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Asia Pacific A viation Industry Perspective Industry Perspective Andrew Herdman Andrew Herdman Director General Association of Asia Pacific Airlines International Aviation Fuel Conference 5 April 2012 Beijing China Beijing, China

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Page 1: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

Asia Pacific AviationIndustry PerspectiveIndustry Perspective

Andrew HerdmanAndrew HerdmanDirector General

Association of Asia Pacific Airlines

International Aviation Fuel Conference5 April 2012

Beijing ChinaBeijing, China

Page 2: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

O er ieOverview• Global Mobility• Global Mobility

• Asia Pacific Aviation

• Business Outlook

• Future Growth

• Sustainable Aviation• Sustainable Aviation

Page 3: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

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

Page 4: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International
Page 5: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

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

Page 6: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

World output – long term historical trends

Source: Maddison (2010) & Conference Board

Output measured on PPP basis

Page 7: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

Asia Pacific Aviation

Page 8: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

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

Page 9: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

Global Regulatory Influences

AsiaAsia Pacific

•Wider impact of US and EU regulations

•Asia Pacific has limited influence

Page 10: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

Current Business Outlook

Page 11: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

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

Page 12: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

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

Page 13: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

Premium and economy traffic

Source: IATA

Slower recovery in premium traffic

Page 14: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

Oil price volatility

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

Page 15: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

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

Page 16: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

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

Page 17: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

Global airline industry profitability

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

• Intensely competitive industry

Page 18: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

Future Growth

Page 19: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

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

Page 20: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

Asia Pacific traffic will grow significantly

Source: Airbus GMF2011-2030

Page 21: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

Asia Pacific fleet expansion

Source: Boeingg

CMO 2011 - 2030

Page 22: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

Sustainable AviationSustainable Aviation

Page 23: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

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

Page 24: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

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

Page 25: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

Aviation emissions reduction roadmap

Source: IATA

Multi-pillar approach to achieve industry goals

Page 26: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

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

Page 27: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

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

Page 28: Asia Pacific Aviation€¦ · Asia Pacific Aviation Industry PerspectiveIndustry Perspective Andrew HerdmanAndrew Herdman Director General Association of Asia Pacific Airlines International

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