Airlines in Asia Pacific

8/6/2019 Airlines in Asia Pacific

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Asia-Pacific - Airlines 0200 - 0756 - 2009

Datamonitor. This profile is a licensed product and is not to be photocopied Page 1

INDUSTRY PROFILE

Airlines in

Asia-Pacific

Reference Code: 0200-0756

Publication Date: October 2010


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EXECUTIVE SUMMARY



EXECUTIVE SUMMARY

Market value

The Asia-Pacific airlines industry shrank by 17.6% in 2009 to reach a value of $81.5 billion.

Market value forecast

In 2014, the Asia-Pacific airlines industry is forecast to have a value of $143.3 billion, an increase of75.9% since 2009.

Market volume

The Asia-Pacific airlines industry grew by 9.9% in 2009 to reach a volume of 522.3 million passengers.

Market volume forecast

In 2014, the Asia-Pacific airlines industry is forecast to have a volume of 805.1 million passengers, an

increase of 54.1% since 2009.Market segmentation I

The domestic segment is the largest in the airlines industry in Asia-Pacific, accounting for 81.8% of theindustry's total volume.

Market segmentation II

Japan accounts for 32.6% of the Asia-Pacific airlines industry volume.

Market rivalry

The Asia-Pacific airlines industry is characterized by strong rivalry and supplier power.


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CONTENTS



TABLE OF CONTENTS

EXECUTIVE SUMMARY 2

MARKET OVERVIEW 6

Market definition 6

Research highlights 7

Market analysis 8

MARKET VALUE 9

MARKET VOLUME 10

MARKET SEGMENTATION I 11

MARKET SEGMENTATION II 12

COMPETITIVE LANDSCAPE 13

LEADING COMPANIES 18

Air China Limited 18

Korean Air Lines Co., Ltd. 22

Qantas Airways Limited 25

Singapore Airlines Limited 30

MARKET FORECASTS 34

Market value forecast 34

Market volume forecast 35

APPENDIX 36

Methodology 36

Industry associations 37

Related Datamonitor research 37

Disclaimer 38

ABOUT DATAMONITOR 39

Premium Reports 39

Summary Reports 39

Datamonitor consulting 39


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CONTENTS



LIST OF TABLES

Table 1: Asia-Pacific airlines industry value: $ billion, 200509 9

Table 2: AsiaPacific airlines industry volume: million passengers, 200509 10

Table 3: Asia-Pacific airlines industry segmentation I:% share, by volume, 2009 11

Table 4: Asia-Pacific airlines industry segmentation II: % share, by value, 2009 12

Table 5: Air China Limited: key facts 18

Table 6: Air China Limited: key financials ($) 20

Table 7: Air China Limited: key financials (CNY) 20

Table 8: Air China Limited: key financial ratios 20

Table 9: Korean Air Lines Co., Ltd.: key facts 22

Table 10:

Korean Air Lines Co., Ltd.: key financials ($) 23

Table 11: Korean Air Lines Co., Ltd.: key financials (KRW) 23

Table 12: Korean Air Lines Co., Ltd.: key financial ratios 23

Table 13: Qantas Airways Limited: key facts 25

Table 14: Qantas Airways Limited: key financials ($) 27

Table 15: Qantas Airways Limited: key financials (A$) 27

Table 16: Qantas Airways Limited: key financial ratios 28

Table 17: Singapore Airlines Limited: key facts 30

Table 18: Singapore Airlines Limited: key financials ($) 31

Table 19: Singapore Airlines Limited: key financials (Si$) 32

Table 20: Singapore Airlines Limited: key financial ratios 32

Table 21: Asia-Pacific airlines industry value forecast: $ billion, 200914 34

Table 22: AsiaPacific airlines industry volume forecast: million passengers, 200914 35


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CONTENTS



LIST OF FIGURES

Figure 1: Asia-Pacific airlines industry value: $ billion, 200509 9

Figure 2: AsiaPacific airlines industry volume: million passengers, 200509 10

Figure 3: Asia-Pacific airlines industry segmentation I:% share, by volume, 2009 11

Figure 4: Asia-Pacific airlines industry segmentation II: % share, by value, 2009 12

Figure 5: Air China Limited: revenues & profitability 21

Figure 6: Air China Limited: assets & liabilities 21

Figure 7: Korean Air Lines Co., Ltd.: revenues & profitability 24

Figure 8: Korean Air Lines Co., Ltd.: assets & liabilities 24

Figure 9: Qantas Airways Limited: revenues & profitability 28

Figure 10:

Qantas Airways Limited: assets & liabilities 29

Figure 11: Singapore Airlines Limited: revenues & profitability 33

Figure 12: Singapore Airlines Limited: assets & liabilities 33

Figure 13: Asia-Pacific airlines industry value forecast: $ billion, 200914 34

Figure 14: AsiaPacific airlines industry volume forecast: million passengers, 200914 35


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MARKET OVERVIEW



MARKET OVERVIEW

Market definition

The airlines industry comprises passenger air transportation, including both scheduled and chartered, butexcludes air freight transport. Industry volumes are defined as the total number of revenue passengersenplaned (departures) at all airports within the country or region, excluding transit passengers who arriveand depart on the same flight code. For the US and Canada, transborder passengers departing fromeither country are considered as part of the international segment. Industry value is defined as the totalrevenue obtained by airlines from transporting these passengers. This avoids the double-counting ofpassengers. All currency conversions in this profile were carried out using constant 2009 average annualexchange rates.

For the purposes of this report, Asia-Pacific comprises Australia, China, India, Japan, Singapore, SouthKorea, and Taiwan.


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MARKET OVERVIEW



Research highlights

The Asia-Pacific airlines industry had total revenue of $81.5 billion in 2009, representing a compoundannual growth rate (CAGR) of 3.6% for the period spanning 2005-2009.

Industry volumes increased with a CAGR of 7% between 2005 and 2009, to reach a total of 522.3 millionpassengers in 2009.

The performance of the industry is forecast to accelerate, with an anticipated CAGR of 12% for the five-year period 2009-2014, which is expected to drive the industry to a value of $143.3 billion by the end of2014.


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MARKET OVERVIEW



Market analysis

The effects of the global economic downturn were felt in the Asia-Pacific airlines industry as itexperienced a sharp double-digit decline in 2009. However, the industry is expected to rebound strongly

and post double-digit growth until 2014.The Asia-Pacific airlines industry had total revenue of $81.5 billion in 2009, representing a compoundannual growth rate (CAGR) of 3.6% for the period spanning 2005-2009. In comparison, the Chinese andSouth Korean industries grew with CAGRs of 12% and 0.9% respectively, over the same period, to reachrespective values of $25.2 billion and $2.8 billion in 2009.

Industry volumes increased with a CAGR of 7% between 2005 and 2009, to reach a total of 522.3 millionpassengers in 2009. The industry's volume is expected to rise to 805.1 million passengers by the end of2014, representing a CAGR of 9% for the 2009-2014 period.

The domestic segment had the highest volume in the Asia-Pacific airlines industry in 2009, with 427.1

million passengers, equivalent to 81.8% of the industry's overall volume. In comparison, the internationalsegment had a volume of 95.3 million passengers in 2009, equating to 18.2% of the industry total.

The performance of the industry is forecast to accelerate, with an anticipated CAGR of 12% for the five-year period 2009-2014, which is expected to drive the industry to a value of $143.3 billion by the end of2014. Comparatively, the Chinese and South Korean industries will grow with CAGRs of 15.6% and 9%respectively, over the same period, to reach respective values of $52 billion and $4.3 billion in 2014.


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MARKET VALUE



MARKET VALUE

The Asia-Pacific airlines industry shrank by 17.6% in 2009 to reach a value of $81.5 billion.

The compound annual growth rate of the industry in the period 200509 was 3.6%.

Table 1: Asia-Pacific airlines industry value: $ billion, 200509

Year $ billion billion % Growth2005 70.8 50.92006 82.5 59.3 16.6%2007 92.5 66.5 12.1%2008 98.9 71.1 6.9%2009 81.5 58.6 (17.6%)

CAGR: 200509 3.6%

Source: Datamonitor D A T A M O N I T O R

Figure 1: Asia-Pacific airlines industry value: $ billion, 200509



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MARKET VOLUME



MARKET VOLUME

The Asia-Pacific airlines industry grew by 9.9% in 2009 to reach a volume of 522.3 million passengers.

The compound annual growth rate of the industry in the period 200509 was 7%.

Table 2: AsiaPacific airlines industry volume: million passengers, 200509

Year million passengers % Growth2005 399.22006 438.8 9.9%2007 476.1 8.5%2008 475.1 (0.2%)2009 522.3 9.9%

CAGR: 200509 7.0%


Figure 2: AsiaPacific airlines industry volume: million passengers, 200509



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MARKET SEGMENTATION I



MARKET SEGMENTATION I

The domestic segment is the largest in the airlines industry in Asia-Pacific, accounting for 81.8% of theindustry's total volume.

The international segment accounts for the remaining 18.2% of the industry.

Table 3: Asia-Pacific airlines industry segmentation I:% share, by volume, 2009

Category % ShareDomestic 81.8%International 18.2%

Total 100%


Figure 3: Asia-Pacific airlines industry segmentation I:% share, by volume, 2009



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MARKET SEGMENTATION II



MARKET SEGMENTATION II

Japan accounts for 32.6% of the Asia-Pacific airlines industry value.

China accounts for a further 30.9% of the Asia-Pacific industry.

Table 4: Asia-Pacific airlines industry segmentation II: % share, by value, 2009

Category % ShareJapan 32.6%China 30.9%India 8.6%South Korea 3.5%Rest of Asia-Pacific 24.4%

Total 100%


Figure 4: Asia-Pacific airlines industry segmentation II: % share, by value, 2009



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Competitive Landscape



COMPETITIVE LANDSCAPE

The airlines market will be analyzed taking airline companies as players. The key buyers will be taken asleisure and business travelers, the latter considered as business-to-business (B2B), and fuel suppliers,aircraft manufacturers, and skilled employees as the key suppliers.

The Asia-Pacific airlines industry is characterized by strong rivalry and supplier power.

Despite the large number of buyers, their power is strengthened by high price sensitivity as productdifferentiation tends to be minimal, with negligible switching costs. Budget airlines can compete intenselyon price with the legacy carriers. Supplier power is strong as airlines must enter into contracts with aircraftsuppliers. Boeing and Airbus dominate the jetliner market; the relative lack of alternatives increases theirpower. Fuel prices remain historically high, although lower than their peak in 2008, and this pressurizesmargins. Strong rivalry results from factors such as low switching costs for buyers, and a focus onpassenger transport that leaves carriers vulnerable to declines in demand in an industry that is highly

sensitive to the state of the wider economy.Airlines generally have a large number of buyers. Many of these are individual consumers purchasingflights directly from the airline, although there are B2B sales to charter companies, discounters, andsimilar buyers. Price sensitivity is high; a result of factors such as the growth of online price comparisonsites, corporate travel expense policies for business flyers, and, for the legacy airlines like JAL, Air China,and Qantas competition from low-cost carriers such as Jetstar and Virgin Blue. This tends to strengthenbuyer power in the airlines market. However, airlines can defend themselves against this by differentiatingtheir service in several ways. A common strategy for easing price competition is to focus on the additionalfeatures available on higher-priced flights, such as extra leg room, in-flight entertainment, and so on.

The inherent switching costs for buyers in the airline market are negligible, which strengthens buyerpower. In response, airlines often use loyalty schemes, such as JALs Mileage Bank or China SouthernAirlines Sky Pearl Club. The air miles lost should a buyer choose to travel with another airline can beviewed as a switching cost.

Where the buyers are individual travelers, whether leisure or business, there is no opportunity for them tointegrate backwards or for the airlines to integrate forwards; however, vertical integration is more feasiblebetween airlines and companies such as travel agents. Overall, buyer power is moderate.

Airlines must enter into contracts when buying or leasing aircraft from suppliers. Breaking these contractscan often imply a heavy financial cost. Furthermore, Boeing and Airbus effectively form a duopoly ofsuppliers of new jetliners, especially in the large jetliner category, with planes such as the 747 and A380.

In the market for lower-capacity regional jets and propeller-driven aircraft, companies such as Embraer,ATR, and Bombadier are significant suppliers. The relative lack of alternative manufacturers or substituteinputs increases supplier power. Air Indias passenger fleet consists of 46 Boeing, 78 Airbus, seven ATR,and seven Bombadier planes. JALs fleet consists of 184 Boeing, 22 Airbus, 25 Bombardier, 30 Douglas,


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and 18 other suppliers planes. Air Chinas passenger fleet consists of 158 Boeing and 98 Airbus planes,following the 2009 introduction of 30 additional jetliners made by these companies.

In an industry where reliability and safety are critical, the quality of the planes and their maintenance are

highly important; another factor that boosts supplier power.Staffing costs for an airline are substantial, with large numbers of flight and ground personnel, includingmechanics, reservation and transportation ticket agents required for an efficient service.

Aviation fuel is another vital input. IATA data indicates that for the global industry, the high price of crudeoil and its derivatives in 2008 meant that fuel accounted for 33% of total airline costs, compared to lessthan 15% before 2003; the proportion remains (2010) at around 25% of total costs. JAL reported that inthe fiscal year ending March 2009, 29% of its total costs were fuel. In fiscal 2009, Air China reported that32% of its operating costs were due to fuel, compared to 36% in the previous fiscal year. In the fiscal yearending March 2010, Singapore airlines reported that 33% of its costs were fuel, down from 43% in theprevious FY. Again, relatively few companies supply aviation fuel, strengthening supplier power, althoughairlines generally defend against price rises using hedging strategies.

Supplier power is restricted by the improbability of these suppliers integrating forwards into the airlinebusiness. In addition, although a company like Boeing has alternative sources of revenue, notablydefense aerospace, civil aviation remains a very significant part of its business. In 2009, Boeinggenerated around 50% of total revenues from its global commercial airplanes division. For Airbus itself,civilian airliners are highly important to its operations, although parent company EADS also has significantactivity in military aircraft, helicopters, satellites, and defense systems. Lack of diversity weakenssuppliers by making them more dependent on airliners as customers.

Airlines are forming and expanding alliances with one another, not only to achieve network size

economies through code sharing, but also to achieve scale economies in the purchase of fuel, and evenof aircraft. Combining forces to make purchases serves to increase the industry players' bargaining powerand therefore reduce supplier power. It is currently virtually impossible to find substitutes for the inputsrequired for airlines to operate an airline must have aircraft, a supply of aviation fuel and a sufficientworkforce before it can offer flights. Unlike other modes of transport, airlines have no alternative source ofenergy. Overall, supplier power is assessed as strong.

The economic entrance barriers to the airlines industry are relatively high. For an entirely new company,they include the considerable up-front outlay needed to obtain planes, although this may not be an issuefor an existing airline beginning to offer flights to a new country or region. Distribution is not particularlyeasy, as new players need to establish an online booking system, and relationships with travel agents

and other sales intermediaries. It is also vital to obtain airport slots for take-off and landing.There has been a growth in air traffic over recent years which mean that congestion at airports in manycountries is expected, especially the major hubs. The time slot given to an airline is important, and issomething all airlines negotiate with airports. Established airlines will already hold the monopoly over slotsat certain airports, making it harder for new airlines to infiltrate. This creates difficulties for a new airline


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aiming to negotiate prime slots at busy airports and can result in it being restricted to offering flights onlyat off-peak times, or having to fly to airports further away from popular destinations. This can be adeterrent to new airlines, as customers may seek more convenient alternatives.

While there is some debate as to whether traditional scale economies are significant in this industry, itseems likely that being able to offer a wide range of routes is advantageous. The larger airlines achievethis not only through their own fleet, but through code sharing agreements with other carriers in alliances;however, a new entrant will not necessarily be approved for membership.

Market value growth had been strong during the 2005-2008 period, but a decline in 2009 wiped out muchof that revenue expansion. CAGR for the 2005-2009 period was a respectable 3.6%, and forecast growthis expected to be stronger, which should attract new entrants. However, should fuel prices continue to risetowards 2008 levels, it may be difficult to maintain margins, thus discouraging new players.

Regulation forms an additional barrier. Authorities such as Japans Civil Aviation Bureau and the CivilAviation Administration of China are responsible for security, safety, environmental impacts and relatedissues. Compliance with regulation increases the height of entry barriers.

For airline markets, there is an additional regulatory issue to consider. Cabotage is the provision ofdomestic transport services in a country by companies based in a different country. Airline cabotage isgenerally forbidden, unless explicitly permitted by an agreement between two or more countries. Forexample, cabotage by any EU-based carriers is permitted in any other EU-country; also, the Open Skiesagreement, finalized in mid-2010, accords cabotage rights to US carriers in the EU. However, until andunless similar rights are extended by individual countries in Asia-Pacific to other countries, access to whatare often substantial domestic markets by foreign carriers will be severely restricted. Overall, there is amoderate likelihood of new entrants to this industry.

Other forms of transport such as road, rail and marine travel are considered as substitutes to airlinetravel. Buyers take into account not only the cost of travel but also how long the journey will take oncorresponding forms of transportation. In larger countries, air travel makes it easier to overcome longdistances and has certain benefits such as shorter travel time than rail travel, even including the time tocheck in. However in smaller countries, domestic air travel may not be so appropriate, and rail and roadtransportation become more attractive alternatives. Furthermore, many consumers are now aware of theenvironmental impact of air travel, and are turning to rail travel instead. It is possible to travel aroundmuch of the world by long-distance bus or train, although levels of service vary and some bordercrossings may present a difficulty.

Domestic flights, which account for 81.8% of air passenger volumes for the region as a whole can be

substituted by car, bus, or rail. (These volumes refer to the sum of domestic passengers within individualcountries, and exclude inter-country flights within Asia-Pacific.) Most available data does not distinguishbetween the length of journeys made by passengers, so the threat posed by substitutes in inter-citydomestic rail travel the only domestic journeys for which passengers would take a plane is not easy toassess. With that proviso, usage of rail travel, as measured by per capita rail passenger-km (PKM)


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volumes, allows some comparisons to be drawn. In 2009, per capita volume was 1,565 PKM in Japan,the highest of all the countries considered in these reports. This no doubt in part reflects the well-developed rail infrastructure and fast, reliable trains that are typical of Japan. India, which also has anextensive rail network, had per capita volume of 775 PK, and China 599 PKM. In comparison, per capitarail travel was 950 PKM in Western Europe, and 930 PKM in Europe as a whole; while in the US, it was

just over 170 PKM.

International air travel is generally less vulnerable to road and rail substitution in this region. Japan,Australia, and Taiwan are islands with no links to mainland Asia, and land access from the South Koreanpeninsula to the rest of the continent is complicated by the need to travel via North Korea. Singapore isconnected by a road and rail bridge to Malaysia. Travel from the more developed regions of China to thewest is technically possible over land, but the distances make this impractical. In contrast, internationalland travel in Europe is favored by a dense road and rail infrastructure, and is a more significant substituteto air travel in that region.

For business travel, alternatives include virtual meetings via videoconferencing and similar technologies.The switching costs here are the cost of the equipment required. At present it is not clear how completelysuch technologies will replace face-to-face meetings. Overall, the threat from substitutes is assessed asmoderate.

Rivalry in the Asia-Pacific airline industry is strong. The competitive landscape has several largecompanies, such as JAL, alongside smaller competitors. Rivalry is increased by the presence of low-costcarriers in the market, as these companies can compete more intensely on price. Switching costs forbuyers are low, which means that it is easy for them to change to a competitor.

In this market, storage costs are actually the costs associated with unsold seats on a flight, equivalent tounsold inventory in the manufacturing industry. Given the cost of fuel, staffing, and so on associated withoperating a flight it is important to maximize the number of seats sold, hence the common policy of sellingslightly more tickets than there are available seats on the understanding that some buyers will not maketheir plane. Where storage costs are high, rivalry is intensified.

Diversification in the passenger airlines industry ranges from moderate to little. Most carriers generateadditional revenues through freight, but this is often a small proportion of their total sales. For example, infiscal 2009, JAL reported that 80% of its total revenues came from passenger services, 12% from cargoand mail, and the rest from other services; Air China had a revenue breakdown of 83%, 11%, and 6%,respectively. Such revenue splits are quite typical of the airline industry in other regions of the world.There are some carriers with more balanced revenue streams; for example, Taiwanese company ChinaAirlines reported in fiscal 2009 that only 55% of its total revenues came from passenger services, 36%from cargo, and the remainder from other services. A lack of diversity forces players to compete moreintensely in their single core business.

Exit costs are moderate. Planes are important assets with a high purchase price, which depreciate invalue with time and require frequent maintenance expenses. The difference between the outlay on them


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and the amount they can be sold for represents a sunk cost for an airline exiting the market. However,they are mobile. If conditions become tough in the airlines market in one country, a carrier that wishes toexit is not obliged to try to sell these assets where other companies are trying to do the same thing. Itcould sell them in a location where there is high demand for second-hand planes. However, the airlineindustry is quite labor-intensive; thus large numbers of employees may need to be offered severance payshould a company lay them off on exiting this market.


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LEADING COMPANIES



Air China also offers ground services for 35 foreign airlines, three domestic aviation groups and airlines atthe Beijing Capital International Airport, which occupies 55% of ground service of the airport. Groundservices include passengers' entry, departure and transit services, special passenger services, irregularflight passenger services, passenger luggage services, tarmac load and unload services, cabin cleaningservices and the supply of various ground equipments and special vehicles.

The others segment of the company includes air catering services and other airline-related services.

Air China has a fleet size of 257 Boeing and Airbus planes, with a further 232 on order. At present thecompany operates 185 destinations worldwide. It provides more 5,090 weekly flights internationally,offering more than one million seats.

The company's flights reach 81 domestic destinations and 42 international and regional destinationsthrough its global route network, with Beijing as the major hub.

Air China has several branch companies, such as: Southwest, Zhejiang Province, Chongqing, InnerMongolia, Tianjin, Guizhou Province, Tibet and bases in Shanghai and Southern China. It also owns aproject technology branch, a business plane branch, Aircraft Maintenance & Engineering (Ameco Beijing),China International Freight Transport Airline and Beijing Air Food.

Air China also has a stake in the following airlines: Air China Cargo Company Limited, Air MacauCompany Limited, Shenzhen Airlines Company Limited, Shandong Airlines Company Limited and CathayPacific Airways Limited. In terms of domestic cargo, Cargo Air China is the 5th largest airline in the world.

Key Metrics

The company recorded revenues of $7,469 million in the fiscal year ending December 2009, a decreaseof 3.4% compared to fiscal 2008. Its net income was $735 million in fiscal 2009, compared to a net loss of$1,369 million in the preceding year.


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LEADING COMPANIES



Table 6: Air China Limited: key financials ($)

$ million 2005 2006 2007 2008 2009

Revenues 5,597.4 6,568.8 7,467.2 7,734.1 7,469.1Net income (loss) 361.1 483.1 575.4 (1,369.3) 735.2Total assets 9,969.8 12,273.8 13,346.2 14,676.6 15,775.6Total liabilities 6,819.5 7,634.7 8,850.9 11,686.4 12,273.9Employees 78,447 78,872 19,972 20,494 23,807 Source: company filings D A T A M O N I T O R

Table 7: Air China Limited: key financials (CNY)

CNY million 2005 2006 2007 2008 2009Revenues 38,291.0 44,936.6 51,082.0 52,908.0 51,095.4Net income (loss) 2,470.4 3,305.1 3,936.0 (9,367.0) 5,029.5Total assets 68,201.9 83,963.6 91,300.0 100,401.0 107,919.0Total liabilities 46,651.3 52,227.9 60,548.0 79,945.0 83,964.6 Source: company filings D A T A M O N I T O R

Table 8: Air China Limited: key financial ratios

Ratio 2005 2006 2007 2008 2009Profit margin 6.5% 7.4% 7.7% (17.7%) 9.8%Revenue growth 14.2% 17.4% 13.7% 3.6% (3.4%)Asset growth 2.3% 23.1% 8.7% 10.0% 7.5%Liabilities growth (4.1%) 12.0% 15.9% 32.0% 5.0%Debt/asset ratio 68.4% 62.2% 66.3% 79.6% 77.8%Return on assets 3.7% 4.3% 4.5% (9.8%) 4.8%Revenue per employee $71,352 $83,285 $373,882 $377,383 $313,737Profit per employee $4,603 $6,126 $28,809 ($66,813) $30,882 Source: company filings D A T A M O N I T O R


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LEADING COMPANIES



Figure 5: Air China Limited: revenues & profitability

Source: company filings D A T A M O N I T O R

Figure 6: Air China Limited: assets & liabilities



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LEADING COMPANIES



Korean Air Lines Co., Ltd.

Table 9: Korean Air Lines Co., Ltd.: key facts

Head office: Korean Air Operations Center, 1370, Gonghang Dong, Gangseo gu, Seoul 157712, KOR

Telephone: 82 2 2656 7857Website: www.koreanair.comFinancial year-end: DecemberTicker: 3490Stock exchange: Korea

Source: company website D A T A M O N I T O R

Korean Air Lines is a Korea-based airline company engaged in providing passenger and cargo airtransportation services. The company has operations primarily in South Korea. The airline is the officialflag carrier for South Korea and the largest airline within the country with a fleet size of 132 aircraft with afurther 54 on order. Korean Air is also a founding partner airline in SkyTeam, the world's second largestairline alliance.

The company is also engaged in providing maintenance service, training and building lease services. Inaddition, it provides catering, hotel and in-flight sales services. Korean Air also operates an aerospacedivision, which is engaged in research and development, and production of aircraft and aircraft parts.

Korean Air operates to 13 cities domestically and 104 cities in 38 countries internationally. Its fleetcomprises Boeing 737-800, Boeing 737-900, Boeing 747-400, Boeing 777-200, Boeing 777-300, Airbus300-600, Airbus 330-200 and Airbus 330-300 aircraft.

The company partners with many other airlines, including the SkyTeam by code-sharing and seat-trading.Some of its partners include: Aeroflot, Aeromexico, Air Europa, Air France, Alaska Airlines, China Airlines,Delta Air Lines, Shanghai Airlines, Garuda Indonesia, Kenya Airways, and Vietnam Airlines.

Key Metrics

The company recorded revenues of $7,329 million in the fiscal year ending December 2009, a decreaseof 8.0% compared to fiscal 2008. Its net loss was $48 million in fiscal 2009, compared to a net loss of$1,528 million in the preceding year.


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LEADING COMPANIES



Table 10: Korean Air Lines Co., Ltd.: key financials ($)

$ million 2005 2006 2007 2008 2009

Revenues 5,917.0 6,302.2 6,874.9 7,967.6 7,328.8Net income (loss) 156.3 298.8 8,581.9 (1,527.5) (48.0)Total assets 10,585.9 10,598.5 11,825.4 12,334.6 13,266.7Total liabilities 7,442.7 7,184.9 8,382.0 10,177.2 10,895.4 Source: company filings D A T A M O N I T O R

Table 11: Korean Air Lines Co., Ltd.: key financials (KRW)

KRW million 2005 2006 2007 2008 2009

Revenues 7,584,200.0 8,077,900.0 8,812,000.0 10,212,600.0 9,393,703.0Net income (loss) 200,400.0 383,000.0 11,000,000.0 (1,957,900.0) (61,495.0)Total assets 13,568,600.0 13,584,700.0 15,157,339.0 15,809,991.0 17,004,700.0Total liabilities 9,539,700.0 9,209,300.0 10,743,777.0 13,044,755.0 13,965,300.0 Source: company filings D A T A M O N I T O R

Table 12: Korean Air Lines Co., Ltd.: key financial ratios

Ratio 2005 2006 2007 20082009Profit margin 2.6% 4.7% 124.8% (19.2%) (0.7%)

Revenue growth 5.2% 6.5% 9.1% 15.9% (8.0%)Asset growth (1.2%) 0.1% 11.6% 4.3% 7.6%Liabilities growth (3.9%) (3.5%) 16.7% 21.4% 7.1%Debt/asset ratio 70.3% 67.8% 70.9% 82.5% 82.1%Return on assets 1.5% 2.8% 76.5% (12.6%) (0.4%) Source: company filings D A T A M O N I T O R


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LEADING COMPANIES



Qantas Airways Limited

Table 13: Qantas Airways Limited: key facts

Head office: Qantus Centre, Level9, Building A, 203 Coward Street, Mascot, New South Wales2020, AUS

Telephone: 612 9691 3636Fax: 612 9691 3339Website: www.qantas.com.auFinancial year-end: JuneTicker: QANStock exchange: Australian

Source: company website D A T A M O N I T O R

Qantas Airways is an Australian airline company, engaged in the operation of international and domesticair transportation services, and the provision of time definite freight services. The group is also involved inthe sale of international and domestic holiday tours and associated support activities, includinginformation technology, catering, ground handling, and engineering and maintenance.

The group operates through five business divisions: Qantas, Jetstar, Qantas frequent flyer, Qantasfreight, and Jetset Travelworld Group.

The group's main business is the transportation of passengers using two complementary airline brands:Qantas and Jetstar. Qantas comprises commercial, customer and marketing, and operations arms. Inaddition to Qantas mainline sales and distribution, the commercial group includes QantasLink, QantasFreight Enterprises, and alliances. The customer and marketing arm includes product and servicedevelopment, cabin crew, marketing, and in-flight services. The operations group comprises engineering,airports, catering, flight operations, operations planning and control, and Qantas Aviation Services.

During the course of the year, engineering, airports, catering, flight operations, operations planning andcontrol, and associated businesses were regrouped into a single airline operations unit, Qantas signalinga renewed focus on core aviation excellence. Qantas is a founding member of the oneworld global airlinealliance. Qantas' Tasman services are operated by Jetconnect, a wholly-owned Qantas subsidiary based

in New Zealand.

Jetstar is the Qantas group's low fares airline and the world's largest low-cost long haul carrier. It hasfocused heavily on regional expansion in the Asia-Pacific over the past year, increasing its strategicholdings in affiliated businesses, with Jetstar Asia in Singapore and Jetstar Pacific based in Vietnam. Ithas also launched New Zealand domestic and additional trans-Tasman services. As a result, the Jetstar


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brands, including Jetstar Asia and Jetstar Pacific, grew strongly in FY2009, carrying 13.4 millionpassengers to 50 destinations in Australia, New Zealand, Asia, and to Honolulu.

Domestically, Qantas, QantasLink, and Jetstar operate around 5,300 flights a week, serving 59 city andregional destinations in all states and mainland territories (Qantas, 2,300; QantasLink, 1,900; and Jetstar,1,100). Jetstar also operates nearly 170 domestic flights a week in New Zealand. Internationally, Qantasand Jetstar operate more than 900 flights each week (Qantas 600 and Jetstar 320). The group's networkcomprises 173 destinations in 42 countries, including Australia and those served by codeshare partnerairlines. At present Qantas has a fleet of approximately 136 aircraft plus a further 51 on order. As of June2010, Qantas and its subsidiaries operate 256 aircraft, which include 52 aircraft by Jetstar Airways, 52 bythe various QantasLink-branded airlines, seven by Jetconnect, four by Express Freighters Australia andfour by Qantas Freight.

The Qantas frequent flyer division represents the customer loyalty program of the group with 5.8 million

members. Members can earn points into their single frequent flyer account with over 400 programpartners in Australia and worldwide, including car rental companies, hotels, financial institutions,restaurants, and retailers. Members can use their points to redeem on Qantas, Jetstar, and 23 partnerairlines; or online at the Qantas Frequent Flyer Store (strengthened to offer over 1,000 products, services,and vouchers).

The freight division operates through Qantas Freight Enterprises (QFE), which markets the freightcapacity of all Qantas and Jetstar international aircraft. QFE includes the following wholly-ownedsubsidiaries: Express Freighters Australia, Qantas Road Express (trading as Jets Transport Express),and DPEX Worldwide. Through Express Freighters Australia, QFE maintains an air operator's certificateand operates four B737 freighter aircraft, which are wet-leased to Australian Air Express (Australia'sleading domestic express air freight service company) on long term contracts.

Jets Transport Express, the bonded trucking business, continues to benefit from the domestic shift tolower cost road transportation of freight. DPEX Worldwide, the Qantas group's Asia-based expresscourier business, has expanded to offer a full range of branded express envelopes and small parcelservices to cost-conscious consumers and small-to-medium enterprises in Australia. QFE also operatestwo joint ventures with Australia Post: time-definite express services with Australian Air Express; and StarTrack Express, a premier road express transport and logistics solutions provider.

In July 2008, Qantas Holidays and Qantas Business Travel were merged into Jetset Travelworld Group,

creating a vertically integrated travel company offering wholesale, retail, and corporate travel services.Since the merger, synergies have been realized through cross-selling, volume aggregation, and therecruitment of new retail shops, together with efficiency and productivity improvements.

The group has investments in other airline and airline related businesses. Qantas holds a 49% interest inNewstar Investment Holdings, which owns all the shares in Orangestar Investment Holdings, which in turn


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owns and operates the value based intra-Asia airlines Jetstar Asia and Valuair, based in Singapore. Thegroup also holds a 27% stake in Vietnam's Jetstar Pacific, a 46.3% interest in Air Pacific, and a 58%interest in Jetset Travelworld.

Key Metrics

The company recorded revenues of $11,358 million in the fiscal year ending June 2009, a decrease of10.1% compared to fiscal 2008. Its net income was $96 million in fiscal 2009, compared to a net incomeof $756 million in the preceding year.

Table 14: Qantas Airways Limited: key financials ($)

$ million 2005 2006 2007 2008 2009Revenues 9,872.4 10,651.2 11,836.8 12,637.8 11,357.8Net income (loss) 596.0 374.2 561.6 756.3 96.0Total assets 14,153.9 14,972.6 15,302.2 15,375.9 15,648.2Total liabilities 9,137.7 10,226.3 10,467.1 10,899.8 11,148.7Employees 35,520 34,832 35,236 35,334 33,030 Source: company filings D A T A M O N I T O R

Table 15: Qantas Airways Limited: key financials (A$)

A$ million 2005 2006 2007 2008 2009Revenues 12,648.8 13,646.7 15,165.7 16,191.9 14,552.0Net income (loss) 763.6 479.5 719.6 969.0 123.0Total assets 18,134.4 19,183.3 19,605.7 19,700.1 20,049.0Total liabilities 11,707.5 13,102.2 13,410.7 13,965.2 14,284.0 Source: company filings D A T A M O N I T O R


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Table 16: Qantas Airways Limited: key financial ratios

Ratio 2005 2006 2007 2008 2009

Profit margin 6.0% 3.5% 4.7% 6.0% 0.8%Revenue growth 11.4% 7.9% 11.1% 6.8% (10.1%)Asset growth 3.2% 5.8% 2.2% 0.5% 1.8%Liabilities growth (0.2%) 11.9% 2.4% 4.1% 2.3%Debt/asset ratio 64.6% 68.3% 68.4% 70.9% 71.2%Return on assets 4.3% 2.6% 3.7% 4.9% 0.6%Revenue per employee $277,939 $305,789 $335,930 $357,666 $343,864Profit per employee $16,779 $10,744 $15,940 $21,404 $2,906 Source: company filings D A T A M O N I T O R

Figure 9: Qantas Airways Limited: revenues & profitability



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Figure 10: Qantas Airways Limited: assets & liabilities



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Tradewinds Tours & Travel Private, a wholly-owned subsidiary of Silk Air, is licensed as a tour operator. Itprovides inbound and outbound package tours, hotel accommodation, and organizes conventions.

The group's other wholly-owned subsidiaries include: Singapore Aviation and General InsuranceCompany, Singapore Flying College, SIA (Mauritius), and Sing-Bi Funds. Some of SIA's associatecompanies include: Abacus Travel Systems (in which the company owns a 61% stake), Virgin Atlantic(49%), and RCMS Properties (20%). The Singapore Government owns 54.6% of the group throughTemasek Holdings. Singapore Airlines is a member of Star Alliance, an international airline alliancecomprising 27 international carriers.

More recent developments saw the company announce on February 16, 2009, a cut of 17 aircraft from itsoperating fleet between April 2009 and March 2010 as part of a cost-saving initiative to help counterfalling passenger and cargo demand. This followed an initial decision to phase out only four aircraft. Theairline stated that it could not rule out delaying deliveries on aircraft already ordered.

Key Metrics

The company recorded revenues of $10,988 million in the fiscal year ending March 2009, an increase of0.1% compared to fiscal 2008. Its net income was $788 million in fiscal 2009, compared to a net incomeof $1,468 million in the preceding year.

Table 18: Singapore Airlines Limited: key financials ($)

$ million 2005 2006 2007 20082009Revenues 8,251.9 9,164.2 9,956.4 10,971.8 10,988.1

Net income (loss) 929.0 852.3 1,462.3 1,467.9 787.8Total assets 14,936.8 16,052.9 17,854.3 18,213.7 17,048.2Total liabilities 4,282.9 4,579.6 4,852.5 4,944.8 7,094.5Employees 13,572 13,729 13,847 14,071 14,343 Source: company filings D A T A M O N I T O R


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Table 19: Singapore Airlines Limited: key financials (Si$)

Si$ million 2005 2006 2007 2008 2009

Revenues 12,012.9 13,341.1 14,494.4 15,972.5 15,996.3Net income (loss) 1,352.4 1,240.7 2,128.8 2,136.9 1,146.8Total assets 21,744.7 23,369.5 25,992.0 26,515.2 24,818.5Total liabilities 6,234.9 6,666.9 7,064.2 7,198.6 10,328.1 Source: company filings D A T A M O N I T O R

Table 20: Singapore Airlines Limited: key financial ratios

Ratio 2005 2006 2007 2008 2009

Profit margin 11.3% 9.3% 14.7% 13.4% 7.2%Revenue growth 23.1% 11.1% 8.6% 10.2% 0.1%Asset growth 9.3% 7.5% 11.2% 2.0% (6.4%)Liabilities growth 11.2% 6.9% 6.0% 1.9% 43.5%Debt/asset ratio 28.7% 28.5% 27.2% 27.1% 41.6%Return on assets 6.5% 5.5% 8.6% 8.1% 4.5%Revenue per employee $608,007 $667,509 $719,033 $779,744 $766,097Profit per employee $68,449 $62,077 $105,605 $104,319 $54,923 Source: company filings D A T A M O N I T O R


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Figure 11: Singapore Airlines Limited: revenues & profitability


Figure 12: Singapore Airlines Limited: assets & liabilities



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MARKET FORECASTS



MARKET FORECASTS

Market value forecast

In 2014, the Asia-Pacific airlines industry is forecast to have a value of $143.3 billion, an increase of75.9% since 2009.

The compound annual growth rate of the industry in the period 200914 is predicted to be 12%.

Table 21: Asia-Pacific airlines industry value forecast: $ billion, 200914

Year $ billion billion % Growth2009 81.5 58.6 (17.6%)2010 93.8 67.4 15.1%2011 107.7 77.5 14.9%2012 119.0 85.6 10.4%2013 130.9 94.1 10.0%2014 143.3 103.1 9.5%

CAGR: 200914 12.0%


Figure 13: Asia-Pacific airlines industry value forecast: $ billion, 200914



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Market volume forecast

In 2014, the Asia-Pacific airlines industry is forecast to have a volume of 805.1 million passengers, anincrease of 54.1% since 2009.

The compound annual growth rate of the industry in the period 200914 is predicted to be 9%.

Table 22: AsiaPacific airlines industry volume forecast: million passengers, 200914

Year million passengers % Growth2009 522.3 9.9%2010 574.3 10.0%2011 622.3 8.4%2012 677.7 8.9%2013 737.5 8.8%

2014 805.19.2%

CAGR: 200914 9.0%


Figure 14: AsiaPacific airlines industry volume forecast: million passengers, 200914



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APPENDIX



APPENDIX

Methodology

Datamonitor Industry Profiles draw on extensive primary and secondary research, all aggregated,analyzed, cross-checked and presented in a consistent and accessible style.

Review of in-house databases Created using 250,000+ industry interviews and consumer surveysand supported by analysis from industry experts using highly complex modeling & forecasting tools,Datamonitors in-house databases provide the foundation for all related industry profiles

Preparatory research We also maintain extensive in-house databases of news, analystcommentary, company profiles and macroeconomic & demographic information, which enable ourresearchers to build an accurate market overview

Definitions Market definitions are standardized to allow comparison from country to country. Theparameters of each definition are carefully reviewed at the start of the research process to ensure theymatch the requirements of both the market and our clients

Extensive secondary research activities ensure we are always fully up-to-date with the latestindustry events and trends

Datamonitor aggregates and analyzes a number of secondary information sources, including:- National/Governmental statistics- International data (official international sources)- National and International trade associations- Broker and analyst reports- Company Annual Reports- Business information libraries and databases

Modeling & forecasting tools Datamonitor has developed powerful tools that allow quantitativeand qualitative data to be combined with related macroeconomic and demographic drivers to createmarket models and forecasts, which can then be refined according to specific competitive, regulatoryand demand-related factors

Continuous quality control ensures that our processes and profiles remain focused, accurate andup-to-date


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APPENDIX



Industry associations

International Air Transport Association (IATA) Travel Industry Designator Service, 800 Place Victoria, P.O. Box 113, Montreal, Quebec, H4Z 1M1,

Canada Tel.: 1 514 874 0202Fax: 1 514 874 1753www.iata.org

International Air Carriers AssociationRue Montoyer, 23, BE-1000 Brussels, Belgium Tel.: 32 2 546 1060Fax: 32 2 546 1070www.iaca.be

Association of Asia-Pacific Airlines9th Floor, Kompleks Antarabangsa, Jalan Sultan Ismail, 50250 Kuala Lumpur, MalaysiaTel.: 60 3 2145 5600Fax: 60 3 2145 7500www.aapairlines.org

Related Datamonitor research

Industry Profile

Airlines in South Africa

Global Airlines

Airlines in the United States

Airlines in Canada


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APPENDIX



Disclaimer

All Rights Reserved.

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form

by any means, electronic, mechanical, photocopying, recording or otherwise, without the priorpermission of the publisher, Datamonitor plc.

The facts of this report are believed to be correct at the time of publication but cannot be guaranteed.Please note that the findings, conclusions and recommendations that Datamonitor delivers will bebased on information gathered in good faith from both primary and secondary sources, whoseaccuracy we are not always in a position to guarantee. As such Datamonitor can accept no liabilitywhatever for actions taken based on any information that may subsequently prove to be incorrect.


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ABOUT DATAMONITOR



ABOUT DATAMONITOR

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