eCommerce - A paradigm shift for Air Cargo Michael Steen EVP & Chief Commercial Officer Atlas Air Worldwide Inc.
Atlas Air Worldwide at a Glance Structure 2017 Global Operating Network Headquarters: 2017 Operating Rev: Purchase, NY $2.16 Billion 422 Airports in 103 Countries 252,802 Total Block Hours Employees: NASDAQ Listed: 48,983 Flights 790 Charters Completed 2,870 AAWW 80+ Unique Customers Fleet (105 aircraft) Valued Customers Cargo Passenger Forwarders/ Airlines Shippers Integrators 10 (747-8F) 12 (777-200LRF) 4 (747-400) Brokers 35 (767-200/300F) 28 (747-400F) 4 (767-200/300ER) 1 (757-200F) 4 (747-LCF) 6 (737-400F) 1 (737-800) 2 Privileged and Confidential
Our Value Proposition – Integrated Solutions Dry Leasing Services ACMI CMI Charter • Turnkey solution • Crew & technical • Ad-hoc & program • Asset financing & • Network analysis expertise charters management & design • Large fleet - various platforms • Economy of scale • Custom cargo & • Dry leasing, sales • Pilot training PAX service & sale / leaseback • Global footprint - • Flexible network • Spare parts scalable network solutions • Leader in South • Fleet planning management American freight • Performance, • Commercial • Conversion • Transportation reliability & collaboration • Leader in US DOD management visibility solution expertise passenger & cargo service A History of Delivering Value to Our Customers 3 Privileged and Confidential
The Global Air Cargo Market & the impact of eCommerce
Global Air Freight is a Large and Growing Industry Airlines operating freighters generate 90% of industry revenues Passenger Belly Only 10% $8.5B All Cargo 10% $8.5B Express Carrier Total 41% $33.6B $85B Combination Carrier 39% $32.8B Sources: Flight Global, U.S. DOT F41, airline reports, and Boeing estimates (2017 data) 5 Privileged and Confidential
Air Cargo is essential to the Global Economy eCommerce will increase the value 6 Privileged and Confidential
Megatrends Will Drive Opportunity in Airfreight Economic Megatrends Digitization Increases in urban consumption Technological breakthroughs at by the growing consuming an increasing pace class – Increase by 1.8B by Adoption of new technologies 2025 Change in buying behaviors. Global consumption to e-Commerce related surpass $30 trillion – increase airfreight demand growing from $12 trillion today significantly eCommerce Globalization New consumer focused retail Global flows increasing – trade, model will drive significant finance, people and data demand growth Tourism and general travel Trends will require efficient air increasing, adding jobs networks to serve effectively Manufacturing moving away from Freighters will play a more traditional passenger hubs important role in the future 7 Privileged and Confidential
Global Airfreight Industry Performance Trends Global Airfreight Market Global Express Market International freight tonne kilometers (FTKs) flown up 10.6% in 2017 The International Express market is showing robust growth FTK growth expected to exceed 4.3% in 2018 5.8% CAGR since 2011 vs. nominal CAGR for International FTK’s PMI Index at 55 for 2017 and semi-conductor sales +18% for 2017 The Express segment benefiting from the e-Commerce growth International Express Market – DHL, FedEx and UPS Total Global Airfreight Tonnage Growing from Record Levels ??% 150% Change in Demand (Base year 2011 - 100%) 62.5 65 59.9 Freight Tonnes 140% 54.9 (Millions) 31% 52.8 51.5 55 49.3 49.5 49.1 48.8 25% 45.4 45.1 130% 43.4 19% 41.1 45 120% 12% 35 6% 110% 25 100% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018F 2.5% 6.4% 4.6% (0.7)% (8.9)% 19.5)% 0.4% (1.0)% 1.4% 4.0% 1.5% 3.8% 10.6% 4.3% 90% 2011 2012 2013 2014 2015 2016 2017 Global e-Commerce Market Supply vs. Demand Global e-Commerce Estimates ($ Billion) FTK and AFTK Growth 15% $2,864 10% $3,000 $2,450 $2,076 5% $1,735 $2,000 $1,450 $1,191 0% $940 $727 $1,000 -5% FTK AFTK $0 -10% 2012 2013 2014 2015 2016 2017 2018F 2019F Overall e-Commerce market penetration is still low Sources: IATA, ICAO, Euromonitor, Forrester, eMarketer, BofA Merrill Lynch Global Research estimates 8 Privileged and Confidential
Market Growth 2017 9 Privileged and Confidential
Evolution of Distribution Models The Last Mile 10 Privileged and Confidential
B2C vs. B2B B2C B2B Number of Customers Millions Thousands Geographical Density Low High Shipment Unit Package Pallet Value/Weight Ratio High Low Delivery Frequency On-demand Scheduled Delivery Speed ASAP Predictable Shipper-Consignee Relationship Transactional Contractual Payment Credit card Purchase order 11 Privileged and Confidential
e-Commerce – A real Paradigm Shift e-Commerce only accounts for ~10% of global retail e-Commerce Penetration sales (as percentage of global retail sales) US e-Commerce spend 16% 15.5% $385B in 2016 – forecasted to 14.6% grow to $600B by 2020 14% 13.1% USA : 237M internet users – 11.6% 73% mobile penetration – 9% 12% e-Commerce penetration 10.1% 10% China : 700M internet users – 8.7% 50% mobile penetration – 8% 10% e-Commerce penetration 7.4% India : 300M internet users – 6% 2015 2016 2017* 2018* 2019* 2020* 2021* 25% mobile penetration – 2% e-Commerce penetration Source: Forrester, Statista, eMarketer 12 Privileged and Confidential
Asia Express & e-Commerce has Great Potential ~2 ~500 People within billion million 4 Hour Flight Average 6.2% 2.5 - 3% GDP Growth (2016-2020) Stable w/ Middle Class 9% limited Growth growth Limited Very Regional Freighters fleet large fleet Deployed Source: Worldbank.org / Brookings Institution / OECD.org 13 Privileged and Confidential
Summary Global Macro Outlook Growth of global “consuming class” will fuel the economy Airfreight Outlook Continued growth driven by e-Commerce and Express Supply Outlook Demand is expected to outpace Supply eCommerce will change the Supply Chain Continued globalization driven by consumer demand Positive Disruption Participate with expertize, digitization and continued investment
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