Transcript Presentation Teyssier

The revenue crisis: when will the
airline industry recover?
Narjess Teyssier
ICAO
Chief Economic Analysis & Policy Section
Montréal 26 September 2010
Regional traffic overview for 2009
North America
Traffic:
-3.9%
Capacity:
-4.7%
Load Factor:
+0.7 Pt
Europe
Traffic:
Capacity:
Load Factor:
-3.9%
-4.3%
+0.3 Pt
Middle East
Latin America
Traffic:
0.9%
Capacity:
2.2%
Load Factor:
-0.9 Pt
Traffic:
Capacity:
Load Factor:
9.1%
11.9%
-1.9 Pt
Africa
World
Traffic:
-2.0%
Capacity:
-2.2%
Load Factor: +0.2 Pt
Traffic:
Capacity:
Load Factor:
-3.9%
-4.3%
-0.7 Pt
Asia Pacific
Traffic:
-0.2%
Capacity:
-0.9%
Load Factor:
+0.6 Pt
Main drivers for air travel demand
Globalization
Liberalization
Falling air fares
Higher Disposable
incomes
ICAN: ICAO forum for liberalization
Air transport conducted under liberal arrangements
As a % of international scheduled services
Country pairs
Frequencies
Number of frequencies
Number of country-pair routes
60%
50%
50%
40%
40%
30%
30%
20%
20%
10%
10%
0%
0%
1995
Source : ICAO
1999
2004
2009
Liberalization: a necessary frame for
Low Cost Carriers development
Number of LCCs : 13
Deregulation :
1978
Network
carriers
Network
carriers
LCCs
21%
79%
Number of LCCs : 48
Network
carriers
LCCs
14%
86%
Deregulation : 1987- 1997
LCCs
Number of LCCs : 33
21%
79%
Deregulation : accelerating
Network
carriers
Number of LCCs : 10
Deregulation : in progress
Network
carriers
LCCs
91%
LCCs
9%
Number of LCCs (Africa and Middle East) : 10
Deregulation : uneven
24%
76%
LCCs development by region
Low Cost Carriers progression
Total European air traffic
1999-2009:
4.3 %p.a.
Traffic
Billions RPK
5000
4500
4000
1999-2009:
14% p.a.
LCCs
Non Scheduled carriers
Legacy carriers
3500
3000
2500
2000
1500
1000
500
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
0
Source: ICAO
Toward more consolidation: Alliances,
Airlines´ mergers and acquisitions
Most well-known Non Aligned airlines
3 Major alliances grouping : more than 60% of the worldwide scheduled traffic
Traffic recovery started in 2010,
despite the volcanic ash impact
Regional traffic* growth forecasts
4.3%
Forecast 2010
Forecast 2011
Forecast 2012
World
North America
Middle East
Latin America
Europe
Asia-Pacific
Africa
0
RPKs Growt h in %
2
*Traffic of airlines registered in each region expressed in RPKs
Source: ICAO
4
1999-2009
average
growth
6
8
10
12
Challenges ahead for the airline industry

How has the financial crisis impacted airlines and other
industry stakeholders?

What are the recovery strategies?

Does liberalization improve or worsen the financial condition
of airlines?

How do alliances and antitrust immunity enhance revenue,
reduce costs, and affect consumer welfare?

Where will the industry be in five years?
€1,000 cash prize for best suggestion of
ancillary revenue
MOST CREATIVE ONES





Charging for toilet paper – with
O’Leary’s face on it,
Charging €2.50 to read the
safety cards,
Charging €1 to use oxygen
masks,
Charging €25 to use the
emergency exit,
Charging €50 for bikini clad
Cabin Crew.
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The statements made herein are based on
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are not shown, ICAO will be pleased to
explain the basis thereof.
Low Cost Carriers progression
Passenger traffic market share
By airline type
Non IATA
IATA members
airlines
75%
25%
Passenger traffic market share
By airline type
1999-2009
IATA4500
members
93%
Non IATA
airlines
7%
Passengerr traffic
Billion RPKs
4000
+14 % p.a.
3500
1999-2009
3000
+4.3 % p.a.
2500
2000
1500
1000
500
0
Source: ICAO, IATA
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Market shares* achieved
International traffic represents 60% of the total passenger traffic
International passenger
traffic**
Africa *
North America 3%
17%
Middle East
10%
Asia Pacific
25%
Latin America
4%
Domestic passenger
traffic**
Africa *
1%
Asia Pacific
North
30%
America
55%
Europe 8%
Europe 41%
Middle East
1%
* Market share of the scheduled traffic of the airlines domiciled in the region
Latin
America 5%
**Expressed in Revenue Passenger Kilometre