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Asia Pacific AviationIndustry PerspectiveIndustry Perspective

Andrew HerdmanAndrew HerdmanDirector General

Association of Asia Pacific Airlines

International Aviation Fuel Conference5 April 2012

Beijing ChinaBeijing, China

O er ieOverview• Global Mobility• Global Mobility

• Asia Pacific Aviation

• Business Outlook

• Future Growth

• Sustainable Aviation• Sustainable Aviation

Aviation: moving the world

• Air travel delivers global mobility

• 2,800 million passengers

• Outstanding safety record

• Carries 35% by value of global trade

• Wider social and economic benefits

Source: ATAG www.aviationbenefitsbeyondborders.org

Asia Pacific

• Diverse geographic regionH t th 4 billi l• Home to more than 4 billion people

• 62% of the world’s population• Generates 27% of global GDP• Generates 27% of global GDP • Wide range of income levels• Dynamic economies delivering global growth• Dynamic economies delivering global growth• Aviation widely recognised as a key contributor

to economic and social developmentp• Political diversity remains challenging: need for

multilateral cooperation

World output – long term historical trends

Source: Maddison (2010) & Conference Board

Output measured on PPP basis

Asia Pacific Aviation

Asia Pacific Aviation

US$163 billion revenue

655 million passengers457 million domestic198 million international

18 5 million tonnes of cargo18.5 million tonnes of cargo

4,984 aircraft

Asia Pacific carriers overall market share:24% of global passenger traffic

Source: Combined AAPA + non-AAPA airlines GMT+7 to GMT+12

38% of global cargo trafficData: 2011 Estimates

Global Regulatory Influences

AsiaAsia Pacific

•Wider impact of US and EU regulations

•Asia Pacific has limited influence

Current Business Outlook

Global recovery moderatesWorld growth2010 +5.2%2011 +3 8%2011 +3.8%2012E +3.3%2013F +3.9%

Pattern of two speed growth maintainedSource: IMF

Pattern of two-speed growth maintained

Global passenger and cargo traffic

Global international passenger and cargo traffic

Passenger traffic continues to expand,Passenger traffic continues to expand, but air cargo markets remain weak

Source: IATA

Premium and economy traffic

Source: IATA

Slower recovery in premium traffic

Oil price volatility

Persistently high oil prices reflectPersistently high oil prices reflect political risk factors

Historic oil price volatility

• Macro economic impact of oil price spikes

• High oil price acts as brake on global economy

Source: US EIA

• High oil price acts as brake on global economy

Fuel price impact on airlines

34%36%

200

250

l

CFOH

26%28%

33%

26%26%

30%

100

150

200

on /

US$

per

bar

re

14%

17%

22%

0

50US$ b

illio

• Rising share of total costs

2003 2004 2005 2006 2007 2008 2009 2010 2011E 2012F 2012F

Fuel expenditure Jet kerosene price CF: Central Forecast, OH: Oil Price Spike

g

• Fuel hedging of limited value

• Impacts aircraft values• Impacts aircraft values

• Influences fleet renewal decisions

Global airline industry profitability

• Margins squeezed by high oil prices• Margins squeezed by high oil prices

• Intensely competitive industry

Future Growth

Growth: complementary business models

2010 Traffic = 4.8 trillion RPK 2030 Traffic = 12.3 trillion RPK

Global network carriers expected to thriveGlobal network carriers expected to thrive despite competition

Asia Pacific traffic will grow significantly

Source: Airbus GMF2011-2030

Asia Pacific fleet expansion

Source: Boeingg

CMO 2011 - 2030

Sustainable AviationSustainable Aviation

Aviation – sustainable growth?

• Aviation delivers continuous improvements in fuel efficiency through technology, operations and infrastructure

• Committed to challenging environmental targets• Intensifying efforts to develop alternative fuels• As a globally competitive, energy-intensive industry, we

would prefer a globally harmonised, sector-specific approach to international aviation emissions under ICAOpp

• Travel and tourism industry faces real threat of proliferation of arbitrary taxes and charges

• EU ETS risks triggering a trade war

Governments set the climate change policy framework but there is a collective failure of political leadership on this issue

Aviation industry emissions targets

• Three Global Industry Targets

Ambitious but achievable goals

• Aviation is already highly energy efficient• Fuel represents 30%+ of total costsp• Committed to further emissions reductions

Aviation emissions reduction roadmap

Source: IATA

Multi-pillar approach to achieve industry goals

Aviation: alternative fuels

• Evaluated multiple feedstocks• Proven technical feasibility• Drop-in fuel using existing

infrastructureinfrastructure• Certification achieved in 2011• Offers lifecycle CO2 reductionsy• Challenge is to achieve commercial

scale and competitive economicsN d l li f k d• Need clear policy framework and support from governments

In the shadows: embedded carbon credits

Closing Thoughts

• Aviation is at the heart of global economic development with bright growth prospects

• Asia Pacific aviation is already a major global force and set to become even stronger in commercial termsterms

• Asia Pacific needs stronger engagement on key international policy and regulatory issues

• Strong collaboration between airlines, fuel suppliers, and other industry partners needed to

d t f t th t itirespond to future growth opportunities

Shared confidence and optimism about the future

www aapairlines orgwww.aapairlines.orgAssociation of Asia Pacific Airlines9/F Kompleks AntarabangsagJalan Sultan IsmailKuala Lumpur 50250MALAYSIA

Tel: +60 3 2145 5600Fax: +60 3 2145 2500