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This new semi-annual report replaces the quarterly Airlines Financial Forecast, and takes a broader look at how the
industry is adding value for its consumers, the wider economy and governments, as well as for its investors.
Key points
Consumers benefit from lower oil prices with lower fares, more routes, and spend 1% of world GDP on air transport.
Economic development big winner from the doubling of city pairs and halving of air transport costs in past 20 years.
Governments gain substantially from $125bn of taxation next year and from 58 million supply chain jobs.
Equity owners see a far better 2015 with a 7% average airline ROIC, but still earn $5.7 billion less than they should.
Fuel use per ATK to fall a further 1.6% y-o-y, saving 12 million tonnes of CO2 emissions and $3 billion of fuel costs.
Load factors forecast to slip as capacity accelerates; new aircraft deliveries represent a $180 billion investment.
Jobs in the industry should reach 2.45 million, productivity will be up 4.8% and GVA/employee almost $109,000.
Infrastructure use costs are rising, plus inefficiencies in Europe alone add $3.8bn to airline costs next year.
N American region performs best with a 6% net post-tax profit margin in 2015. Africa weakest at just 1.1%.
Consumers
Consumers will see a substantial increase in the value they
derive from air transport next year. We expect 1% of
world GDP to be spent on air transport in 2015, totaling
over $820 billion. Air travel is accelerating, with growth of
7% expected next year, the best since 2010, well above
the 5.5% trend of the past 20 years. This is being driven
partly by the upturn of the economic cycle. But consumers
will also benefit from cheaper travel, due to the fall of fuel
prices, with the average return fare (before surcharges
and tax) of $458 in 2015 forecast to be 5.1% lower than
this year after adjusting for inflation. Business will also
benefit from the cost of shipping freight falling 5.8% next
year in real terms. Air freight had been in the doldrums
since 2010 but now a moderate cyclical upturn is evident.
120
Passenger services
growth expected in the
next 12 months
100
80
Cargo services
growth
expected in the
next 12 months
60
40
20
0
2006 2007 2008 2009 2010 2011 2012 2013 2014
www.iata.org/economics
2013
2014
2015
753
1.9%
1.0%
498
-6.2%
2.35
-7.3%
3,134
5.3%
5,793
5.4%
49.3
2.3%
2.5%
2.7%
789
4.8%
1.0%
483
-3.0%
2.25
-4.3%
3,306
5.5%
6,126
5.7%
51.3
4.1%
2.6%
3.0%
823
4.3%
1.0%
458
-5.1%
2.11
-5.8%
3,530
6.8%
6,552
7.0%
53.5
4.3%
3.2%
4.0%
RPKs, billion
% change over year
Wider economy
Economic development worldwide is getting a significant
boost from air transport. This wider economic benefit is
being generated by increasing connections between cities
enabling the flow of goods, people, capital, technology
and ideas - and reducing air transport costs. The number
of unique city-pair connections is estimated at more than
16,000, almost double the connectivity by air twenty
years ago. The price of air transport to users continues to
fall, after adjusting for inflation. Compared to twenty
years ago real transport costs have more than halved.
2013
2014
15782
190%
104.8
-54%
6,490
2.1%
589
5.4%
58.1*
2.3%*
2434*
3.6%*
16161
195%
101.1
-55%
6,802
4.8%
617
4.7%
Compared to 1994
3.5
14,000
12,000
2.5
10,000
8,000
6,000
1.5
4,000
US$/RTK in 2014US$
16,000
2,000
-
96.5
-57%
7,293
7.2%
644
4.3%
Note: RTK = Revenue Tonne Kilometers, GVA = Gross Value Added. The total
number of routes or airport pairs is much higher because of multiple airports
in some cities and connections are counted both ways.
Source: IATA, ATAG, OAG, UNWTO, IHS Global Insight. * 2012 data
2015
0.5
120
110
Billion
60
100
55
90
50
80
Tax revenues
70
45
60
40
$ billion
65
130
% GVA
# of consumer protection regimes
2013
2014
2015
109
7.7%
47.5%
55
117
7.2%
47.3%
59
125
7.2%
47.0%
50
35
40
2000 2002 2004 2006 2008 2010 2012 2014
www.iata.org/economics
Sources for charts on this page: ATAG, Oxford Economics, IATA, ICAO, OAG.
Capital providers
2013
2014
2015
4.9%
-2.3%
-15.4
3.5%
10.6
1.5%
3.38
6.1%
-1.2%
-8.7
5.1%
19.9
2.7%
6.02
7.0%
-0.8%
-5.7
6.0%
25.0
3.2%
7.08
% revenues
$ per passenger
9.0
Cost of capital
(WACC)
8.0
% of invested capital
7.0
6.0
5.0
4.0
Return on capital
(ROIC)
3.0
2.0
1.0
0.0
2000
2002
2004
2006
2008
2010
2012
2014
66
65
% ATKs
64
63
Breakeven
62
61
60
59
58
2000
Aircraft
2002
2004
2006
2008
2010
2012
2014
www.iata.org/economics
1700
Aircraft deliveries
1600
1500
1400
1300
1200
Airlines ROIC
1100
1000
900
800
1800
2013
2014
2015
Aircraft fleet
25,268
3.2%
3.4
5.3%
134
2.1%
32.0
2.7%
5.0%
79.7%
46.8%
66.9%
64.5%
26,051
3.1%
3.5
5.0%
136
1.8%
33.4
4.4%
5.5%
79.9%
47.2%
67.1%
63.7%
26,995
3.6%
3.7
5.5%
139
1.8%
35.4
5.7%
7.3%
79.6%
46.9%
66.8%
62.8%
Note: ASK = Available Seat Kilometer, AFTK = Available Freight Tonne Kilometer,
ATK = Available Tonne Kilometer.
Source: Ascend, ICAO, IATA.
Fuel
Next year we forecast the airlines fuel bill will fall to $192
billion, which will represent 26% of their total operating
costs. Jet fuel prices have fallen substantially and we base
our forecast on an average price of just under $100/b next
year, and $85/b for the Brent crude oil price. The crack
spread over Brent crude oil prices has risen recently above
its recent average of 15%. However, profit from jet fuel is
made not in the refining part of the value chain but
upstream by the oil producers. We forecast that
purchases of jet fuel by the airline industry next year will
generate $16 billion of profit for the upstream part of the
jet fuel supply chain.
140
60
120
55
100
50
80
45
60
40
40
35
20
0
30
2000 2002 2004 2006 2008 2010 2012 2014
2013
2014
2015
208
0.4%
30.1%
261
1.6%
24.1
-1.9%
693
1.6%
124.5
-3.9%
14.4%
24
204
-2.3%
28.6%
269
3.0%
23.6
-1.8%
714
3.0%
116.6
-6.3%
15.0%
23
192
-5.6%
26.1%
282
5.1%
23.3
-1.6%
751
5.1%
99.9
-14.3%
17.5%
16
% operating costs
Fuel use, billion litres
% change over year
Labour
Airlines are expecting to slow the pace of hiring over the
next year. Growth in employment has been strong in
2014, but IATAs survey of airline CFOs in September
showed a net balance between those saying they would
and would not increase hiring over the next 12 months.
Employment, million
% change over year
Productivity, atk/employee
% change over year
80
Employment change expectations
for next 12 months
70
GVA/employee, $
% change over year
2013
2014
2015
135
4.2%
2.35
2.1%
461,517
2.1%
0.125
0.5%
97,541
5.8%
142
4.8%
2.41
2.8%
471,258
2.5%
0.125
-0.1%
102,127
4.7%
149
4.7%
2.45
1.5%
496,201
4.8%
0.122
-2.0%
108,610
6.3%
Note: ATK = Available Tonne Kilometer, GVA = Gross Value Added (firm level
GDP).
Source: IATA, ICAO, ATAG, Oxford Economics.
The jobs being created are not just productive for their
airline employers; they are also highly productive for the
economies in which they are employed. We estimate that
the direct GVA for national economies, generated by the
average airline employee, will rise 6.3% next year to
almost $109,000 a year, which is well above the economywide average.
60
50
40
30
20
2006 2007 2008 2009 2010 2011 2012 2013 2014
Infrastructure
Infrastructure partners play an important role in the
service airlines provide to their customers, affecting the
experience, the timeliness of the journey, and its cost.
180
170
160
Unit cost of
infrastructure use
150
140
130
Airline non-fuel
unit cost
120
110
100
90
2000
2002
2004
2006
2008
2010
2012
2014
www.iata.org/economics
2013
2014
2015
3,824
7,700
3,838
7,719
3,899
7,842
Regions
The strongest financial performance is being delivered by
airlines in North America. Net post-tax profits are the
highest at $13.2 billion next year. That represents a net
profit of $15.54 per enplaned passenger, which is a
marked improvement from just 3 years earlier. Net
margins forecast at 6% exceed the peak of the late 1990s.
This improvement has been driven by consolidation,
helping to raise load factors (passenger + cargo) to 65%
this year, and ancillaries, which together push breakeven
load factors down below 60% next year.
Breakeven load factors are highest in Europe, caused by a
combination of low yields due to the highly competitive
open aviation area, and high regulatory costs. As a result,
and despite the industry in the region achieving the
second highest load factor, financial performance has
been poor. Net profits of $4 billion next year represent
only $4.27 per passenger and a margin of 1.8%.
Airlines in Asia-Pacific are doing better than those in
Europe. Profit per passenger is a little higher at $4.30 as
lower fuel costs and stronger cargo markets, particularly
important in this manufacturing region, help to boost net
margins moderately to 2.2% and net profits to $5 billion.
Middle Eastern airlines have one of the lower breakeven
load factors. Average yields are low but unit costs are
even lower, partly driven by the strength of capacity
growth; 15.6% this year. Post-tax profits are expected to
grow to $1.6 billion next year, representing a profit of
$7.98 per passenger and a net margin of 2.5%.
Latin American airlines have faced a mixed environment,
with weak home markets hampering performance, but a
degree of consolidation and some long-haul success will
boost net profit to $1 billion next year, which is $3.53 per
passenger and a margin of 2.6%.
Africa is the weakest region, as in the past 2 years. Profits
are barely positive, and represent just $2.51 per
passenger. Breakeven load factors are relatively low, as
yields are a little higher than average and costs are lower.
However, few airlines in the region are able to achieve
adequate load factors, which are the lowest by 5% points.
Performance is improving, but slowly.
2013
2014
2015
Africa
Net post-tax profit, $billion
Per passenger, $
% revenue
RPK growth, %
ASK growth, %
Load factor, % ATK
Breakeven load factor, % ATK
-0.1
-1.66
-0.8%
4.8%
4.2%
56.1%
56.3%
0.0
0.26
0.1%
1.5%
3.7%
56.1%
55.8%
0.2
2.51
1.1%
5.1%
5.5%
55.3%
54.5%
2.3
2.31
1.2%
7.2%
7.2%
66.9%
63.1%
3.5
3.20
1.6%
7.0%
7.6%
66.6%
62.3%
5.0
4.30
2.2%
7.7%
8.5%
66.4%
61.3%
0.5
3.17
0.9%
11.9%
12.5%
60.1%
59.5%
1.1
6.25
1.9%
12.9%
11.4%
60.7%
59.1%
1.6
7.98
2.5%
13.9%
15.6%
60.4%
58.6%
0.2
0.82
0.6%
6.6%
4.7%
61.2%
59.9%
0.7
2.85
2.1%
5.5%
3.7%
61.9%
59.7%
1.0
3.53
2.6%
6.0%
6.5%
60.7%
58.3%
7.2
8.79
3.4%
2.6%
2.3%
64.3%
60.8%
11.9
14.25
5.5%
2.7%
2.2%
65.1%
60.2%
13.2
15.54
6.0%
3.1%
3.5%
65.1%
59.6%
0.5
0.58
0.2%
4.1%
3.0%
66.7%
66.2%
2.7
3.13
1.3%
5.4%
4.6%
66.8%
65.6%
4.0
4.27
1.8%
5.5%
5.8%
66.3%
64.7%
Asia-Pacific
Net post-tax profit, $billion
Per passenger, $
% revenue
RPK growth, %
ASK growth, %
Load factor, % ATK
Breakeven load factor, % ATK
Middle East
Net post-tax profit, $billion
Per passenger, $
% revenue
RPK growth, %
ASK growth, %
Load factor, % ATK
Breakeven load factor, % ATK
Latin America
Net post-tax profit, $billion
Per passenger, $
% revenue
RPK growth, %
ASK growth, %
Load factor, % ATK
Breakeven load factor, % ATK
North America
Net post-tax profit, $billion
Per passenger, $
% revenue
RPK growth, %
ASK growth, %
Load factor, % ATK
Breakeven load factor, % ATK
Europe
Net post-tax profit, $billion
Per passenger, $
% revenue
RPK growth, %
ASK growth, %
Load factor, % ATK
Breakeven load factor, % ATK