aircraft/sim type into account

Source: Centre for Asia Pacific Aviation, Ascend jun 09, CAT Magazine Annual Sim Survey Apr 09

China

India

Brazi

l UAE

Mex

ico

However, LCC’s accounted for almost all growth this decade, 22% in 09 vs 7% in 2000


Source: Centre for Asia Pacific Aviation and OAG

Se

ats

m

A recovery in confidence looks well established, for example in the US

8 Sept 09 11

US Leading Economic Indicators Jan 06 – Jul 09

Source: Conference Board

USA Leading Economic Indicators


And Asia is recovering strongly

• World Bank President Zoelick said he now expected China’s economy to grow by nearly eight percent in 2009 … higher than the World Bank’s official forecast of 7.2% AFP, 2 Sept 09

• Hong Kong’s exports and economy may ‘fully recover’ by the middle of next year as global growth resumes, said Edward Leung, the chief economist at the government backed Hong Kong Trade Development Council

Bloomberg ,3 Sept 09

• Bank of Japan Governor Masaaki Shirakawa said on Monday the Japanese economy is showing signs of recovery, though uncertainty over the outlook remains high Reuters, 31 Aug 09

• “…official data showed India's economy grew 6.1 percent in the three months to June, signalling the country was emerging from the negative effects of the global downturn AFP, 2 Sept 09

• Economists more upbeat… In the second quarter, Singapore emerged from a recession, posting a 20.7% jump in GDP Straits Times, 2 Sept 09


The slowing rate of decline in passenger traffic is starting to look like a sustained trend…

8 Sept 09APATS 2009 Hong Kong

13

Source: Centre for Asia Pacific Aviation and IATA

ACI total passenger number growth: Jul-08 to Jul-09

International demand, capacity & load factors:Aug-2008 to Jul-2009

Source: Centre for Asia Pacific Aviation and ACI

The Middle East has maintained growth reportedly at weak yields


IATA airlines RPK growth by region: Jul-08 to Jul-09

Usually a lead indicator, the rate of decline for freight traffic is also slowing, albeit at poor yield


Source: Centre for Asia Pacific Aviation and ACI

ACI total cargo volume growth: Jul-08 to Jul-09

A recent survey by CAPA found the majority saw profitable growth returning in 12-18 months

8 Sept 09 16

Fastest Growth next 12 months:•China (85%)•Middle East (76%)•India (43%)•Rest of Asia (33%)

Slowest Growth next 12 months•North America (72%)•Western Europe (64%)•Eastern Europe (36%)•= Africa (36%)

Source: Centre for Asia Pacific Aviation Survey, Sept 09


Current priorities are not a surprise: demand, cash and costs

8 Sept 09 APATS 2009 Hong Kong 17Source: Centre for Asia Pacific Aviation Survey, Sept 09

Over the medium term, people and environmental issues are added to demand, cash and costs as key issues


Source: Centre for Asia Pacific Aviation Survey, Sept 09

Over the long term, Asia Pacific and the Middle East will see the greatest growth in traffic and fleet size

8 Sept 09 19

Source: Boeing Current Market Outlook 2008 to 2028; Centre for Asia Pacific Aviation Analysis


Urbanisation, the motor of Chinese growth, is set to continue to drive growth


*

*

205020452040203520302025202020152010200520001995199019851980197519701965196019551950

13% 14% 16% 17% 17%17% 19% 23% 27% 31% 35% 40% 45% 49% 53% 56% 60% 63% 66% 70% 73%Urbanisation % 13%13%

Ch

ina

: T

ota

l Po

pu

lati

on

(00

0’s)

Chinese Urbanisation

(1950 – 2050f)

Source : United Nations, World Urbanization Prospects: The 2007 Revision

And the BRICS countries will climb up the rankings of aviation nations over the next 20 years


Source: ACI Sept 08

Take the Indian example: even with current surplus capacity, the skilled manpower requirements are

significant. How strongly will demand ‘snap back’?


Source/Note: CAPA Analysis, Personnel numbers DGCA 2009, IMF GDP forecasts to 2014. Assumes 3% attrition rate for pilots and maintenance personnel and 8% for cabin crew, 2% per annum productivity improvement (or outsourcing) in maintenance personnel

2008 Complement

Additional reqmt2014 in high growth case

Additional reqmt2014 in low growthcase

Company positions are rewritten during a downturn with new winners emerging


Source: Corporate Executive Board

As we look towards recovery on the horizon, how prepared are you?

• After the biggest shock to the aviation industry ever, growth will return and with it, the skills shortage

• Choices ahead:– Impact of the changing business models and strategies as legacy carriers evolve

• No longer the traditional “lifelong airline man”; different backgrounds, skills• Narrowing the scope of proprietary vs open or shared, cf R&D• Challenging the autarky to keep up with the LCCs• Constrained capital

– Realign to respond to growth shifting to emerging markets (especially BRICS countries)• Need for cost effective models, eg the $2,000 Nano car?• Is the ‘export model’ of training sustainable?

– Renewed focus on employability• Great marketing emphasis on self-funded students?• Degree courses, continuous learning? non traditional career pathways? internationally recognised accreditation? Greater mobility

– Evolving regulatory environment, eg • EASA, MPL• Impact of the “Environmental New Age”

– Need for greater scale, broader discipline and market coverage to provide more compelling offer to major airlines

• Functional silos or broader training service provider covering more disciplines?• Further consolidation, cross border activity?

8 Sept 09 24

Asia Pacific Airline Training Symposium The Business of Aviation Training: Set for Takeoff (? Or !) 8 September 2009Steve Mann Project Director CAPA AeroPark.

Documents

hong kong slide

source slide

mths slide

wk training

business of aviation

aviation industry

regulated training

training industry development