Market overview project (pcso)

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  • 1. Market overviewMichael DaviesCustomer Business
  • 2. Overview Latest traffic statistics US airline yields and costs Capacity reductions Outlook for traffic Key issues & uncertainties Aircraft delivery forecasts Discussion
  • 3. 2001-02 passenger traffic growthRPKs – key markets-40%-35%-30%-25%-20%-15%-10%-5%0%5%10%15%JanFebMarAprMayJunJulAugSepOctNovDecJanFebMarAprMayJuneUS domesticTransatlanticEurope Intra
  • 4. AEA weekly trafficRPKs-60%-50%-40%-30%-20%-10%0%10%Sep09Sep23Oct07Oct21Nov04Nov18Dec02Dec16Dec30Jan13Jan27Feb10Feb24Mar10Mar247-Apr21-Apr5-May19-May2-Jun16-Jun30-JunEurNAAsia
  • 5. US airlines’ 2001-02 trafficTranspacific passenger & total international cargo-45%-35%-25%-15%-5%5%15%Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar AprTranspacific Pax.International Cargo
  • 6. North American domestic traffic2001-02-40%-30%-20%-10%0%10%20%30%Sep Oct Nov Dec Jan Feb Mar Apr May JunContinentalAmericanDeltaSouthwestAirTranAMR EagleContinental ExpressMajorsLow Cost/Regionals
  • 7. October 2001 passenger load factorChange vs. Oct 200058%62%66%70%74%78%82%BritishAWKLMAirFranceAmericanDeltaContinentalNorthwestCathayOct 2000
  • 8. 58%62%66%70%74%78%82%BritishAWKLMAirFranceAmericanDeltaContinentalNorthwestCathayMay 2002 passenger load factorChange vs. May 2001May 2001
  • 9. 58%62%66%70%74%78%82%BritishAWKLMAirFranceAmericanDeltaContinentalNorthwestCathayJune 2002 passenger load factorChange vs. Jun 2001Jun 2001
  • 10. Key Rolls-Royce customers’ traffic change-40%-30%-20%-10%0%10%20%30%40%Aug Sep Oct Nov Dec Jan Feb Mar Apr May JunBritish AirwaysAmericanCathaySingaporeEmirates
  • 11. US domestic yields – absolute levels678910111213141516J F M A M J J A S O N D J F M A M J J A S O N D J F M A M2000 2001US¢Yields : c/RPMRevenues : c/ASMSource : Air Transport Association2002
  • 12. US airlines’ costs up, revenues down-50%-40%-30%-20%-10%0%10%20%30%J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J1999 2000 2001 2002-5-4-3-2-10123Unit costsOperating profit ($bn)Unit revenuesChange (year-on-year) Profit ($bn)
  • 13. Airline net profits-$10,000-$5,000$0$5,000$10,000$15,0001995 1996 1997 1998 1999 2000 2001Variation of reported2001 final figureswith year 2000figures$m
  • 14. 106108110112114116118120JanFebMarAprMayJunJulAugSepOctNovDecJanFebMarAprMayJunUSUKEconomic leading indicators 2001-2002Source : Conference Board, composite leading indicesDecline Aug-Oct Recovery since Dec
  • 15. GDP growth forecasts for 2002-1%0%1%2%3%4%5%6%7%8%9%USA Japan Germany UK France ChinaAug-01Dec-01Jun-02Source : Consensus ForecastsSharp upturn in June forecast
  • 16. Industry monitor – June 2002GDPPax. trafficL.F.ProfitsOrdersDeliveriesCompositeleading inds.(Indiv.countries)Asia Pacific Europe Middle EastNorth Asia N.AmericaCargo traffic
  • 17. Stored aircraft – monthly totalsInc.freighters020040060080010001200140016001800200022002400NoofaircraftRegional JetsWidebodyNarrowbody
  • 18. Stored aircraft – monthly totalsRolls-Royce onlyInc.freighters050100150200250300350400450AugSepOctNovDecJanFebMarAprMayForecast
  • 19. Aircraft available for sale or leaseSource : Airline Monitor/BACK020040060080010001200Jan-99 Apr Jul Oct Jan-00 Apr Jul Oct Jan-01 Apr Jul Oct Jan-02 AprNew WBNew NBOld WBOld NB
  • 20. Stored aircraft summary : by engine mfr21371124011783791222478211505001000150020002500R-R P&W GE TotalAugustMayIncludes Reg Jets)IAE split 50/50 PW/R-RTotal also includes 14/36 HoneywellInc.freighters
  • 21. Stored aircraft summary : by aircraft category73214803845116212405001000150020002500August MayRegional JetWidebodyNarrowbodyInc.freighters
  • 22. Stored aircraft summary : by age band37 51 65122261642158120243 25452275301002003004005006007008000-5 5-10 10-15 15-20 20-25 25+AugustMarchInc.freighterse.g. 0-5 = 1997-2001 build
  • 23. Incremental stored aircraft since Aug 2001by age band0501001502002500-5 5-10 10-15 15-20 20-25 25+R-RP&WGELikely to return to service Not likely to return to serviceAge Inc.freighters
  • 24. Schedule reductions by airlineNov 2001 actual vs planned-35%-30%-25%-20%-15%-10%-5%0%5%SR EI VS AZ LH IB BA KL AF UA TZ AA NW AC DL WN CX KE SQ CI MH JL QF GF EKMiddle EasternN.AmericanAsianEuropeanTotal world schedule -10.2%-parked aircraft -5%-reduced flying -5%
  • 25. Schedule reductions by airlineMay 2001 vs May 2002, source OAG Feb 2002-35%-30%-25%-20%-15%-10%-5%0%5%10%15%SR EI KL VS BA IB LH AF AZ UA NW AA DL AC WN TZ MH CX JL QF KE CI SQ GF EKMiddle EastAsiaNorth AmericaEuropeTotal world schedule -7.5%Lufthansa – decide in next 2 weeks how much to add back – lifted hiring freezeAir France – stable capacityAustrian – adding, but will remain 5% below 2001KLM – cutting 5% from summer 2001Thomas Cook – reviewing planned cuts for summer
  • 26. Schedule reductions by airlineAug 2002 vs Aug 2001, source OAG June 2002-30%-25%-20%-15%-10%-5%0%5%10%15%20%EI KL VS BA IB LH AF AZ UA NW AA DL AC WN TZ MH CX JL QF KE CI SQ GF EKMiddle EastAsiaNorth AmericaEuropeTotal world schedule -7.0%
  • 27. Monthly traffic forecast - US domestic-40%-30%-20%-10%0%10%20%30%40%50%Mar-01Apr-01May-01Jun-01Jul-01Aug-01Sep-01Oct-01Nov-01Dec-01Jan-02Feb-02Mar-02Apr-02May-02Jun-02Jul-02Aug-02Sep-02Oct-02Nov-02Dec-02Jan-03Feb-03Mar-03Apr-03May-03Jun-03Forecast RPKsActual RPKsGulf War (ATA RPKs)Growth over 2000Jul90Mar91RPKs ASKs2001 : -6.8% -4.3%2002 : -1.2% -1.6%2003 : +12.8% +11.3%
  • 28. Monthly traffic forecast – North Atlantic-60%-40%-20%0%20%40%60%80%Mar-01Apr-01May-01Jun-01Jul-01Aug-01Sep-01Oct-01Nov-01Dec-01Jan-02Feb-02Mar-02Apr-02May-02Jun-02Jul-02Aug-02Sep-02Oct-02Nov-02Dec-02Jan-03Feb-03Mar-03Apr-03May-03Jun-03Forecast RPKsActual RPKsGulf War (AEA+DoT RPKs)Growth over 2000Jul 90Feb 91Oct 91RPKs ASKs2001 : -10.1% -3.2%2002 : +0.3% -0.6%2003 : +17.9% +14.6%
  • 29. Monthly traffic forecast – Europe-Asia-40%-30%-20%-10%0%10%20%30%40%50%60%Mar-01Apr-01May-01Jun-01Jul-01Aug-01Sep-01Oct-01Nov-01Dec-01Jan-02Feb-02Mar-02Apr-02May-02Jun-02Jul-02Aug-02Sep-02Oct-02Nov-02Dec-02Jan-03Feb-03Mar-03Apr-03May-03Jun-03Forecast RPKsActual AEA RPKsGulf War (AEA - RPKs)Growth over 2000Jul90Feb91RPKs ASKs2001 : -6.6% -3.8%2002 : +0.2% -0.7%2003 : +14.1% +12.1%
  • 30. Monthly traffic forecast – Intra Europe (sched)-30%-20%-10%0%10%20%30%40%50%Mar-01Apr-01May-01Jun-01Jul-01Aug-01Sep-01Oct-01Nov-01Dec-01Jan-02Feb-02Mar-02Apr-02May-02Jun-02Jul-02Aug-02Sep-02Oct-02Nov-02Dec-02Jan-03Feb-03Mar-03Apr-03May-03Jun-03Forecast RPKsActual RPKsGulf War (AEA - RPKs)Growth over 2000Jul90Feb91RPKs ASKs2001 : +0.6% +3.4%2002 : +4.6% +0.6%2003 : +7.1% +5.8%
  • 31. Rolls-Royce N.America traffic & GDP forecast809010011012013014015016020002001200220032004200520062007200820092010Nov 00 GDPNov 01 GDPNov 00 RPKsNov 01 RPKs2001 -7%2002 -1%Index (2000=100)2003 +14%
  • 32. Rolls-Royce European traffic & GDP forecast809010011012013014015016017018020002001200220032004200520062007200820092010Nov 00 GDPNov 01 GDPNov 00 RPKsNov 01 RPKs2001 -2%2002 -0%Index (2000=100)2003 +12%
  • 33. Rolls-Royce Asian traffic & GDP forecast8010012014016018020022020002001200220032004200520062007200820092010Nov 00 GDPNov 01 GDPNov 00 RPKsNov 01 RPKs2001 -1%2002 +3%Index (2000=100)2003 +11%
  • 34. Rolls-Royce world traffic forecast (RPKs)0100020003000400050006000700019841986198819901992199419961998200020022004200620082010Nov-00Nov-01History1983 forecast1991 forecast1989 forecast1993 forecast1996 forecast1999 forecastRPKs (bn)
  • 35. Rolls-Royce world traffic & GDP forecast050100150200250300350 Nov 00 GDPNov 01 GDPNov 00 RPKsNov 01 RPKs2003 +12%1991 –3%2001 –4%2002 +0%Index (1990=100)
  • 36. ‘Airline Monitor’ world traffic forecast (RPKs)01000200030004000500060001984198619881990199219941996199820002002200420062008Jul-01Oct-01HistoryTrend10% Traffic rebound in 20031991 –3%2001 –6%2002 +2%RPKs (bn)Forecast made in October 2001Reviewed in Jan – no change as yet
  • 37. ‘Aviation Strategy’ world traffic forecast (RPKs)2000 RPKs based on Airline Monitor data for reference01000200030004000500060001984198619881990199219941996199820002002200420062008Jul-01Oct-01Feb-02HistoryTrend 14% Traffic rebound in 2003(vs 17% previously)1991 –3%2001 –5% (-6% originally forecast)2002 -1% (vs –5%)RPKs (bn)Forecast made in October 2001Reviewed in Feb – less severe
  • 38. 80901001101201301402000 2001 2002 2003 2004 2005Pre Sep-11thCurrent highCurrent midCurrent lowGulf WarTraffic growth scenarios2002 2003 2004High +6% +8% 8%Mid +0% +12% 8%Low -1% +10% 8%RPK Index (2000=100)
  • 39. Regional traffic summaryNear-term growth Long-term levels2001 2002 2003 2010 traffic levelEurope -2% -0% +12% 97% of previous forecastN.America -7% -1% +14% 96% of previous forecastAsia/Pacific -1% +3% +11% 92% of previous forecastWORLD -4% +0% +12% 95% of previous forecast
  • 40. 20030040050060070080090010002001 2002 2003 2004 2005High caseMid pointLow caseAirline MonitorAircraft delivery forecasts 2001-2005Panel of industry forecasters – Dec 2001
  • 41. 2003004005006007008009002001 2002 2003 2004 2005HighAverageLowAirline MonitorAircraft delivery forecasts 2001-200580+ seat aircraftLatest analyst views (Boeing+Airbus) :Morgan Stanley : 2003 = 555, 2004 = 660JPMorgan : 2003 = 530, 2004 = 540, 2005 = 625CSFB : 2003 = 553
  • 42. 20030040050060070080090010002001 2002 2003 2004 2005 2006Mar-01Feb-02Aircraft delivery forecasts 2001-2005Rolls-Royce forecast (100+ seat pax aircraft)871 deliveries removed
  • 43. Fleet evolution – ‘mid’ traffic scenario100+ seater passenger aircraft100001050011000115001200012500130002000 2001 2002 2003 2004End year In service fleetNew deliveriesRetirements/into storeReturn from storec500 aircraft ‘retired’ early(I.e. assumed not to return)Fleet required to matchtraffic growth (@ constant prod’y)
  • 44. Fleet evolution – 3 traffic scenarios100+ seater passenger aircraft100001050011000115001200012500130002000 2001 2002 2003 2004End year In service fleetNew deliveriesRetirements/into storeReturn from storec500 aircraft ‘retired’ early(I.e. assumed not to return)1998 19991999 & 2000 saw significantLoad factor & utilisation growthFleet required to matchtraffic growth (@ constant prod’y)Airline net profit $8.2bn $8.5bn $4.7bn -$12.0bn -$8bn?* -$0.5bn?* $3.5bn?*Load factor 69.3% 69.8% 72.4% 69.1% 70.5% 72.0% 72.5%* Airline Monitor estimates2002 updated May ‘02
  • 45. Aircraft delivery forecastsPassenger aircraft only050010001500200025003000717 737 A320 757 767 A330 A340 777 747 A3802001-102002-11