Future Of Aviation Advisory Committee Future Of Aviation Advisory Committee Domestic and Global Airline Competition – Current State of Play and Challenges Looking Forward August 25, 2010 August 25, 2010 Kevin Knight - Senior Vice President, Planning Kevin Knight - Senior Vice President, Planning Graham Atkinson – EVP / President, Mileage Plus Graham Atkinson – EVP / President, Mileage Plus United Airlines United Airlines
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August 25, 2010 Kevin Knight - Senior Vice President, Planning
Future Of Aviation Advisory Committee Domestic and Global Airline Competition – Current State of Play and Challenges Looking Forward. August 25, 2010 Kevin Knight - Senior Vice President, Planning Graham Atkinson – EVP / President, Mileage Plus United Airlines. - PowerPoint PPT Presentation
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Future Of Aviation Advisory CommitteeFuture Of Aviation Advisory Committee
Domestic and Global Airline Competition – Current State of Play and Challenges Looking Forward
Graham Atkinson – EVP / President, Mileage Plus Graham Atkinson – EVP / President, Mileage Plus United AirlinesUnited Airlines
+11%
+8%
+3%
+5%
+6%
+3%
+1%
+1%
The World Is Changing And The World Is Changing And Growth Is Occurring On A Global ScaleGrowth Is Occurring On A Global Scale
Sources: Cartogram of the World's Population (2007); Global Insight (WMM), Real GDP growth rates for 2010 (base year as 2005).
Population Weighted Map With 2010 Real GDP Growth Rates (%)
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+5%+5%
+2%
+4%
+6%
+5%
Open Skies Agreement
Restrictive Agreement
No Agreement
U.S. Air Services Agreements By Country
Access To Some Of The World’s Largest And Access To Some Of The World’s Largest And Fastest Growing Markets Remains RestrictedFastest Growing Markets Remains Restricted
3
Foreign Airline Competitors Have BeenForeign Airline Competitors Have BeenSupplanting U.S. Carriers In World Leadership…Supplanting U.S. Carriers In World Leadership…
1/ Pro formaSource: Airline Business, Air Transport Intelligence
Global Top 10 Airline Rankings (By Revenue)
1010
99
88
77
66
55
44
33
22
11 United
American
FedEx
Delta
British Airways
Japan Airlines
Lufthansa
ANA Group
Northwest
Air France
19991999 20092009
Lufthansa Group
Air France-KLM
Delta
FedEx
American
Japan Airlines
ANA Group
British Airways / Iberia1/
Continental
United
1010
99
88
77
66
55
44
33
22
11
4
……And There Are Emerging Carriers Like Emirates And There Are Emerging Carriers Like Emirates That Are Positioned To Capture This Global GrowthThat Are Positioned To Capture This Global Growth
5
5757
7777
106106
DubaiDubai
Emirates currently operates 143 widebody aircraft with
orders for 197 more
Europe To Asia: Emirates Via Dubai Hub
Source: OAG, August 2010
• Emirates connects 24 European airports with 29 Asian airports via their Dubai hub (nearly 700 airport pairs)
• In contrast, British Airways serves 517 Europe to Asia airport pairs via their London-Heathrow hub
• Qatar and Etihad have implemented similar network strategies at Doha and Abu Dhabi, respectively
Alliances Have Emerged To Help Carriers Compete Effectively Alliances Have Emerged To Help Carriers Compete Effectively In Response To Regulatory Barriers In Restricted MarketsIn Response To Regulatory Barriers In Restricted Markets
Source: OAG, August 2010. International is defined as non-U.S. online destinations.
Online International Destinations Served – August 2010
These Alliances Offer Many KeyThese Alliances Offer Many KeyBenefits To Airlines And ConsumersBenefits To Airlines And Consumers
For Airlines:For Airlines:
•Linking route networks•Expansion of nonstop international services•Increased profitability
For Consumers:For Consumers:
•Connectivity•Seamless travel•Recognition
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To Produce Greater Benefits, Alliances Are Moving To Produce Greater Benefits, Alliances Are Moving Toward Deeper And Broader Commercial RelationshipsToward Deeper And Broader Commercial Relationships
Mergers And Cross-Border Investments Have And Will Mergers And Cross-Border Investments Have And Will Continue To Impact The Make-Up And Effectiveness Of AlliancesContinue To Impact The Make-Up And Effectiveness Of Alliances
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Carrier(s) From Alliance To Alliance Catalyst
ConclusionsConclusions
• The world is changing and growth is occurring on a global scale
– The highest growth rates are occurring outside the United States
• Access to many of the world’s emerging markets is still highly restricted
• The U.S. has lost its leadership role to foreign airlines
• Emerging airlines are changing the competitive landscape
• The development of alliances has been a key strategy for U.S. airlines to compete effectively in the global marketplace
• Cross-border investments and mergers have and will continue to impact the effectiveness of U.S. airline alliances
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SuggestionsSuggestions
• Establish access to most important international growth markets– Reaffirm policy to support open skies– Negotiate additional open skies agreements – Support removal of trade barriers
Three Robust Global Alliances Exist Three Robust Global Alliances Exist In A Highly Competitive MarketplaceIn A Highly Competitive Marketplace
Cross-Border Investments Of U.S. Owned Companies Cross-Border Investments Of U.S. Owned Companies Have Become Commonplace In Other IndustriesHave Become Commonplace In Other Industries