iata - outlook for the airline industry - world financial
TRANSCRIPT
Outlook for the airline industry
Brian PearceChief Economist
25th September 2019
Still adding value for consumers and the economy
Source: IATA Economics using data from SRS Analyzer, ICAO, IATA statistics, IATA Economics forecast
0.50
0.70
0.90
1.10
1.30
1.50
1.70
1.90
2.10
2.30
2.50
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
22000
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
US
$/R
TK
in
20
18
US
$
Nu
mb
er
of
un
iqu
e c
ity
-pa
irs
Unique city-pairs and real transport costs
Unique city pairs
Real cost of air transport
But profitability trending downwards
Source: IATA Economics using data from The Airline Analyst
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
2011 2012 2013 2014 2015 2016 2017 2018 2019
% o
f o
pe
rati
ng
re
ve
nu
es
Airline industry operating margin
Seasonally adjusted
Actual
Financial markets have lost confidence
0.80
0.90
1.00
1.10
1.20
1.30
1.40
1.50
2016 2017 2018 2019
Ind
ex
ed
to
eq
ua
l 1 in
Ja
nu
ary
20
16
Worldwide airlines and FTSE All World share price indices
FTSE All World share prices
Worldwide airlines share prices
Source: Thompson Reuters Datastream
Worried that this is just transitory
Source: IATA Economics using data from ICAO. IATA and the IMF World Economic Outlook
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Airline industry operating profit margin and global GDP growth
Airlines' EBIT margin
Global GDP growth
Some regions yet to see any improvement
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
% c
ha
ng
e y
ea
r-o
n-y
ea
r
Net post-tax profit margins
N America
Europe
Asia Pacific
L America
Africa
Middle East
Source: IATA Economics Economic Performance of the Airline Industry, Mid-Year 2019
Debt means vulnerability to shocks for some
Source: IATA Economics using data from The Airline Analyst
0
1
2
3
4
5
6
7
8
2010 2011 2012 2013 2014 2015 2016 2017 2018
Ne
t d
eb
t a
dju
ste
d f
or
op
era
tin
g le
as
es
/
EB
ITD
AR
Net debt as a ratio of EBITDA
Middle East
Asia Pacific
Latin America
N America
Europe
Investment grade
Trade war is one cash flow shock
Source: IATA Economics using data from Netherlands CPB and Oxford Economics
Cargo market shrinking
Source: IATA Economics using data from IATA Statistics
18
19
20
21
22
23
500
550
600
650
700
750
2015 2016 2017 2018 2019
FT
Ks
mo
nth
ly, b
illio
ns
RP
Ks
mo
nth
ly, b
illio
nGlobal RPKs and FTKs, billions per month
RPKs
FTKs
Recession would be another shock
Source: IATA Economics using data from the IMF World Economic Outlook
-3
-2
-1
0
1
2
3
4
5
2006 2008 2010 2012 2014 2016 2018 2020
IMF forecasts of global economic growth (market exchange rates not PPP)
April 2013
April 2014
April & July 2019
April 2018
Dates show the revision of global GDP forecasts by the IMF
Risk is significant
Source: IATA Economics using data from IATA Statistics, Markit and Thompson Reuters Datastream
35
40
45
50
55
60
65
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
1990 1995 2000 2005 2010 2015 2020
Ind
ex
, 50
=n
o c
ha
ng
e
% p
oin
ts
Recessions in global RPKs, business confidence & the yield curve
RPK recessions (10-2 year) US Treasury yield curve
Business confidence (globalPMI composite)
Brexit no deal 50:50
Source: IATA Economics using data from the National Institute for Economic and Social Research
1.8
1.9
2.0
2.1
2.2
2.3
2.4
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
£ t
rilli
on
, co
ns
tan
t p
ric
es
UK GDP, £ trillion, constant prices
No-deal
Deal + FTADeal + Backstop
Remain in EU
Passenger business much stronger
Source: IATA Economics using data from IATA Statistics
43%
44%
45%
46%
47%
48%
49%
50%
51%
52%
76%
77%
78%
79%
80%
81%
82%
83%
84%
2012 2013 2014 2015 2016 2017 2018 2019
% o
f A
FT
Ks
% o
f A
SK
s
Global passenger and cargo load factors
Passenger load factor
Cargo load factor
Quick to match supply to demand
Source: IATA Economics using data from IATA Statistics
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
2012 2013 2014 2015 2016 2017 2018 2019
% c
ha
ng
e y
ea
r-o
n-y
ea
r
Growth in global RPKs and ASKs
RPKs growth
ASKs growth
Cost recovery ability disappeared mid-2018
Source: IATA Economics using data from The Airline Analyst
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
2011 2012 2013 2014 2015 2016 2017 2018 2019
% c
ha
ng
e y
ea
r-o
n-y
ea
r
Unit cost and unit revenue growth
Unit cost growth
Unit revenue growth
Ancillaries helping to recover costs
Source: IATA Economics Economic Performance of the Airline Industry, Mid-Year 2019,
0
50
100
150
200
250
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
US$
per
dep
art
ing
pa
ssen
gerAirline revenue per passenger, US$
Ancillaries: 11.9%
Cargo: 12.9%
Surcharges: 7.2%
Base fare: 68%
Some structural improvements to profitability
Source: IATA Economics Economic Performance of the Airline Industry, Mid-Year 2019
57
59
61
63
65
67
69
71
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
% A
TK
s
Breakeven and achieved cargo + passenger weight load factors
Load factor achieved
Breakeven load factor
Profitability remains fragile
0
20
40
60
80
100
120
140
160
180
200
220
Revenue Cost Net profit
Worldwide airline net post-tax profit, US$ per departing passenger, 2019
Fare
Cargo
$188.98$182.86 $6.12
Ancillaries + surcharge
Fuel
Non-fuel operating costs
Downward pressure on profits set to continue
-40
-30
-20
-10
0
10
20
30
40
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
US
$ b
illio
n
% r
ev
en
ue
s
Global commercial airline profitability
Net post-tax profit
EBIT margin
Source: IATA Economics Economic Performance of the Airline Industry, Mid-Year 2019
