2012-20312012-20312012-2031Navigating the futureTITLEGLOBAL MARKET FORECASTnAVIgATIngTHE fUTURE
1010Demand for air travel• Economy• Urbanisation• Tourism• Network evolution• High speed rail58Demand for passengeraircraft• Aircraft Segments6868Demand by Region• Asia-Paciﬁc• Europe• North America• Middle East• Latin America• CIS• Africa136136Summary and methodology• Summary of results• Passenger methodology• Freight methodology6Executive summary4IntroductionGlobal Market Forecast 540Trafﬁc forecast122Demand for freight trafﬁc
Global Market Forecast 7Welcome to this year’s Airbus Global MarketForecast book. We hope that you will findit a useful reference. The last year has beencharacterised by social unrest in various parts ofthe world, and continued economic uncertaintyin others. We have witnessed similar difficultevents over the last 10 years or so. However, it isremarkable, that even allowing for some of the mostdifficult periods aviation has faced in its relativelyshort existence, including the banking crisis of 2008/ 2009 and now sovereign debt issues in Europe,aviation has still managed to grow more than 50%.This resilience is a clear sign of the value peopleplace on flying, and something that throughthe data methods we employ, we are able toreflect in our 2012 forecast. An Airbus surveyconducted recently, showed that of the10,000people questioned worldwide, the majoritybelieved that we would fly more in the future.In China and India this number totaled more than80% of respondents.This is exactly the message that Airbus forecastersget from modeling the future, using the best dataand one of the most comprehensive methodologiesemployed in the industry today. It is useful, fromtime to time, to reinforce our findings with anotherform of empirical research.As well as more flyers, we forecast a continuingexpansion of the world’s aviation network, withgreater aviation connectivity and more capacitybetween major population centres helping todrive benefits in terms of jobs, prosperity, andeconomic growth.However, like you, we are determined that thisprogress will not come at the expense of ourenvironment. We will continue to strive to matchand better the achievements of aviation’s pioneers,moving from canvas to carbon, cables to fly-by-wire, one seat to more than 550 seats, massiveimprovements in efficiency in terms of operationsand fuel consumption in order to meet this challenge.www.airbus.com/gmfwww.airbus.com/gmf
Global Market Forecast 9The last year has been characterised bysocial unrest in various parts of the world, andcontinued economic uncertainty in others.We have witnessed similar difficult events overthe last 10 years or so. However, it is remarkable,that even allowing for some of the most difficultperiods aviation has faced in its relatively shortexistence, including the banking crisis of 2008 /2009 and now sovereign debt issues in Europe,aviation has still managed to grow more than50%. This resilience is a clear sign of the valuepeople place on flying, and something thatthrough the data and methods we employ, weare able to reflect in our 2012 forecast.Higher economic growth rates in emergingeconomies are expected to drive a large portionof the growth in air traffic. In fact, 56% of theeconomic growth between 2011 and 2031 willcome from emerging regions. This economicgrowth, together with increasing urbanisation,will greatly increase the world population’spropensity to travel by air. By 2031, traffic indomestic PRC will be equal to traffic in domesticUS making them the two largest flows for airtraffic in 2031. These two regions together willaccount for more than 20% of worldwide airtraffic by the end of the forecast.BackgroundNumber of new aircraftPassenger aircraft >100 seats; freight aircraft > to 10 tonnes05,00010,00015,00020,00025,000Single-Aisle Smal Twin-Aisle Intermediate Twin-Aisle Very Large Aircraft19,5184,8182,156 1,70669%40%17%27%8%17%6%16%% Unit% ValueSingle-Aisle 69% of units, Twin-Aisle 44% of valueHighlights
New passenger aircraft deliveries per regionPassenger aircraft (≥ 100 seats)2012-2021 413 4,505 492 2,815 1,004 1,007 2,580 12,8162022-2031 544 5,113 737 2,886 1,081 899 3,271 14,5312012-2031 957 9,618 1,229 5,701 2,085 1,906 5,851 27,347% of 20-year totalnew deliveries 4% 35% 4% 21% 8% 7% 21% 100%AFRICAASIA-PACIFICCIS EUROPELATINAMERICAMIDDLEEASTNORTHAMERICAWORLD20-year new aircraft deliveries per regionTop 10 countries GMF 2012Top 10 countries 20-year new passenger aircraft deliveriesand business volume (2012 – 2031)61% of total new deliveries1 US 5,2892 PRC 4,2723 India 1,2324 Germany 9865 UK 9796 Russia 9587 UAE 8828 Brazil 7819 Ireland 70210 Australia 652New passenger aircraft deliveries60% of total business volume1 PRC 634.02 US 544.03 UAE 223.94 India 173.75 Germany 138.16 UK 129.87 Russia 113.78 Australia 102.19 Brazil 100.110 Japan 98.2Business volume (bn. US$)the trafficAirbus analysis has shown for example that trafficgrowth between advanced and emerging airtransport markets will grow at an average annualrate of 5.1%, not far off the 6.6% annual growthrate forecast between emerging markets. On aworldwide basis, traffic growth is expected toaverage 4.7% per year. Even though emergingmarkets are the key and leading driver of futureair transportation, the importance of advancedaviation markets cannot be underestimated.In fact by 2031, over 60% of all traffic will involvethe advanced aviation markets, primarily NorthAmerica and Europe.Like the GMF 2011, traffic carried by Middle Eastairlines is expected to grow at the highest rate of7.3% per annum, accounting for 11% of all trafficcarried in 2031. But the three largest regions interms of airline domicile will continue to be Asia-Pacific, Europe and North America, accounting for32%, 24% and 20% of traffic respectively in 2031.Freight traffic is expected to grow slightly higherthan passenger traffic at 4.9% per year. Likepassenger traffic, much of the growth will comefrom traffic connected to emerging markets withtraffic between emerging markets commandingthe highest growth rates at 5.7% per year.
Global Market Forecast 11Retired9,880FreighterFleetPassengerFleetNew deliveries28,20027,3508,5608501,320Passengerto freight conversionRecycled &stay in service5,2001,790Fleet and DeliveriesBy 2031, the fleet of passenger and freighteraircraft, ≥100 seats and ≥10 tonnes, will be35,490 aircraft more than doubling from the17,170 aircraft in service today. Single-aislepassenger aircraft represent the largest segmentof the new deliveries with 19,500 new deliveriesover the next 20 years. The demand for Twin-Aisle aircraft will require 6,500 new passengeraircraft and nearly 500 freight aircraft. Over thenext 20 years, technological advancements andfuture new products will help deliver capacity,cost and environmental efficiency to not onlymake flying better and more accessible but toalso lessen the impact on the environment.Due to the growth in traffic demand in Asia-Pacific, it is no surprise that 46% of the demandfor very large passenger aircraft will be withinthis region. It is equally important to note that42% of all new aircraft deliveries over 100 seatswill be within North America and Europe. Muchof this demand, especially in North America, isfor new, more fuel efficient aircraft to replaceolder less eco-efficient types.By 2031, the world’s airlines will take delivery ofmore than 28,200 new passenger and freighteraircraft worth US$3.96 trillion at current listprices.Retired9,8808,560 1,320Recycled &stay in service
DemandforairtravelEConoMYEConoMIC gRoWTH,THE CoRnERSTonEof AIR TRAffIC gRoWTHOne of the key variables in forecasting air trafficgrowth is the growth in GDP. It is thereforeno surprise that it is an area aircraft demandforecasters keep a very close eye on, particularlythroughout 2012.The world economy is showing its resiliencesince bottoming after the 2008 financialcrisis, the worst crisis since World War II.Since this time, some significant progress hasbeen made with improved world governance, inparticular through the emergence of enlargedinternational forums (G20, WEF).As a result, the time spent in recession at worldlevel has decreased over time, from more than40% from 1919 up to 1939, down to less than10 % from 1986 up to 2011.
Global Market Forecast 15Cycles are not what they used to beAt the time of writing, inflationary pressure iseasing thanks to more reactive and coordinatedmonetary policies. With decreasing inflationarytensions and, on the contrary, a growing need tosustain the economy, Central Banks monetarypolicies are easing (remaining acommodating inwestern economies with record low policy rates).Having been faster to implement structural reformsand debt deleveraging measures, emergingcountries have rebounded faster and strongerto pursue their development growth, increasinglyadopting some Western consumption patternsincluding air travel.On their way to converge and eventually catch upwith more mature advanced economies, emergingeconomies are clearly driving world growth, asshown in the two-speed growth pattern startedsince the beginning of the century and reinforcedduring 2008 financial crisis.% of time spent in recession at world levelSource: IHS Global Insight, Airbus0%10%20%30%40%50%1919-1939 1940-1962 1963-1985 1986-2011In contrast to mature economies, emerging economies have kept their debtat relatively low levelsSource: IHS Global Insight, AirbusSovereign debt level as a % of GDPEmergingeconomiesMatureeconomies0%40%80%100%140%120%60%20%2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011ItalyUSFranceGermanySouth AfricaIndiaMexicoChina% of GDP
DemandforairtravelAccording to third party forecasts used byAirbus in its projections, the world economyis expected to grow at a yearly average rate of3.1% over the next 20 years, which, as in thepast, will not be linear. Fast growing emergingcountries (5.3 % yearly average growth rateover the next 20 years) will compensate for thelower growth of the more mature, advancedeconomies, (2.1 % yearly average growth rateover the next 20 years).A two-speed world-4%-2%0%2%4%6%8%10%Emerging economies** 54 emerging economiesMature economies1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016History ForecastReal GDP growth (%)Source: IHS Global Insight, Airbus1 - US2 - Japan3 - Germany4 - France5 - UK6 - Italy7 - Russia8 - Spain9 - Canada10 - Brazil11- Mexico12 - China1 - US2 - Japan3 - China4 - Germany5 - UK6 - France7 - Italy8 - India9 - Canada10 - Spain11 - Brazil12 - South Korea1 - US2 - China3 - India4 - Japan5 - Germany6 - UK7 - France8 - Brazil9 - Italy10 - Canada11 - Mexico12 - South KoreaThe world of 2031 will be very different from today1991 2011 2031As a result, the economic world of 2031 will bevery different from today. For instance, China,currently the 3rdlargest world economy, will soonsurpass Japan. India, currently the 8th largestworld economy is expected to become the 3rdlargest world economy by 2025.Beyond the BRICS, emerging countries arepoised to include in the next 20 years fastgrowing economies such as Nigeria, Mexico,Colombia, Vietnam or Indonesia, which have acombined population of nearly 2 billion people. Asa consequence, the world GDP economic centreof gravity currently located somewhere in Tunisiais expected to gradually move to the East as wellas to the South.Country ranking by GDPSource: IHS Global Insight, Airbus
Global Market Forecast 17According to a recent study from the OECDDevelopment Centre, the World “Global middleclass” (households with daily expendituresbetween US $ 10 and US $ 100 per personat PPP) is expected to reach 5 billion peopleby 2031, up from 2.1 billion people in 2011.Emerging economies, in particular in Asia-Pacific,will account for most of the growth of this “Globalmiddle class”, potentially fuelling the need forincreased mobility. By 2031, it is estimated that60% of the world population could be part of this“Global middle class” segmentation.As world population grows, so does the global middle classNote: Green indicates earlier years, red indicates later years. Orange line highlight the latitudes of Washington and Beijing (for reference)Source: IHS Global Insight, AirbusWorld GDP economic centre of gravity196520102030 2050Millions of people* Households with daily expenditures between $10 and $100 per person (at PPP)Source: Kharas and Gertz, Airbus20117,00030%20217,70044%20318,40060%World population% of World population01,0002,0003,0004,0005,0002,101419746265671OtherAsia-PacificNorth AmericaEurope / CIS3,4135601,8892637015,0487393,377254x 2x 5678
DemandforairtravelWorld trade suffered a sharp decline in 2009,but bounced back robustly in 2010 and 2011,and is estimated to have ended 2011 well aboveits 2008 peak.In the next 20 years, the trade landscape willundergo fundamental change with the emergingeconomies making up a significant share of theglobal output.As a new proof of increasing globalisation, worldtrade is expected to increase much faster thanthe overall world economy (+5.3% yearly averagegrowth to compare with +3.2%).In addition, with growing volumes of consumerfinal goods exchanged at world level, it is expectedthat raw materials trading will represent a greatershare of world trade. In particular, oil will continueto represent a significant share of commoditiestraded because of increasing volumes as well asexpected growing prices in the mid-to-long term.Globalisation expected to generate growing world tradeHigh oil prices here for the long-term010,00020,00030,00040,00050,00060,00070,00080,00090,000100,000History ForecastUS$ (billion)Source: IHS Global Insight, Airbus2001200220032004200520062007200820092010201120122013201420152016201720192021202320252018202020222024202620272028202920302031* Exports + ImportsWorld real GDPCAGR 2012-2031: +3.2%World real Trade*CAGR 2012-2031: +5.3%020406080100120140History ForecastBrent oil price (current US$ per bbl)Source: IHS CERA, Airbus; Average price in the year displayed1980 1990 2000 2010 20302020
Global Market Forecast 19Airlines have achieved tremendous fuel efficiencyimprovements over the last decade as illustratedby the 53 % growth in passenger air travel since2000 with a relatively flat growth in fuel demand.This has been achieved thanks to improvedoperations of more fuel efficient aircraft, withnew generation aircraft progressively replacingold and mid-generation aircraft. This contrastswith short-term fuel hedging policies whosebenefits could be erased in the current volatileprice environment, the best long-term hedgingpolicy is to operate new fuel efficient aircraft.Since 2000, air travel has grown 53%, with relatively flat growth in fuel demandEvolution of RPKs and jet fuel demand(Base 100 in 2000) Traffic+ 53%Fuel+ 3%Traffic growthJet fuel demand2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20118090100110120130140150160Source: IHS CERA, ICAO, Airbus
DemandforairtravelThe world is more and more urbanisedWorld urbanisation rate (share of World population, left axis) and World population (billions, right axis)1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 20303214567890%10%20%30%40%50%60%70%Source : UN Department of Economic and Social Affairs, Airbus% UrbanWorld populationURBAnISATIonOver the past 60 years, the world has becomemore and more urbanised. According to theDepartment of Economic and Social Affairs ofthe United Nations, in 1950, less than one thirdof the world’s population lived in urban areas.In 2010, this share has increased to more thanhalf of the world population. While the worldtotal population will increase from 7 to 8.3 billionpeople in 2030, the urbanisation growth rate isexpected to be 2% per year, representing 60% ofthe world population or 5 billion people in 2030.the world is becoming increasingly urbanised
Global Market Forecast 21China, India and the US will have the largest urban population in 2030Many countries urbanised at more than 80 % in 20300 100 200 300 400 500 600 700 0 200 400 600 800 1,000 1,200Source: UN Department of Economic and Social Affairs, AirbusChinaIndiaBrazilNigeriaJapanPakistanRussian FederationMexicoUSIndonesiaChinaIndiaUSBrazilIndonesiaJapanPakistanNigeriaMexicoRussian FederationUrban population (in millions) by country in 2010 (left graph) and 2030 (right graph) – Top ten countries100%95%90%85%80%75%95%90%85%80%75%70%JapanVenezuelaArgentinaBrazilFranceUSSouth KoreaSaudi ArabiaAlgeriaCanadaVenezuelaArgentinaJapanFranceBrazilSouth KoreaUSSaudi ArabiaCanadaUnited KingdomSource: UN Department of Economic and Social Affairs, Airbus* Countries with a population more than 30M peopleUrbanisation (share of total population) by country* in 2010 (left graph) and 2030 (right graph) – Top ten countriesToday, the countries with the largest urbanpopulations are expected to retain their leadin 2030. These countries include China, India,US and Brazil.Asia-Pacific countries will contribute 53 % ofthe growth to the world’s urbanised population,followed by Africa (23 %), Latin America (8 %)and Middle East (8 %).
DemandforairtravelThe urbanisation rate and the level of economicdevelopment in a country are correlated. Peoplelooking for employment opportunities and/orbetter living conditions will move to big urbaneconomic centres. On the other hand, large urbanareas create economies of scale/agglomeration,lower transportation costs, favour technologicaldevelopment, a greater division of labour,enabling better dissemination of information,skills, goods and services.Attracting large multinational corporationsand favouring international trade, cities havebecome a major driver of globalisation.Theworldwillhavemoreandmorelargeurbancentres.In 2025, the 90 largest cities will represent 1 billionpeople, one eighth of the world’s population.The largest 500 cities will represent 2 billionpeople, one quarter of the world’s population.The share of the world’s population in just the top100 cities will equal of more than 13% in 2025.Urbanisation drives wealthProductivity and urbanisation are correlatedPeople will be concentrated in the biggest cities01020304050607080901000% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%GDP per worker (thousands $US at PPP)vs. urbanisation (share of total population) in 2010Source: EIU, UN Department of Economic and Social Affairs, Airbus1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 20250%2%4%6%8%10%12%14%Share of World population in the top 100 populated citiesSource: UN Department of Economic and Social Affairs, Airbus
Global Market Forecast 230.000.010.101.0010.000% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%Trips per capita (logarithmic scale) vs. urbanisation (share of total population)Source: Sabre, UN Department of Economic and Social Affairs, AirbusSource: UN Department of Economic and Social Affairs, Airbus0 5 10 15 20 25 30 35 40KarachiBeijingDhakaSão PauloNew YorkMexico CityMumbaiShanghaiDelhiTokyo20102025Top ten agglomerations in 2025 by population (millions)From 1985 to 2010 the number of urban agglomera-tions with more than 5 million inhabitants has grownfrom 27 to 61. By 2025, this number will reach 96urban agglomerations. Today, 62 % of these urbanagglomerations, with more than 5 million inhabitants,are in Asia-Pacific, with 56 % expected in 2025.The fastest growing region, in terms of both numberof agglomerations and populations in cities over 5million inhabitants is Africa; growing from just over30 million inhabitants in 3 cities with over 5 millionto more than 106 million in 12 agglomerations.The ranking of the top ten urban agglomerationsis expected to remain relatively stable from 2010 to2025. But Tokyo, the largest today and in 2030, isexpected to grow at a much slower rate than theother mega-cities.Among the most populated agglomerations, 7 out of 10 will be in Asia-PacificAs urbanisation leads to greater economicgrowth and per capita GDP, the demand forair travel increases. This is clearly shown bythe close correlation between percentage ofurbanisation and the number of trips per capitaof a given country.Not only does urbanisation drive economicgrowth and air travel, it also provides aframework for the development of aviationmega-cities, cities with more than 10,000 dailylong-haul passengers, to be built upon. Today,22 of the 42 mega-cities have a population ofmore than 5 million people and 38 of the 42 haveover 1 million inhabitants.Urbanisation is both a building block for economicgrowth and prosperity. Over the next 20 years,the inhabitants of these urban environments willcontinue to drive the global demand for aviation.Propensity to travel and urbanisation are correlated
DemandforairtravelTourism plays an important role for many countriesDirect contribution of tourism to the economy (share of GDP) – Top ten countries in 2011Source: World Travel and Tourism Council, Airbus0 5 10 15 20 25 30 35 40 45 50Cape VerdeAntigua and BarbudaBahamasVanuatuUK Virgin IslandsArubaAnguillaSeychellesMaldivesMacauToURISM AnDIMMIgRATIonTourism plays an extremely important role inmany countries economies, to the extent thatsome countries choose to base the majority oftheir economy on tourism. For example, thedirect contribution to the economy of the traveland tourism industry in Maldives represented30 % of their GDP in 2011, according to theWorld Travel & Tourism Council (WTTC). Thesehigh percentages can also be seen in a numberof island states around the world.Among all the direct, indirect and induced benefitsthat air transport provides to the world economy,its impact on the tourism industry cannot beunderstated. According to the world TourismOrganization (WTO), 51% of all international tourismarrivals were made possible due to air transportin 2010. Air transport will continue to benefit frominternational tourism as the WTO forecasts thatair transport will represent 52% of all internationaltourism arrivals in 2020.a bright future for the traveland tourism industryThere are a number of reasons why peoplechoose to travel. The WTO (World TourismOrganisation) deﬁnes the types of travel as:Leisure, recreation and holidays (54% of allarrivals in 2010).Visiting friends and relatives (VFR),health, religion and other (30% of all arrivals in 2010).And lastly, business and professionaltravel (16% of all arrivals in 2010).Within each of these categories, there area number of drivers which affect people’swillingness to travel and the motivators behindwhich destinations they choose.
Global Market Forecast 25The WTTC forecasts that the travel and tourismindustry’s total contribution to GDP andemployment will remain high in 2020, in everyregion of the world, and that this contributionwill increase in Asia-Pacific and Latin America.According to the WTTC, visitor exports willcontinue to represent a large share of all tourismexpenditures, with almost 50 % for Africa,Middle East and Europe.The large share of domestic spending of Asia-Pacific (China, India and many other countries)and North America is characterised by a strongdomestic demand for tourism activities.Travel and tourism will account for a significant share of the global economy by 2020Source: World Travel and Tourism Council, Airbus0%2%4%6%8%10%12%Asia-Pacific Europe North America Latin America Middle East Africa CISTotal contribution of travel and tourism to the economy, by region (share of GDP)20112020
Demandforairtravel2020 share of domestic and visitor spendingsDomesticVisitorShare of domestic and visitor spendings, by region, in 2020Source: World Travel and Tourism Council, Airbus0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%AfricaAsia-PacificCISEuropeLatin AmericaMiddle EastNorth AmericaEurope will be the largest region in terms of visitor exports19881989199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013201420152016201720182019202020212022CIS EuropeAfrica Latin America Asia-PacificMiddle East North AmericaVisitor exports evolution, by region (constant 2011 billion $US)Source: World Travel and Tourism Council, Airbus02004006008001,0001,2001,4001,6001,800More and more people emigrate so as tobenefit from studies in a foreign university andemployment opportunities. According to theInstitute of International Education (IIE), morethan seven hundred thousand foreign studentswere in the US in 2010.Not only do these students often needtransportation to get to the country of theirnew university, but they will also travel once theystart their studies, occasionally by air, with theirfamilies also likely to visit them.More international education
Global Market Forecast 27More people studying abroadInternational students in the US (Thousands)1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 20100100200300400500600700800Source: Institute of International Education, AirbusOn top of expatriates that only live in a foreigncountry for a short period of time, there are alsoincreasing rates of immigration, partially causedby increased globalisation. One of the waysthat immigration feeds economic developmentis through remittances, where immigrantssend money back to family members in theirhome countries. Some countries are heavilydependent on remittances, which can accountfor more than 20 % of their GDP.Emigration and immigrationAccording to the world Bank, more than 215 millionpeople (3% of the world population) live outside oftheir country of birth. In 2010, the US and Russiawere the two largest immigrant destinations.This is a key driver of aviation growth, andone that is often resilient to the early stagesof downturns.Many countries are dependent on remittances0% 5% 10% 15% 20% 25% 30% 35%El SalvadorKosovoLebanonTongaNepalKyrgyzstanSamoaMoldovaLesothoTajikistanSource: World Bank, AirbusRemittances sent (share of GDP) – Top ten countries
DemandforairtravelGlobal migration grew faster than global populationRegions sending migrants Regions receiving migrants100%110%120%130%140%1990 2010+38%+31%World populationThe world counts today214 millionmigrantsInternational migrantsSource: United Nations Population division, International Migrant StockRelative evolution of world population and international migrants, 1990 set to 100% (intra- and inter-regional migration)LatinAmericaNorthAmericaAfricaAsiaEuropeLatinAmericaNorth AmericaAfricaAsiaEurope2010 world inter-regional migration corridors2010 by emigration region (million persons)2010 world inter-regional migration corridors2010 by immigration region (million persons)Region definition according to United Nations;Asia including Oceania, countries of the Middle East and countries of CIS, Europe including RussiaSource: United Nations Population division, International Migrant Stock
Global Market Forecast 29While traffic on economy class representsmore than 95 % of all passengers worldwideaccording to Sabre, premium class is necessaryin the profit management of most carriers:around 15-20 % of all revenue comes from thepremium class. The average yield ratio betweenthe premium and the economy class is aroundthree to one, according to Sabre.Business and professional tourism willmaintain its sharePremium class accounts for 3 % of worldwide passengers and 20% of revenues91%92%93%94%95%96%97%98%99%100%2002 2003 2004 2005 2006 2007 2008 2009 2010 2011World share of premium and economy passengersSource: Sabre, AirbusPremium EconomyEven though the recent economic crisis has hada negative impact on premium class bookings,we expect that business travel will still represent aformidable share of air passenger traffic. Accordingto the WTO, 17 % of international tourism will bebusiness and professional related in 2020.The contribution of business related expendituresin the travel and tourism industry will remainrelatively constant between today and 2020ending 1 % down from today’s level at 23 % ofall expenditures.
DemandforairtravelBusiness expenditures will grow at 4.0% per year20112020Business expenditures evolution, by region (Constant 2011 billion $US)Source: World Travel and Tourism Council, Airbus0 100 200 300 400 500 600CISAfricaMiddle EastLatin AmericaEuropeNorth AmericaAsia-PacificBusiness will account for a significant share of all tourism related spendings20%21%1988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018201920202021202222%23%24%25%26%27%Share of business spendings in direct travel and tourism contribution to the economySource: World Travel and Tourism Council, AirbusBusiness travel will continue to remain a verykey component of the global business world aspeople continue to prefer a face-to-face meetingover video teleconferencing. Today, as in tenyears time it is projected that business travel willremain high in Asia-Pacific, North America andEurope. However, the growth in expendituresin the Asia-Pacific region is expected tobe the most rapid over the next 10 years.In terms of countries the BRIC nations, Brazil,Russia, India and China, will be where the growthin business travel expenditures will be the highest.However, it is likely that airlines willl continueto search for ways to reduce the cost perpassenger with aircraft like the A380, and waysto extract more revenue from the back of theplane.
Global Market Forecast 31TRAInS & PLAnESJust as civil aviation has evolved over the lastcentury from soaring tests on self-made woodengliders to scheduled long-haul traffic doubledecker wide-body aircraft, another, means ofmass transportation, some 100 years older, hasalso evolved: rail transport. What started withwhat were effectively wheeled steam boilers atthe beginning of the 18thcentury, has in manyplaces of the world developed into a networkof modern high-speed trains running up to350 km / h.According to the International Union ofRailways (UIC) more than 90 % of today’s14,600-km-network of high-speed-rail islocated in Europe, Japan and China, anddespite projects all over the world, that in totalcould almost triple the network length by 2025,these three regions will still account for morethan 80% of high-speed rail kilometres.When it comes to modal competition betweentrain and aircraft, a very decisive factor in thetraveller’s choice is the time it takes to go fromone city to another. In terms of travel time anddistance between two cities, air and railwaytransport have some overlapping marketsegments.Up to a certain distance limit, trains cancompensate for the faster travel speed of aircraft.This is because access time from a city centre toa train station might be shorter than to an airport;and less onerous passenger and baggagehandling procedures at train stations alsocontribute to competitive travel times by train.However, there is a trend for new high speed railstations to be situated further from city centres,and as land cost increases and availabilitydecreases, this reduces this advantage over time.
DemandforairtravelTransfer of traffic from air to rail0%50%100%0 2 4 6 8Transfer of traffic sharefrom air to railTrain travel time [h]Assessing the potential modal shift from airto rail in markets where plane and train arecompeting against each other, depends onmultiple and often regionally specific factors.The graph above illustrates the market sharetransfer from air to rail as a function of traintravel time. The blue shaded, s-shaped curverepresents aggregated observations of marketswhere plane and train are competing againsteach other. Market share shift occurs especiallyon trips of up to three hours and reduces morerapidly for train travel times above four hours.Looking at the distribution of domestic andintra-regional traffic in Europe and Chinaover the great circle distance of Origin-and-Destination city pairs (O&D city pairs), the zoneon the left of the dashed line represents thearea of O&Ds separated by up to 1,000 km, adistance that corresponds to a three to four hourtrip at 300 km / h.30% to 40% of domestic PRC passengers on O&Ds of more than 1000 km0%10%20%30%40%50%60%70%80%90%100%02505007501,0001,2501,5001,7502,0002,2502,5002,7503,0003,2503,5003,7504,0004,2504,5004,7505,0005,2505,500Cumulated O&D passengers on route distanceDomestic PRCKilometersDomestic / Intra-EuropeSource: Sabre, Airbus
Global Market Forecast 33In Europe, where modal competition betweenaircraft and train has existed for several decadesand where some traffic has already moved fromair to rail, air travel still represents about 60 %of domestic and intra regional traffic on routeswith great-circle distances of less than 1,000km.High-speed rail in China is relatively recent, withthe first lines having been inaugurated over thelast few years. Therefore only a very limitedamount of air traffic has been transferred to railtransport. There is much greater competition inEurope than in China, as a much greater portionof China’s major city pairs are further apart.Air travel is well positioned to meet the need tolink the rapidly growing population centres inChina, particularly in the central regions, quicklyand efficiently.Given the current state of railway projects inChina, some 35 % of O&D city pairs that areserved today by air transport on non-stop andmulti-stop flights will face competition fromhigh-speed rail. Estimates on modal traffic shiftvary between 5 to 15 % over the next decade.Several factors influence the future air vs. railmarket share and the potential modal trafficshift.Travel time, as mentioned, is one of the majorfactors. In cases where high-speed trains runon a dedicated, high-speed only network, newtrain stations are necessary that might not alwaysbe built in close proximity to the city centre. Inthese cases access time to a station can beas long as those to an airport. Modal shift willalso be driven by competitive pricing, whereespecially low cost carriers might be able tomaintain and enlarge the air transport market.Apart from modal competition there are alsoopportunities for intermodal complementarities.Some major airports are connected to the high-speed rail networks through dedicated stations.In these cases trains can contribute to expendingsurrounding airport catchment areas and may helpto enlarge accessible markets for air transport.High speed rail and air transport might facecompetition on some market segments. But,due to the main performance characteristicsand differences between surface and airtransport large segment markets will remainwell separated. Air transport networks still havethe potential to respond to modal competition.Finally, the advantages of both transport modescan be combined to create synergies on bothsides, meaning that the future will very muchbe a story of air and rail, rather than air or rail.Global Market Forecast 33
DemandforairtravelnETWoRKDEVELoPMEnTTraffic on the airline network has grown rapidlyover the last decades: measured in RevenuePassenger Kilometres (RPK), the global air trafficof 2011 was twice the volume of 1995.RPK (trillion)x 2Global RPK traffic, 1995 - 20110123451995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Source: Airbus, ICAO
Global Market Forecast 35This additional traffic has been accommodatedthrough both network and capacity expansion:the network has been extended with the openingof new routes and the capacity on the existingnetwork has been increased with more flightfrequencies and larger aircraft.Contrasting network evolution with total trafficevolution shows that a large part of the additionaltraffic has been absorbed with capacity increaseon the already existing network. The total ofoffered seats on the short-haul market by 2011was 58 % above the level of 1995, whereas thenumber of additional non-stop city pairs overthe same period has increased by 25 %; thetotal capacity on long-haul city pairs almostdoubled with an increase in offered seats of93 %, whereas the number of new non-stopconnections increased by around 42 %.Traffic as of month of SeptemberLong-haul traffic: flight distance >2,000nm, excl. domestic traffic;Source: Airbus, OAGEvolution of offered seats and number of served city pairs, long haul and short haul market - 1995 base year at 100%+93%+58%+42%+25%100%125%150%175%200%1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Short haul served city pairsShort haul seats offeredLong haul served city pairsLong haul seats offered2011 vs. 1995Long haulseats offered2011 vs. 1995Long haul servedcity pairs2011 vs. 1995Short haul servedcity pairs2011 vs. 1995Short haulseats offered
DemandforairtravelThe future evolution of the airline network is animportant input for the Airbus Global MarketForecast. The shape of the air transport network,such as the number of routes that are served orthe competition of airlines on a single marketdoes in the end also influence the type of aircraftneeded to satisfy the demand for air travel.The global traffic forecast of 157 traffic flows inthe GMF 2012 is the baseline for further networkanalysis.Adding more country and city-pair relateddetails helps to refine the traffic forecast inorder to reflect country or city pair specificcharacteristics. This enlarges the scope of ourstudy from 157 global traffic flows down tomore than 10,000 country pairs and more than200,000 origin-destination city pairs.The air transport network today comprises morethan 18,000 non-stop connections betweencities with more than 1,500 long-haul and morethan 16,500 short-haul city pairs. Increasedaccess to air travel all around the world willmake further non-stop connections viable andtherefore the network will continue to grow.This evolution is taken into account in the GMF2012 with the introduction of several thousandnew routes into the forecast.Focusing on the detail helps to define the forecast.Macro traffic forecast Micro network forecast>200,000 O&D city pairs >1,000.000 O&Dcity pair routings>10,000 country pairs157 global traffic flows
Global Market Forecast 3742 cities in the world handle more than 10,000 long-haul passengers per day.By 2011, some 300 cities that handle more than100 long-haul passengers per day on average,are connected to the global long haul network.However, the single relative weight of each ofthese cities within the long-haul network varies.Of the more than 300 cities only 42, less than15 %, handled more than 10,000 long-haulpassengers per day.Aviation Mega-cities, 25% of the routes,50% passengers between themthe number of non-stop city pairsoperated exclusively between the AviationMega-cities accounts for only 25 % of thetotal non-stop long-haul city pairs. Contraryto this, more than 50 % of the 2011 long-haulpassengers have been carried between two ofthese cities, either as non-stop origin-destinationpassengers or as connecting passengers todestinations beyond the 42 hubs.The number of non-stop city pairsbetween hubs and secondary cities accountsfor the largest percentage in terms of non-stopconnections, more than 50%. The share slightlyabove 40% in terms of passenger traffic staysbehind the traffic share of city pairs between theAviation Mega-cities. Adding the key figures ofthese two types of long-haul connection togethershows that more than 90% of today’s long-haultraffic travels from, to or via the 42 largest hubs.2011 cities with more than 10,000 daily long-haul passengersLong-haul traffic is concentrated on a few main aviation centresTraffic as of month of SeptemberLong haul-traffic: flight distance >2,000nm, excl. domestic traffic;Source: Airbus GMF42AviationMega-cities (2011)> 90%of long-haul trafficon routesto/from/via42 citiesTraffic as of month of SeptemberLong haul traffic: flight distance >2,000nm, excl. domestic traffic;Share of passenger traffic and # of served city-pairsper long-haul route category0%10%20%30%40%50%60%Aviation Mega-city<>Aviation Mega-cityAviation Mega-city<>Secondary citySecondary city<>Secondary city25%41%57%18%6%53%25%% of passenger traffic% of served city pairsSource: Airbus GMF
DemandforairtravelLong-haul passenger traffic and frequency split on routes between the 422011 Aviation Mega-cities16%18%17%28%9%13%up to 1 (179)Flights per day (# of city pairs)up to 2 (93) up to 3 (50)up to 4 (32) up to 10 (43) more than 10 (5)Share of total passenger traffic between the 2011Aviation Mega-cities per route frequency and number of city pairsSource: OAG, AirbusStepwise global traffic breakdownDistribution of traffic and frequencyThere are three ways to accommodate trafficgrowth on a route: increase frequency, increasecapacity or do both at the same time. The firststep for an airline to expand on a route canbe to increase frequencies; this is limited whenreaching a certain minimum service level, e.g.one flight per day.Once this limit is reached the airline couldincrease frequency and capacity in parallel overa certain period of time, e.g. with additionalflights around the weekend and larger aircrafton some days of the week.This continued expansion would then lead toan upper limit of flight frequencies, above whichadditional frequencies do not necessarily bringadditional value to the passenger. Therefore themore economic alternative for further expansionwould be to upgrade the capacity per flight andto grow solely in aircraft size.However, this upper limit in flight frequenciescan also be reached earlier due to congestedairports that simply do not have airspace, runwayor apron capacity to accommodate more flightmovements.Many of today’s long-haul trunk routes alreadyoffer a high level of frequency:More than 400 non-stop city pairs are offeredbetween the 42 Aviation Mega-cities. These400 city-pairs represent more than 50% of the2011 long-haul passenger traffic. Looking moreclosely at how the traffic between these 42 hubsis carried operationally, it can be seen that 320out of the 400 are served up to three times a day,resulting in some 50 % of the passenger traffic.The other 50 % is on only 80 city pairs that todayalready have more than 3 daily flights.
Global Market Forecast 39With the expected growth in air traffic over thenext 20 years, not only will the overall quantityof traffic increase, but also the allocationof this traffic on the route network will alsochange. Not surprisingly, routes to and fromthe emerging economies will grow at a higherrate than those in the developed regions.The opening of new non-stop routes will inevitablytake connecting traffic from today’s existingroutes. This is visible with the evolving trafficshare on non-stop long-haul routes that todayalready connects the 42 Aviation Mega-cities:their relative share of long-haul passenger trafficis 53% today and is expected to slightly decreaseto 49% by 2031. In absolute terms however, thisstill equates to traffic growth of +140% betweenthe top 42 cities, compared to an overall growthof long-haul passengers of +160 %. But, withthe expected overall traffic growth, the numberof cities, which fulfill the criterion of 10,000 dailylong-haul passengers, to become aviation mega-cities will increase to the total of 92 cities by 2031.Composition of long-haul passenger traffic per route category, 2011 and 2031PAX (million)2011(42 AviationMega-cities)2031(42 2011 AviationMega-cities)Secondary city <> Secondary city Aviation Mega-city <> Secondary city Aviation Mega-city <> Aviation Mega-city020406002040602011(42 AviationMega-cities)2031(92 AviationMega-cities)Traffic as of month of September; including direct and connecting traffic - Long haul traffic: flight distance >2,000nm, excl. domestic traffic;Source: Airbus GMF
DemandforairtravelAlong with the increase in Aviation Mega-cities over the coming decades, the numberof big trunk routes will increase as well.By 2011 more than 180 long-haul city-pairshad average daily round trip traffic of more than1,000 passengers.Three quarters of these large city-pairsconnected Aviation Mega-cities with each other.By 2031, it is expected that almost 600 city-pairs will handle 1,000 or more passengersper day.2031 cities with more than 10,000 daily round trip long-haul passengersLong-haul traffic is concentrated on a few main aviation centresTraffic as of month of SeptemberLong-haul traffic: flight distance >2,000nm, excl. domestic traffic;92AviationMega-cities (2031)92 aviation Mega-cities in 2031Number of long-haul trunk routes expected to more than triple by 2031Long-haul city-pairs with more than 1,000 daily passengers*Traffic as month of September; estimates for historic passenger derived from offered seats; Long haul traffic: flight distance >2,000nm, excl. domestic traffic;Source: OAG, Airbus GMF631231883435990100200300400500600700# of city-pairs History ForecastX 3.0 X 3.21991 2001 2011 2021 2031
Global Market Forecast 41The air transport’s centre of gravity is moving eastwards:For interest sake let’s imagine the world as atwo-dimensional slab, just as a projection in anatlas. It’s then possible to find the supporting pointof this slab. This point, defined as the "centre ofgravity", is the point on which the slab could bepositioned and would remain balanced. If the slabis now loaded at several points, the location of thecentre of gravity moves.Let’s assume now that these loads arerepresented by the passenger weight of eachcity, which corresponds to the sum of passengerson departing and arriving aircraft for each singlecity. Then it can be illustrated how the centre ofgravity moves on the surface over time.In the early 1970s the centre of gravity wouldhave been right in the middle of the northernAtlantic. North America and Europe have beenthe regions where air traffic was the mostconcentrated by far.By early 2000s, the point of equilibrium hadalready moved slightly towards the east, but stillremained on the western hemisphere. In 2011,the centre of gravity passed the prime meridianto the eastern hemisphere.Between 1972 and 2011, it has thereforemoved on average some 130 kilometres peryear in south-easterly direction. Over the coming20 years the point of equilibrium is expected tocontinue to move in a south-easterly direction,but at a slower pace of roughly 80 kilometresper year. The total distance that the centre ofgravity is expected to have moved between1972 and 2031 is about 6,500 kilometres,which is the equivalent great-circle distancebetween Amsterdam and Chicago or Frankfurtand Mumbai.The centre of gravity of air traffic moving South and EastTraffic as month of September; estimates for historic passenger derived from offered seats;espective centres of gravity as median of city coordinates weighted by passenger trafficSource: Airbus GMF, OAGGeographic centre of gravity of departing/arriving/connecting passengers per city1971 1981 1991 2001 2011 2021 2031
PASSEngER TRAffICOne of the fundamental inputs of the GMF,used to derive the demand for aircraft, is thetraffic forecast. In the Airbus forecast, theworld is divided in 19 regions: Sub-SaharaAfrica, Asia, Australia / New Zealand, Canada,Caribbean, Central America, Central Europe,CIS, Indian Sub-Continent, Japan, Middle East,North Africa, Pacific, Russia, South Africa,South America, Western Europe, PRC, US.Each region regroups countries which havebeen put together because of their geographicalcloseness and /or because of the similarityof their economic development, the state ofmaturity and the degree of liberalisation of airtransport. That is why, for example, Russia isconsidered separately from CIS, and SouthAfrica separately from Sub-Sahara Africa.Trafﬁcforecast
forecastGlobal Market Forecast 45World map of the GMF regionsNeighbour countries of the same colour belong to the same regionThe nineteen regions of the GMFA traffic forecast is performed for all the traffic flowslinking the 19 regions of the GMF. For this GMF,157 passenger traffic flows have been identified.Similar to the definition of the GMF regions, somespecific traffic flows have been treated separately.For example, Domestic Brazil has been separatedfrom Domestic South America.For each of the 157 traffic flows, data has beencollected from civil aviation authorities, airlineassociations and / or other databases to providethe most reliable historical evolution of passengerair traffic and yields. IHS Global Insight is our mainprovider for historical regional economic dataand forecast. For each flow, several econometricmodels have been carefully designed and the mostrelevant chosen, based on statistical propertiesand market expertise. In other words, the finalchosen model expresses traffic as a function of themost appropriate factors which explain its evolution.
TrafﬁcforecastAir travel has proved to be resilient to external shocks0.00.51.01.52,02.53.03.54.04.55.0+53%** since 20001970 1975 1980 1985 1990 1995 2000 2005 2010Oil Crisis Oil Crisis Gulf CrisisAsianCrisis Financial CrisisWTCAttack SARSWorld annual traffic (RPKs - trillions)Source: ICAO, AirbusAs seen historically, air transport is a growthindustry as proved by its resilience to externalshocks. The several exogenous events it hasfaced in recent years had an impact in theshort-term, but did not prevent air traffic fromrecovering its long-term growth trend.air transport is a growth industryFor example, the 1990-1991 Gulf War provokeda -2.9% decrease in world traffic, expressedin RPKs (Revenue Passenger Kilometre). The1998 Asian crisis slowed the world traffic growthdown to 1.8%. Last decade (2000-2011) hadseveral very pronounced exogenous shocks: the2001 terrorist attacks in the US (-2.9% RPKs in2001, -0.5% in 2002), the 2003 SARS respiratorydisease (+1.3% RPK in 2003), and finally the2008-2009 financial crisis (+2% RPK in 2008, and-2% RPK in 2009). All these events did not preventpassenger traffic from increasing by 53% over theperiod of 2000-2011 period. People deﬁnitelywant and need to ﬂy.Growth over the last 40 years was enabledby various factors:Demographic evolution, with both greaterpopulation and especially greater urbanpopulations.Increased wealth, in parallel with thedevelopment of a middle-class in many countries.Progressive liberalisation of air transport,which permitted the creation of the low-costbusiness model. This in turn provoked thereaction of traditional airlines, which improvedthe efficiency of their operations, notably withthe increase of aircraft fleet productivity andload factors and the continued developmentof the hub-and-spoke system. The overalleffect was a decrease of the airlines’ unitcost (average cost per RPK), which itself hastranslated into a decrease in the average ticketprice over time.Globalisation: Allowing increased worldconnectivity of people as well as their overallincreased need and ability to travel.Availability of efficient, operationallycapable aircraft, which has facilitatedpassenger trips.
Global Market Forecast 47From a forecast perspective, passenger airtrafﬁc is driven by two main factors:Global economic activity. Considering onlythe Gross Domestic Product (GDP) at a worldwidelevel, an increase of this indicator translates intoan increase of global wealth, which increasespeople’s propensity to travel. Among the othermacroeconomic activity data, we also look atExports, Imports, Disposable Income, PrivateConsumption, Unemployment Rate, ConsumerPrice Index, Oil prices, etc. For example, tradevariables are more suitable to traditionally businesstraffic flows, whereas total net disposable incomeis more suitable to traditionally leisure traffic flows.Over the last 40 years, the income elasticity ofpassenger air traffic is estimated to be around+1.3 at world level, meaning that if world GDPincreases by 1%, then air traffic is expected toincrease by 1.3%.The price of travel. Everything else beingequal, a decrease in the average price relaxes theconsumers’ budget constraints and makes morepeople economically able to fly. It is estimatedthat the price elasticity of passenger air trafficis around -0.6 at world level, meaning that if theaverage price decreases by 1%, then the air trafficis expected to increase by 0.6%.Air traffic is correlated to the economyAir traffic is correlated to air fares0%-2%-4%-6%4%2%8%6%10%14%12%16%-3%-1%1%3%199319941995199219911988198919901985198619871981198219831984198019961997199819992001200020022003200420052006200720082009201020115%7%9%World real GDP (left axis) vs. RPK traffic (right axis) growthTraffic Real GDPSource: IHS Global Insight (january 2012), ICAO, Airbus-15%-10%-5%0%5%10%15%20%25%30%35%-10%-5%0%5%10%15%20%Domestic US RPK traffic (left axis) vs. airline yields (right axis) growthSource: ATA, AirbusAirline unit revenue expressed in average passenger revenue per kilometer flown (airline yield) as a proxy of air fares19931994199519921991198819891990198519861987198119821983198419801996199719981999200120002002200320042005200620072008200920102011US Traffic Yields
TrafﬁcforecastDespite the “Arab Spring” events in the Middle-East and North Africa, the tsunami in Japan andrising fuel costs, 2011 was a very good year forpassenger air traffic.World RPKs (scheduled and non-scheduled)went past the 5 trillion threshold, with trafficincreasing by 5.8 %, confirming the 6.9 %recovery from the financial crisis in 2010. Witha 5.5 % traffic growth prediction for 2011, theprevious GMF (GMF 2011) was quite accurate.2011 growth was driven by emerging regions,the fastest growing regions in terms of totaltraffic being Russia, CIS, PRC, Middle East,South America and Asia.GMF 2011 slightly underestimated the hugegrowth of these regions. In 2011, the advancedregions continued to grow, although at a slowerpace than the world average, with 3.7 %increase for the US and 4.8 % increase forWestern Europe.The March 2011 earthquake in Japan, the tsunamiit created and Fukushima nuclear plant disasterwas a terrible shock for the country and its airtraffic was very broadly impacted.According to Sabre data, domestic RPK trafficdecreased by -8.3 % and international trafficdecreased by -5.3% for the full year 2011. Loadfactors were significantly impacted as trafficsupply (ASK) did not match demand collapse.The 2011 “Arab Spring” events in North Africaand the Middle East, unpredictable at leastfor the timing and intensity, had a negativeimpact on air traffic, with for example the NATOintervention in Libya closing for some monthsthe airspace for commercial airlines. RPK trafficfrom / to / within North Africa decreased by3.2 %, Libya being the most impacted country.However, ASK traffic from/to/within Algeria keptgrowing.2011 was a good year for air trafficAirbus forecasts are continually conservative-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%2008 2009 2010 2011Actual vs. GMF2011 World RPK year-on-year growth rateSource: ICAO, AirbusGMF 2011Historical data
Global Market Forecast 49Short-term economic outlook is less optimistic than one year beforeEmerging regions will drive the short-term economic growthAfter the recovery from the 2009 economiccrisis, new concerns appeared in mid-2011with the Eurozone macroeconomic difficultiesand the possible contagion to other regions ofthe world.Therefore, the global economic outlook for thenext two years at the beginning of 2012 (+2.4 %real GDP growth in 2012, +3.3 % in 2013) wasmore pessimistic than it was at the beginning of2011 (+3.5 % in 2012, +3.7 % in 2013).The difference in the pace of growth betweenadvanced and emerging regions will still bevalid with, PRC and Indian sub-continent beingthe leaders and Western Europe and NorthAmerica displaying the slowest growth.Expected slowdown of growthin the short-term2012 and 2013 World real GDP forecast (Beginning 2011 and 2012 forecasts)3.5% 3.5%3.7%1.6%-2.0%4.0%2.7%2.4%3.3%-3%-2%-1%0%1%2%3%4%5%2008 2009 2010 2011 2012 2013January 2011 forecastJanuary 2012 forecastSource: IHS Global Insight (January 2012), Airbus2012 and 2013 real GDP forecast by region-1%0%1%2%3%4%5%6%7%8%9%Europe NorthAmericaCentralAmericaJapan Pacific MiddleEastIndianSub-Continent2013 average2012 averageSouthAmericaCIS Asia Africa PRC2012 2013Source: IHS Global Insight (January 2012), AirbusThis slowdown in the world economic growth willbe coupled with high crude oil prices which willcontinue to challenge airline finances. Crude oilprices progressively returned to the peak valueof 2008 after the economic crisis in 2009. Thesehigh prices can be explained by geopoliticaltensions, a high demand in emerging regions andsmall excess capacities in production.
TrafﬁcforecastFuel currently represents around 30% of anairlines total operating costs and based on recenthistory and the long-term forecast, it is apparentthat higher prices in fuel are the new baseline.At the time of writing this text, ASK traffic growthhas been positive in 2012 but decelerating.The observed increase in load factors at thebeginning of 2012 is also expected to decelerate.Therefore, we expect RPK growth to be in therange of 3-4% in 2012, which is confirmed by ourshort-term scenario on real GDP and averageticket price and the elasticity of passenger airtraffic related to these indicators.World ASK year-on-year growth rate (monthly data)2009/012009/022009/032009/042009/052009/062009/072009/082009/092009/102009/112009/122010/012010/022010/032010/042010/052010/062010/072010/082010/092010/102010/112010/122011/012011/022011/032011/042011/052011/062011/072011/082011/092011/102011/112011/122012/012012/022012/032012/042012/052012/06-6%-4%-2%0%2%4%6%8%10%Source: OAG, AirbusAfter a strong recovery, ASK traffic grows at a slower paceHigh fuel prices becoming the new norm0204060801001202000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Nominal crude oil price (Brent, $US) historical evolutionSource: IHS Global Insight (July 2012), Airbus
Global Market Forecast 51Emerging regions will drive long-term economic growthEmerging regions will contribute 56% to the total economic growthbetween 2011 and 2031.From 2011 to 2031, it is forecast that world realGDP will grow at 3.2% per year on average,slightly below the GMF 2011 forecast of 3.3%over the same period of time.This slightly lower growth rate mainly reflectsshort-term macroeconomic concerns, but inthe long-term, the economic growth prospectsremain robust.Much of the growth will be driven by Indian SubContinent (+7.1%), PRC (+6.5%), South America(+4.4%) and Africa (+4.4%). Despite the lowergrowth of Europe (+1.8%) and North America(+2.6%), these two regions will contribute to37% of the total real GDP growth, expressedin 2005 $US, between 2011 and 2031. Overall,the advanced economies will account for 40%of the total real GDP growth, and emergingeconomies for 56% (25% for China alone).Robust expectations in the long-term2011-2031 real GDP average annual growth rate, by regionMiddle EastAsiaAfricaSouth AmericaPRCIndian Sub ContinentCentral AmericaCISEuropePacificNorth AmericaJapan2,0%1,0%0 3,0% 4,0% 5,0% 6,0% 8,0%7,0%Source: IHS Global Insight (January 2012), Airbus2040806012010002011 2031AdvancedBRICOtheremergingDeveloping40%38%18%4%2011-2031 contribution to World real GDPgrowth (2005 Billion $US), by type of regionSource: IHS Global Insight, Airbus
TrafﬁcforecastAs already mentioned, the airlines have achievedremarkable efficiency improvements, their unitoperating cost having decreased at a yearlyaverage of -2.3% per year in real terms over theperiod 1980-2011.Although this efficiency has reached a high level,we expect that the non-fuel unit cost will stilldecrease, although at a slower pace, -1.2% peryear on average between 2012 and 2031, inreal terms. This will be achieved thanks to moreefficient airline operations. Fuel costs are expectedto maintain their long-term upward trend, withpersistent volatility leading to the continueddifficulty for airlines today. It is expected thateco-efficient types due to enter service in thenear-future will help by lowering the fuel burdenon airlines and act as a natural fuel hedgingmechanism. We therefore expect that airlines’unit cost will decrease by 0.7% per year onaverage on 2012-2031, in real terms, potentiallyrelaxing the pressure on the price of travellingfor passengers, and stimulating traffic.198019821984198619881990199219941996199820002004200620022008201020122014201620182020202220242026202820300510152025Other costsForecastHistoryUnit cost (cents/RPK in 2011 US$)Unit cost (CAGR 1980-2011: -2.3%)Fuel costUnit cost (CAGR 2011-2031: -0.7%)Fuel cost (CAGR 1980-2011: -1.7%) Fuel cost (CAGR 2011-2031: 0.1%)Other costs (CAGR 1980-2011: -2.5%) Other costs (CAGR 2011-2031: -1.2%)Source: ICAO, EIA, IHS Global Insight, AirbusBased on the main drivers we identified for eachtraffic flow, and the forecast of their evolution,our analysis suggests that RPKs will double inthe next 15 years, as it did in the last 30 years.Air transport is and will remain a growth industry.traffic forecast results02468101214Air traffic has doubledevery 15 yearsAir traffic will doublein the next 15 years1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030ICAOtotal trafficAirbus GMF2012World annual RPK (trillion)Source: ICAO, Airbus2011-20215.1%20-yearworld annualtraffic growth4.7%2021-20314.4%World RPK traffic is expected to increase at a4.7% growth rate per year on average. As 2011was a good year for air traffic, the 4.7% forecastgrowth rate means that passenger traffic in 2030will be similar to 2030 traffic levels of the GMF2011 forecast.Cost per RPK (inflation removed) expected to decreaseby an average of 0.7% yearly until 2031
Global Market Forecast 53The four largest flows will represent 34% of the world traffic in 2031With a 7.0 % average growth rate per year overthe next 20 years, Domestic PRC will becomethe largest single flow in 2031 with 10.4 % ofthe total world RPK traffic, closely followed byDomestic US and followed by Intra WesternEurope. Ranked fourth we find the largest inter-regional flow, Western Europe – US, which will growon average by 3.7% per year on 2012-2031 andwill represent 5.3% of the world RPKs in 2031.Remarkably, the first four flows will represent34% of all RPKs in 2031. They will be followedby Domestic India and Western Europe – SouthAmerica.The fastest growing flows between 2012 and2031 mostly include emerging regions, thanksto untapped demand and robust economicgrowth prospects in these regions.Middle East – South America (11.9% growth onaverage), Domestic India (9.9% average growth)and Indian Sub-Continent – PRC (8.9%) will bethe three fastest growing flows.Emerging regions grow faster, advancedregions remain significantly high2031 Shareof Worldtraffic %10.410.47.55.32.126.96.36.199.31.31.52011 - 2031CAGR %2.27.03.13.188.8.131.52.56.06.55.46.184.108.40.206.23.7220.127.116.11.12.12.01.91.18.104.22.168Largest 20 flows in 2031, by RPK (billion)201120314002000 600 800 1000 1200 16001400Western Europe -South AmericaDomestic IndiaWestern Europe -USIntra WesternEuropeDomestic PRCDomestic USAsia to PRCIntra AsiaDomestic BrazilAsia -Western EuropeIndian Sub ContinentMiddle EastWestern Europe -PRCCentral Europe -Western EuropeDomestic AsiaWestern Europe -North AfricaAsia - Middle EastPRC - USJapan - USDomestic RussiaWestern Europe -Middle East
Trafﬁcforecast2011 - 2031CAGR %22.214.171.124.126.96.36.199.38.28.08.07.188.8.131.52.184.108.40.206.9Fastest growing 20 flows in 2031, by RPK (billion)20112031100500 150 200 300 350 450400Sub-Sahara Africa -PRCMiddle East -South AfricaCanada -Indian Sub-ContinentIndian Sub-Continent -PRCDomestic IndiaMiddle East -South AmericaNorth Africa - PRCNorth Africa -South AfricaCIS - PRCCanada -Middle EastCanada -Central AmericaSub-Sahara Africa -South AmericaPacific - PRCSub-Sahara Africa -North AfricaIndian Sub-Continent -USSub-Sahara Africa -CaribbeanPRC - RussiaPRC - South AfricaMiddle East - USAsia -Indian Sub-ContinentDistinguishing between advanced and emergingcountries, the share of “emerging – emerging”traffic flows is expected to become the largestwith 38% of World RPKs in 2031, growing at6.6% per year on average.They are followed by “advanced – advanced”flows, losing market share from 45% in 2011to 32% in 2031, and “advanced – emerging”flows, gaining market share from 28% in 2011to 30% in 2031.The fastest growing flows will mainly concern emerging regions
Global Market Forecast 55The fastest growing flows will mainly concern emerging regionsTraffic with emerging markets represent 55% of traffic today, 68% in 2031201120122013201420152016201720182019202020212022202320242025202620272028202920302031Advanced - AdvancedEmerging - EmergingAdvanced - EmergingWorld annual RPK (trillion), by type of flow0.02.04.06.08.010.012.014.038%30%32%45%28%27%20-yearannualtraffic growth6.6%20-yearannualtraffic growth5.1%20-yearannualtraffic growth2.9%As a result, the fastest growing regions in termsof total RPK traffic will be the emerging regions:Indian Sub-Continent (+7.6%), PRC (+6.8%),Middle East (+6.2%), CIS (+6.2%). The largestwill remain Western Europe and the US, withrespectively 21% and 17% of the total trafficin 2031, followed by PRC (13%), Asia (10%),Middle East (7%) and South America (5%).Western Europe and the US will remain the largest regions in 20312031 RPK (billions) from / to / withinPRCCISWestern EuropeUSSouthAmericaAsiaMiddle EastIndianSub-ContinentSize of the bubble is proportional to 2011 RPK traffic2011-2031 RPK traffic CAGR01,0002,0003,0004,0005,0006,0003% 4% 5% 6% 7% 8%
TrafﬁcforecastAggregating the regions at a broader level,Europe and North America will remain in 2031the largest regions for domestic and intra-regionaltraffic as well as for interregional traffic.Similarly, the transatlantic Europe – NorthAmerica flow will remain the largest interregionalflow in 2031 (13% of all interregional traffic in2031, down from 17% in 2011).Major traffic flows and regions in 2011Major traffic flows and regions in 20312011 RPK traffic by flow and region(1) The size and darkness of each line is proportional to the traffic on the flow.(2) The size of each bubble is proportional to domestic and intra-regional traffic of the region.(3) The darkness of each bubble is proportional to total traffic from/to/within the region.JapanPRCIndianSub ContinentAsiaAfricaSouthAmericaCentralAmericaNorthAmericaMiddleEastEuropeCISPacific2031 RPK traffic by flow and region(1) The size and darkness of each line is proportional to the traffic on the flow.(2) The size of each bubble is proportional to domestic and intra-regional traffic of the region.(3) The darkness of each bubble is proportional to total traffic from/to/within the region.JapanPRCIndianSub ContinentAsiaAfricaPRCSouthAmericaCentralAmericaNorthAmericaMiddleEastEuropeCISPacific
Global Market Forecast 57At the airline domicile level, the world 2012-20314.7% average RPK growth will be driven by MiddleEast airlines (+7.3% per year on average over2012-2031), Latin American (+5.9%), Asia-Pacific(+5.4%), CIS (+5.4%) and African airlines (+5.1%).Although at a slower pace, European and NorthAmerican airlines will continue to grow, respectivelyat 4.1% and 3.3% per year on average.Consequently, between 2011 and 2031, theairlines of the emerging regions will gain themost market share of total world traffic. MiddleEast airlines will represent 11% of total RPKsin 2031 from 7% in 2011, while PRC airlineswill represent 13% of total RPKs in 2031, upfrom 10% in 2011. Airlines from Europe, NorthAmerica will still represent a high share of trafficin 2031, respectively at 24% and 20% of theworld RPKs.RPK growth by airline domicile driven by Middle EastEmerging economy airlines will grow rapidly2011-2031 traffic growth by airline domicile, per regionNorth America2021-20315.2%20-yeargrowth5.9%Latin America2011-20216.7%2021-20314.9%20-yeargrowth5.1%2011-20215.2%2021-20314.4%20-yeargrowth4.7%2011-20215.1%2021-20314.9%20-yeargrowth7.3%2011-20219.8%2021-20315.1%20-yeargrowth5.4%2011-20215.7%2021-20314.8%20-yeargrowth5.4%2011-20215.9%2021-20313.9%20-yeargrowth4.1%2011-20214.3%2021-20313.3%20-yeargrowth3.3%2011-20213.3%EuropeCISAsia-PacificMiddle EastWorldAfrica
TrafﬁcforecastEuropean and North American airlines are the largest in 2011Emerging countries airlines will be the fastest growing until 2031Anamorphic map – 2011 airline domicile RPK traffic, by countryAnamorphic map – 2031 airline domicile RPK traffic, by country
Global Market Forecast 59Our airlines segmentation consists of 6 groupsof airlines: Global Network, Major Network,Small Network, Low-cost, Charter, Regionaland Affiliate. Global Network airlines will be thelargest in 2031, keeping a share of traffic of59%, slightly down from 60% in 2011.Low-cost carriers will gain the most marketshare, from 15% to 20%, thanks to the dynamicsof the American, European and Asian low-costcarriers and as a consequence of ongoingliberalization of air transport all over the world.Global Network and Low-cost carriersare the largest in 2011Low-cost carriers will be the fastestgrowing airlines between 2011 and 2031LCC will continue to growSource: Airbus60%2011 share of World RPK trafficby airline type60%Charter Global NetworkLCCMajor Network Regional And AffiliateSmall Network5%5%5%10%15%Source: Airbus60%2011 share of World RPK trafficby airline typeCharter Global NetworkLCCMajor Network Regional And AffiliateSmall Network5%5%5%10%15%The traffic of airlines considered as subsidiary is counted in the traffic of the principal airline59%2031 share of World RPK trafficby airline type59%Charter Global Network LCCMajor Network Regional And AffiliateSmall Network4%4%3%10%20%Source: Airbus
Demandforpassengeraircraftsingle-aisleLow Cost to long-haulDEMAnD BYAIRCRAfT SEgMEnTToday, there are 12,161 Single-Aisle aircraftproviding service to customers in every cornerof the globe. They represent 78 % of the totalcommercial airline fleet of aircraft over 100 seats.By 2031, the number of aircraft will more thandouble to almost 24,000 aircraft growing at 3.5%per year. Some 19,500 of the 24,000 will comefrom new deliveries between now and 2031 with~40% coming from replacing older aircraft and~60% targeting growth in the industry.A large number of these new deliveries will comefrom new more fuel efficient aircraft like theA320neo. This variant delivers 15 % lower fuelburn through the continuing application of newtechnology at the right time, specifically throughaerodynamic and engine improvements.Geographically, North America and Europe willdrive the demand, as they look to replace theiraging fleets. These two regions combined willaccount for nearly 50% of the overall demand fornew Single-Aisle aircraft.
Global Market Forecast 63Single-Aisle aircraft perform a range of operationsfrom direct service to connecting aviation mega-cities to smaller airports in the region, for thepurpose of hubbing. One way that clearly displaysthe use of Single-Aisle aircraft to connect larger hubairport is seen in the transition of regional airlinesfrom aircraft with less than 100 seats to Single-Aisleaircraft. Not only does the type of operation varywithin the Single-Aisle but the range or distanceflown also varies greatly. Between 5-7% of the fleetin 2011 is used on what is traditionally consideredlong-haul routes, over 2,000 nm; a trend that it islikely to continue, with the introduction of newer,more range capable variants over the forecastperiod, like the A320/A321neo.The size of aircraft is the third category displayingthe great flexibility of Single-Aisle aircraft.The seating in the Single-Aisle segment is broadwith the types segmented between 100 to 210 seats.Our forecast predicts that the centre of gravityfor the category will remain at 150 seats, but withlarger capacity types more significant in volumesthan smaller types, with for example more than7,600 deliveries expected in 175 and 210 seatcategories over the period. This broad variationin operations, ranges and seating capacity is whyAirbus believes in providing a family of aircraft,clearly shown by the many airlines who areexpected to purchase more than one category ofSingle-Aisle aircraft.Single-Aisle fleet in service evolutionNew deliveries of Single-Aisle aircraft by regionSingle-Aisle 2012-2031 new passengeraircraft deliveries1,6473,0817,1414,8772,77201,0002,0003,0004,0005,0006,0007,000100 125 150 175 2108,000Single-Aisle 2012-2031 new passenger aircraft deliveriesSingle-Aisle passenger aircraftNumber of new aircraft10,0005,00015,00025,00030,00020,0000Beginning 2012 2031Fleet sizeGrowthReplacedStay in service& recycled11,8377,6814,480Single-Aisle passenger aircraft23,99812,161Newaircraft19,518+ 3.5 %per annum4,956WORLD : 19,518Single-Aisle passenger aircraft6,0281,658724792North America25%31%Europe22%Latin America9%Middle East4%Africa4%CISAsia Pacific5%1,018= 500 units4,34220-year demand (2012-2031)
DemandforpassengeraircraftLike the smaller Single-Aisle aircraft, the Twin-Aisle aircraft also provide a varied operationalcapability to airlines around the world. Takingpassengers on high density short-haul routes,like Singapore to Kuala Lumpur, or low-densitylong-haul routes, like Rome to Buenos Aires.37 % of all RPKs were flown on the 3,320 Twin-Aisle aircraft in service at the beginning of 2012.By 2031, the fleet of Twin-Aisle aircraft willdouble to almost 7,200 aircraft; growing at arate of 3.9 % per year. These aircraft will beused to connect major aviation hubs acrossthe globe, but also to connect major hubs tosecondary cities. 40 % of the deliveries, 2,600aircraft, will replace existing, less fuel efficientaircraft with new, eco-efficient aircraft like theA350XWB. 3,900 aircraft will be used for growth,Asia-Pacific will be the largest contributor to thedemand for growth in this market segment.Today, Asia-Pacific represents 36% of the totalfleet of twin-aisle aircraft, and this percentagewill continue to grow over the forecast period tomore than 40% in 2031. The Middle East alsohas a large appetite for aircraft in this category,representing 42 % of the demand for aircraftabove 100 seats for the Middle East and 12%of the world’s Twin-Aisle demand. North Americaand Europe jointly represent 30% of the overalldemand.twin-aisleBroad requirements, broad capabilityTwin-Aisle fleet in service evolutionFleet sizeTwin-Aisle passenger aircraftBeginning 2012 2031+ 3.9 %per annum01,0002,0003,0004,0005,0006,0007,0008,0007,1983,320GrowthReplacedStay in service & recycled3,8782,619701Newaircraft6,497
Global Market Forecast 65In terms of the size of aircraft, the Twin-Aislesegment incorporates aircraft between 250 and400 seats. The centre of gravity in this segmentis in the 250-300 category, which is expectedto represent 70 % of the Twin-Aisle demand,a market where the 787 and A350XWB competetoday. But aircraft in the 350-400 category willstill represent more than 1,900 units over thenext 20 years, a segment where the A350-1000XWB is designed to fit efficiently.New deliveries of Twin-Aisle aircraft by regionTwin-Aisle 2012-2031 new passenger aircraft deliveries827Twin-Aisle passenger aircraft2,9811,105393204806North America13%46%Europe17%Latin America6%Middle East12%Africa3%CISAsia Pacific3%181= 250 unitsWORLD : 6,49720-year demand (2012-2031)2,5002,0001,5001,0005000Number of new aircraft2,2081,2107102,369250 300 350 400Twin-aisle passenger aircraft
DemandforpassengeraircraftVery Large aircrafta common sight todayat the world’s major airportsVery Large Aircraft, VLAs, are becoming acommon sight in the largest aviation cities aroundthe world. In 2012, 16 of the top 20 largestairports for international traffic were or soon willbe serviced by the A380. Through their size andnew technologies, these aircraft are designed tomeet demand efficiently by minimising seat costsin both fuel and CO2. The VLAs, like the A380provides the flexibility airlines need to managetheir revenue through providing unmatchedspace onboard to their strategies and the needsand wants of their customers.Looking at the segmentation and seating chart inthe summary section of this document, it showsis the most adaptable aircraft in this respect, withseating, either in service or on order, ranging fromjust over 400 seats to just over 800 seats; a cabinwith unrivalled versatility. VLAs are optimally suitedfor meeting the increasingly expanding demandfor passengers not only between mega-citiesbut also with secondary cities and high densitydomestic routes.Today, there are many more markets and routeswhich are ideally suited to VLAs, and as moredeliveries are made and more customers join theexisting customer base of the A380, these too willbecome the home for these aircraft.The requirement for VLAs exists today and willgrow with the world’s network and the needs ofpeople to fly. By 2031, this demand will result ina need for more than 1,300 VLAs.Given the projected growth in Asia-Pacific, botheconomic and air passenger traffic growth, theregions demographics, urbanisation trends andthe dense traffic flows between Asia-Pacific andEurope and North America, it is unsurprising thatthe region’s airlines will take 46% of these aircraftover the next 20 years. The Middle East will be thesecond largest region in terms of demand for VLAs,at 23%. This can be seen today in the size of thebacklog of A380s within Middle Eastern carriers.Europe is expected to be the third largest region interms of demand with 19% of the demand.
Global Market Forecast 67The A380 network as of July 2012Singapore AirlinesEmiratesQantasAir FranceLufthansaKorean AirChina SouthernMalaysia AirlinesThai AirwaysSeasonal or temporary Routes(e.g. during early ops)not currently operatedMontréalTorontoNew YorkWashingtonAtlantaMiamiHoustonLos AngelesSan FranciscoJohannesburgJeddahDubaiKuala LumpurSingaporeBangkokSydneyMelbourneAucklandHong KongGuangzhouLondonAmsterdamParisFrankfurtMunichZurichRomeManchesterShanghaiSeoulBeijing TokyoFrankfurtAmsterdamMunichRomeZurichParisLondonMontrealTorontoNew YorkWashingtonAtlanta GuangzhouDubai
DemandforpassengeraircraftTop 10 A380 airports ranked by weekly departuresA380 weekly departures: Week 24, June 2012 - Source: OAGAir FranceChina SouthernEmiratesKorean AirLufthansaQantasSingapore AirlinesDubai Singapore Frankfurt London(LHR)Paris(CDG)Sydney HongKongSeoul(ICN)New York(JFK)LosAngeles204060801001201400A380s link the world’s aviation mega-citiesNew deliveries of Very Large Aircraft by regionOver 100 ﬂights per day carrying more than 1m passengers per month68Very large passenger aircraft60925434 29308North America5%46%Europe19%Latin America3%Middle East23%Africa2%CISAsia-Pacific2% 30= 100 unitsWORLD : 1,33220-year demand (2012-2031)
Global Market Forecast 69A380s at all of the top 10 international airports…… and at 16 of the top 20. The future has arrived !London-LHRParis-CDGHongKongDubaiFrankfurtAmsterdamSingapourSeoul-ICNTokyo-NRTBangkokMadridLondon-LGWMunichKualaLumpur-KULRome-FCOTapai-TPENewYork-JFKZurichIstanbulTorontoSource: ACIA380 Service in 20127550250International Passengers 2010 (mill.)
DemandbyRegionAsia-Pacific still sports the strongest regional economic performance, powered by ChinaAsia-Pacific continues to be one of the fastestgrowing regions in the world, and a key componentin the world’s economy. Representing more thana quarter of the world economy today, Asia-Pacific’s economy is growing 2.5 times fasterthan in Europe or North America, which explainswhy the region continues to be the main driver ofglobal economic growth and air transport.Extrapolating the same trend in the future, Asia-Pacific will represent more than one third of theworld economy in twenty years time. This newgrowth will also help other developing regions,such as Africa and Latin America, to find newmarkets in addition to their more traditionalcustomers.8,0009,00010,00011,00012,00013,00014,00015,00016,00017,000010,00020,00030,00040,00050,00060,000200220012000199919981997 2003 2005 2007 20092004 2006 2008 2010 2011USA & CanadaAsia-PacificEuropeWorld (Right)Evolution of real GDPSource: IHS Global Insight, AirbusASIA-PACIfICMoRE PEoPLE,MoRE fLYIng
Global Market Forecast 73In Asia-Pacific, the second fastest growing regionafter CIS, the strong economic performanceof the traditional tiger economies continuesto be reinforced by the booming Chinese andIndian economies, which today represent 40%(30 % and 10 % respectively) of total 2011regional GDP and are expected to represent60 % of the same total in the next twenty years(44 % and 16 % respectively).Asia-Pacific provides us with an interestingillustration of the income convergence theory,according to which poorer economies (lowerGDP per capita) tend to grow at faster ratesthan richer economies. For example, althoughstarting from a much lower real GDP per capita in1990, China is narrowing the gap that separatesit from wealthier economies like Japan.India and China leading global economic growthAsia-Pacific, to drive world growth020,00040,00060,00080,000100,000120,000Real GDP per capita per region, selected years.Africa1997 2011 2030Share of real GDP per regionMiddle East Latin America Asia-Pacific Europe CIS US & CanadaSource: Global Insight and Airbus8%10%12%0%0% 2% 4% 6% 8% 10% 12%2%4%6%Western EuropeUnited StatesAustraliaMiddle EastLatin AmericaChina IndiaAfricaJapan* Circle diameter approximately proportional to 2020 real GDP at PPP (2005 US$)Source : IHS Global Insight, AirbusConsumer spending (2005 US$)Real GDP (2005 US$)Evolution of GDP and consumer spending, 2011 – 2020 average annual growth*
DemandbyRegionNevertheless, because standards of living in Asia-Pacific, as a whole, are still well behind those ofdeveloped countries, this regional "catching up"effect will continue in the coming years.With differences between countries, Asia-Pacificalso provides us with an example of how publicinvestment has been used by local governmentas an instrument to stimulate economic growth.As shown below for airport investment, asignificant portion of the region’s investmenthas been made by state-owned enterprises and,in recent years, by private-public partnerships.Source: ADB, the Planning Commission of India, Frost & Sullivan. (*) Excluding India.Asia Pacific, catching upAnnual average growth rate of real GDP per capita, 1990-20111990 Real GDP per capitaSource: Global Insight and GMF 2012-4%-2%0%02%4%6%8%10%5 10 15 20 25 30 35JapanIndiaChina1990 Real GDP per capita and annual average growth rate of real GDP per capita, 1990-2011Country Public PrivateCambodia 0% 100%China 78% 22%Malaysia 61% 39%Philippines 17% 83%India 39% 61%Thailand 97% 3%Vietnam 0% 100%Total* 65% 35%PUBLIC INVESTMENT, A KEY DRIVERInvestment in airports, selected countries, 1991-2011Asia-Pacific’s economic prosperity, leadingto the steady up scaling in the standard ofliving of its expanding middle class, combinedwith a growing population and increasingurbanisation, has and will continue to lead toa higher desire (and ability) to fly. The hugepotential for the region’s “propensity to travel”to continue increasing is evident. An Americanmakes 1.8 flights per year, a German makesone flight per year, whilst even allowing forsignificant growth in recent years, people fromChina and India make a relatively low 0.2 and0.1 flights per year, respectively. Still growth tocome.While the region’s population is expected torepresent nearly 60% of the world’s population by2031, the demand for air travel, as measured bytotal RPK from/to/within Asia-Pacific, is forecast togrow at a 5.8% per year over the next 20 years,above the 4.7% increase in total world demandover the same period.Another reflection of these positive regionaltrends, is the fact that air transport in Asia-Pacificis becoming much more accessible, as witnessedby the 23% increase in the number of regularlyserved cities in Asia-Pacific, between 2005 and2011, which contrasts to the -1% in North Americaand the +6% in Europe, over the same period.
Global Market Forecast 75Benefitting from the strong regional economicgrowth and the resulting improvement instandards of living, Low Cost Carriers (LCCs)in Asia-Pacific have been able to profit from thispositive trend by increasing their relative shareof total traffic in Asia-Pacific.Being a true success story in the industry overthe last decade, their market share in terms ofseats offered in 2005 increased to more than20% in 2011.Air transport becoming more accessible is Asia-PacificLCC market share in Asia-Pacific above 20%0150300450Africa&MiddleEastLatinAmericaNorthAmericaAsia-PacificEuropeEvolution of number of regularly served cities per regionTraffic as of month of September; regular service referring to a minimumof two daily departures on a 150-seater aircraftSource: OAG, Airbus2005 2011+19%171204 211232269 266283300358441+10% -1% +6% +23%Low Cost Carriers2005Market share2006 2007 2008 2009 2010 20110%5%10%15%20%25%Traffic as of month of September; domestic and international traffic within Asia-Pacific; GMF 2012 airline segmentationSource: OAG, GMF 2012Evolution of market share for LCCs in Asia-Pacific (seats offered)7%10%11%12%14%18%21%
DemandbyRegionLCC traffic in Asia-Pacific is still highly concentratedon domestic relative to intra-regional traffic. Thehigher relative share of domestic traffic in theAsia-Pacific LCC market in 2011 contrasts withthe relative predominance of intra-regional trafficin the European LCC market (11% difference infavour of intra-Europe traffic) and suggests that ifEurope can be considered as the benchmark of aliberalised LCC market, there is large potential forincreasing intra-regional integration in Asia-Pacific.Number of routes served by LCCs has almost tripled over the last yearsAsia-Pacific’s LCCs expanded their marketpresence through both adding capacity onroutes that they already serve and throughincreasing the number of new routes.In fact, the number of offered city pairs hasalmost tripled over the last years.2005# of served city-pairs2006 2007 2008 2009 2010 2011-200400600800Traffic as of month of September; domestic and international traffic within Asia-Pacific; GMF 2012 airline segmentationSource: OAG, GMF 2012Evolution of number of city-pairs served by LCCs in Asia-Pacific255376421 4585216417342005 2006 2007 2008 2009 2010 2011100%200%300%400%Traffic as of month of September; domestic and international traffic within Asia-Pacific; GMF 2012 airline segmentationSource: OAG, GMF 2012Evolution of seats offered and number of flights on LCC network in Asia-Pacific (relative to 2005)x4.3x3.3Seats offeredNumber of flights
Global Market Forecast 77Nevertheless, and despite some past failures,efforts to apply the low-cost model to longer-haul travel have accelerated in the last years, aswitnessed in the entrance of new LCCs to thelong-haul market, together with the settlement ofnew subsidiaries and new strategic alliances in theregion, such as the recent joint ventures in Japan.Whether the long-haul, low-cost modelsucceeds or whether these new strategicalliances are to be permanent will dependon time. But still, what seems certain for theforthcoming years is that LCC will continue withits previous trend, growing at a higher pacethan full service carriers.Over the next ten years, the region is expectedto grow at 6.4% per year, mainly driven by PRCand India, with expected growth rates of 7.7%and 8.6%, respectively.Potential for LCCs to increase intra-regional integration within regions01030504020Africa&MiddleEastLatinAmericaNorthAmericaAsia-PacificEurope2011 LCC market share on intraregional traffic per global region (Seats offered)Traffic as of month of September; regular service referring to a minimumof two daily departures on a 150-seater aircraftSource: OAG, GMF 2012Domestic: traffic within the countriesIntra-regional: traffic between the countries32%43%6%12%23%29%9%43%7%16%Large potential for increasing intra-regional integration
DemandbyRegionOver the next twenty years, this very dynamicregion, with its large and diverse populationcentres, will require larger longer range aircraft.As an example, the region will need more than600 VLAs, which represents 45% of the totalworldwide demand.RPK development from/to Asia-Pacific (2012-2031 CAGR)Europe4.5%Africa7.1%North America5.0%Latin America6.6%Middle East6.1%CIS6.7%Domestic andIntra-Regional6.3%2022-20315.2%20-yeargrowth5.8%Asia-Pacific2012-20216.4%2022-20314.4%20-yeargrowth4.7%World2012-20215.1%4,0002,0006,00010,00012,0008,0000Beginning 2012 2031Fleet sizeGrowthReplaced6,1373,481822Recycled & stayin servicePassenger aircraft ≥100 seatsSource: Airbus GMF10,4404,303Newaircraft9,618+ 4.5 %per annumSingle-aisle Smalltwin-aisleIntermediatetwin-aisleVery Largeaircraft6,0288796092,102Number of new aircraft01,0002,0003,0004,0005,0006,0007,000Passenger aircraft ≥100 seats
Global Market Forecast 79Economic and social impacts of aviationin Asia-PaciﬁcBy facilitating and optimising travel across theworld, air transport significantly contributesto improving living standards in Asia-Pacific.As aviation enables both direct contact withforeign partners and regular on-site visits, ithas significantly fostered investments andoutsourcing to the region. For example in China,the development of air cargo (which grew ata 10.7% yearly rate between 1995 and 2011)has further enabled increased production oftime-sensitive products such as electronicsand perishables. These growing internationalinvestments have created jobs and developedskills across a wide range of sectors in a regionwhere underemployment has long been a socialand economic problem.Aviation yields positive benefit for local economies.In 2010, the air industry generated more than$258 billion1in this region, representing almost20% of the global aviation GDP. Aviation alsosupports a total of 6.1 million jobs2, split intofour categories: airlines (24%), aerospace (10%),airports (6%), and other on-airport activities (60%).1Including direct returns (equal to USD 94 billion) plusindirect and induced impacts.2Total here refers to the direct, indirect and inducedimpacts but excludes catalytic impacts.Economy 1 Real GDPReal tradeUrban population4.6%7.2%1.8%Fleet 2Traffic 1Fleet in service beginning 2012Fleet in service 203120-year new aircraft deliveries4,30310,4409,618Intra-regional & domesticInter-regionalTotal6.3%5.2%5.8%12012 – 2031 CAGR - 2Passenger aircraft ≥ 100 seatsRWC 2011 IN NEW ZEALANDIn 2011, the land of the long white cloud heldthe largest sporting event in its history and oneof the biggest sporting events of the year: theRugby World Cup. Gathering 20 teams from allover the world and thousands of supporters, thecup could only be organised in New Zealandthanks to air travel. Hosting more than 133,000overseas visitors for this six-week event (againstthe 65,000 expected), the air transport industrywas crucial in helping supporters get to theevent. It increased the international image of thecountry, thanks to the 2,000 international mediaattending the event. It also brought economicspillover: ticket sales amounted to over $224.5million, accommodation-related spending was$204.1 million, and food and drinks $187 million.The fiscal stimulus represented nearly 1.4% ofquarterly GDP for New Zealand.ASIA-PACIFIC
DemandbyRegionFollowing the 2008 worldwide financialcrisis, European airlines were given littlerespite. However, 2010 and 2011 were moreencouraging than the previous two years,with both positive margins and an increasein passenger traffic. Despite this, 2012 looksmuch more challenging as Europe’s economicenvironment remains difficult with highunemployment rates and uncertainties relatedto the Eurozone sovereign debt crisis.More positively however, IHS Global Insightforecasts an improvement in the situation overthe medium term, with the unemployment ratefor example expected to come down to thepre-crisis level by 2016;This wealth increase will directly translate intoan increased demand for travel: air traffic fromor to Western Europe is forecast to grow at4% and at an even higher rate of 5.6% perannum from or to Central Europe over thenext 20 years.Unemployment rate (%) GDP growth (%)201120102009200820122013201420152016Source : IHS Global Insight Source : IHS Global Insight0246810121420062004200220002008201020122014201620182020-6-4-202468Western Europe Central Europe Western Europe Central EuropeEconomic environmentEURoPETRAVEL In THEIR DnA
Global Market Forecast 81The ‘Low Cost Carrier’ category is a very commonand practical way of grouping those airlines thatoffer low fares, unbundle their product, focus onancillary revenues and high aircraft utilisation.However, this designation can hide fundamentallydifferent operational philosophies.Regarding airport types, the most traditional LCCstend to favour operating from smaller, remoteairports where airport charges tend to be loweror incentives are offered, whereas others competeat a city’s main airport.Another element of differentiation is flightfrequency. Far from the “at least one flight perday”-Full Service Carriers philosophy, LCCs tendto offer less flights to more destinations for theirmore leisure oriented customers.European LCCs have been able to capitaliseon the current economic situation to increasetheir presence across the region.LCCs have continued their expansion initiated15 years ago, taking market share from fullservice carriers year by year.LCCLCC frequency shareLCC market share within EuropeSource : OAG0%Barcelona Budapest20%40%50%60%30%10%FEB 12(with Malev, Spanair)MAR12(without Malev, Spanair)0%5%10%15%20%25%30%35%40%45%50%LCC Market ShareSource : OAG1996199719981999200020012003200520072009200220042006200820102011
DemandbyRegionAnother characteristic shared by LCCs is theirpropensity to open new routes. One prominentEuropean low cost operator has opened no lessthan 1,720 new routes (an average of 22 per month).However, there does appear to be an elementof speculation in some of these route openings:In fact, 48% of them do not survive longer than3 years.Nevertheless, the LCC network expansion remainsvery significant, as European LCCs now cover 33%of all possible intra-European country pairs in 2011,against only just 6% in 2001.Top 4 European LCCs40%50%60%70%80%90%100%Opening + 1Y + 2Y + 3YNew routes survival ratesSource : OAG, AirbusNew route survival rateNumber of intra-European country pairs servedSource : OAG, Airbus1993199419951996199719982000200220042006199920012003200520072009200820102011Full service Low cost300350400450500050100150200250
Global Market Forecast 83As coverage grows, the new market opportunitiesthat present themselves have typically beenfurther afield. In recent years, these haveincluded new operations to North Africa,the Middle East and CIS for example. As a result,average stage lengths have increased dramatically,from ~900 km in 2002 to nearly 1150 km by theend of 2012.Average stage length of European LCCsAverage Stage Length (km)8008509009501,0001,0501,1001,2001,1502003 2004 2005 2006 2007 2008 2009 2010 2011Source : OAG, AirbusIn response to the economic and competitivepressure, as well as efforts to drive costs lowerthrough synergy benefits and economies of scaleand scope, a number of traditional major carriersin Europe have chosen consolidation throughmergers as a potential solution. The last 8 yearshave seen a number of mergers and acquisitionsthat have changed the competitive landscape inthe region. This consolidation has taken two forms:either multiple groups being merged under oneoperating name or a newly created entity keepingthe corporate identities of the former carriers.Despite this shift towards consolidation, it appearsthat the intra-European market is still significantlyfragmented. If compared to the US domesticmarket, its indicator for level of concentration (asmeasured by the Herfindahl-Hirschman Index forASK traffic) is still relatively low.Consolidation
DemandbyRegionConsidering that these two markets are similarin population, the US has the obvious advantageof sharing a single language and culture, where itis potentially easier for a single brand to addressthe entire market. Interestingly, if we were toconsider the big 3 alliances members as onesingle airline, we see that the HHI would comeclose to the US levels.Time will tell whether the mergers of the lastseveral years are a start towards further integrationbetween European alliance members and whetheror not it will lead to the economies of scale thatEuropean airlines desire.Market concentration (1)Market concentration (2)Considering alliances members as one single airlineIntra EuropeDomestic USHHISource : OAG, Airbus197219731974197519761977197819791980198119821983198419851986198719881989199019911992199319941995199619971998199920002001200220032004200520062007200820092010201100.020.040.060.080.10.120.140.16HHIIntra Europe Domestic US Intra Europe (Alliances)Source : OAG, Airbus19721974197619781980198219841986198819901992199419961998200020022004200620082010201100.020.040.060.080.10.120.140.16
Global Market Forecast 85Traffic from / to Europe by regionDespite the strong development of EasternEuropean countries, the overall European airtransport market will continue to mature overthe next 20 years. Air traffic within Europe isforecast to grow at the moderate pace of 3.4%per annum, whereas international traffic willgrow at 4.4% per annum, mainly driven by thedynamism of emerging markets.As a result, European airlines will need 5,701new aircraft by 2031, 76% of which will be in theSingle-Aisle category. The overall fleet in servicewill grow by 90%, while average aircraft size willincrease from 162 to 190 seats.Fleet and deliveriesRPK development from / to Europe (2012-2031 CAGR)Europe3.4%Africa4.5%North America3.8%Latin America4.5%Middle East5.4%CIS5.3%Asia Pacific4.5%2022-20313.8%20-yeargrowth4.1%Europe2012-20214.3%2022-20314.4%20-yeargrowth4.7%World2012-20215.1%
DemandbyRegionFleet in service - EuropePassenger aircraft >= 100 seats2012 – 2031 new aircraft deliveriesPassenger aircraft >= 100 seatsMost of Europe is a well-developed air market. Itis highly mature in the West, while the East is lessdeveloped and still has significant growth potential.Accounting for one third of global air transport,aviation employs almost 300,000 highly-skilledworkers in the civil aerospace industry, which isequal to 37% of all civil aerospace jobs worldwide.Although Europe is currently facing a job crisis,aviation still provides more than 5.1 million jobs.Aviation is also a driver of productivity throughoutthe Old Continent. There is a relationship betweenbusiness travel and productivity. Over time, a 10%increase in travel corresponds to a 1% increasein productivity.Air transport also helps the economy by facilitatingmobility. Aviation supports regional tourismthroughout Europe, which generates additionalincome, job creation and skills development. Byincreasing labour mobility, aviation also helpsstrengthen the links between European countriesand the functioning of the Monetary Union.The expansion of air transport will continue topositively impact Europe’s economy.840,000 direct jobs will be created over thenext 20 years. Aviation’s continuous effortsto counterbalance the increase in regulatoryburdens and investments in innovation drivenby environmental issues will spread to othersectors’ R&D. In parallel, the growing need foraviation services, aimed mainly to pre-empt theincreased congestion in major European hubsand to ensure efficient connectivity will be asignificant source of investment.Economic and social impact of aviation2,0001,0003,0005,0006,0007,0008,0004,0000Beginning 2012 2031Fleet sizeGrowthReplacedStay in service& re-cycled3,4262,2751,565Passenger aircraft ≥100 seats7,2663,840New aircraft5,7013.2 %per annum Number of new aircraft4,342708397 25405001,0001,5002,0002,5003,0003,5004,0004,5005,000Single-Aisle SmallTwin-AisleIntermediateTwin-AisleVery LargeAircraftSource : Airbus GMF2012 – 2031 new aircraft deliveriesPassenger aircraft >= 100 seats
Global Market Forecast 87Aviation is crucial to Norway due to its sizeand the fact that other forms of transport,like high-speed train are underdeveloped.In 2020, it is expected that there will beno realistic alternative means of transportfor 94% of the flights compared to 92%in 2007 (when distance is taken intoconsideration). As a result, an optimisedair transport network places two thirdsof Norway’s population within one hourof an airport.Supporting around 65,000 jobs, aviation inNorway accounts for 4% of the country’sGDP. Tourists arriving by air represent30% of visitors coming to Norway, andthey spend more than $2bn every year.Aviation is also central to the medicalcare of the population, as it transportsan annual average of 400,000 patientsand is vital for emergency operations. Airtransport facilitates nationwide gatheringsaround cultural and sport events in thisvast country.Vienna heavily relies on its airport toattract business. Offering connections toanywhere in Europe within three hours,Vienna airport manages to attract around300 multinationals (among which Coca-Cola, IBM, Ericsson...) to establish theirEastern European headquarters in theAustrian capital. This has enabled thecity to benefit from the recent growth inthe neighbouring Transition Economies.Economy1 Real GDPReal tradeUrban population1.9%3.5%0.6%Fleet3Traffic2Fleet in service beginning 2012Fleet in service 203120-year new aircraft deliveries3,8407,2665,701Intra-regional & domesticInter-regionalTotal3.4%4.4%4.1%1/22012 – 2031 CAGR - 3Passenger aircraft ≥ 100 seatsNORWAY’S DEPENDENCEON AIR TRANSPORT:VIENNA’S AIRPORT ATTRACTSMULTINATIONALS:EUROPEGlobal Market Forecast 87Cola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirCola, IBM, Ericsson...) to establish theirEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theEastern European headquarters in theAustrian capital. 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DemandbyRegionToday, the domestic US market is the largestsingle aviation market in the world, with over115 airlines, with 6,700 aircraft in service andmore than 730 million passengers flown to, fromand within the US in 2011.Over the last year, we have seen the replacementof older aircraft beginning. The last year has alsobeen marked by post-merger integration asairlines work on integrating new acquisitionsand mergers.noRTH AMERICASource: Global Insight, AirbusYear-over-year quarterly evolution of GDP of the USA and Canada-6%-4%-2%0%2%4%6%US Canada2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1SIMPLY THE BEST WAYfRoM A To B
Global Market Forecast 89Much of US and Canadian economic growthhinges on the national debt, and how this impactsconsumers perceptions and to some extent theon-going financial concerns in Europe. As ofAugust 2012, forecast for the recovery in theUS were still positive. IHS Global Insight projectsan increase in the GDP growth rate in the US,peaking at 2.7% in the fourth quarter of 2014before returning to a stable growth rate of about2% annually.This growth in the US and Canadian economieshas led to a much more positive employmentsituation. Unemployment rates have recededfrom the 2009 highs of 10.0% and 8.7% and arenow around 8.1% and 7.3% for US and Canadarespectively, with unemployment rates projectedto continue their decline in the near future. Thisshould lead to greater income levels and largerconsumption demands, including for air travel.EconomicsEvolution of expenditures for travel per capita in the USSource: IHS Global Insight, Airbus01002003004005002005 US$1981198219831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008200920102011
DemandbyRegionConsolidation and the replacement of theregion’s ageing ﬂeets, are the two most citedtopics when the US commercial aerospacemarket is discussed, and they will likely continueto dominate the conversation for some time tocome. Despite the continuing potential for somefurther mergers, 2011 and beginning of 2012 hasbeen a period of “post-merger integration” asairlines look to most effectively leverage the recentmergers. Several examples of this were United andContinental receiving a single operating certificatein November 2011 and fully merging websites andfrequent flyer programs in March 2012; Southwestand AirTran receiving a single operating certificatein March 2012 and Southwest deciding to sell theformer AirTran 717s to maintain a consistent fleetof aircraft. Today, seven airlines represent 90%of all domestic US traffic whereas 25 years agoit took 19 airlines to reach 90% of annual traffic.The ageing fleet in North America is beginning tobe replaced. Today, North American carriers haveone of the oldest fleets in service of any region.On average, the fleet in North America is elevenyears old, which is the second oldest in the world,with only Africa’s being older, at 12 years old onaverage.Looking outside of the Single-Aisle market,the newest sight at several airports across the USis the A380, a VLA (Very Large Aircraft). Althoughno North American airlines have chosen to adoptthe newest super jumbo jet, foreign carriers areusing it effectively across the continent. As ofJune, there is regular A380 service to Los Angeles,New York, Montreal, Toronto, Washington DC andSan Francisco with more expected destinationsbefore the end of the year.Airlines in North America have become verycreative in their cost reduction strategies tothe extent that today, there is some convergenceof business models between LCCs and networkcarriers. By taking aspects of the LCC businessmodel, including increasing baggage fees andcharging for services on flights, and applying thisto network carriers’ businesses, they have beenable to increase their per passenger profit. LCCson the other hand are looking at what they canleverage from network carriers to increase theirprofitability, such as maximising benefits fromhub-and-spoke networks and even expandinginternationally. Due to costs-cutting and expandingrevenue streams, airlines in North America havebeen able to produce some of the highest profitswhen compared to other regions. IATA states thatNorth America was the second most profitableregion in terms of net post-tax profits at $4.1billion in 2011, more than double the profitabilityof European airlines.Even though the domestic market is one ofthe largest in the world, the reliance of NorthAmerican carriers on domestic markets has greatlydecreased over the past 10 years. In 2003, 73% ofNorth American carriers’ traffic was on domesticand intra-regional routes. Today, this represents65% of total traffic.Civil aviation is becoming more affordablefor North American populations. Since 1995, theaverage price per ticket has declined by nearly$US 50 when you remove the effects of inflation.This decrease in ticket prices has led to greateropportunities for more North Americans to travel.Market trends
Global Market Forecast 91Global Market Forecast 91Over the next 20 years, traffic to, from and withinNorth America is expected to grow at 3.5% peryear. As can be expected, the strongest growthwill to come from routes with the Middle East, theIndian sub-continent, Latin America and PRC.This growth and the overall market position isleading airlines to invest in their fleets, specificallylooking at purchasing the most fuel-efficientaircraft in an attempt to reduce the costsassociated with fuel.ResultsRPK development from/to North America (2012-2031 CAGR)Europe3.8%Africa5.3%Latin America4.6%Asia Pacific5.0%Middle East7.3%CIS6.2% Domestic andIntra-Regional2.3%2022-20313.4%20-yeargrowth3.5%North America2012-20213.7%2022-20314.4%20-yeargrowth4.7%World2012-20215.1%
DemandbyRegionThis growth in traffic will be absorbed by almost6,900 aircraft in service with North Americancarriers by 2031, which equals an increase ofalmost 70% compared to the fleet of 4,100aircraft in service by 2011. Over the comingtwo decades, the airlines of the region areexpected to have a demand for more than 5,800new aircraft. More than 3,000 aircraft will beneeded to replace part of the current aircraftfleet in service today. 2,800 will be needed toaccommodate the additional traffic growth forNorth American carriers.Close to 85% of the new aircraft demand ofairlines in the US and Canada is for aircraftfrom the Single-Aisle category. A large portionof these aircraft will be needed to renew andexpand the fleet serving the domestic USmarket, which is today and also forecast tobe by 2031 one of the largest traffic flow in theworld.Almost 900 aircraft from the Twin-Aisle and Very-large-aircraft category will be needed primarily toserve the large long-haul markets from the US andCanada, including routes on the Trans-Pacific,Trans-Atlantic and traffic to South America.01,0002,0003,0004,0005,0006,0007,0008,000Beginning 2012 2031Fleet sizeGrowthReplacedPassenger aircraft ≥100 seats - Source: Airbus GMF4,0796,897+ 2.7 %per annum3,0331,046Stay in service& recycled2,818Newaircraft5,8514,956621206 68Single-Aisle SmallTwin-AisleIntermediateTwin-AisleVery LargeAircraft01,0003,0002,0004,0005,0006,000Number of new aircraftPassenger aircraft ≥ 100 seatsSource: Airbus GMFNORTH AMERICAEconomy 1 Real GDPReal tradeUrban population2.6%5.1%1.0%Fleet 3Traffic 2Fleet in service beginning 2012Fleet in service 203120-year new aircraft deliveries4,0796,8975,851Intra-regional & domesticInter-regionalTotal2.3%4.6%3.5%1/22012 – 2031 CAGR - 3Passenger aircraft ≥ 100 seatsSource: IHS Global Insight, Airbus
Global Market Forecast 93As a result of the size of its air market, the aviationreturns in North America are the largest worldwide.The industry generated over $556 billion andsupported more than eight million jobs in 2010,representing 38.5% and 35.7% of GDP and jobsgenerated by air transport globally. Of these, otheron-airport activities provide more than 68% ofdirect jobs, whereas airline jobs only account for23.5% .By 2030, aviation will help to create an additional874,000 high skilled jobs across the region.Beyond income and employment, thedevelopment of air transport is expected todrive the improvement of infrastructure in NorthAmerica. In the coming years, one of the driverswill be the transformation of the ground-basedair traffic control system into the NextGensatellite-based one. These advancements inATM will reduce congestion and improve safety,increasing efficiency.aviation benefiting north americaBENEFITS OF BUSINESS TRAVELIN THE USBusiness travel contributes proﬁt and growth. In the US, each dollar investedby a company in business travel drives $3.80 in proﬁts.Executives report that business travel helps with:KEEPING CUSTOMERS• 28%: the average percentage of revenue that executives and business travellers estimated wouldbe lost without in-person meetings with clients.• 77%: proportion of customers who prefer in-person meetings with their suppliers and partners• 81%: corporate executives who believe that a slow economy calls for more contact with clientsand not less.CONVERTING PROSPECTSThe rate of conversion of a prospect into a client is around 16% for not in-person meetings,while it is more than 40% with in-person meetings. Around 85% of corporate executives find thatin-person meetings with prospective clients are more effective than virtual meetings.BUILDING RELATIONAL NETWORKS BOTH INTERNALLY AND EXTERNALLYTrade shows and internal company meetingsINVESTING IN HUMAN CAPITAL• Corporate executives link travel to the performance and morale of the employees. Nearly 80% ofexecutives believe that incentive travel has a significant impact on employee morale and job satisfaction.70% of them also indicate that incentive travel has a real impact on employee performance.Source: The ROI of U.S. Business Travel (Oxford Economics)High-impact beneﬁts fromexternal trade show attendanceHigh-impact beneﬁts of travelfor internal company meetingsBuilding industry partnerships (75%)Garnering industry insights (69%)Retaining customers (40%)Sharing ideas (76%)Strengthening communication (73%)Fostering staff morale (66%)Source: Corporate executives survey (n=300)
DemandbyRegionThe aviation industry in the Middle East achieved8.9% growth in 2011 despite unrest in the regionand the hesitant world economy slowed bythe European debt crisis. The region’s airlines,enjoying high growth, were able to generate$US 1 billion profit last year and continue theirimpressive development underlying the strengthof their ambitious business models. Backed bymassive investments in infrastructures, the Gulfairports are expected to boost their capacityby another 130 million passengers by 2018,benefiting from a unique geographical positionat the crossroads between Europe, Asia-Pacificand Africa.As a result, connectivity and air transport havebecome an important enabler in meeting thisambition. Today, Gulf carriers serve more than600 intercontinental destinations and this numberwill continue to increase, stimulating the demandfor efficient long-haul aircraft such as the A380 orthe A350XWB.The political unrest affecting the region hadonly a slight impact on economic growth in theregion, stimulated by high oil prices. Indeed, theregion outpaced the average world economicgrowth in 2011, reaching 5.5%, whilst IHSGlobal Insight forecasts a 4.0% growth for 2012.As a consequence, carriers are looking to expandtheir services in a thriving domestic market whichenjoyed a 7.8% growth in 2011.MIDDLE EASTWHERE gEogRAPHYAnD TECHnoLogY MEET
Global Market Forecast 95As mentioned, the turmoil that shook the regionin 2011 had a short term impact on the economy,as industry levels comparable to those before theArab Spring were witnessed in early 2012, thiswas a quicker than expected recovery. Moreover,the events had very little impact on the air traffic ofthe Middle-East region, since primarily low-densityroutes were affected.Middle Eastern countries have built economic andtrade relationships with countries all around the worldand especially emerging regions. As a consequence,trade with the EU and the US represents only15% of the gulf country exports. The GCC (GulfCo-operation Council) countries are also enjoyinga comfortable fiscal and current account stanceresulting from rising oil revenues and a relatively lowpopulation levels. This combination makes it possiblefor the region to sustain high growth rates, boostingair traffic in the region.0123456J 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 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 F M A M JJ A S O N DDomesticInternationalTotal2006 2007 2008 2009 2010 2011 2012+118%Source: OAG, AirbusYearly ASK (trillions) evolution from / to / within the Middle-East regionMiddle East GDP has grown at 5.2% yearlylast decade, 2.5% higher than world GDP10%8%6%4%2%0%-2%-4%Source : IHS Global Insight, Airbus19982000200220042006200820102012201420162018202020222024202620282030WorldMiddle EastHISTORY FORECASTGDP growth rate evolution
DemandbyRegionGulf carriers, with their ambitious business model,are determined to take advantage of their centralposition to expand services to an increasingnumber of destinations. Indeed, 81% of the world’spopulation is within 8 hours of the threemajor sixth freedom hubs, AbuDhabi, Doha and Dubai. Since2006, they have doubledtheir traffic and in 2011,these three airportssaw a 10.5% trafficgrowth to reach 73million passengers,increasing the need for large aircraft such as theA380. Today, Dubai airport is as large as ParisCDG and the authorities are planning a US$7.8billion investment to boost their capacity from 60to 90 million passengers by 2018 in order toaccommodate the passengers fromthe new destinations openedeach year by the carriersserving these airports. Infact by 2031, Dubai’sairport will rank 2ndinterms of the amountinternational traffic.almost 6 billion people are within 8 hours flyingtime from the gulf countries16 hours flight4hours flight8 hours flight5.7 billionpeople7 billionpeoplePassengers (million)Traffic evolution for the three biggest Middle East airports0204060801002006 2007 2008 2009 2010 2011Abu Dhabi Doha DubaiSource: OAGPassengers through Middle Eastern airports growing dramatically
Global Market Forecast 97The domestic and intra-regional market is alsobooming in the Middle East, as it has enjoyedan average 8.3% growth rate since 2006.Low cost carriers are taking the opportunityof increased mobility of a young populationand are developing their networks and todayrepresent almost 13% of the Intra-regionalmarket. Several reasons are behind thisimpressive traffic surge, amongst them, Gulftourists travelling increasingly to destinationslike Lebanon, Jordan and Turkey.Another reason is the high proportion of expatriatesliving in the region: 44% of the population of theGulf Cooperation Council countries (UAE, SaudiArabia, Kuwait, Oman, Qatar and Bahrain) areforeigners, mainly from neighbouring Arabiccountries or from the Indian Subcontinent. Theyrepresent almost 19 million potential travellersflying regularly to and from their home countries,contributing to intra-regional traffic growth whichhas increased by 150% since 2000.LCCs continue to develop their networksin the region"A young and increasingly mobile population helping to drive travel within the region"LCCs presence in the domestic traffic in Middle EastRPKs (million)0100200300400500600LCCs marketshareArab SpringeffectMonthlydomestic trafficin Middle East2006 2007 2008 2009 2010 2011 2012Source: OAG, Airbus0%2%4%6%8%10%12%14%16%
DemandbyRegionWith 29 million inhabitants, including an estimatesix million expatriates, Saudi Arabia is the largestcountry in the Arabian Peninsula, with a GDPexpected to grow at the rate of 4.4% through tothe end of the decade. Aware of the huge potentialoffered by their international and domestic airtransport industry, Saudi authorities announcedrecently plans to open their skies to new foreignairlines for their domestic market. In parallel, thekingdom will invest US$600 billion between 2010and 2020 on transportation, retail environment,real estate... including more than US$20 billionto expand or build 23 new airports throughoutthe country.Some 16 million tourists visited Saudi Arabia in2011, largely due to business tourism and pilgrimstravelling to Mecca. However, steps to encouragecultural and leisure tourism are ongoing, amongthem relaxations in visa regulations have beencreated. As a consequence, the World Traveland Tourism Council expects the revenues fromtourism to double in 10 years from $US39 billionin 2011 to $US81.6 billion in 2020.Focus on saudi arabia048121620Inbound touristsMillionsOutbound touristsTourists in Saudi Arabia evolution2006 2007 2008 2009 2010 2011 2012 (f)Source: World Tourism Organisation, AirbusAveragegrowthrate: 14%
Global Market Forecast 99International traffic will continue to be a key driverof growth during the next twenty years in theregion, with an average growth rate of 6.2%.Continuing to take advantage of their idealgeographic position, the Middle Eastern globalcarriers will need more than 1,100 Twin-Aisleaircraft to expand their network, especially towardsemerging markets such as those in Asia or LatinAmerica, which is expected to grow at 11.9%per year. On the domestic and intra-regional side,traffic will continue to forge ahead with a growthrate of 4.9% thanks to the liberalisation of themarket and the development of LCCs.This traffic growth will require the region’s airlinesto acquire 1,906 new aircraft with 100 seats ormore over the next twenty years, resulting in afleet in service in 2031 that is more than twoand a half times the fleet today. As discussedpreviously, a major focus for Middle Easterncarriers is on connecting regions, such asAsia-Pacific and Europe. To accommodate thisemphasis, Middle Eastern carriers will purchasemore Twin-Aisle and VLA aircraft than Single-Aisle aircraft, resulting in demand for 1,114 Twin-Aisle and VLA aircraft over the next 20 years.ForecastTraffic from/to Middle East by regionRPK development from/to Middle East (2012-2031 CAGR)Africa7.2%North America7.3%Latin America11.9%CIS6.0%Europe5.4%Asia Pacific6.1%Domestic andIntra-Regional4.9%2022-20315.5%20-yeargrowth6.2%Middle East2012-20217%2022-20314.4%20-yeargrowth4.7%World2012-20215.1%
DemandbyRegionMiddle East – Fleet in service evolution for aircraft with more than 100 seatsMiddle East total new deliveriesNewaircraft1,906Fleet sizePassenger aircraft ≥100 seats+ 5 %per annum8282,21205001,0001,5002,0002,500Begining 2012 20315223061,384GrowthReplacedStay in service& recycledAviation is the main driver for growthin Dubai. 19% of jobs in the Emirateand 28% of GDP were supported bythe sector in 2011. The industry drivesDubai’s high level of tourism. Aviationalso increased connectivity betweenDubai and other cities and markets whichattracted both talent and investments.In the future, aviation will continue to playa vital role in Dubai’s economy. In 2020,up to 22% of jobs could be supportedby the industry.DUBAI’S AVIATION SECTOR,UNITED ARAB EMIRATESSingle-Aisle SmallTwin-AisleIntermediateTwin-AisleVery Largeaircraft792302 308504Number of new aircraft0100200300400500600700800800
Global Market Forecast 101Economy 1 Real GDPReal tradeUrban population3.9%4.4%2.0%Fleet 2Traffic 1Fleet in service beginning 2012Fleet in service 203120-year new aircraft deliveries8282,2121,906Intra-regional & domesticInter-regionalTotal4.9%6.4%6.2%12012 – 2031 CAGR - 2Passenger aircraft ≥ 100 seatsMIDDLE EASTAviation is a major force for economic developmentin the Middle East. Slightly over a million jobs arecurrently supported1by the industry, with the mainpart of direct jobs being with airlines, handlingcrew or on-site jobs at airports. There are anadditional 1.6 million jobs created by the catalyticimpacts of travel and tourism.Tourism and other indirect and induced impactsof aviation make a notable social and economiccontribution to the Middle East. The UnitedArab Emirates’ economy for instance hasbeen boosted by aviation, with over 206,000scheduled international flights departing from thecountry each year to 178 different airports. Manyprojects carried out in the Middle East are aimingto transform the region into a knowledge-driveneconomy and luxury hub for tourists. Developingair transport has therefore become central to theregion’s leaders.The impact of aviation on the region’s economyis set to increase over the next twenty years.Considerable growth in passenger and cargotraffic will directly help to create almost 300,000new jobs across the region.The expansion of air transport will supportregional tourism, which will lead to an increase inemployment and skills. There will be an increasedneed for investment in infrastructure as the Gulf’sairports are expected to boost their capacityby another 130 million passengers by 2018.Regulatory reform will also enable the region toachieve its full potential by encouraging regionalcompetition.In 2025, the number of tourists to Mecca andMedina is expected to rise to 17 million. Jeddah’sairport capacity will rise from 15 to 30 millionpassengers in 2012 before reaching 80 millionin capacity when it completed. This increasedcapacity mainly results from the hundreds of dailyflights that bring the estimated total of 12 millionpilgrims to Saudi Arabia each year. During theHajj for example, regular flights are suspendedwhile about 5,000 special “pilgrim flights” operatearound the clock.1Whether directly, indirectly or inducedEconomic impact
DemandbyRegionAviation in Latin America has a very long tradition.Pioneers in bold but fragile flying machines werenot limited to Europe or the US; many remarkableaviators originated in Latin America.Names like Alberto Santos-Dumont or JorgeChàvez have made it into our history books withspectacular flight demonstrations more than100 years ago. Their legacy is visible in placeslike the “Aeroporto Santos-Dumont” in Rio deJaneiro or the “Aeropuerto Internacional JorgeChàvez” in Lima.Aviation was chosen in the region many yearsago as the preferred mode of transport totraverse the region’s thick forests, wide plainsand high mountains. Therefore it should be nosurprise that some of the world’s oldest and mostactive airlines are found in countries like Brazil,Colombia, Venezuela or Chile.Examining recent economic development showsthat Latin America’s economy has also beenimpacted by the last economic crisis, althoughit has fared better than the world average. Theadvanced economies in Europe and NorthAmerica lost up to 4% of real GDP at the peakof the financial crisis in 2009. Latin Americahowever went into the negative by only 2%,slightly better than the world average of -2.2%.LATIn AMERICAEconomy and businessBEnEfITS of fLIgHTWELL UnDERSTooD
Global Market Forecast 103The current economic outlook up until 2020projects that Latin America will again be amongstthe regions performing well above the worldaverage. Latin America’s economic growth isexpected to be in the same range as other highlydynamic regions including the Middle East, Africaand South-East Asia.Average annual growth from 2011 to 2020 isforecast to be at 2.9% for real consumption and3.3% for real GDP on a global scale. Latin Americaclearly outperforms these growth figures with aforecast 4.2% compound annual growth for bothconsumption and GDP.The Latin American countries shown in thenext graphic represent more than 90% of theregion’s real GDP. Each one is expected togrow in terms of both consumption and realGDP above the world average until 2020.A precise look at some of Latin America’seconomies gives interesting details: Brazil,for example, even though already the region’slargest economy, is forecast to grow not onlyabove the world average, but even aboveLatin America’s average. A forecast meaningthat aviation will continue to be an importantcomponent of Latin America’s transport systemas it was in the past.-6%-4%-2%0%2%4%6%8%10%Europe US & Canada World Latin America South-East Asia China20092008 2010 2011 2012Year-over-year evolution of real GDP per global region (2005 US$)Source: IHS Global Insight, AirbusEvolution of real GDP at consumer spending 2011-2020 in Latin America per countryWorld averageLatin America averagePanamaBrazilPeruGuatemalaGuatemalaGuatemalaVVenezuelaenezuelaenezuelaVenezuelaVVenezuelaVMexicoArgentinaColombiaChileBubble diameter proportional to real GDP at PPP (Purchasing Power Parity) in bn. US$ in 2020. Source : IHS Global Insight, AirbusReal GDP average annual growth 2011-2020Real consumption per capita average annual growth 2011-20200%1%2%3%4%5%6%0% 1% 2% 3% 4% 5% 6%
DemandbyRegionThe airlines of Latin America have made hugeprogress in terms of fleet development over thepast decade. In 2000, the Latin American airlinerfleet was one of the oldest in the world with anaverage aircraft age of almost 16 years.Since then, the fleet in service has not only increasedby almost 40% from some 800 to more than 1,100aircraft, but, has also reduced the average age by35% down to slightly above 10 years. Today, theaverage age of Latin America’s aircraft in service iseven slightly below the world average, putting it ina similar age range as Europe’s fleet.The influx of new fuel efficient aircraft into theregion’s airlines has helped to increase theirmarket share by eight percentage points to 21%since 2005.Even though this has largely been pent-up demandafter the pullback of one of the major players in theregion, it also demonstrates the carriers’ capabilityto grow in a highly competitive environment.traffic and fleetEvolution of average fleet age (years)Passenger and Combi aircraft > 100 seats; fleet as end of respective yearSource: ASCEND, Airbus04812162000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Latin America World averageYearsMarket share evolution of the top 6 airlines on interregional long-haul traffic per region, 2005 and 2011 (ASK traffic)**Traffic as month of September; long-haul traffic: GC distance > 2,000nm, excl. domestic traffic; respective top 6 carriers per region as of 09/2011Source: OAG, Airbus39% 40%13%38% 39%21%0%10%20%30%40%50%Europetop 6 airlinesNorth Americatop 6 airlinesLatin Americatop 6 airlines2005 2011Latin American airlines have a huge potential to increase their market shareon long-haul routes
Global Market Forecast 105The capacity offered on departing and arrivingflights at Latin America’s airports has increasedby more than 40% since 2005. The share of totaloffered capacity to/from the 10 largest cities by2011 was at 42%.On the long-haul market to and from LatinAmerica, the offered capacity increased by almost30%. Routes to and from the top10 cities have seen an above-average growth of 40% comparedto 15% growth on routes to otherdestinations in Latin America.On the intra-regional market within Latin America,the contribution to growth of the largest airportshas been even more significant. At an averagecapacity growth of almost 50%, the capacityoffered on routes to, from and between the top10 cities has increased by more than 70%.2011 top 10 Latin American cities in seats offered on departing and arriving flights;2011 vs. 2005 evolution of traffic per route from/to/between the top 10 cities0%20%40%60%from/totop 10 citiesfrom/tofurther cities0%20%40%60%80%from/to/betweentop 10 citiesfrom/to/betweenfurther citiesTraffic as month of September; long-haul traffic: GC distance > 2,000nm,excl. domestic traffic; respective top 6 carriers per region as of 09/2011Source: OAG, AirbusLong-haul traffic from/to Latin America, 2011 vs. 2005Traffic within Latin America, 2011 vs. 2005SAOMEXRIOBOGBSBBUELIMBHZSCLSSAGlobal Market Forecast 105On the long-haul market to and from LatinAmerica, the offered capacity increased by almost30%. Routes to and from the top10 cities have seen an above-average growth of 40% comparedto 15% growth on routes to otherdestinations in Latin America.10 cities has increased by more than 70%.
DemandbyRegionShare of population living in agglomerations of 500,000+ inhabitants, 2010 and 202517%24%22%25%42%55%24%29%31%33%49%65%0% 20% 40% 60%AfricaEuropeAsia-PacificWorld averageLatin AmericaNorth America2025 2010Source: United Nations, Department of Economic and Social Affairs,Population Division, 2011 revisionBy 2010, more than 40% of Latin America’spopulation lived in cities and agglomerationswith more than 500,000 inhabitants. This is thesecond highest percentage in the world, andgreatly exceeds the world average of 25% andalmost twice as high as in Asia-Pacific.The urban population of cities and agglomerationsin Latin America is expected to grow rapidly.It is projected that almost 50% of Latin America’spopulation will live in cities and agglomerationsof more than half a million inhabitants by 2025.Cities and air transportCities and agglomerations in Europe, North America and Latin America with more than 5,000,000 inhabitants (2025)more than 10 million inhabitants 5 to 10 million inhabitantsLONDONMEXICO CITYSAO PAULOBUENOS AIRESRIO DE JANEIROLIMABOGOTANEW YORKLOS ANGELES CHICAGO MADRIDBARCELONASANTIAGO DE CHILEBELO HORIZONTEGUADALAJARAMONTERREYSALVADORMIAMIPHILADELPHIATORONTODALLASATLANTAHOUSTONBOSTONWASHINGTONDETROITPARIS
Global Market Forecast 107By 2010, Europe, North America and LatinAmerica had 19 cities and agglomerations withmore than five million inhabitants out of whicheight were in Latin America. The number of citiesor agglomerations with more than five millioninhabitants is expected to increase from 19 to27 by 2025 and from 8 to 11 in Latin America.These large cities and agglomerations play animportant role in the air transport network in theregion. The cities in Latin America with more than5,000,000 inhabitants will be key destinationswithin the region:More than 50% of origin-destinationpassenger traffic to, from and within LatinAmerica is either to, from or between oneof these 11 cities.The region’s air traffic is expected to grow at 5.3%annually over the coming 20 years and thereforeabove the world average at 4.7%.Traffic within the region is forecast to grow at 6.0%per year. The largest of the intra-regional trafficflows is Domestic Brazil, which already accountsfor more than 40% of total traffic within LatinAmerica. It is expected to have continued stronggrowth at 6.5% over the next 20 years. Furthergrowth above the intra-regional average of 6.0%is expected to be on traffic flows connecting thecountries of Latin America, further reinforcing theintegration within the region. Traffic to and fromLatin America is forecast to grow at 4.9% annually.Within inter-regional traffic, the two single largesttraffic markets for Latin America are Europe andNorth America, which account for more than90% of traffic today. Despite growth slightlybelow the international average (4.5% and 4.6%compared to 4.9%) their relative contributionto total traffic to and from the region will still beclose to 90% by 2031.Rapid growth is expected to come from traffic tothe emerging economies in Africa, Asia-Pacific,the Middle East and the CIS, which will growat at least 6% per year over the coming twodecades.Fleet and traffic forecastRPK development from/to Latin America (2012-2031 CAGR)Europe4.5%Africa7.2%North America4.6%Asia Pacific6.6%Middle East11.9%CIS6.0%Domestic andIntra-Regional6.0%2022-20314.8%20-yeargrowth5.3%Latin America2012-20215.7%2022-20314.4%20-yeargrowth4.7%World2012-20215.1%
DemandbyRegionThe aircraft fleet in service with in Latin Americancarriers is expected to grow by 4.3% per year overthe coming 20 years. Out of the almost 2,100 newaircraft, more than 650 will be needed to replaceolder, less efficient aircraft, and another more than1,400 to satisfy the expected traffic growth.Almost 80% of the new deliveries will be aircraftin the Single-Aisle category that predominatelyserve routes within the Latin America. A totalof 20% of new deliveries are Twin-Aisle aircraftthat will mainly be needed to serve long-haulmarkets and to help Latin America’s to furtherregain international market share.Newaircraft2,085Fleet sizePassenger aircraft ≥ 100 seats+ 4.3 %per annum1,0962,52905001,0001,5002,0002,5003,000Begining 2012 20316524441,433Latin America fleet in serviceGrowthReplacedStay in service& recycledSingle-Aisle SmallTwin-AisleIntermediateTwin-AisleVery LargeAircraft1,65860 34333Number of new aircraft02004006008001,0001,2001,4001,6001,800Passenger aircraft ≥ 100 seats
Global Market Forecast 109More than a million jobs in Latin America andthe Caribbean have been created by the aviationindustry, and a further 3.5 million are supportedby its catalytic impact. Air transport has stimulatedthese regions’ economies by enabling tourismin areas that were previously inaccessible.Productivity in the industry is three times higherthan in the economy as a whole.The development of aviation has had a lastingeffect on business in the region. It has openedforeign markets to exports and has increasedthe flexibility of labour supply. Aviation has alsoenabled countries in the region to speed up theadoption of management practices such as just-in-time that rely on the fast delivery of supplies.These practices increase the region’s globalcompetitiveness.Aviation will likely have an increasing impact in thefuture. By 2030, an additional 294,000 jobs willhave been directly created.To ensure further growth in aviation, investmentin infrastructure, particularly in runways and otherairport facilities, will be necessary, also creatingopportunity. This will in turn contribute to theincrease in job creation induced by the industry.Economy1 Real GDPReal tradeUrban population4.1%5.1%1.1%Fleet3Traffic2Fleet in service beginning 2012Fleet in service 203120-year new aircraft deliveries1,0962,5292,085Intra-regional & domesticInter-regionalTotal6.0%4.9%5.3%1/22012 – 2031 CAGR - 3Passenger aircraft ≥ 100 seatsThe development of an airport inEl Calafate, Patagonia transformedthe city. It was previously difficult toaccess and the presence of the airportincreased both tourism and the amountof time and money people spent in theregion. In 1999, only 60,000 visitorsvisited the town whereas in 2006,408,000 passengers arrived at theairport. In the same timeframe, the localpopulation multiplied by four, which inturn has boosted investment in localinfrastructure.EL CALAFATE, PATAGONIALATIN AMERICABenefits of aviation
The Commonwealth of Independent States (CIS)was formed in 1991. This GMF region is composedof twelve countries: Armenia, Azerbaijan, Belarus,Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia,Tajikistan, Turkmenistan, Ukraine and Uzbekistan.The aim of this organisation is to maintain politicallinks between the different states so as to smooththe progressive transition from a centrally plannedeconomy to a market economy.Despite some economic difficulties in its earlyyears, over the 13 years since 1998, the region’stotal real GDP has grown at 5.6% per year.Russia is the biggest country in the CIS, with aGDP of almost 2 trillion $US in 2011, the ninthlargest globally, eighth in terms of population withalmost 150 million inhabitants in 2011, and withan area of 17 million km², it is the largest countryin the world.Russia is by far the biggest economy in the CISCISUzbekistanBelarusAzerbaijanUkraineKazakhstanRussiaTurkmenistanKyrgyzstanTajikistanMoldovaArmeniaGeorgia4002000 600 800 1,000 1,4001,200 1,600 1,800 2,000Source: IHS Global Insight (May 2012), Airbus2011 Nominal GDP by country (billion $US)fLYIng ToWARDSDIVERSIfICATIonDemandbyRegion
Global Market Forecast 111Fast economic growth in Russia in the last decadeRussia is the second largest oil producer in the worldBetween 1999 and 2011, Russia was characterisedby a fast growing economy, giving it membershipin the BRIC (Brazil, Russia, India, and China) groupof emerging countries and economies.Russia’s economy is underpinned by a wealthof natural resources, owning 25 % of all provennatural gas reserves and 6.3 % of all proven oilreserves. In 2011, according to the US EnergyInformation Administration (EIA), it was the secondlargest oil producer in the world behind SaudiArabia. This having been said, Russia is keen todiversify its economy and is looking to aviation tohelp this transition.10011012013014016018015017019020001999 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Source: IHS Global Insight (May 2012), AirbusRussia real GDP growth (Base 100 in 1999)CanadaIranChinaUnited StatesRussiaSaudi ArabiaUnited Arab EmiratesKuwaitBrazilMexico4,0002,0000 6,000 8,000 10,000 12,000Source: EIA, AirbusTop ten oil producers in 2011 (000’s barrels/day)
DemandbyRegionEurope is the main trading partner of the CIS:according to the WTO, 54 % of merchandiseexports were to Europe in 2010. According toEurostat, more than 40 % of Europe’s oil andgas imports came from CIS in 2007. This tradewith Europe has been an important componentof the region’s economic progress.As previously stated, the real GDP annual growthrate for the whole CIS region for the period1998-2011, was 5.6 % and is expected to growat 0.2% faster than the world average, at 3.4 %from 2011-2031. Over the same period, 1998-2011, domestic and intra-CIS passenger ASKtraffic increased at an annual average growthrate of 9.1 %.However, demand in domestic and intra-CIS, outside of Russia, has been slower andopportunity still exists for the greater regionalintegration of air traffic.Population and trading partnersIHS Global Insight predicts that the total Russianpopulation will likely decline between today’slevel and 2031, but this will likely be offset by theincreases in population by the other countries inthe region. Looking at the data, with 2011 as thebase year, we see that the population of CIS willlargely remain constant as other countries grow.By 2020, the total population of CIS countries,excluding Russia, will surpass Russia’s totalpopulation.40608012010014020162011 2021 2026 2031Source: IHS Global Insight (May 2012), AirbusNote: Base year 2011=100Source: WTO, AirbusForecasted population evolutionRussiaCIS, less RussiaCIS, with Russia54%Merchandise exports from CIS by region (share of total)54%EuropeAfricaLatin AmericaMiddle East North America AsiaCIS19%6%15%1%2%3%
Global Market Forecast 113Strong growth of international traffic from/to CISReflecting trade flows, booming intercontinentaltraffic from / to CIS has been dominated byEurope and Asia-Pacific. With this growth,CIS airlines’ have succeeded in keeping a highmarket share on these intercontinental flows,this remaining fairly stable at 60 %.More recently, traffic to Africa and the MiddleEast has developed quickly. From 2009, MiddleEast low-cost carriers have opened more than20 routes to the CIS, stimulating demand forreligious tourism. In 2011, low-cost market shareon the CIS - Middle East flow reached 8 % oftotal ASKs.Huge productivity improvements have resultedin the number of aircraft operated by CIS airlinesto actually decrease, whilst traffic has increased.This phenomenon was common to all aircrafttypes, but was more noticeable for regionalaircraft.199419931992199119951996199719981999200020012003200520072009200220042006200820102011Source: OAG (September data of each year), Airbus02468101214160%10%20%30%40%50%60%70%Middle East Asia-Pacific EuropeLatin America Africa North AmericaCIS airlines market shareInter-continental traffic from/to CIS by region (billion ASK)Strong growth of domestic and intra-regional traffic0246820001998200220042006200820102001199920032005200720092011101214Intra-regional DomesticDomestic and intra-regional traffic in CIS (billion ASK)Source: OAG (September data of each year), Airbus
DemandbyRegionFleet in service evolution in CISFleet in service evolution by aircraft generationOver the past 20 years, the penetration of westernbuilt aircraft has greatly increased. In 1990, 100%of the fleet in the CIS were Russian or Ukrainian-built aircraft. Today, western-built aircraft representmore than 80% of the fleet in service in CIS.The generation of the aircraft being flown in theCIS is also leading to greater efficiency. In 2006,more than 60% of the fleet were older generationtypes. Today, these aircraft represent less than15 % of the fleet. That being said, efficiencyimprovements can still be realised, as at the endof 2011, new generation aircraft only account for40% of the fleet-in-service.020040060080020001998199619941992200220042006200820111,0001,2001,4001,6001,800regional aircraftSource: Ascend (data as of end of each year), Airbusmore than 100 seats aircraftCIS fleet in service evolution by aircraft type CIS fleet in service by manufacturer region0%10%20%30%40%200019981996199419922002200420062008201150%60%70%80%90%100%Western Russian0%20%40%199019911992199319941995199619971998199920002001200220032004200520062007200820092010201160%80%100%Source: Ascend (data as end of each year), AirbusOldMidNewCIS fleet evolution by generation (share of total)
Global Market Forecast 115Traffic from/to CIS by regionBased on these trends and the high economicgrowth forecast for the CIS region, the GMFpredicts a 5.7% average annual RPK growth ratefor traffic from/to/within CIS for the next twentyyears. Inter-regional traffic is expected to grow at5.9%, with domestic and intra-regional growingat 5.5 % over the forecast period. The highesttraffic growth for the CIS region is expected to bein connection with the People’s Republic of China,where growth is projected to be 7.6% annuallyover the next 20 years.This traffic growth will translate into a demandfor 1,229 aircraft with over 100 seats by 2031.Some 78 % of this demand will come fromgrowth in the region, while only 267 aircraftwill be for replacement. The great majority ofthis demand, 83 % in units, will come from theSingle-Aisle market with a large part of thisdemand servicing intra-regional and traffic toand from Europe. Overall, the fleet in servicewill more than double over the forecast periodgrowing at 4.1% per annum.RPK development from/to CIS (2012-2031 CAGR)Europe5.3%Africa6.2%North America6.2%Latin America6.0%Middle East6.0%Asia Pacific6.7%Domestic andIntra-Regional5.5%2022-20315.0%20-yeargrowth5.7%CIS2012-20216.4%2022-20314.4%20-yeargrowth4.7%World2012-20215.1%
DemandbyRegionFleet in service evolutionGreater or equal to 100 seatsCIS total new deliveriesEconomic impactThe aviation industry and aviation technology wasan area of great interest to and investment underthe USSR and continues to be an area of greateconomic interest today in the region. Below isone example of how aviation plays a key role inthe lives of Russians today.4002006001,0001,2001,4001,6001,8002,0008000Beginning 2012 2031Fleet sizeGrowthReplacedStayin service& recycled962267525Passenger aircraft ≥100 seats1,754792New aircraft1,229+ 4.1 %per annum0Single-Aisle SmallTwin-AisleIntermediateTwin-AisleVery Largeaircraft4008001,0001,20060020040 301411,018Number of new aircraftEconomy 1 Real GDPReal tradeUrban population3.5%3.3%0.3%Fleet 2Traffic 1Fleet in service beginning 2012Fleet in service 203120-year new aircraft deliveries7921,7541,229Intra-regional & domesticInter-regionalTotal5.5%5.9%5.7%12012 – 2031 CAGR - 2Passenger aircraft ≥ 100 seatsCIS
Global Market Forecast 117EXCITEMENT ABOUT AN AIR BRIDGEBETWEEN KAMCHATKA AND ALASKAIn 2012, flights between Alaska and Kamchatkabegins. There had been flights on this route in thepast, and there is great excitement about theirreintroduction.Without these flights, the only way to get to theKamchatka peninsula from Alaska was via Moscow.The air bridge will reduce travel time by a day,enabling expatriates to return home a lot morefrequently. In addition, this route will bringfishing and hunting tourism back to Kamchatka.When the route was cancelled in 2008, tourismdropped by almost 20%. Its re-opening willprovide the needed boost to the local economy.
DemandbyRegionIf there is one region where the benefits of aviationare suited, it is Africa. It is the second largestcontinent, covering 6% of the world’s surface area,more than 20% of its land mass, covering 11.7million square miles. It is a hugely diverse region,home to more than a billion people today withmore than 2,000 languages.Economic growth in the region has been strong,even at a time when more mature economies aregrowing at very low levels or have faced recession.In the short term, Africa is expected to grow evenfaster than Asia, and in the longer term, is forecastby IHS Global Insight to grow at 4.4% per year.Combined with a population that will grow tosome 1.5 billion people by 2031, and who willincreasingly live in the region’s cities, driving wealthand as a result a growing middle class, the needfor aviation is expected to continue to developstrongly. If further evidence were needed of Africa’scontinued development, South Africa, one of thelargest and most influential countries in the regionin terms of air transportation, was inducted intothe BRIC group of leading emerging economieslate in 2010, joining Brazil, Russia, India and China.Now the BRICS, with the South Africa giving the “S”to the acronym, has a combined population over3 billion people and a GDP of some $14.7 trilliondollars. In 2010, the phrase ‘Ke Nako’ – ‘it’s time’was used to herald the coming of the world cup toAfrica. Perhaps ‘it’s time’ for aviation to really takeoff in Africa as it has in other emerging markets.AfRICAMoRE WEALTH, MoRE fLYIng,MoRE DEVELoPMEnTKE nAKo!
Global Market Forecast 119Since 2000, capacity to, from and within Africahas increased dramatically. Intra-regional flyinghas grown more than 90%, with capacity to Asia/Pacific and Latin America growing 126% and149% respectively. Traffic to and from the MiddleEast has grown by more than 300%, partly throughnatural demand and partly as airlines from theMiddle East seek additional business opportunitiesthrough additional connectivity within Africa andfrom the region to the rest of the world. Whilst thiscould be considered a challenge competitively forthe region’s own airlines, whose share has beenfalling in recent years, it is also acting as a realstimulus for traffic growth within the region.Today Africa’s GDP growing faster than AsiaTraffic to/from/within Africa (ASKs), 2011 vs. 2000North America+77%Latin America+149%CIS+589%Asia-Pacific+126%Middle East+300%Europe+50%Intra Africa+93%Intra-regional traffic: +93%International traffic: +89%Overall traffic: +90%Source: September traffic from OAG, Airbus-1%0%1%2%3%4%5%6%7%8%9%Europe NorthAmericaCentralAmericaJapan Pacific MiddleEastSouthAmericaCIS Asia Africa IndianSubPRC201220132012WorldAverage2013WorldAverage2012 and 2013 real GDP forecast by region
DemandbyRegionThe low cost airline model has helped to stimulatetraffic growth in other regions of the world,notably North America and Europe, where itsshare of seats is now more than 30%. This airlinemodel itself was stimulated when markets wereliberalised or at least became liberal enough fortheir successful operation; a process we are nowseeing in parts of Asia. In Africa, the share of lowcost ASKs is around 9% of the total.This is low compared to Europe and NorthAmerica, but considerably more than just 10 yearsago, when low cost airline seats totalled just 3%.Today, new African low cost ventures are on thehorizon, with passengers in this region no doubtas keen as those in other areas of the world tosample their service and low ticket prices.The growth in inbound tourism to Africa is alsoexpected to contribute to growth, with the UNWTO(UN World Tourism Organisation) expecting 5.0%growth per annum to 2030, growing from 50 to134 million annual international tourist arrivals. Thiswill represent an increased share of global tourismof 7% by 2030 (up from 3% in 1980).With these developments, economic, social,network and airline, it is expected that air trafficwill grow well above the world average, with 5.7%growth per annum to 2031 forecast. Flying withinAfrica is forecast to grow at an average rate of6.2%, with international flights forecast to growat 5.6%.Large potential for low-cost carrier developmentSource: September traffic from OAG, AirbusLCC share of domestic and intra-regional African traffic (ASKs)0%1%2%3%4%5%6%7%8%9%10%2003 2011
Global Market Forecast 121As a result, the fleet of aircraft in Africa will morethan double to 1,450 aircraft, nearly 960 newaircraft will be needed to meet demand from bothgrowth in the region’s aviation industry, but alsofrom the replacement of older, less fuel efficienttypes. Already today, the fleet of aircraft consistsof more than 50% new generation aircraft like theA320, this increasing from 20% just ten years ago.Adding mid generation types means that less than10% of the fleet can be considered old generationor are out of production types.Some 75% of the new deliveries to African airlineswill be Single-Aisle types like the A320 or the Neo,with the remaining 230 aircraft being Twin-Aisletypes like the A330/A350XWB or the A380.Growth will drive the fleetto nearly 1,500 aircraftAfrica total new deliveries4002006001,0001,2001,4001,6008000Beginning 2012 2031Fleet sizeGrowthReplacedStay in service& recycled8351224961,453618Newaircraft957+ 4.4 %per annumPassenger aircraft ≥100 seatsSingle-Aisle SmallTwin-AisleIntermediateTwin-AisleVery Largeaircraft72436 29168Number of new aircraft0100200300400500600700800
DemandbyRegionEconomy 1 Real GDPReal tradeUrban population4.4%5.4%3.1%Fleet 2Traffic 1Fleet in service beginning 2012Fleet in service 203120-year new aircraft deliveries6181,453957Intra-regional & domesticInter-regionalTotal6.2%5.6%5.7%12012 – 2031 CAGR - 2Passenger aircraft ≥ 100 seatsSource: Global Insight, United Nations, Airbus GMFAFRICAEconomic impactAfrica has benefited from aviation thanks toincreased tourism and trade. In 2010, airtransport contributed over $21 billion to AfricanGDP. Although it is one the regions in the worldwhere the fewest jobs have been directly createdby the industry, the catalytic impacts of traveland tourism have created six million additionaljobs. An increasing number of foreign touristsarriving by air support growth by spending in theregion. Air transport has enabled the continent toexport perishable goods to European countries.However, the jobs generated by the industryare unevenly distributed across the continent.In 2010, over 56,000 of the 257,000 jobs directlycreated were in South Africa.The continent’s economy will benefit furtherfrom the industry in the coming twenty years aspassenger and cargo traffic will both increase.An extra 66,000 jobs will be created directlyby the industry between 2010 and 2030, andthis number rises to 879,000 if we also takeinto account its catalytic impact. This rate ofgrowth will require development of a qualifiedworkforce. South Africa is already on the rightpath and has created an aerospace clusternear Pretoria which is set to grow further in thecoming years.
Global Market Forecast 123FÈS, MOROCCOTourism in Fès, Morocco’s second largest city,is highly dependent on aviation. The city is a UNWorld Heritage Site and hosts the Festival of WorldSacred Music every year. However, the city’spotential for tourism is under exploited. Investingin aviation is a key part of the government’s plans.More point-to-point flights to European airportsneed to be introduced, and existing routes willhave to multiply the number of flights if Fès isto become the major city-break destinationMorocco wants it to be.
fREIgHT foRECASTfREIgHT IS gREATDemandforfreighttrafﬁc
Global Market Forecast 127Today, there are more than 1,600 freighter aircraftin service with a cargo hold of at least 10 tons,carrying 22 million tons of cargo per year. Thisis performed by around 200 airlines, some ofwhich handle both passengers and freight. Almostevery industry, at some place in the supply-chain,depends on air transportation; industries whoneed the ability to quickly transport productsand sub-components from one side of the planetto another. Today, the semiconductor/hightechnology and telecommunications industriesare the largest users of air freight in terms ofthe value of transported goods. Semiconductorsalone accounted for 17% of the value of all goodstransported in 2011. These goods were closelyfollowed by "valuables" and pharmaceuticals.In terms of weight, the fresh foods industry is thelargest contributor to the air freight industry. Allin all, the air cargo industry carried $2.9 trillionin cargo value in 2011, according to Seabury.Taking the vast number of products that rely onair freight and the extensive value that is carried bythe industry, freight is obviously of key importanceto both trade and economic growth.2012 freighter operators and fleetFleet825North AmericaOperators38Fleet275Europe & CISOperators45Fleet64AfricaOperators29Fleet57Middle EastOperators15Fleet316Asia-PacificOperators49Fleet78Latin AmericaOperators23Fleet1,615WorldOperators199 Source: ASCEND
DemandforfreighttrafﬁcInter-continental airlines from emerging marketsare also expected to play an increasing role inworld air cargo, as it is expected their fleets willmore than double over the next 20 years. Carriersin Asia-Pacific are anticipated to take advantage ofthe strong growth of their market, which is drivenby trade with developed and emerging regions.The Middle Eastern carriers’ freight business isalso expected to develop. As a result, their fleetsis expected to increase more than two fold in thenext two decades.The Airbus GMF assumes that a freighter’seconomic life will depend largely on its size, whilesmall aircraft retire on average at the age of 34years, larger aircraft are withdrawn from servicewhen they reach 32 years on average.Today, there exists a huge age discrepancybetween small and large aircraft. The averageage of small cargo jets in service today is30 years; whereas, mid-size and large aircraftare much younger, respectively 23 and 15years old on average. As such, almost all smallaircraft will be replaced before the end of theforecast. Since the average age of mid-size andlarge freighters is considerably less, it can beexpected that ~80 % of today’s freighter fleetwill be retired by 2031.The combination of high fuel prices and theeconomic downturn have forced many airlinesto retire the oldest aircraft from their fleet, aircraftsuch as the “DCs” or old 747s, bringing downthe world fleet to 1,615 aircraft compared to the1,731 units two years earlier. These retirementshave been followed by an increasing interest innewly built aircraft, as they provide fuel efficiencyand better reliability. Interestingly, the integrators/express carriers have been the most resilient tothe crisis.North American integrators/express carriers haveeven increased their fleet by 15 units since lastyear, proving once more the sustainability of thismarket space. With nearly 600 aircraft from USintegrators/express carriers and 100 aircraft fromother express carriers, more than 40 % of thefleet is dedicated to serving this market. Wealso expect new express markets to boom overthe next two decades, especially in China, Indiaand Brazil, where the demand for this service isgrowing continually.0102030401 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 475060708090100Source: ASCEND, AirbusUnitsAverageretirement ageYearsAverageconversion ageFreighters fleet age in 2012intRoDUCtion
Global Market Forecast 129Theinter-dependencebetweentheeconomy / tradeand the air cargo industry means that any volatilityor difficulty in the global economy or regionaleconomies has a direct effect on the air cargomarket. The most recent economic crisisstarting in 2008, and the increasing cost of jetfuel have led to a period of difficulty in the cargomarket. Even with this period of crisis, the totalnumber of Freight Ton Kilometres (FTKs) in 2011was 7 % above the pre-crisis high in 2007 and23 % higher than the low in 2009. There are 21flows that were studied for the forecast did nothave a single year of decline from 2007 to 2011,and these flows represented 12 % of all of thetraffic in 2011.The largest example of this is the Europe to PRCflow, which grew at 4.5 % per year from 2007 to2009 and was more than 64 % higher in 2011 whencompared to 2007. The fastest growing flow from2007 to 2011, also not recording a year of decline,was the CIS to PRC flow which experienced growthof 84 % over the same four year period.Over the forecast period, the world economy isexpected to grow at 3.2 % per year, allowing formuch opportunity for recovery and growth in the aircargo market.Onedriverofeconomicgrowthandaircargodemandis the growth in Foreign Direct Investment (FDI) flows.During the economic crisis FDI markets have beennegatively impacted, but in 2011 FDI flows reachedabove the average of 2005-2007 according to theUNCTAD. FDI has historically focused on the flowof capital from developed economies to developingand occasionally from emerging economies.Today, there is more FDI flowing from developing todeveloping or developing to emerging.The US and Europe have been the drivers ofinvestment internationally, but now China, otherAsian countries and the Middle East have displayedthe largest growth in outward FDI flows.On top of a change in the source of flows, the typeof investment is also shifting. In the past, the bulk ofinvestment was in extractive services (i.e. oil and gas,precious metals, etc.). Even though today extractiveservices are a relatively high component of FDI, itspercentage versus technology or manufacturing ison the decline. This shift is creating further demandfor air cargo as products and sub-components aremanufactured in more diverse regions, while thecontinued investment in extractive services allowsfor the persistence of their requirements in air cargo.Market Trends / economies6.0 % 6.5 % 7.0 % 7.5 % 8.0 %Central America to IndiaPRC to South AmericaIndia to South AmericaAfrica to IndiaDomestic PRCEurope to IndiaIndia to PRCIndia to Central AmericaDomestic IndiaPRC to IndiaSource: CAGR % 2012 - 2031Top 10 fastest growing flows (2012-2031)
DemandforfreighttrafﬁcFor the period 2011-2031, worldwide air freight isexpected to grow at 4.9% per year. The structureof the top ten flows in volume of today will greatlychange over the forecast period. In fact, the10thranked flow, Domestic PRC, will be the 5thlargest flow by 2031 and traffic from PRC to NorthAmerica will surpass that of the Domestic US.These changes are indicative of the changes inthe face of the global economy as Asia-Pacificand particularly PRC not only continue their globalrole in manufacturing but also increase their roleas one of the largest consumer regions by 2031.FREiGHt tRaFFiCFoRECastDomestic PRCPRC to EuropeEurope to PRCDomestic USPRC to North America1050 15 20 25 30 35 40 45 50North America to AsiaEurope to AsiaNorth America to PRCEurope to North AmericaNorth America to EuropeEurope to Middle EastAsia to EuropeEurope to South AmericaEurope to IndiaAsia to North AmericaEurope to PacificAfrica to EuropeSouth America to EuropeNorth Americato South AmericaEurope to Africa2011 2012-2031 growth% of 2011FTKsGrowth2012-20316.5%2.5%6.5%6.0%7.3%4.3%3.4%6.7%5.0%4.4%4.1%7.4%5.1%2.9%5.1%4.8%5.8%4.5%4.8%3.8%7%10%4%4%3%5%5%3%4%4%3%1%2%3%2%2%1%1%1%2%17%7%11%9%9%6%5%7%6%5%4%4%3%2%3%3%2%2%2%2%% of 2031FTKsTraffic Evolution: Top Ten largest flows in billions of FTKs
Global Market Forecast 131It is clear that traffic between and within emergingeconomies will experience the highest growthrates, reaching 5.7% per annum over the 20 yearperiod. This is followed by traffic from developedregions to emerging regions, growing at 5.2%per year. Even the most mature flows, betweenand within developed regions, will still benefit fromgrowth at 3.2% over the next 20 years.Fastest growth coming from traffic between and within emerging regions3.2%5.7%5.0%5.2%20012003200520072009201120132015201720192021202320252027202920310100200300400500600FutureHistoricalDeveloped to Developed Emerging to DevelopedEmerging to Emerging Developed to EmergingGrowth Rate2011-2031FTKs (billions)
DemandforfreighttrafﬁcDevelopments in Asia-Pacific will be one of thelargest drivers of freight traffic. In 2011, trafficoriginating or ending in Asia-Pacific accountedfor more than 60% of all global air traffic in termsof FTKs. Not only is manufacturing in Asia-Pacificdriving demand, but it is quickly becoming one ofthe key drivers of capital markets globally, heavilyinvesting in many regions across the world.Specifically, Chinese and Indian investmentsinto Latin America and Africa are beginningto contribute to demand for traffic in each ofthose regions, as Chinese and Indian companiesdevelop manufacturing and infrastructure anduse the opportunity to bring Asian products tothese markets. Intra-Asian traffic is also on therise with increasing capacity and demand onmany of these internal flows. As an example,traffic between Malaysia and China grew at 32%per annum from 2000 to 2010 and the value perton has nearly doubled over that period. Lookingat the region, there are numerous examples ofstrong growth in intra Asia-Pacific traffic.Even with the potential slowdown of the Chineseeconomy, the overall demand to and from thismarket is key to the air cargo market. In 2011,traffic to, from and within PRC represented 26%of the global air traffic market. On top of theoverall size of the market, it is also on 6 out ofthe top 10 fastest growing flows within the region.Like its neighbouring BRICS country, India hasalso been a strong area of growth. In fact, tradebetween the two countries has been one ofthe fastest growing flows for both India andChina. Traffic from India to China has grownat 35 % per year over the last ten years.The value of goods transported from China toIndia has been multiplied by 15 over the last tenyears and now represents 18% of the value ofall goods transported to China.Between 2011 and 2031, traffic to, from, or withinthe region is expected to grow at 5.3% per year,well above the 4.9 % projected for worldwideFTKs. Unsurprisingly, the 10 fastest growingflows of the world (each with an annual growthrate of 7%) are expected to be in connection withIndia and/or PRC. Two of the fastest are PRCto India, growing at 7.7% annually and India toPRC, growing at 7.4% over the next 20 years.REGionaL oVERViEWsasia-PacificMalaysia to ChinaSource: Seabury, AirbusExports from Malaysia to China grew by 32% annually from 2000 to 2010TOP 5 EXPORTEDGOODS (VALUE):Semiconductors2. Computers & related3. Electrical components4. Parts / componentsfor machinery5. TelecommunicationsAverage kilo value: $862000 20101TOP 5 EXPORTEDGOODS (VALUE):Semiconductors2. Telecommunications3. Computers & related4. Electrical Components5. Machinery for generalindustrial usesAverage kilo value: $1561102000K Tonnes M US$2010204050807060010,0005,00015,00025,00020,0003010WEIGHT (K tonnes) VALUE ($US millions)
Global Market Forecast 133Air cargo began in the US, with the first air cargodelivery on November 7, 1910, performed by theWright Company over a distance of 65km andcost $ 5,000 for only few kilograms of freight.One century later, North America is still by far thelargest market for air cargo aircraft in the world.American carriers represent 51% of the fleet whilethe traffic from and to North America accounts fornearly 40% of the world traffic, this boosted bythe two largest express carriers, UPS and FedExwhich combined are responsible for 50% of allthe traffic generated by US carriers. The Expressmarket in the US is the most mature expressmarket in the world, and the carriers are continuallyexpanding their global footprint both in productofferings and geographical locations. Today, NorthAmerican express carriers have expanded theirproduct offering to the extent that they provideboth express and general cargo services whenneeded. According to ACMG, express carriersmade up 77% of 2010’s domestic US traffic andthey are continuously increasing their network,especially to international destinations. In2003, 45 % of US cargo traffic was domestictraffic; in 2011, domestic traffic representedonly 33 % of all US carriers’ cargo traffic. Thismovement toward the international marketis partially caused by the globalization of theindustrial production. Today, a typical “hightech” product includes parts coming fromat least half a dozen countries worldwide,with new products entering the market asfrequently as every six months. Air transportationis critical in the supply chain, especially towardthe number one consumer market in the world,North America.Over the next 20 years, traffic to, from and withinNorth America is expected to grow at 4.4% peryear. The two fastest growing flows for the regionare for traffic from North America to PRC andPRC to North America, with growth rates of 6.7%and 6.5% annually respectively. Outside of trafficwith PRC, traffic from North America to India,South America, CIS and Africa make up the nextgroup of fastest growing flows. By 2031, this trafficgrowth will result in a demand for more than 400new aircraft, with 265 of these coming from themid-sized freighter segment.north americaUS freight traffic for the top 2 carriers>2011< 2006All other US carriers Top 2 express Carriers
DemandforfreighttrafﬁcIn terms of the value of products transported,nearly 25 % of all air cargo originated fromEurope in 2011. The economic crisis had asignificant impact on the flows with Europe, butthey have recovered with some strength. Beforethe crisis, air cargo traffic to, from and withinEurope reached over 75 billion FTKs in 2007,dropping to 64 billion FTKs in 2009. Since 2009,the recovery in terms of FTKs has been strongand fast. The total market grew by 30% from thelows of 2009 to 2011, reaching 82 billion FTKsin 2011. This recovery has in part been drivenby a shift in economic prowess in the region.Central Europe is playing a much larger role inthe global economy and therefore the air trafficmarket. Today, we can see a major growth inmanufacturing output in Central Europe drivingthis demand. This is most clearly identifiablein the expected growth rates of Western andCentral Europe, where GDP growth is anticipated at1.6% and 3.6% annually over the forecast period.With nearly 400 million inhabitants from middleor higher classes, Europe will still be one of themost important consumer markets in the world,and the European air cargo traffic is predictedto grow at 4.8 %, close to the worldwideaverage. Also, as middle and upper classesgrow in regions such as Asia-Pacific, demandfor European products will continue to expand,traffic to India and China for example is expectedto grow at 7.4% and 6.5% respectively over thenext 20 years.On the domestic side, the railroad network iscontinuously improving, and multi-modal meansof transportation are gaining in importance inorder to cut the energy bill. However due to themultiple natural barriers, air transport will stillhave an important role, especially for on-timedeliveries. Therefore, the traffic within Europeis expected to grow at 4% per annum over thenext two decades.EuropeOver the last ten years, freight traffic to, from andwithin the Middle East has grown at 6.7% per year.The vast majority of this growth has come fromtraffic flows into the Middle East from otherregions, which grew at 8.8% per year. As in thepassenger market, Middle East carriers are lookingto leverage their strategic geographic positioningto establish themselves as “great connectors”. Tothis end, Middle Eastern carriers have launchednew routes to and from Asia-Pacific, Europe andAfrica.In leveraging their geographic positioning forsuccess in air cargo, Middle East carriers havedeveloped a business model around a mix ofmid-sized and large freighters. This has allowedthe carriers to use large freighters on high densityflows, and to use mid-sized jets to access newmarkets at a lower risk. This is a businessmodel that we see today being studied and/orimplemented by other carriers across the globe.In recent years, the companies and individuals inthe Middle East have been actively diversifyingtheir economic activity, focusing more and moreon financial services and foreign direct investmentoutside of extractive services. This is in part in adesire to hedge the risks of volatile oil and gasprices, but also to deploy the available capital thatis currently held in the Middle East. This investment,coupled with the Middle East’s investment in theaviation industry, is providing a strong platform ofgrowth for Middle East carriers.Traffic to, from and within the region is expectedto grow at 5 % per annum, slightly above theworld average. The largest flow with the MiddleEast today and in 2031 is Europe to the MiddleEast which represents 31% of all traffic to, fromor within the region today. As expected, growthwith Asia- Pacific is the fastest of any other regions.Traffic between Asia-Pacific and the Middle East willgrow at 5.5% over the next 20 years.Middle East
Global Market Forecast 135Increasing economic and trade ties betweenLatin America and other regions of the world hasled to impressive growth opportunities for aircargo in Latin America. Inflows of FDI (ForeignDirect Investment) from North America, Europe,the Middle East and Asia-Pacific will continue toprovide growth possibilities in Latin America. Infact, FDI into Latin America and the Caribbeanexperienced 35% growth between 2010 and2011 according to UNCTAD. Over the next 10years, it is estimated that Brazil alone will receiveover 10 billion US$ in FDI.Due to these drivers and the continued demandfor fresh food products and flowers from LatinAmerica to both North America and Europe,we project that traffic to, from and within LatinAmerica will grow at 5.2 % per annum overthe next 20 years. Interestingly, the flows withEurope, which are the biggest in volume, willcontinue to enjoy a high growth rate of 4.8 %.Another of Latin America’s fastest growing andlargest flows is from North America to SouthAmerica which is expected to grow at 5.8 % perannum over the next 20 years.Latin americaGlobal Market Forecast 135
DemandforfreighttrafﬁcAfrica is the second most populous continentafter Asia, with more than a billion inhabitants.It is also larger, in terms of population than bothNorth America and Latin America combined.In terms of land size, Africa represents nearly25 % of the total world land mass and 25 %of the world’s agricultural land. Increasedgeopolitical stabilization in Africa has led tomagnificent economic growth rates over thelast 10 years. Between 2000 and 2010, 8African countries outpaced the combined BRICGDP growth rate. Over the next 10 years, theeconomies of Africa are predicted to enjoy GDPgrowth of 4.8 % per year.Much like Latin America, FDI inflows are increasingthe rate of globalisation in the region which isshifting away from traditional extractive services,to be more focused on higher value-added goodsand services. Specifically, investments in businessand financial services have been two of the largestgrowth areas according to a report published byEarnst & Young. The economic and trade growthto and from Africa has encouraged a large numberof airlines, especially from Europe, the MiddleEast and Asia-Pacific to invest in more air cargocapacity to Africa. Historically, South Africa hasbeen the largest source of air cargo traffic in Africa,but today more and more capacity is focused onEast and West Africa, which are now increasingtheir role in the air cargo market.africaAfrica to ChinaSource: Seabury, AirbusValue of goods shipped from Africa to China is growing faster than the weight of shipped itemsTOP 5 EXPORTEDGOODS (VALUE):Valuables2. Miscellaneousmanufacturing3. Semiconductors4. Animal products5. Leather &fur industry consumablesAverage kilo value: $372000 20101TOP 5 EXPORTEDGOODS (VALUE):Valuables2. Clothing & Accessories3. Semiconductors4. ElectricalComponents5. Fresh FoodsAverage kilo value: $691102000K Tonnes M US$201010202540353001,0005,0001,5003,0002,5002,000155WEIGHT (K Tonnes) VALUE ($US millions)
Global Market Forecast 137Based on the trends affecting the African aircargo market today, Airbus forecasts a growthin traffic of 5.1 % per year over the forecastperiod. Today, traffic between Africa and Europerepresents 55% of all traffic to, from and withinAfrica and is expected to grow at 4.8% over thenext 20 years, representing 51% of traffic in 2031.The fastest growing flow in the region is expectedto be from Africa to India, which will grow at 7.2%per annum. The high growth between Africa andIndia, and the high growth between Latin Americaand Africa may also present the opportunity for anew traffic flow between Latin America and Indiathrough the continent of Africa.FLEEt EVoLUtion2012-2031 freighter fleet evolutionThe choice between a new built or a convertedcargo aircraft depends on several factors, suchas the capital available to the airline, the utilisationrequired, available delivery dates and feedstockavailability. On high density routes where aircraftare expected to fly at high utilisation rates, airlinesoften prefer new, more fuel efficient aircraft whichprovide a lower operating cost and greater reliability.Airlines with less capital availability, lower utilisationrequirements or airlines looking to convert theirexisting passenger aircraft to freighter aircraft willoften choose the converted aircraft option. Today,there is a large delta in the ratio of new built aircraftin small and larger aircraft. Indeed, smaller aircraftfly on shorter distances and usuallyless dense routes and stay longeron the ground, while bigger aircraftare operated on the denser andoccasionally longer-range flowswith a much higher daily utilizationwhich can justify the investmentin new built cargo jets. Therefore,today the fleet in service of smallcargo aircraft includes only 5%of new built jets, while the fleet oflarger aircraft comprises 41% ofnew built aircraft. Over the forecastperiod, there is a forecast demandfor nearly 1,800 converted aircraftand nearly 900 new aircraft.Converted vs. new BuiltFleet sizeNewConversionsRetained in serviceBeginning 2012 2031+ 3.0 %CAGR01,0002,0003,0004,0002,9381,6151,793851294Source: Airbus
Demandforfreighttrafﬁc2012-2031 small freighter fleet evolutionHistorically, small jets have been used toaccommodate the domestic or short-haul demandfor mail transportation and small shipments. Thedevelopment of alternative transportation, such asthe belly hold of passenger aircraft or freight trucksand trains, have contributed to the reduction ofthis category. Aircraft in the segment today aremainly used by express carriers or for ease ofuse by other carriers between islands or overgeographic difficulties such as mountains.In 2011, almost 60 old generation small cargojets were retired permanently from servicebringing down the fleet to ~370 aircraft, half of itconcentrated in the US and Europe.In twenty years, the fleet of small cargo aircraftis expected to grow to 535 units, mainly drivenby the domestic market of PRC and India, whichwill grow at an annual rate of 7.3% and 7.5%respectively over the next two decades.The market will be dominated by converted aircraftas there are no new built small cargo aircraft over10 tons being manufactured today to supply thiscategory.small jets2001003005006004000Beginning 2012 2031ConversionsRetainedin service523851Source: Airbus5353661.9 %CAGR
Global Market Forecast 139This very dynamic segment will see a 3.2 %growth rate over the next 20 years, driven largelyby express companies. In fact, over 50% of the730 units which were flying in 2011 belonged tointegrators/express carriers.The fleet in this segment is expected to increaseto 1,375 aircraft by 2031, partially thanks to thedevelopment of the express markets in Chinaand India, where integrators/express carriers willneed more capable aircraft to serve an increasingdemand from customers in a limited time frame.In addition to the express carriers, a number ofgeneral cargo carriers are displaying interest in thissegment as they look to expand their networks onless dense routes with a lower level of risk. Intra-regional flows, especially in emerging markets, areexpected to experience a very high growth rate,where regional cargo jets offera good solution from a rangeand payload point of view toaccommodate these.This segment is also gaininginterest from operators oflarge freighters, as their sizeis increasingly being seenas the lower risk option,particularly during slowdowns of the type we havewitnessed recently.Among those 1,375 aircraft, 411are forecast to be new built jets,like the A330-200F, and another847 will be for converted aircraftlike the A330P2F.Regional and Long-haulFleet sizeNewRetained in serviceConversionsBeginning 2012 2031+ 3.2 %CAGR02004006008001,0001,2001,4001,6001,375729847411117Source: Airbus2012-2031 Mid-sized freighter fleet evolution
DemandforfreighttrafﬁcLarge freighters are in general used on longdistance routes overseas where the benefit ofspeed provided by air shipments overcomes thecosts, or if it is the only suitable mean of transport,such as for perishable goods. They are thereforeofter needed to accommodate the traffic on themajor intercontinental flows.The fleet of large freightersis also expected to nearlydouble over the next 20years, growing from 521units in 2011 to over 1,000in 2031. This growth is mainlydriven by the highest densityflows, such as those linkingAsia-Pacific with Europe andNorth America. The airlinesoperating on these flowswill require bigger aircraft toaccommodate the increasingdemand, as they can providehigher yields if they canovercome low load factors.Major and imbalanced flows can be an issue dueto higher per trip costs if the airlines cannot reacha high enough load factor.Just over 50% of the demand for large aircraft willbe for new built aircraft reaching 440 new deliveriesin this category.Large freightersFleet sizeNewRetained in serviceConversionsBegining 2012 2031+ 3.4 %CAGR02004006008001,0001,2001,028521423440165Source: Airbus2012-2031 large freighter fleet evolutionBy 2031, traffic, in FTKs, for the air cargo marketwill be more than double the current market size.To accommodate this growth, the dedicated cargoaircraft fleet is expected to increase globally fromover 1,600 aircraft in 2012 to nearly 3,000 aircraftin 2031. The fastest growing segments contributingto this are express/integrators and traffic betweenand within emerging regions and from developedto emerging regions. Even with a lower growthrate of 2.1%, North America will the largest centreof demand with approximately 1,150 new orconverted aircraft to be delivered in large part toreplace older aircraft currently in service.Asia with the PRC, will continue its impressivegrowth stimulated by an increasing demandfor goods produced in the region, both fromdeveloped regions and emerging regions. By2031, the region will need nearly 800 new orconverted deliveries to accommodate thesegrowth opportunities.In terms of market value, the worldwide demandfor nearly 900 new freighters will be worth $211billion at current list prices, 35% of this comingfrom the regional and long range segment and65% from the large freighter segment.Conclusion
Global Market Forecast 141Freighter fleet evolution forecast20311,254North America20128252031500Europe & CIS2012275203154Africa2012642031123Middle East2012572031887Asia-Pacific20123162031120Latin America20127820312,938World20121,615+52%+82%-16%+116%+181%+54%+82%New deliveries worth than $220 billionsRegional& Long range$74 billionLarge$148 billionSource: Airbus2012-2031 freighter demand 2012-2031 new delivery freighterbusiness volume0Small jets Regional &Long rangeLarge4008001,0001,4001,200600200Conversions New freighters523847423411 440Source: Airbus
SummaryandmethodologySUMMARYof RESULTSPassenger Traffic Flow Passenger Traffic FlowCAGR 2012-2031 CAGR 2012-2031Passenger traffic FlowSub-Saharan Africa - Asia 6.0%Sub-Saharan Africa - Australia/NZ 3.8%Sub-Saharan Africa - Caribbean 7.7%Sub-Saharan Africa - Indian Sub 6.6%Sub-Saharan Africa - Middle East 7.1%Sub-Saharan Africa - North Africa 7.9%Sub-Saharan Africa - PRC 8.3%Sub-Saharan Africa - Russia 4.0%Sub-Saharan Africa- South Africa 5.8%Sub-Saharan Africa - South America 7.9%Sub-Saharan Africa - United States 6.5%Sub-Saharan Africa - Western Europe 4.0%Asia - Australia/NZ 4.6%Asia - Canada 4.1%Asia - Central Europe 5.8%Asia - CIS 6.3%Asia - Indian Sub 8.0%Asia - Japan 2.6%Asia - Middle East 5.6%Asia - North Africa 5.9%Asia - Pacific 5.4%Asia - PRC 6.5%Asia - Russia 6.0%Asia - South Africa 6.6%Asia - South America 6.7%Asia - United States 4.3%Asia - Western Europe 4.1%Australia/NZ - Canada 5.2%Australia/NZ - Indian Sub 4.9%Australia/NZ - Japan 2.7%Australia/NZ - Middle East 6.1%Australia/NZ - Pacific 5.1%Australia/NZ - PRC 6.5%Australia/NZ - South Africa 5.6%Australia/NZ - South America 7.1%Australia/NZ - United States 3.9%Australia/NZ - Western Europe 2.4%Canada - Caribbean 6.1%Canada - Central America 7.9%Canada - Central Europe 4.9%Canada - CIS 5.6%Canada - Indian Sub 8.3%Canada - Japan 2.4%Canada - Middle East 8.2%Canada - North Africa 4.7%Canada - PRC 7.1%Canada - Russia 4.4%Canada - South America 6.7%Canada - United States 3.0%Canada - Western Europe 4.3%Caribbean - Central America 5.2%Caribbean - Russia 6.0%Caribbean - South America 3.1%Caribbean - United States 2.3%Caribbean - Western Europe 3.2%Central America - Japan 6.0%Central America - PRC 6.7%Central America - Russia 6.4%Central America - South America 6.9%Central America - United States 4.7%Central America - Western Europe 4.3%Central Europe - CIS 6.3%Central Europe - Middle East 5.7%Central Europe - North Africa 5.0%Central Europe - PRC 5.0%Central Europe - Russia 6.7%Central Europe - United States 3.7%Central Europe - Western Europe 5.6%CIS - Indian Sub 4.1%CIS - Japan 4.9%CIS - Middle East 6.5%CIS - North Africa 6.3%
Global Market Forecast 145Passenger Traffic Flow Passenger Traffic FlowCAGR 2012-2031 CAGR 2012-2031CIS - PRC 8.0%CIS - Russia 6.8%CIS - United States 5.5%CIS - Western Europe 5.3%Domestic Africa Sub Sahara 6.4%Domestic Asia 5.4%Domestic Australia/NZ 4.1%Domestic Brazil 6.5%Domestic Canada 2.5%Domestic Caribbean 1.6%Domestic Central America 6.9%Domestic Central Europe 3.8%Domestic CIS 5.1%Domestic India 9.9%Domestic Indian Sub 4.1%Domestic Japan 1.9%Domestic Mexico 5.2%Domestic Middle East 3.7%Domestic North Africa 5.5%Domestic Pacific 4.5%Domestic PRC 7.0%Domestic Russia 5.0%Domestic South Africa 5.6%Domestic South America 3.8%Domestic Turkey 5.5%Domestic United States 2.2%Domestic Western Europe 2.6%Indian Sub - Japan 5.4%Indian Sub - Middle East 6.5%Indian Sub - North Africa 6.3%Indian Sub - PRC 8.9%Indian Sub - Russia 4.7%Indian Sub - South Africa 7.1%Indian Sub - United States 7.9%Indian Sub - Western Europe 5.7%Intra Africa Sub Sahara 5.9%Intra Asia 6.0%Intra Australia/NZ 3.4%Intra Caribbean 2.1%Intra Central America 6.3%Intra Central Europe 6.1%Intra CIS 5.8%Intra Indian Sub 6.5%Intra Middle East 5.5%Intra North Africa 6.2%Intra Pacific 5.6%Intra South America 6.5%Intra Western Europe 3.1%Japan - Middle East 6.1%Japan - Pacific 3.3%Japan - PRC 6.0%Japan - Russia 4.0%Japan - United States 3.7%Japan - Western Europe 2.6%Mexico - United States 4.4%Middle East - North Africa 6.8%Middle East - PRC 7.0%Middle East - Russia 5.5%Middle East - South Africa 8.3%Middle East - South America 11.9%Middle East - United States 7.2%Middle East - Western Europe 5.4%North Africa - PRC 8.3%North Africa - Russia 6.2%North Africa - South Africa 8.2%North Africa - United States 6.4%North Africa - Western Europe 5.2%Pacific - PRC 7.9%Pacific - South America 4.0%Pacific - United States 2.8%Pacific - Western Europe 3.7%PRC - Russia 7.5%PRC - South Africa 7.3%PRC - South America 6.3%PRC - United States 6.2%PRC - Western Europe 5.7%Russia - South America 6.4%Russia - United States 6.4%Russia - Western Europe 4.9%South Africa - South America 6.7%South Africa - United States 3.1%South Africa - Western Europe 3.9%South America - United States 4.9%South America - Western Europe 5.1%United States - Western Europe 3.7%
SummaryandmethodologyFreight traffic FlowAfrica to Asia 4.1%Africa to Central America 5.9%Africa to CIS 4.3%Africa to Europe 4.8%Africa to India 7.2%Africa to Japan 2.7%Africa to Middle East 5.4%Africa to North America 4.6%Africa to Pacific 3.6%Africa to PRC 6.6%Africa to South America 4.8%Asia to Africa 4.6%Asia to Central America 6.0%Asia to CIS 5.3%Asia to Europe 2.9%Asia to India 6.3%Asia to Japan 2.9%Asia to Middle East 3.8%Asia to North America 4.1%Asia to Pacific 3.3%Asia to PRC 5.4%Asia to South America 5.3%Central America to Africa 4.9%Central America to Asia 5.0%Central America to CIS 3.3%Central America to Europe 4.4%Central America to India 7.1%Central America to Japan 4.0%Central America to Middle East 4.0%Central America to North America 2.4%Central America to Pacific 5.6%Central America to PRC 5.4%Central America to South America 4.7%CIS to Africa 3.2%CIS to Asia 4.1%CIS to Central America 4.4%CIS to Europe 3.2%CIS to India 4.1%CIS to Japan 3.3%CIS to Middle East 4.1%CIS to North America 3.2%CIS to Pacific 4.0%CIS to PRC 6.4%CIS to South America 3.9%Domestic Brazil 4.5%Domestic India 7.5%Domestic PRC 7.3%Domestic USA 2.5%Europe to Africa 4.8%Europe to Asia 5.0%Europe to Central America 4.9%Europe to CIS 4.6%Europe to India 7.4%Europe to Japan 2.7%Europe to Middle East 5.1%Europe to North America 3.4%Europe to Pacific 3.8%Europe to PRC 6.5%Europe to South America 5.1%India to Africa 6.4%India to Asia 6.4%India to Central America 7.6%India to CIS 4.1%India to Europe 5.4%India to Japan 4.3%India to Middle East 6.6%India to North America 4.5%India to Pacific 4.3%India to PRC 7.4%India to South America 7.2%Intra Africa 4.4%Intra Asia 4.7%Intra Central America 4.6%Intra CIS 4.3%Intra Europe 4.1%Intra India 5.1%Intra Middle East 3.7%Intra North America 2.8%Intra Pacific 2.3%Intra South America 5.8%Freight Traffic Flow Freight Traffic FlowCAGR 2012-2031 CAGR 2012-2031
Global Market Forecast 147Japan to Africa 4.7%Japan to Asia 3.7%Japan to Central America 4.0%Japan to CIS 4.7%Japan to Europe 2.1%Japan to India 4.4%Japan to Middle East 4.3%Japan to North America 3.2%Japan to Pacific 4.0%Japan to PRC 4.0%Japan to South America 2.7%Middle East to Africa 4.6%Middle East to Asia 3.9%Middle East to Central America 5.2%Middle East to CIS 4.4%Middle East to Europe 2.0%Middle East to India 6.8%Middle East to Japan 2.4%Middle East to North America 4.1%Middle East to Pacific 4.0%Middle East to PRC 5.8%Middle East to South America 4.5%North America to Africa 5.7%North America to Asia 4.4%North America to Central America 2.3%North America to CIS 5.2%North America to Europe 4.3%North America to India 6.2%North America to Japan 1.6%North America to Middle East 4.9%North America to Pacific 3.2%North America to PRC 6.7%North America to South America 5.8%Pacific to Africa 4.0%Pacific to Asia 3.7%Pacific to Central America 5.7%Pacific to CIS 5.0%Pacific to Europe 2.6%Pacific to India 4.1%Pacific to Japan 3.7%Pacific to Middle East 5.0%Pacific to North America 2.1%Pacific to PRC 3.4%Pacific to South America 6.3%PRC to Africa 6.5%PRC to Asia 5.6%PRC to Central America 6.6%PRC to CIS 5.8%PRC to Europe 6.0%PRC to India 7.7%PRC to Japan 4.3%PRC to Middle East 6.8%PRC to North America 6.5%PRC to Pacific 6.3%PRC to South America 7.2%South America to Africa 5.0%South America to Asia 5.6%South America to Central America 5.6%South America to CIS 4.9%South America to Europe 4.5%South America to India 6.6%South America to Japan 4.0%South America to Middle East 4.7%South America to North America 4.2%South America to Pacific 4.1%South America to PRC 7.0%Freight Traffic Flow Freight Traffic FlowCAGR 2012-2031 CAGR 2012-2031
SummaryandmethodologyPASSEngERMETHoDoLogYThe making of the Airbus Global MarketForecast follows a process which has beencontinuously improved upon for more than 20years. Each major change in the industry (suchas the appearance of low cost business modelsor the strong development of hub and spokeoperations) have been the occasion for Airbus torefine and improve its modelling in order to bestidentify and forecast current and future trends.The GMF process consists of three main steps:the traffic forecast giving the overall shape oftraffic evolution, the network forecast identifyingthe future evolution of the airlines networks, andthe demand forecast estimating the number ofaircraft which will be required to accommodatethe traffic growth.GMF Process stepsAirlinesOperationsForecastTrafficforecastAirlinescaibrationNetworkForecastNewDeliveries2ndhandaircraftAirlines FleetBuild-UpBacklogs andretirementsassumptionsCapacityFrequencyModelDemand forecast
Global Market Forecast 151Forecasting trafficForecasting AircraftdemandForecasting networkThe objective of the traffic forecast is to assessthe quantity of passengers travelling by air.Initially, all countries are grouped into 19 trafficregions, based on geographical proximity andlevel of socio-economic development. Eachregion pair defines a non-oriented traffic flow,assuming that outbound and inbound passengertraffic is balanced. Whenever a part of a trafficregion develops significantly different from therest of the region, a new, specific flow is created,taking into consideration more country-relatedspecific characteristics. This process resultedin 157 flows for the GMF 2012. The main inputdata for the traffic forecast are historical trafficvolumes as well as large sets of historical andforecast socio-economic data from externaldata providers.For each traffic flow several socio-economicvariables are selected and input in econometricequations with the aim of identifying the one setor combination of variables that explains bestthe historical traffic evolution. Once the modeland variables with the best fit are identified, theforecast economic data are used to derive thefuture traffic volume.The demand forecast aims to estimate thenumber of aircraft which will be required overthe next 20-years to satisfy the world’s trafficgrowth. The new demand identified by the AirbusGMF (on top of current fleet and known orders)is expressed in neutral seat categories. The useof such virtual aircraft allows a view of futuredemand unconstrained by the product supply.This “theoretical” demand represents a solutionwhich would best match the airlines needsin terms of aircraft size, if no considerationsof supply (specific product performance,production availability, etc.) are made. Basedon this undistorted view, the results can beused to consider such things as new productintroduction, size requirements and timing. Byexamining the market at a route by route andairline by airline level then also allows a largenumber of other uses, from discussions withairlines to our supplier partners, for example.Airline networks evolve over time and airlineskeep on adding and removing routes from theirnetworks, changing the supply of travel fromthe passenger standpoint. The evolution of thenetwork with new opened and closed routesshifts the demand from one routing to another,with an impact sometimes even visible at a levelas high as the traffic flow level. Furthermore,new routes tend to fragment the market asthey partially absorb traffic from the existingnetwork and therefore impact the route-per-route traffic evolution. The network forecastaims at quantifying these impacts.The first step of this phase consists of breakingdown the forecast from a global traffic flow leveldown to estimates of Origin-and-Destinationtraffic on city- or airport-pair level. A set of newroute candidates is then devised for each airline,based on the airline’s current network and thepotential size of new markets. This set of routesis fed into a ‘Quality of Service Index’- basedmodel, which determines for each new routethe traffic potential and the point in time whenit could be opened.The Airbus GMF is a demand forecastVirtual aircraftby seat categoryReal aircraft(known product)Real aircraft(existing product)Real aircraft(existing product)Open DemandBacklog2ndhandStay in service
Summaryandmethodologythe airline calibration processthe airlines operation forecastThe Airbus GMF 2012 covers 889 passenger airlines and their subsidiaries worldwide.Global NetworkMajor NetworkSmall NetworkLCCRegional & AffiliateInstalled seatsin service9%5%54%10%6%16%020406080100120140160AsiaCanadaCentralAmericaCentralEuropeCISEuropeIndianSub-continentMiddleEastNorthAmericaPacificPRCSouthAmericaSubSaharaUSANumber of airlines7546384814426513347236013275Airlines distribution per region Airlines distribution per typeNumberof airlines49%7%22%5%5%12%As a first step and for each of these airlines, adedicated calibration process is carried out.It aims to take the best of several sources ofinformation concerning the airlines in order tounderstand how an airline is operating each of itsaircraft. Precise fleet data allows us to calibratethe detailed operations of a given airline (eitherscheduled or unscheduled) and therefore deducewhich type of aircraft has been flying on whichsector for a particular month of the year. Thisdetailed adjustment allows us effectively apply theway an airline utilizes its aircraft on its network.Once the calibration of an airline has been carriedout, real aircraft are converted into virtual aircraft in afashion that keeps the overall number of seats in thefleet constant. The whole forecast is then based onneutral categoryvalues,ourseat categories,e.g.100,125, 150, 210 for single aisle types and requirements.Traffic growth rates are applied to each airline’snetwork, also taking into consideration futuredevelopments, as anticipated in the networkforecast process. There are few ways an airlinecan accommodate traffic growth: load factorimprovement, improvement of its aircraft utilization,frequency or capacity increase.The split between frequency increase and / orcapacity increase is one of the most importantfactors influencing the shape of the futuredemand. A dedicated model (the Airbus Capacity/Frequency Model) has been developed to addressthis issue. The general principle is that airlinesgrow on a route by adding frequencies up until aminimum level of service is reached.Beyond this minimum level, airlines grow with amix of both frequency and capacity increases,until the maximum level of service is reached,above which time differentiation through additionalfrequencies does not bring any further value tothe passenger.Above this maximum service level, the most efficientway to accommodate further growth is to increasethe average aircraft size to achieve lower costsper aircraft seat. Each market in the world has itsown specificities. Passengers in North America forinstance, are used to a very high level of service (i.e.very frequent flights between two airports) which isnot true for other regions in the world.A market in this case can be defined as a set ofroutes on a given traffic flow for a certain typeof airline’s business model. For each of thesemarkets, one or more airlines may compete andeach route might have a different length. Takingall this into account allows us to specify howfrequencies and capacity will develop over timefor a given traffic growth.
Global Market Forecast 153A dedicated model handles the Frequency and/or Capacity splitThe calibration of this model has to be reviewedeach year based on the market definitions and inlight of any market evolution (e.g. infrastructuredevelopment plans).As a result, the airline operation forecast outputsyear by year, the demand in terms of aircraftnumbers (yearly utilization, flight frequencies andcapacity) expressed in neutral categories for thecomplete network of each airline.0501 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20100150200250Typical evolution on a route enjoying growthTraffic (RPK index 100 @ year 1)Threshold dependingon market characteristicsFrequency increaseFrequency&Capacity increaseCapacityincreaseTime (years)Airlines fleet build-up 2ndhand aircraftOnce the overall neutral demand is forecast,each airline fleet build-up can be carried out.This demand is re-allocated to the existing fleetand the known orders.Generic assumptions are made for each regionregarding the retirement age of the fleets, butthese schemes are adapted to each airline.Elements such as replacement plans (newaircraft replacing older types), end of contractlease, airline business models or economicand financial environment have to be taken intoaccount in determining replacements.The remaining demand which cannot besatisfied by the current fleet or the known orderscorresponds to the open market.As well as identifying demand, the GMF alsoallows us to extract all forecast operational detaile.g. traffic flow, route, frequencies, utilization,load factors, etc.The final step of the GMF process consists inestimating second hand or re-cycled deliveriesas they account for a significant share of totaldeliveries (~13% including regional aircraft).Survival curves applied to the GMF base fleet,per aircraft type, allow identification of the gapbetween the statistical world fleet attrition andthe shape of those that will “stay in service”. Thedelta corresponds to the maximum potential forsecond hand aircraft. In parallel to this, candidateaircraft are identified amongst the existing fleetand reallocated as deliveries to another airline ifthe corresponding demand exists.This study is carried out on a worldwide basisas a first step and then refined by region andby airline. At the end of the process, these“second hand” deliveries are subtracted fromtotal deliveries, leaving only the “new deliveries”which are the figures displayed in this publication.
SummaryandmethodologyfREIgHTMETHoDoLogYThe freighter GMF has been part of the Airbusforecasting process for more than 10 years and isbeing constantly enhanced to account for all thekey aspects of the cargo market, as well as theirevolution. It is closely linked to the GMF passengerforecast, drawing on results from this forecast toderive future belly hold capacity.The freighters forecast exercise can be divided intothree main steps: the traffic forecast resulting fromeconometric projections for each directional flow,the integration of the belly traffic coordinated withthe passenger aircraft forecast and the demandforecast evaluating how many freighters will beneeded in the next 20 years.FreighterdemandCargo capacityneededTotal trafficforecastHistorical trafficdata analysisPassengerforecastBelly capacityavailableAirline fleetcalibrationEconometricmodelsRetirementassumptionsAircraft utilizationanalysis
Global Market Forecast 155The first step in the traffic forecast is assessingthe relationship between macroeconomictrends and the cargo traffic. GDP, Real Income,Investments, Exports / Imports, industrialproduction, and many other parameters areused in our econometric models to assessthe closest relationship to growth in traffic.Alongside these macro economics factors, theanalysis of historical data allows us to identifyand understand the multiple trends involved inthe evolution of the market, such as modal shiftsfor certain commodities.traffic Forecast036912151821Historical dataModel1995 1999 2003 2007 2011 2015 2019 2023 2027 2031FTKs (billion)Flow : Europe to North AmericaHistory ForecastCAGR3.7%CAGR3.5%Source: AirbusCPIEuropeCPINorth AmericaReal GDPEuropeVARIABLES CHOSEN
SummaryandmethodologyOnce the traffic flow forecasts have beenestablished, a very important step consistsof splitting the future demand between bellycapacity and the dedicated freighters. Thanksto the passenger aircraft GMF, it is possible toestimate the belly capacity each airline will offeron its network. In addition, Airbus monitors howairlines use their belly holds to carry cargo toestablish trends in belly capacity load factors.As a result, the combination of the airlines’passenger network development and the cargohold load factor evolution gives an estimation ofthe share of freight transported in the passengeraircraft belly on each flow.In parallel, a calibration is conducted on today’sfreighter fleet. An assessment of multiple datasources is performed to arrive at the bestestimate of airlines’ network, aircraft utilizationand load factors for the base year. Projectionsare based on historical data collected for morethan a decade, with current market perspectivesgathered from stakeholders across the industryto ensure the latest data and trends areincorporated.Belly Capacity and base year calibration2012 Freighter Operators and FleetsFleet825North AmericaOperators38Fleet275Europe & CISOperators45Fleet64AfricaOperators29Fleet57Middle EastOperators15Fleet316Asia-PacificOperators49Fleet78Latin AmericaOperators23Fleet1,615WorldOperators199Source: ASCEND
Global Market Forecast 157The freighter forecast for the next 20 yearsestimates the number of aircraft required toaccommodate the cargo traffic growth. Thedemand is divided into four neutral size categoriesstarting at 10 tonnes, including new build andconverted aircraft. Thanks to these virtualcategories, it is possible to assess which aircraftsize, on which flow, best suits the market.Our freighter forecast is the result of the analysisof the behaviour of more than 200 differentairlines.To address the specific question of the domesticexpress market, a dedicated forecast model hasbeen developed and deals with four countries: theUS, which today is the largest player in expresstraffic, as well as Brazil, India and China all whichare expected to become large consumers ofexpress services over the next 20 years.This model analyses a distinctive set of parametersto understand the customer’s need for expressservices resulting from well-known or newbehaviours, such as online purchasing, next-daydelivery for business purposes, service reliabilityand traceability.The model for domestic express consists intwo parts: the first estimates the US expresstraffic and fleets based on 40 year historicaldata to identify the main drivers of growth.The second, used for the emerging markets,takes into account US express developmentas a benchmark, whilst at the same time takinginto account the unique characteristics of eachcountry including infrastructure development,labour cost, internet penetration, etc.Freighter forecastDomestic Express analysis051015201975 1980 1985 1990 1995 2000 2005 201025Billions Express Freight RTKs Mail and general cargo RTKsSource: ACMGUS Air Freight Domestic Market
Global Market Forecast 159ERJ-195717Yak-42MD-80-87DC-9-50A319neoA319-100737-700737-300CS300MD-80-88MD-80MD-80-83727737-400MD-90IL-62Tu-154A320-200MS21-200C919737-8maxA320neo737-800757-200A321-200737-900A321-100MS21-300A321neoTu-204757-300767-200ER767-200A310-300A340-500767-300ER787-8767-400ERA340-200A330-200767-300A300-600A300A350-800777-200LRA300-600RIL-96A340-300777-200ER787-9A330-300MD-11ERL1011A350-900DC-10A340-600IL-86777-200777-300ERA350-1000747-400C747-400777-300747-300747-200747-8A380-800125150175210250300350400450500