Air transport and equipment market Review & outlook for 2017 Dublin, January 17 th 2017 Slide 1
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Four-cycle model – Background The “Technology Cycle” Type Technology Cycle The “Industry Cycle” Aviation industry Cycle determines how competitive determines the demand for an aircraft is. A more seat (RPK) and cargo (FTK) competitive design (same capacity. This “demand” can payload/range category) can be compared to the “supply” severely undermine value side (ASK and AFTK) to and remarket ability (A340 determine/project shortage vs. 777). A successor may or surplus situations also impact the value curve (“last of the line” effect) peaked new generation gaining momentum For investors/financiers the Increasingly aircraft A/c Maintenance Cycle end-of-lease conditions are transactions take place increasingly important. Is the between “financially driven” Financing Cycle aircraft under a FHA, Return parties (lessors, investors) Conditions or does the lessor vs. the traditional “airline -to- have access to Maintenance airline” model. The state of Reserves? the finance market conse- quently is very important increasingly important for "mid live investors “ very high Slide 3
The global economic environment – Improving slightly IMF – Macro-economic projections (Y-o-Y growth) [%] 5 4.6 4.6 4.2 4.0 3.8 3.9 4 3.4 3.4 3.2 3.1 3 2.6 2.3 2.1 1.9 2 1.8 1.6 1 0 2014 2015 2016 2017 World output Output advanced economies Output emerging markets World trade volume Source: IMF – World Economic Outlook October 2016 Slide 4
Towards an era of de-globalisation/protectionism? Global trade vs. global production [%] 20 15 10 5 0 -5 -10 -15 -20 -25 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 World industrial production volume (excl. construction) World merchandise world trade Source: CPB World Trade Monitor Slide 5
Airline fuel and interest cost moving up Crude oil & jet fuel – price development [US$ and € ] IMF US$ libor (mnth.) projection [US$] [ € ] [%] 350 350 2% 1.5 300 300 1.3 2016 250 250 1.0 1% 1.0 200 200 150 150 0.5 1% US Gulf Coast jet fuel spot (cUS$ per barrel) 0.5 0.3 100 100 WTI Spot (cUS$ per barrel) US Gulf Coast jet fuel spot (c € per barrel) 50 50 WTI Spot (c € per barrel) 0% 0 0 2014 2015 2016 2017 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Source: IMF – World economic outlook October 2016 West Texas Intermediate (WTI) crude oil price IMF oil price projection [US$] [ € ] [US$ per barrel] 120 52 30 $50.8 $50.6 projections 20 100 50 18% 10 80 48 0 60 46 -10 -15% -8% 40 -20 44 $43.0 20 -30 42 0 -40 Jan-2015 Jul-2015 Jan-2016 Jul-2016 Jan-2017 Jul-2017 40 -50 -47% 38 -60 Historical spot price STEO price forecast NYMEX futures price 2014 2015 2016 2017 95% NYMEX futures upper confidence interval 95% NYMEX futures lower confidence interval Δ Oil price (US$ in %) Oil (US$/BBL) Source: eia – Short-term energy outlook, December 2016 Source: IMF – World economic outlook October 2016 Slide 6
2010 – 2016 passenger traffic robust, but yields down IATA passenger market data RPK growth & pax yield PLF [%] [%] 20 82 80.4 14.9 80.2 79.9 15 79.7 79.8 79.4 80 8.9 9.5 78.5 10 7.9 8.3 7.4 8.0 6.9 6.6 7.5 5.9 5.7 6.3 5.3 5.2 5.1 78 5 2.8 1.7 2.4 1.0 76.2 0.0 0 76 75.0 -1.2 -1.4 -5 73.5 -3.9 74 -5.5 -8.0 -10 -10.7 72 -15 -13.7 -20 70 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017F RPK growth Pax. yield PLF RPK = Revenue passenger-km PLF = Passenger load factor Source: IATA Slide 7
2011 – 2016 stagnant freight traffic – 2016 turn-around? IATA cargo market data [%] 25 19.4 20 14.4 15 11.6 10 7.0 6.3 5.6 5.0 4.4 3.5 3.9 4.7 5 3.4 2.3 2.3 0.8 0.6 0.5 0.4 0.0 0 -0.7 -0.9 -2.0 -5 -4.2 -4.9 -10 -8.8 -12.5 -15 -15.2 -17.4 -20 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017F FTK growth Cargo yield FTK = Freight tonne km Source: IATA Slide 8
2016 YtD – Passenger traffic solid, freight recovering Traffic volumes [%] 10 8 Intra 2016 freight trend 6 YtD: 6.1% 4 YtD: 3.2% 2 0 -2 -4 -6 -8 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 RPK FTK Source: IATA Air passenger and freight analysis Slide 9
2016 – Peak in the profit cycle? World airline financial results [US$ mn] 718 701 800 700 600 500 400 300 35.3 200 35.6 100 0 -100 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E Op. income Net income Airline revenue Airline expenses Source: Airline Monitor; ICAO; for 2014/15/16 IATA Slide 10
2016 – Profitability mainly for North American Airlines IATA – Net airline profit – (post tax) per region [US$ bn] 40 35.5 35 30 25 22.4 20.3 20 15 9.4 10 7.3 7.50 7.84 5.5 4.4 5 1.1 0.9 0.3 0 -0.8 -5 -10 -9.6 -15 Africa Latin America Middle East Asia/Pacific Europe North America Global Net profit 2016F Net profit per passenger 2016F Source: IATA (Ec. performance December 2016) Slide 11
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