Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
The State of the Industry – and what AEA can do The current crisis – A catalyst for a structural change of European aviation European Aviation Club 12 March 2009 Brussels Ulrich Schulte-Strathaus AEA Secretary General -1- The Association of European Airlines AEA member airlines' brands give credibility and weight to the Association… AEA leverages this weight and gives it back, multiplied, to each individual member. member airlines passengers flights a day destinations in countries tonnes of cargo employees Total turnover of -2- The worst crisis since the 1930s 1973-75 1979-80 Oil crisis Oil crisis 7 1981-83 Economic crisis 6 % 5 2001-03 9/11 Economic 1990-92 1997-98 crisis Economic Asian crisis Financial crisis 2008-? 2007 8 1989 Timeline of crises since 1961 (GDP Growth) 4 3 2 World recession = GDP growth below 3% 1 Source: AEA research, IMF data -3- 2009 2005 2003 2001 1999 1997 1995 1993 1991 1987 1985 1983 1981 1979 1977 1975 1973 1971 1969 1967 1965 1963 1961 0 Economies worldwide are suffering Recession is Here % growth GDP 9 2008 2009 % growth rate GDP 7 5 3 1 -1 Source: IMF -4- World Brazil India China Japan Central & Eastern Europe EU US -3 Concerted governmental action to … contain the financial problems Global Action Government bail-outs of banks and financial institutions Targeted assistance to e.g. Fannie Mae, Freddie Mac, AIG, Fortis, Bradford & Bingley, Glitnir, Kaupthing, RBS, Lloyds TSB,… Government guarantees for interbank lending Government guarantees of savings deposits Interest rate cuts to counter economic slide IMF provides financial support to Iceland, Ukraine, Turkey IMF, EU and World Bank provide financial support to Hungary. Eurozone rescue US rescue UK rescue package package package US$ 700 bn GBP 387 bn EUR 1000 bn (EUR 550 bn) (EUR 480 bn) Source: AEA staff research, BBC -5- World economic outlook weakens further IMF Revises World GDP Forecast Gross Domestic Product, Constant Prices, Annual % Change 5 % 4 3 2 3.0 Oct'08 2.2 Nov'08 0.5 Jan'09 1 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 0 Source: IM F IMF has progressively revised its world forecast for 2009 down, from +3.0% to +0.5%. On 10 March 2009, Strass-Kahn warned that the world economy could shrink in 2009, suggesting an even gloomier outlook than the current official forecast of 0.5% growth. -6- Confidence Levels are at historic lows EU Economic Sentiment Index 120 110 Euro Area ESI 100 % EU ESI 90 80 70 Base year of index is annual 2000. Source: European Commission. In early 2009 the ESI for Euro Area and EU continued to fall. Both indicators stand at their lowest levels since the series was launched in 1985. -7- 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 60 Airlines -8- Traffic Trend Turnaround since mid-year Traffic Trend Turnaround came mid-year 2008 AEA Total Scheduled Services 15 2008 RPK % H1: +3.4% H2: -0.8% = Year +1.2% 10 5 Passenger RPKs % 0 -5 -10 Total Freight Tonne-Kms -15 2008 TFTK % H1: +3.1% May-08 -25 Mar-08 -20 H2: -8.3% = Year -2.8% Source: AEA -9- Dec-08 Nov-08 Oct-08 Sep-08 Aug-08 Jul-08 Jun-08 Apr-08 Feb-08 Jan-08 -30 Traffic Volumes are in free fall since mid year 2008 Traffic Volumes Are in Free Fall AEA Total Scheduled Services 15 10 Passenger RPKs 5 % growth 0 -5 -10 -15 Total Freight Tonne-Kms -20 Source: AEA - 10 - Jan-09 Nov-08 Sep-08 Jul-08 May-08 Mar-08 Jan-08 Nov-07 Sep-07 Jul-07 May-07 Mar-07 Jan-07 Nov-06 Sep-06 Jul-06 May-06 Mar-06 Jan-06 Nov-05 Sep-05 Jul-05 -25 All routes from Europe are affected Passenger Traffic Volumes on Major AEA Route Areas RPK % Growth 20 Far East Australasia 15 Cross Border Europe % 10 5 0 North Atlantic -5 Source: AEA - 11 - Jan-09 Oct-08 Jul-08 Apr-08 Jan-08 Oct-07 Jul-07 Apr-07 Jan-07 Oct-06 Jul-06 Apr-06 Jan-06 Oct-05 Jul-05 -10 Passenger traffic will fall by 4% in 2009 2009 will bring the lowest growth in 30 years of passenger air transport with the exception of external shocks 1991 Gulf War I 15 2001 9/11 2003-04 Gulf War II, SARS % RPK growth 10 5 0 -5 2009: - 4% Source: AEA ▼Passenger traffic levels started to fall in H2 2008 ▼ AEA forecasts -4% growth in RPK in 2009 ▼ Over a ‘normal’ baseline -4% equates to -6% loss in RPK - 12 - 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 -10 Freight is an indicator of economic health Freight traffic will weaken as recession spreads … and will not recover until economies do. 25 1981-83 Economic Crisis % Freight TK growth 20 15 10 2008: -2.8% 2009: - 5% 5 0 -5 Source: AEA ▼Freight traffic levels started to fall mid-2008 ▼ AEA forecasts -5% growth in FTK in 2009 ▼ Over a ‘normal’ baseline -5% equates to -10% loss in FTK - 13 - 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 -10 Premium traffic is losing importance Short haul Long haul 100% 0% 2000 2002 2004 *AEA Airlines, International routes - 14 - 2006 2008 14.4 14.3 14.4 10% 13.9 20% 13.7 20% 14.4 30% 7.8 30% 8.4 40% 9.3 40% 10.1 50% 10.4 50% 16.0 60% 18.1 60% 17.3 70% 21.0 70% 10% Premium 80% 13.5 Premium 80% Low 90% 14.3 Low 90% 13.2 100% 0% 2000 2002 2004 2006 2008 Source: AEA RB2 European Capacity cuts go deep European capacity cuts go deep % change in flights and seats on offer on services within Europe 0 -2 % growth -4 -6 -8 -10 Number of Flights Available Seat Kms -12 Apr-09 Source: Schedule analysis - 15 - May-09 Jun-09 Jul-09 Aug-09 Sep-09 Fewer aircraft are needed In the last 3 months Europe's airlines have taken 102 aircraft out of service 5000 102 aircraft taken out of service number of aircraft 4000 Nov-08 Feb-09 115 aircraft fewer on order 3000 2000 136 more aircraft parked 1000 29 aircraft more under option 0 In Service Source: ASCEND - 16 - Stored On Order On Option Employment: 15,000 jobs lost already Thousands Further Job Losses are inevitable AEA Carriers' total FTE count to 2007, announced cuts through 2008 to date 500 To date AEA carriers have already announced 15,000 job losses + another 5,000 positions affected by other labour cost saving measures (unpaid leave,reduced working hours,..) More are likely to follow. 40,000 job losses 450 400 350 - 17 - 2007 2006 2005 2004 2003 2008 & to date Source: AEA Yearbook & staff research 2002 2001 2000 300 Aviation in its entirety is losing traffic ACI-Europe Passenger Traffic Development % month-on-month Growth rate, per Airport Category Major Airports >25 mill/pax Large Airports 10-25 mill/pax Medium Airports 5-10 mill/pax Small Airports <5 mill/pax 10 % 5 0 -5 -10 Jan-08 Feb-08 Source: ACI-Europe - 18 - Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Access to aircraft financing has been curtailed Aircraft Lessors were caught in the financial markets turmoil 2000 Current Fleet On Order Number of Aircraft 1750 For Sale 1500 1250 For Sale 1000 750 500 250 RBS Aviation Capital DAE Capital Boeing Capital Corp AerCap Babcock & Brown CIT Aerospace AWAS Aviation Capital Group ILFC GECAS 0 Source: ASCEND The aircraft leasing sector has not been unaffected by the financial crisis. Although lease rates are falling, access to capital has become an issue which could touch airlines and manufacturers alike. The stock of white-tails and aircraft entering the market from bankruptcies will also depress the assest value of aircraft. - 19 - AEA Airline financial outlook is dismal AEA Airlines will once again post losses in 2009 after just 5 years of profits 5 4 Operating Profit Net Profit (after Interest) 3 EUR bn 2 1 0 -1 -2 -3 Forecast Loss -1.5bn to -2.5bn -4 2000 Source: AEA - 20 - 2001 2002 2003 2004 2005 2006 2007 2008e 2009f 2008 marks the beginning of recession Key figures 2007 2008 and beyond Demand (RPK) +5.3% +2.0% ▼ Capacity (ASK) +4.6% +4.0% Seat Load Factor 77.0% 75.5% ▼ Fuel: Single biggest, and most volatile cost factor Economic downturn will reduce demand increasingly Cost factors such as airport charges, ATC likely to increase Volume-dependent no-frills likely to maintain overcapacity Governments could impose further taxes to fund bail-out of other sectors EU ETS could lead to trade sanctions from third countries - 21 - External costs of utmost urgency Global recession makes it even more imperative to drive down external costs: An ETS in 2012 – from a cap-and-trade system to a disincentive tax measure A proliferation of national taxes Volatility of fuel price: from 9% of our operating costs in 1998 to 34% in 2008 And ATM fragmentation costs the environment €16mln tons of CO2 and airlines € 5 bln a year Airport charges and ATM Unit Rates will increase in 2009 despite the recession - 22 - Slovenia Bosnia & Herz. Czech Rep. Croatia Slovakia Belgium-Lux. Moldova Sweden Netherlands Spain Hungary Ireland France Denmark Albania Switzerland Germany Romania Poland Portugal Spain Canaries Portugal S. Serbia-Mont. Malta Austria Finland Turkey Greece Italy Lithuania Norway FYROM Bulgaria UK Cyprus % change 2009 over 2008 ANSP Unit Rates rise, less traffic European ATC Unit Rates will rise by 3.2% in 2009, despite reduced traffic levels % Increase 2009 over 2008 30 25 - 23 - 20 15 10 5 Average increase of +3.2% in unit rates for ATC Charges 0 -5 -10 -15 Source: Eurocontrol Europe needs a Single European Sky For passengers: delays caused by bottlenecks in the sky, circuitous routings and holding patterns above airports… For the environment: unnecessary emissions of 16 million tons of CO2 a year For the airlines: unnecessary costs of around €5 billion a year - 24 - EU ATM : more costs… inferior performance USA Europe ATM Airspace: 9,8 million km² 1 21 1 ATM Airspace: 10,5 million km² ATC Organisation (civil + mil.) 47 En-Route Centres 58 Operating System 22 900 Movements per Air Traffic Controller 480 $400 ATM Cost / Flight $800 - 25 - ATC Organisations (civil + mil.) En-Route Centres Operating Systems Movements per Air Traffic Controller ATM Cost / Flight Airport Charges increases 2008/2009 Airport Charges (-/+ %) - 26 - UK Sweden Spain Norway Germany France Denmark Czech Republic 18 15 12 9 6 3 0 -3 -6 -9 -12 -15 Consequences of ETS post 2012 Buying 15% of carbon allocation will massively increase the cost base → additional financial hardship; Increase of administrative burden with regard to the MRV guidelines + additional requirements by individual Member States; ETS will fundamentally change the operating economics of every route and flight: Many communities will lose service; International distortion of competition; Some non-EU competitors will see traffic diversion as a gift; for others, the EU ETS will be unacceptable, and will spark trade wars. - 27 - 2009 crisis management to ensure Europe’s global sustainable competitiveness Europe as a region must confront unnecessary regulatory burdens: ETS & MRV as economic instrument Proliferation of national taxes (UK, NL, Ireland) Non-safety EASA rulemaking proposals Surge of costs for security measures Further unnecessary administrative burdens Role of EU institutions in airline restructuring process Structural inefficiencies of the value chain to be addressed jointly: Cost efficiency of airport services Cost efficiency of ANSP services Sufficient and well organised infrastructure Review of market orientation of all aviation service providers - 28 -