Asia Pacific AviationIndustry PerspectiveIndustry Perspective
Andrew HerdmanAndrew HerdmanDirector General
Association of Asia Pacific Airlines
International Aviation Fuel Conference5 April 2012
Beijing ChinaBeijing, China
O er ieOverview• Global Mobility• Global Mobility
• Asia Pacific Aviation
• Business Outlook
• Future Growth
• Sustainable Aviation• Sustainable Aviation
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
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
World output – long term historical trends
Source: Maddison (2010) & Conference Board
Output measured on PPP basis
Asia Pacific Aviation
Asia Pacific Aviation
US$163 billion revenue
655 million passengers457 million domestic198 million international
18 5 million tonnes of cargo18.5 million tonnes of cargo
4,984 aircraft
Asia Pacific carriers overall market share:24% of global passenger traffic
Source: Combined AAPA + non-AAPA airlines GMT+7 to GMT+12
38% of global cargo trafficData: 2011 Estimates
Global Regulatory Influences
AsiaAsia Pacific
•Wider impact of US and EU regulations
•Asia Pacific has limited influence
Current Business Outlook
Global recovery moderatesWorld growth2010 +5.2%2011 +3 8%2011 +3.8%2012E +3.3%2013F +3.9%
Pattern of two speed growth maintainedSource: IMF
Pattern of two-speed growth maintained
Global passenger and cargo traffic
Global international passenger and cargo traffic
Passenger traffic continues to expand,Passenger traffic continues to expand, but air cargo markets remain weak
Source: IATA
Premium and economy traffic
Source: IATA
Slower recovery in premium traffic
Oil price volatility
Persistently high oil prices reflectPersistently high oil prices reflect political risk factors
Historic oil price volatility
• Macro economic impact of oil price spikes
• High oil price acts as brake on global economy
Source: US EIA
• High oil price acts as brake on global economy
Fuel price impact on airlines
34%36%
200
250
l
CFOH
26%28%
33%
26%26%
30%
100
150
200
on /
US$
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
Global airline industry profitability
• Margins squeezed by high oil prices• Margins squeezed by high oil prices
• Intensely competitive industry
Future Growth
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
Asia Pacific traffic will grow significantly
Source: Airbus GMF2011-2030
Asia Pacific fleet expansion
Source: Boeingg
CMO 2011 - 2030
Sustainable AviationSustainable Aviation
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
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
Aviation emissions reduction roadmap
Source: IATA
Multi-pillar approach to achieve industry goals
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
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
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