Market characteristics, drivers and trends; direct service characteristics; the view of U.S. carriers – and what African airport stakeholders can do to shape that perception
Sustainable agriculture, food security and climate change
Air Transport Market Potential: US-Africa Air Transportation Summit, Miami, 2007
1. PASSENGER POTENTIAL:
US - AFRICA MARKETS
Presented by:
Presented by:
Mark Diamond
Director, SH&E, Inc.
USAfrica Air Transportation Summit June 7, 2007
2. Agenda
1. Market Characteristics, Drivers and Trends
2. Direct Service Characteristics and Trends
3. The View of US Carriers – and What African Airport
Stakeholders Can do to Shape Their Perception
1
3. Agenda
1. Market Characteristics, Drivers and Trends
2. Direct Service Characteristics and Trends
3. The View of US Carriers – and What African Airport
Stakeholders Can do to Shape Their Perception
2
4. The US-Africa Passenger Market is a Fraction of the
Size of Most Other US-International Markets
US-International Passenger Flows (Millions)
CY 2005
Western Europe 47.7
Central America 23.5
North America 21.8
Caribbean 19.8
Northeast Asia 14.8
Southwest Pacific 11.9
Upper South America 4.6
Lower South America 3.8
Southeast Asia 2.2
Middle East 1.3
Eastern/Central Europe 1.1
South Asia 0.7
Southern Africa 0.4
Northern Africa 0.2
Eastern Africa 0.0
0 5 10 15 20 25 30 35 40 45 50
3 Source: IATA Passenger Forecast CY 2005
5. However, the Market Has Been Growing Rapidly
and Has Considerable Upside Potential
North America-Overseas Markets:
Historic Growth and Percentage Share by Partner Region
1995-2005 Average Annual 2005 Percentage Share of RPKs
RPK Growth by Region
8%
7.3% Africa
7% 0.5%
SW Asia
6% Europe
Middle East 0.2%
48%
5% 2%
4.4%
4.0% 3.9%
4% Oceania
3.4% 3.3%
4%
3% 2.6% SE Asia
2.0% 5%
2%
S America
1% 0.5% 5% China
0% 5% NE Asia
Central
16%
America
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4 Source: Boeing Current Market Outlook 2006. Data excludes intra-North America market
intra
6. Propensity to Travel in Africa is Well Below
That in Other World Regions
Annual Passengers per Thousand Population,
2005
70
62.2
60
50.6
50
40
30
20 16.2
10 8.3
5.3
0
Europe North America Latin American Asia Africa
Africa
& Carribean
5 Sources: Population – United Nations Department of Social and Economic Affairs: Air Passengers - IATA
7. 10 Countries Account for 90% of Reported Origin-
Destination Traffic Between the US and Africa
Percentage Distribution of Reported US-Africa O&D Passengers by Country, 2006
Senegal Other
1% 10%
Uganda
2% South Africa
Tanzania
23%
4%
Kenya
6%
Morocco
6%
Egypt
Ethiopia 17%
8%
Nigeria
10% Ghana
13%
6 Sources: US Department of Transportation Origin-Destination Survey. Excludes passengers traveling exclusively on non-U.S. carriers
8. The US-Africa Market is Projected to Grow at a Rate
That Surpasses Most Other US-International Markets
Projected 20-Year Average Annual Growth for US Traffic, by Partner Region
Boeing Forecast: North America RPK’s, 2005-2025
16%
12.8%
12%
7.4% 6.6%
8% 6.5% 6.3% 6.0% 5.8%
4.5% 4.1% 4.1% 3.6%
4%
0%
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Airbus Forecast: US RPK’s, 2006-2025
10%
8% 7.6% 7.4% 6.9% 6.7%
6.3% 6.2% 6.2% 6.2% 6.1% 6.0%
5.4% 5.2%
6% 4.8% 4.5% 4.3% 4.3%
3.8%
4% 2.7%
2%
0%
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7 Sources: Boeing Current Market Outlook, 2006; Airbus Global Market Forecast, 2006-2025.
9. Key Growth Drivers
Year/Year Percentage Growth in GDP,
Rapid Growth of GDP Africa vs. Total World, 2004-2007E
7%
Burgeoning Trade in Natural
5.7% 5.8%
Resources 6%
5.2% 5.3% 5.3% 5.3%
5% 4.7% 4.5%
Rapid Growth in Foreign Direct
Investment, Particularly in the 4%
Energy Sector
3%
Expansion in the Construction 2%
Sector
1%
Development of Tourist
0%
Infrastructure & Initiatives to
2004 2005 2006 2007E
Increase Tourism
Africa World
8 Sources: UN Economic Commission for Africa (Africa GDP), CPB Netherlands Bureau for Economic Policy Analysis
10. Load Factors on Direct US-Africa Services
Have Been Reasonably Healthy
Load Factors on Each of the Top 5 Routes Exceeded 72% in 2006
Average Load Factors on US-Africa Nonstops, 1997-2006
100%
70.0% 70.8% 66.8%
75% 66.1% 62.7% 63.0% 65.9% 63.8%
60.5% 61.7%
50%
25%
0%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Average Load Factors on Top 5 Routes, 2006
100%
72.8% 73.0% 73.1% 75.3% 74.9%
75%
50%
25%
0%
New York-Cairo New York-Dakar New York- Atlanta-Ilho do Sal Washington-
9
Casablanca Dakar
Source: US Department of Transportation T100
11. US-Africa Yields are on a Par With the US-Far East
Market, and Higher Than US-Europe
Yields in US-International Markets, 2006
US Dollars per RPK
$0.12
$0.11 US-Canada
Yield, USD $ per RPK
$0.10
US-Caribbean
$0.09
US-Middle East US-Australia/Pacific
US-Central America
$0.08
US-South America
US-Far East US-Africa
$0.07 US-Europe
$0.06
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000
Trip Length, Kilometers
10 Source: Based on US DOT O&D Survey. Note: does not include trips that were exclusively on non-U.S. carriers.
trips non-
12. Who is Flying? Nearly Two-Thirds of Passengers
on US-Africa Direct Services are U.S. Citizens
This Has Positive Implications for Economic Impact on Africa,
and the Ability to Attract U.S. Carrier Service
Percentage Breakdown, U.S. Citizens vs. Non-U.S. Citizens, 2004
Non-U.S.
Citizens
40%
U.S. Citizens
60%
11 Sources: U.S. Immigration and Naturalization Service (INS)
13. Nearly 80% of the US-Africa Market is Estimated to Connect
in Another Region, Most Likely at a European Hub
US-Africa Market: Estimated True O&D Passengers and Percentage by Travel Routing --
Flying Direct vs. Connecting in Another Region
Flying Direct
24%
Connecting @ 600-700k
Enroute
76%
@ 1.9 - 2.3 mil
12 Sources: Estimates based on data from US Department of Transportation T100 and World Tourism Organization
14. US-Africa Travelers Have Numerous On-Line Travel
Options on European Hub Carriers
via CDG via MAD
via LHR & LGW via LIS
via ZRH
via FRA
via VIE
via MXP & FCO
via LHR
via AMS
13
15. European Airlines Offer US-Africa Travelers Hundreds of
Weekly On-Line Connecting Opportunities at Their Hubs
European Hub Carrier Service Opportunities
Between the US and Africa, May 2007
300
250 218 226
Weekly Frequencies from Hub
200 161
150
135 To Africa To US
96 98
100 61 60 57 66 48 37 47
35 34 40
50 14 26 22 21 16 14 14
9
0
AF/CDG BA/LHR AZ/MXP LH/FRA KL/AMS IB/MAD AZ/FCO TP/LIS LX/ZRH BA/LGW OS/VIE VS/LHR
35
29
30
Nonstop Destinations Served from Hub
25
20 17 To Africa To US
15
15 12 14
11 10
8 9 8
10 7 7 6
5 5 5 5 5 4 5
5 1 2 2 2
0
AF/CDG BA/LHR KL/AMS LH/FRA IB/MAD AZ/MXP TP/LIS LX/ZRH AZ/FCO OS/VIE BA/LGW VS/LHR
14 Source: Official Airline Guide, June 2007
16. Agenda
1. Market Characteristics, Drivers and Trends
2. Direct Service Characteristics and Trends
3. The View of US Carriers – and What African Airport
Stakeholders Can do to Shape Their Perception
15
17. Current US-Africa Direct Service, June 2007
Total: 47 Weekly Nonstops + 7 One-Stops (via Europe)
Atlanta-Dakar-Johannesburg (7x/Week) Delta
JFK-Accra (4x/Week) Delta
JFK-Lagos (3x/Week) North American
Baltimore-JFK-Accra (1x/Week) North American
JFK-Cairo (7x/Week) Egyptair
JFK-Casablanca (9x/Week) Royal Air Maroc
Boston-Praia (Cabo Verde) (3x/Week) TACV
Washington IAD-Addis Ababa (6x/Week) Ethiopian
Washington IAD-Johannesburg (7x/Week) South African
JFK-Dakar-Johannesburg (7x/Week) South African
16 Source: Official Airline Guide. Note: Ethiopian Airlines service to Addis Ababa via Rome.
18. 8 African Countries Currently Receive Direct
Service from the US
African Countries Served Morocco
17.9%
Direct from the US, & Share
12.9%
of US-Africa Seat Capacity, Egypt
May 2007
Cape Verde
Senegal
1.5% 7.3%
13.1%
Nigeria
Ghana Ethiopia
5.0%
8.2%
The Top 4 Countries – South Africa,
Egypt, Senegal and Morocco – Receive
Nearly 80% of Seat Capacity
South 34.0%
Africa
Source: Official Airline Guide, May 2007.
17 In cases where a single aircraft from the US serves 2 destinations in Africa, seats are allocated 50:50 to each destination.
19. Historically, Non-U.S. Airlines Have Carried the
Lion’s Share of Direct US-Africa Passengers
Share of US-Africa Passengers by Carrier Nationality
CY 1997 – CY 2006
100% 4%
7% 8% 8% 10% 8% 6% 6% 10%
11%
90%
80%
70%
60%
50% 96%
93% 92% 92% 90% 92% 94% 94% 90%
89%
40%
30%
20%
10%
0%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
U.S. Carrier
Non-U.S. Carrier
18 Source: U.S. Department of Transportation T100
20. With the Exception of a Few Markets, Service
Between the US and Africa Has Been Spotty
US-Africa Scheduled Direct Passenger Service, CY 1997 – CY 2006
Carrier Route 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Afrinat Int'l New York-Banjul
Air Afrique New York-Abidjan
New York-Dakar
Delta Atlanta-Dakar-Johannesburg
New York-Accra
New York-Cairo
Egyptair New York-Cairo
Ethiopian Newark-Addis Ababa*
Washington-Addis Ababa*
Ghana Airways Baltimore-Accra
Baltimore-Banjul
Baltimore-Freetown
Baltimore-Monrovia
New York-Accra
New York-Banjul
New York-Monrovia
Nigeria Airways New York-Lagos
North American Baltimore-Banjul
Baltimore-New York-Accra
New York-Lagos
Royal Air Maroc New York-Casablanca
South African Airways Atlanta-Cape Town
Atlanta-Johannesburg
Atlanta-Sal
Miami-Cape Town
New York-Dakar-Johannesburg
New York-Johannesburg
New York-Lagos-Johannesburg
New York-Sal
Washington-Accra
Washington-Dakar
Washington-Johannesburg
TAA Houston-Banjul
New York-Banjul
New York-Freetown
Washington-Dakar
Washington-Freetown
TACV New York-Sal
Boston-Praia*
Boston-Sal
TWA New York-Cairo
19 Source: Official Airline Guide. * = certain flights have intermediate stops in Europe.
21. However, in Recent Years, There Has Been Renewed
Interest in the US-Africa Market Among African Airlines . . .
A Number of African Carriers Have Plans
to Launch Service to the United States:
20
22. . . . as Well as US Carriers
North American Airlines Launched Services to West Africa in July 2005,
After Ghana Airways’ Shutdown
– Currently Offers 3 Weekly Nonstops JFK-LOS,
and 1 Weekly Direct Flight BWI-JFK-ACC
Continental Had Plans to Launch Daily Nonstop Service to Accra and
Lagos from its Newark Hub in 2005
– Plans Were Axed Due to Inability to Gain Authorization
for Service, in Wake of Virgin Nigeria Dispute
Delta Launched Service to Africa in 2006 and is Growing
– In Late 2006, DL Launched Daily ATL-DKR-JNB Service,
and JFK-ACC 4 Times per Week
– Plans to Launch Daily ATL-LOS Nonstop Service in December 2007
21
23. Capacity in the US-Africa Market is Well on its Way
to Surpassing Pre-September 11 Levels
US-Africa Nonstop Capacity and Service, August 1997 – June 2007
Weekly Seats Each Way Weekly Frequencies
Thousands Each Way
16 60
14
14
50 48
12
11 12
12 11 42
10 10 38
40
10 9 35 35
9 33 34
9 32
30 30
8 30
6
20
4
10
2
0 0
98
99
00
01
02
03
04
05
06
07
98
99
00
01
02
03
04
05
06
07
19
19
20
20
20
20
20
20
20
20
19
19
20
20
20
20
20
20
20
20
22 Source: Official Airline Guide
24. US Carrier Code-Sharing to African Destinations
Has Grown Enormously Over the Past 10 Years
US Carrier Code-Share Service to African Destinations,
Weekly Frequencies, Summer 2007 vs. Summer 1997
500
409
400
300
200
100
36
0
1997 2007
23 Source: Official Airline Guide, August 1997 and June 2007
25. Six of the US Major Carriers Now Sell Seats to 36
Destinations Throughout the Continent via Code-Share
US Carrier Code-Share Service to Africa
June 2007
Number of African
Weekly Frequencies Destinations Served
140 35
123
120 111 30 28
26 25
100 25
80 71 20
56 13
60 15
41
9
40 10
20 7 5
1
0 0
d
d
tin t
tin t
ta
s
ta
s
an
an
l
l
ta
ta
es
es
ay
ay
te
te
el
el
ic
ic
en
en
w
w
ni
ni
rw
rw
D
D
er
er
th
th
U
U
Ai
Ai
m
m
or
or
on
on
A
A
S
S
N
N
U
U
C
C
24 Source: Official Airline Guide, June 2007
26. Current US Carrier Code-Shares to Africa
June, 2007
US Major: American Continental Delta Northwest United US Airways
Code-Share Partner: British Brussels Royal Air South
Airways Airlines Alitalia KLM Air France Maroc KLM Lufthansa African TAP Lufthansa
Abidjan X X
Abuja X
Accra X X X
Addis Ababa X X
Asmara X
Bamako X
Borg El Arab X
Brazzaville X
Cairo X X X
Cape Town X X X
Casablanca X X X
Conakry X
Cotonou X
Dakar X X X X X
Dar-Es-Salaam X X X
Douala X X
Entebbe/Kampala X X X
Freetown X
Ilha Do Sal X
Johannesburg X X X X X
Kano X X
Khartoum X
Kinshasa X
Lagos X X X X X
Libreville X
Lome X
Lusaka X
Maputo X
Nairobi X X X X
Ndjamena X
Niamey X
Nouakchott X
Ouagadougou X
Rabat X
Tunis X
Yaounde X
25 Source: Official Airline Guide, June 2007
27. Since 1999, the U.S. Government Has Signed “Open Skies”
Bilateral Air Service Agreements With 17 African Nations
Mali
Cape Verde
Senegal Chad
Gambia Burkina
Faso
Nigeria
Benin Ethiopia
Liberia Ghana Cameroon
Uganda
Gabon Rwanda
African Countries With
“Open Skies” Bilateral Air Service Tanzania
Agreements With the U.S.
Namibia
26 Source: U.S. Department of State.
28. Agenda
1. Market Characteristics, Drivers and Trends
2. Direct Service Characteristics and Trends
3. The View of US Carriers – and What African Airport
Stakeholders Can do to Shape Their Perception
27
29. US Carriers’ View of the US-Africa Market
Pros:
Growing Very Rapidly, Certain Key Markets in Particular
High O&D Traffic Volumes and High Yields
– Oil-Driven Business
– “VFR”
European Carriers Have Operated Successfully
for Years Throughout the Continent
Competition is Relatively Limited at Present
Cons:
Uncertain Environment, Continued Perception of Risk
Market Information is Sparse
Limited Number of Markets Can Sustain Direct Service
28
30. Prerequisites for Service
Sufficient Traffic Must be Generated on “Local”, “Behind”, “Beyond”
and/or “Bridge” Sectors to Sustain Widebody Service
– @ 150-200 Passengers per Day Each Way (PDEW) for Daily Widebody Service
– Connecting Potential at the African Gateway to “Beyond” Points Elsewhere in
the Continent is Not Yet a Key Factor – But May Be in the Future
“Local”
US Gateway Africa Gateway
“Behind”
US Gateway Africa Gateway
“Beyond”
US Gateway Africa Gateway
“Bridge”
US Gateway Africa Gateway
29
31. Prerequisites for Service, Cont’d.
Sufficient Information Must be Available to Enable Accurate
Market Sizing, by City-Pair and by Purpose of Travel
– Need to Understand “O&D” Traffic Flows and Yields, at the City-Pair
Level if Possible
– “MIDT” Booking Data is Insufficient in the US-Africa Market
Aircraft Turns at African Airports Should be Quick
– Maximum: 2 Hours
– Target: 1 Hour 45 Minutes
30
32. What do US Carriers Evaluate Before Committing a
Scarce Aircraft Resource to a Particular Service?
Market Characteristics & Potential Profitability
– Airlines Estimate a Proposed Service’s Traffic and
Revenue Generation Capability
– Based on This Information, Airline Will Prepare a Full
Pro-Forma P&L for the Proposed Service
– The Airline Will Evaluate and Rank These Results Against
Other Proposed Markets
Operational Feasibility
Reliable Local Aircraft Service and Handling
Minimum of Red Tape
Safety & Security
31
33. African Governments and Airport Stakeholders are
Now Actively Marketing Themselves to US Carriers
It Appears That Financial Incentives Have Not Yet Been
a Major Factor in Influencing Service Decisions
However, Incentives are a Common Component of Airports’
Air Service Development Initiatives in the U.S. and Elsewhere.
Examples:
– Seat Guarantees
– Local Marketing Assistance
32
34. What Can Airports, Governments and Stakeholders
in Africa do to Help Stimulate US Carrier Service?
Pro-Active Marketing is Likely to be a Necessity to Attract
Service, Particularly for Smaller Markets
The Airlines Will be Looking for a Positive Business Case
to Justify Committing Aircraft to a Market
Airports, Governments and Stakeholders Can Help Airlines
in Their Decision Making by:
– Helping to Provide the Information Carriers Need to Evaluate
and Support a Service Decision
– Aiding Carriers in Approvals Process; Minimizing Red Tape
– Helping to Ensure That the Carrier Will Face Few Operational
Difficulties
33
35. THANK YOU
mdiamond@sh-e.com
www.sh-e.com
www.sh-e.com
LONDON NEW YORK BOSTON WASHINGTON, DC LOS ANGELES
Tel: +44.20.7242.9333 Tel: +1.212.656.9200 Tel: +1.617.218.3500 Tel: +1.202.572.9400 Tel: +1.310.471.9118
Fax: +44.20.7242.9334 Fax: +1.212.471.6000 Fax: +1.617.218.3600 Fax: +1.202.572.9500 Fax: +1.310.471.5860
E-mail: london@sh-e.com E-mail: newyork@sh-e.com E-mail: boston@sh-e.com E-mail: washington@sh-e.com E-mail: losangeles@sh-e.com
34