Market overview project (pcso)

transcript

Market overview

Michael Davies

Customer Business

Overview

Latest traffic statistics

US airline yields and costs

Capacity reductions

Outlook for traffic

Key issues & uncertainties

Aircraft delivery forecasts

Discussion

2001-02 passenger traffic growth RPKs – key markets

Feb Mar

May Ju

lAug S

ep Oct

Dec Ja

nFeb M

US domestic

Transatlantic

Europe Intra

AEA weekly traffic RPKs

US airlines’ 2001-02 traffic Transpacific passenger & total international cargo

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

Transpacific Pax.

International Cargo

North American domestic traffic 2001-02

Sep Oct Nov Dec Jan Feb Mar Apr May Jun

Continental

American

Southwest

AirTran

AMR Eagle

Continental Express

Majors

Low Cost/

Regionals

October 2001 passenger load factor Change vs. Oct 2000

Britis

Contin

Oct 2000

Britis

Contin

May 2002 passenger load factor Change vs. May 2001

May 2001

Britis

Contin

June 2002 passenger load factor Change vs. Jun 2001

Jun 2001

Key Rolls-Royce customers’ traffic change

Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

British Airways

American

Cathay

Singapore

Emirates

US domestic yields – absolute levels

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M

2000 2001

Yields : c/RPM

Revenues : c/ASM

Source : Air Transport Association

US airlines’ costs up, revenues down

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J

1999 2000 2001 2002

Unit costs

Operating profit ($bn)

Unit revenues

Change (year-on-year) Profit ($bn)

Airline net profits

-$10,000

-$5,000

$5,000

$10,000

$15,000

1995 1996 1997 1998 1999 2000 2001

Variation of reported

2001 final figures

with year 2000

figures

Feb Mar

Sep Oct

Feb Mar

Economic leading indicators 2001-2002 Source : Conference Board, composite leading indices

Decline Aug-Oct Recovery since Dec

GDP growth forecasts for 2002

USA Japan Germany UK France China

Aug-01

Dec-01

Jun-02

Source : Consensus Forecasts

Sharp upturn in June forecast

Industry monitor – June 2002

Pax. traffic

Profits

Orders

Deliveries

Composite

leading inds. (Indiv.countries)

Asia Pacific Europe Middle East North Asia N.America

Cargo traffic

Stored aircraft – monthly totals

Inc.freighters

Regional Jets

Widebody

Narrowbody

Stored aircraft – monthly totals Rolls-Royce only

Inc.freighters

ep Oct

Dec Ja

Aircraft available for sale or lease

Source : Airline Monitor/BACK

Jan-99 Apr Jul Oct Jan-00 Apr Jul Oct Jan-01 Apr Jul Oct Jan-02 Apr

New WB

New NB

Old WB

Old NB

Stored aircraft summary : by engine mfr

R-R P&W GE Total

August

Includes Reg Jets)

IAE split 50/50 PW/R-R

Total also includes 14/36 Honeywell

Inc.freighters

Stored aircraft summary : by aircraft category

August May

Regional Jet

Widebody

Narrowbody

Inc.freighters

Stored aircraft summary : by age band

37 51 65

158120

243 254

0-5 5-10 10-15 15-20 20-25 25+

August

Inc.freighters

e.g. 0-5 = 1997-2001 build

Incremental stored aircraft since Aug 2001 by age band

0-5 5-10 10-15 15-20 20-25 25+

Likely to return to service Not likely to return to service

Age Inc.freighters

Schedule reductions by airline Nov 2001 actual vs planned

SR EI VS AZ LH IB BA KL AF UA TZ AA NW AC DL WN CX KE SQ CI MH JL QF GF EK

Middle Eastern

N.American

European Total world schedule -10.2%

-parked aircraft -5%

-reduced flying -5%

Schedule reductions by airline May 2001 vs May 2002, source OAG Feb 2002

SR EI KL VS BA IB LH AF AZ UA NW AA DL AC WN TZ MH CX JL QF KE CI SQ GF EK

Middle EastAsiaNorth AmericaEurope

Total world schedule -7.5%

Lufthansa – decide in next 2 weeks how much to add back – lifted hiring freeze

Air France – stable capacity

Austrian – adding, but will remain 5% below 2001

KLM – cutting 5% from summer 2001

Thomas Cook – reviewing planned cuts for summer

Schedule reductions by airline Aug 2002 vs Aug 2001, source OAG June 2002

EI KL VS BA IB LH AF AZ UA NW AA DL AC WN TZ MH CX JL QF KE CI SQ GF EK

Middle EastAsiaNorth AmericaEurope

Total world schedule -7.0%

Monthly traffic forecast - US domestic

Forecast RPKs

Actual RPKs

Gulf War (ATA RPKs)

Growth over 2000

RPKs ASKs

2001 : -6.8% -4.3%

2002 : -1.2% -1.6%

2003 : +12.8% +11.3%

Monthly traffic forecast – North Atlantic

Forecast RPKs

Actual RPKs

Gulf War (AEA+DoT RPKs)

Growth over 2000

Jul 90

Feb 91

Oct 91

RPKs ASKs

2001 : -10.1% -3.2%

2002 : +0.3% -0.6%

2003 : +17.9% +14.6%

Monthly traffic forecast – Europe-Asia

Forecast RPKs

Actual AEA RPKs

Gulf War (AEA - RPKs)

Growth over 2000

RPKs ASKs

2001 : -6.6% -3.8%

2002 : +0.2% -0.7%

2003 : +14.1% +12.1%

Monthly traffic forecast – Intra Europe (sched)

Forecast RPKs

Actual RPKs

Gulf War (AEA - RPKs)

Growth over 2000

RPKs ASKs

2001 : +0.6% +3.4%

2002 : +4.6% +0.6%

2003 : +7.1% +5.8%

Rolls-Royce N.America traffic & GDP forecast

Nov 00 GDP

Nov 01 GDP

Nov 00 RPKs

Nov 01 RPKs

2001 -7%

2002 -1%

Index (2000=100)

2003 +14%

Rolls-Royce European traffic & GDP forecast

Nov 00 GDP

Nov 01 GDP

Nov 00 RPKs

Nov 01 RPKs

2001 -2%

2002 -0%

Index (2000=100)

2003 +12%

Rolls-Royce Asian traffic & GDP forecast

Nov 00 GDP

Nov 01 GDP

Nov 00 RPKs

Nov 01 RPKs

2001 -1%

2002 +3%

Index (2000=100)

2003 +11%

Rolls-Royce world traffic forecast (RPKs)

Nov-00Nov-01History1983 forecast1991 forecast1989 forecast1993 forecast1996 forecast1999 forecast

RPKs (bn)

Rolls-Royce world traffic & GDP forecast

350 Nov 00 GDP

Nov 01 GDP

Nov 00 RPKs

Nov 01 RPKs

2003 +12%

1991 –3%

2001 –4%

2002 +0%

Index (1990=100)

‘Airline Monitor’ world traffic forecast (RPKs)

Jul-01

Oct-01

History

10% Traffic rebound in 2003

1991 –3%

2001 –6%

2002 +2%

RPKs (bn) Forecast made in October 2001

Reviewed in Jan – no change as yet

‘Aviation Strategy’ world traffic forecast (RPKs)

2000 RPKs based on Airline Monitor data for reference

Jul-01

Oct-01

Feb-02

History

Trend14% Traffic rebound in 2003

(vs 17% previously)

1991 –3%

2001 –5% (-6% originally forecast)

2002 -1% (vs –5%)

RPKs (bn) Forecast made in October 2001

Reviewed in Feb – less severe

2000 2001 2002 2003 2004 2005

Pre Sep-11thCurrent 'high'Current 'mid'Current 'low'Gulf War

Traffic growth scenarios

2002 2003 2004

High +6% +8% 8%

Mid +0% +12% 8%

Low -1% +10% 8%

RPK Index (2000=100)

Regional traffic summary

Near-term growth Long-term levels

2001 2002 2003 2010 traffic level

Europe -2% -0% +12% 97% of previous forecast

N.America -7% -1% +14% 96% of previous forecast

Asia/Pacific -1% +3% +11% 92% of previous forecast

WORLD -4% +0% +12% 95% of previous forecast

2001 2002 2003 2004 2005

High case

Mid point

Low case

Airline Monitor

Aircraft delivery forecasts 2001-2005 Panel of industry forecasters – Dec 2001

2001 2002 2003 2004 2005

Average

Airline Monitor

Aircraft delivery forecasts 2001-2005 80+ seat aircraft

Latest analyst views (Boeing+Airbus) :

Morgan Stanley : 2003 = 555, 2004 = 660

JPMorgan : 2003 = 530, 2004 = 540, 2005 = 625

CSFB : 2003 = 553

2001 2002 2003 2004 2005 2006

Mar-01

Feb-02

Aircraft delivery forecasts 2001-2005 Rolls-Royce forecast (100+ seat pax aircraft)

871 deliveries removed

Fleet evolution – ‘mid’ traffic scenario 100+ seater passenger aircraft

2000 2001 2002 2003 2004

End year In service fleet

New deliveries

Retirements/into store

Return from store

c500 aircraft ‘retired’ early

(I.e. assumed not to return)

Fleet required to match

traffic growth (@ constant prod’y)

Fleet evolution – 3 traffic scenarios 100+ seater passenger aircraft

2000 2001 2002 2003 2004

End year In service fleet

New deliveries

Retirements/into store

Return from store

c500 aircraft ‘retired’ early

(I.e. assumed not to return)

1998 1999

1999 & 2000 saw significant

Load factor & utilisation growth

Fleet required to match

traffic growth (@ constant prod’y)

Airline net profit $8.2bn $8.5bn $4.7bn -$12.0bn -$8bn?* -$0.5bn?* $3.5bn?*

Load factor 69.3% 69.8% 72.4% 69.1% 70.5% 72.0% 72.5%

* Airline Monitor estimates

2002 updated May ‘02

Aircraft delivery forecasts Passenger aircraft only

717 737 A320 757 767 A330 A340 777 747 A380

2001-10

2002-11

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