Future Growth of the Airline Industry
How will global competition drive change?
Andrew Herdman
Director General
Association of Asia Pacific Airlines
Geneva, Switzerland
22 February 2011
Overview
• Current business conditions
• Future growth drivers
• Evolving airline strategies
Aviation: moving the world
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Air travel delivers global mobility
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2,500 million passengers
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Outstanding safety record
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Carries 35% by value of global trade
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Wider social and economic benefits
Source: ATAG
Airlines managed through the downturn
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Trimmed route networks and capacity in response to lower demand
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Reduced utilisation, grounded surplus aircraft, deferred some new deliveries
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Implemented wide range of measures to reduce staff costs, retrenchment as a last resort
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Conserved cash, shored up balance sheets
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Worked with industry partners to reduce unnecessary costs
Airlines focused on survival whilst preserving their ability to respond to an upturn
Global economic recovery
World growth
2009A - 0.6%
2010E +4.8%
2011E +4.2%
2012F +4.5%
Source: IMF
Led by dynamic Asia Pacific economies
Recovery in passenger and cargo volumes
Global international passenger and cargo traffic
Overall volumes returned to pre-recession levels Source: IATA
Slower recovery for premium traffic
Global international passenger traffic by class
Source: IATA
Refocusing on growth
• Ongoing capital investment in fleets, airports and other services infrastructure
• Recruitment and training of skilled workforce
• Airfares do not keep pace with general price inflation
• Constant focus on productivity improvements and reducing unit costs
• Manage risks including currency and oil price volatility
Governments still view our industry as a soft target for arbitrary taxes
• Value chain improvement
• Partnering with service providers
Evolving Business Models
• Full Service Network Carriers
• Streamlining short haul operations
• Establishing LCC subs and associates
• Point-to-Point LCCs
• Initially focused on domestic short-haul
• Venturing into longer-haul markets
• Experimenting with codeshares, connections, adding customer service
• Further signs of convergence and hybridisation
• Long haul invariably uses wide body aircraft, involves cargo operations, two-class passenger configurations
Asia: customer service leadership
• Asian carriers are global leaders in service quality with world-class premium product offerings • Premium cabins generate 27% of total international passenger revenue
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