economic performance of the airline industry - iata - home · other casm 2017q1 asm ... 83.4% 79.6%...
TRANSCRIPT
Economic performance
of the airline industry Mid-year 2017 update
Brian Pearce,
Chief Economist,
IATA
www.iata.org/economics
Performance drivers are now diverging
Source: IATA Economics using data from The Airline Analyst and Markit
40
42
44
46
48
50
52
54
-20%
-15%
-10%
-5%
0%
5%
10%
2012 2013 2014 2015 2016 2017
Ind
ex, 5
0 =
no
ch
ange
in o
utp
ut
% c
han
ge o
ver
pre
vio
us
year
Airlines unit cost growth and global business confidence
Global business confidence
Airlines' unit cost growth
Return on capital performance good in 2016
Source: IATA Economics using data from The Airline Analyst
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2010 2011 2012 2013 2014 2015 2016
EBIT
ad
just
ed f
or
op
erat
ing
leas
es a
s %
in
vest
ed c
apit
alReturn on invested capital
Industry average
North America
Europe
Asia PacificLatin America
Middle East
Weighted Average Cost
2016 free cash flow good but more divergent
Source: IATA Economics using data from The Airline Analyst
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
2010 2011 2012 2013 2014 2015 2016
FCF
as %
inve
sted
cap
ital
Free cash flow yield (% invested capital)
North America
Industry average
Asia PacificLatin America
Europe
Middle East
Debt still ranges from investment grade to weak
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
Deb
t ad
just
ed f
or
op
erat
ing
leas
es/E
BIT
DA
R
Adjusted net debt/EBITDAR
Latin America
Asia Pacific
Industry average
Europe
North America
Middle East
Investment grade
Operating margins still high but declining
Source: IATA Economics using data from The Airline Analyst and airline releases
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
2011 2012 2013 2014 2015 2016 2017
% r
evenues
Airline industry operating margin, % revenues
Margins
adjusted for
seasonality
Unadjusted
margins
As margins squeezed by accelerating costs
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
% c
han
ge o
ver
pre
vio
us
year
Unit revenues and unit costs, % change over previous year
Unit cost growth
Unit revenue growth
Cost acceleration driven by fuel, MRO, labour
Source: IATA Economics using data from The Airline Analyst
7
7.2
7.4
7.6
7.8
8
8.2
8.4
CASM2016Q1
Fuel MRO Labour Infra-structure
Other CASM2017Q1
US
cen
ts/A
SM
CASM 2016Q1 to 2017Q1
Signs of a stabilization of yields
Source: IATA Economics using data from The Airline Analyst and Markit
80
82
84
86
88
90
92
94
96
98
100
48
49
50
51
52
53
54
2014 2015 2016 2017
Ind
ex o
f fa
res,
co
nst
ant
FX
Bu
sin
ess
con
fid
ence
50
= n
eutr
al
Worldwide average fares (constant FX) and business confidence
Business confidence
Average return fare index, constant FX
Financial markets and airline CFOs are confident
Source: IATA Economics using data from IATA Business Confidence survey and Thompson Reuters Datastream
0
10
20
30
40
50
60
70
80
90
100
350
450
550
650
750
850
950
1,050
1,150
1,250
1,350
2012 2013 2014 2015 2016 2017
CFO
exp
ecta
tio
ns
of
airl
ine
pro
fits
in 1
2
mo
nth
s, 5
0 =
no
ch
ange
Glo
bal
air
line
shar
e p
rice
ind
ex
Airline share prices and CFO expectations of airline profitability
Airline share prices
CFO expectations for change in profits in next 12 months
We’ve upgraded our forecasts for 2017
Source: IATA Economic Performance of the Airline Industry, Mid-year 2017 and End-year 2016 reports
2.5
0
5.1
3.3
5.66.6
2.9
-2
7.4 7.3 77.7
-4
-2
0
2
4
6
8
10
GDP Pax yields RPKs Freight tonnes ASKs Operatingmargins
Perc
enta
ge c
han
ge o
r %
rev
enu
es
Forecast revisions for 2017Previous forecast
Current forecast
Air travel has started the year strongly
Source: IATA Economics using data from IATA Statistics and Markit
30
35
40
45
50
55
60
65
-12%
-8%
-4%
0%
4%
8%
12%
16%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
% year-on-year Diffusion indices
Growth in industry RPKs (LHS)
Global manufacturing PMI index (adv. 2 months, RHS)
Global services PMI index (adv. 2 months, RHS)
Strong growth in domestic markets
Source: IATA Economics using data from IATA Statistics
-0.7%
6.0%
3.4%
8.1%
15.3%
14.9%
14.8%
7.4%
-2.1%
3.0%
4.7%
6.6%
12.7%
15.3%
16.7%
7.7%
-5% 0% 5% 10% 15% 20%
Apr 2017 Mar 2017
Domestic revenue passenger kilometres (% year-on-year)
Industry
Domestic Russia
Domestic India
Domestic China
Domestic Japan
Domestic USA
Domestic Brazil
Dom. Australia
Load factors (mostly) at all-time highs
Source: IATA Economics using data from IATA Statistics
All-time low All-time high
Industry
Europe
N. America
L. America
Asia Pacific
Middle East
Africa
50% 60% 70% 80% 90%
Apr 2017 Apr 2016
Passenger load factors (% of available seat kms, seasonally adjusted)
81.7%
84.3%
84.2%
81.7%
80.9%
74.7%
72.3%
80.4%
82.1%
83.4%
79.6%
79.6%
75.4%
67.8%
Air freight rebound driven by re-stocking
Source: IATA Economics using data from IATA Statistics and Thompson Reuters Datastream
-15%
-10%
-5%
0%
5%
10%
15%-30%
-20%
-10%
0%
10%
20%
30%
40%
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
Global FTKs (LHS)
Inventory to sales ratio (RHS, inverted scale)
% year-on-year Year-on-year change
*Rolling 3 month periods
Fall in inventory to sales ratio, increase in FTK growth
Breakeven point rising but so are load factors
Source: IATA Economic Performance of the Airline Industry, Mid-year 2017 report
55
57
59
61
63
65
67
69
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
% A
TKs
Breakeven and achieved weight load factors
Achieved
Breakeven
Return on capital lower but still good in 2017
Source: IATA Economic Performance of the Airline Industry, Mid-year 2017 report
0.0
2.0
4.0
6.0
8.0
10.0
12.0
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
% o
f in
vest
ed c
apit
al
Return on capital invested in airlines
Cost of capital (WACC)
Return on capital (ROIC)
2017 profits down but upgraded
Source: IATA Economic Performance of the Airline Industry, Mid-year 2017 report
0
2
4
6
8
10
-10-505
10152025303540
2009 2010 2011 2012 2013 2014 2015 2016 2017
% r
even
ues
US$
bill
ion
Net profits and operating margins
Net profits - current Net profits - previous
Operating margin - current Operating margin - previous
Regional divergence in profitability remains
Source: IATA Economic Performance of the Airline Industry, Mid-year 2017 report
-2
0
2
4
6
8
10
12
14
16
18
-1%
1%
3%
5%
7%
9%
N America Europe Asia Pacific L America Middle East Africa
US$
bill
ion
% r
even
ues
Net profits by region in 2017
Net profits % revenues