Airbus Global Aviation Market Forecast 2015

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Global Market Forecast

2015 2034

Flying by Numbers

Global M

arket Forecast 2015 2034

Flying by Numbers001

Introduction

For this year’s Global Market Forecast we have chosen the theme of equations and numbers. It seemed appropriate as the economists and data analysts working on Airbus’ forecasts spend much of their day either searching for and evaluating new, complementary and relevant sources of data; then trying to find ways to use these numbers more effectively to improve the reliability and validity of our analyses and forecasts. They rely daily on equations and ever more capable software tools to achieve this.

But more than this, a key part of their work is to check and challenge the methodologies used and the analyses produced against real World behaviours of passengers and airlines alike. Their aim is to identify a market-based vision of air transport over the next 20 years backed up by rigorous data, clear graphics and industry insight.

The numbers resulting from our equations will in time become real passengers and aircraft, and their worldwide flows will drive aviation infrastructure and investment.

It may sound a little geeky to quote the philosopher and mathematician Plato, but he got it right when he said “A good decision is based on knowledge and not on numbers” Our aim is to apply knowledge to numbers and through the GMF to share this with you.

We hope that you find the 2015 Global Market Forecast informative and useful. We seek to improve our analyses continually, and your questions, challenges and suggestions help us advance towards that goal. Don’t forget you can download our App in several formats from tablet to smartphone. It complements the forecast and includes our thoughts in an interactive format.

As usual this is best read on an aeroplane, perhaps taking advantage of the quiet, smooth comfort of your next A380 flight. Enjoy!

“WE ARE FOCUSED ON OUR LONG-TERM FUTURE MORE THAN EVER BEFORE.”Fabrice Brégier CEO Airbus

002Flying by Numbers

Flying by Numbers003 004Flying by Numbers

Network and traffic forecast028

P.030 Network DevelopmentP.038 Traffic Forecast

Freighterforecast102

P.104 Air Freight

Demand for air travel

010

P.012 EconomyP.020 Market Drivers

Demand by region

058

P.060 Asia-PacificP.066 Europe

P.072 North AmericaP.078 Middle East

P.084 Latin America & CaribbeanP.090 CIS

P.096 Africa

Summary &methodology

110

P.113 Summary of resultsP.118 Passenger methodology

P.124 Freight forecast methodology

Executive summary004

Demand forpassengeraircraft 046

P.048 Aircraft Demand

Executive summary


CONTEXT

The benefits of aviation reach more of the World’s people every year, as wealth grows, deregulation continues, particularly to and from the World’s developing markets, and Visa requirements and processes simplify. As well as benefiting individuals, countries, regions also profit. In Europe for example ACI recently stated that aviation represents 4.1% of European GDP and nearly 12 million jobs. According to ICAO, some 3.2 billion passengers used air transport for their business and tourism needs in 2014, up approximately 5 per cent compared to 2013. Aircraft departures reached 33 million globally during 2014, a record, surpassing the 2013 figure. Solid global economic growth and improving World trade helped World scheduled passenger traffic (revenue passenger-kilometres or RPKs) grow at a rate of 5.9 per cent in 2014, this compared to 5.5 per cent in 2013, above the long term trend.

Demand is being met through more of latest technology aircraft, and by airlines striving to increase their efficiency by filling every available seat, with average load factors now close to an impressive 80%. On ground this would be like seeing every car on the road with four of their five seats filled. Airlines continue to work with manufacturers to use every available centimeter in the aircraft to maximise operational efficiency and revenues. All this whilst providing the service that customers demand in terms of schedules, comfort and ticket price. Airports are also key, growing to meet origin and destination demand, which for international flights is relatively concentrated. Today, forty seven Aviation Mega-cities focus over 90% of long-haul flights and nearly a million passengers a day. Growing demand to these cities generates its own challenges, with thirty-nine of the forty-seven experiencing various levels of congestion. Larger aircraft including the A380 have been part of the solution, freeing up frequencies to allow new operations, and adding to airline efficiency by lowering the cost per passenger flown.

It is forecast that aviation will continue to grow, this being both an opportunity and a challenge.The challenge for manufacturers will be to continue to reduce the environmental impact of flights in the years to come, and to give airlines the tools they need to meet the demands of both their passengers and stakeholders. The Airbus Global Market Forecast is one of the tools Airbus uses to meet this challenge, a piece of analysis used to inform its day to day decision making, from production rates to product policy deliberations.

Airbus forecasters take the best macro-economic and operational data and combine it with a forecasting methodology developed over 20 years, performing more than 200 traffic flow forecasts, modelling over 300,000 Origin and Destination (O&D) city-pairs and analysing demand from nearly 800 individual airlines in order to deliver the forecast.

DEMAND FOR MORE THAN 32,500 NEW AIRCRAFTPassenger aircraft (≥100 seats) and jet freight aircraft (> 10 tons)

Converted

Remarketed & stay in service

31,781

32,585

1,552

3,968

804

11,834

13,135

1,301

PassengerFleet

NewDeliveries

Retired

FreighterFleet



DELIVERIES AND THE FLEET

Total new deliveries, both passenger and freighter aircraft are expected to be close to 32,600 aircraft. Nearly 14,000 passenger aircraft will be retired or converted to freighter, to be replaced with more fuel efficient latest generation aircraft. Most deliveries are forecast for Asia-Pacific with 39% of the demand, or nearly 12,600 aircraft. North America and Europe, more mature markets, will still require 11,900 aircraft (37% of total deliveries) to meet their airlines’ needs. Combining replacements and the passenger aircraft needed to meet forecast traffic growth, the fleet is expected to more than double to more than 35,000 aircraft by 2034.

SINGLE-AISLE: 70% OF UNITS; WIDE-BODIES: 55% OF VALUEPassenger aircraft (≥ 100 seats) and jet freight aircraft (>10 tons)Source: Airbus GMF 2015

NEW AIRCRAFT DEMAND PASSENGER AND FREIGHTERS

HIGHLIGHTS

The ability to effortlessly fly anywhere in the World is often taken for granted; it is only if we tries to imagine the World without aviation that its impact can start to be realised. Over the next 20 years our forecast suggests that more people from the emerging economies will want take the benefits of aviation. Asia-Pacific is often cited, but people including those from Africa, and Latin America will also have greater access to flying both economically and physically. When they fly they will likely be most familiar with single aisle aircraft types like the A320 family and the 737. Over the next 20 years 70% of new deliveries will be for this class of aircraft. Long-haul travel will continue to be characterised by larger aircraft like the A330, A350 and A380. Twin-aisle types will represent a quarter of all new deliveries, but 44% of their value. VLAs like the A380 have the smallest share of deliveries at 5%. These aircraft are very visible today at the World’s greatest airports, and in the future will continue to provide the most efficient way of connecting the “big points”.

TRAFFIC

Since 2001, despite facing two of the worst downturns the commercial aviation industry has experienced, traffic measured in Revenue Passenger Kilometres (RPK’s) has grown a remarkable 85%. The factors which have led to this increase, including the emerging economies, tourism, and liberalisation, will continue to drive traffic growth. RPKs are expected to double again in the next fifteen years, and grow 145% to 15.2 trillion RPKs by 2034. Traffic to and from the more mature markets is forecast to grow, with flows such as Western Europe to the US growing 1.7 times over the next 20 years. The Domestic Chinese flow is expected to become the largest single traffic flow, growing nearly four times over this period, with the demographics and density of traffic requiring ever larger aircraft to meet the demand. International long-haul traffic is expected to grow faster than domestic and international short-haul traffic, with its annual growth rate 4.7% and its overall share of traffic growing to 45%.

New Deliveries

32,600GMF 2015-2034

20-year new deliveries of passenger and freighter aircraft

% units

% value

25%

43%

5%

12%

70%

45%

0

5,000

10,000

15,000

20,000

25,000

Very Large AircraftTwin-aisleSingle-aisle

22,900

8,100

1,600

2015-2024 2025-2034 2015-2034 SHARE OF 2015-2034 NEW DELIVERIES

AFRICA 460 657 1,117 3%

ASIA/PACIFIC 4,986 7,610 12,596 39%

CIS 577 711 1,288 4%

EUROPE 3,375 2,990 6,365 20%

LATIN AMERICA 1,111 1,399 2,510 8%

MIDDLE EAST 1,174 1,187 2,361 7%

NORTH AMERICA 2,972 2,572 5,544 17%

FREIGHTERS 463 341 804 2%

WORLD 15,118 17,467 32,585 100%


Demand for air travel

ALTHOUGH LEVELS OF GROWTH REMAIN DIFFERENT, THE REBOUND IS YET TO HAPPEN IN EMERGING ECONOMIES WHEREAS IT STARTED IN EARLY 2013 IN ADVANCED ECONOMIESSources: IHS Economics, Airbus* Gross Domestic Product (year-over-year quarterly evolution)

The World’s economy increased by +2.6% in 2014, up from +2.4% in 2013 and +2.3% in 2012. 2014’s “soft” economic growth resulted from the combination of slightly better than expected growth in most developed markets (especially in the US) together with disappointing growth in some emerging economies. This trend is expected to continue in 2015, as the economic growth rebound in emerging economies is yet to happen in a meaningful way, a rebound which started in early 2013, in advanced economies.

Economy-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

201620152014201320122011201020092008200720062005

Real GDP*(%)Advanced economies

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

201620152014201320122011201020092008200720062005

Real GDP*(%)Emerging economies

014Flying by NumbersFlying by Numbers013

However, the fundamentals are in place for the global economy to pick up in the short term, up to +2.8% in 2015 and 3.2% in 2016. Lower oil price, whilst maintained, and additional monetary stimulus (particularly in Japan, Europe and China) will not only support growth, but could provide the basis for some upside surprises.

Over the long term, the global economy is expected to grow steadily thanks mainly to more aggressive businesses investment, which itself is fuelled by accumulated pent-up consumption demand in developed and emerging economies.As a result, the pace of growth is projected to be strong over the next 20 years, averaging +3.2% yearly average for the real GDP and +4.3% for the international trade.In 2014, passenger air transportation has again shown its resilience despite the Eurozone’s soft recovery, ongoing Middle East and North Africa uncertainties, the Ukraine-Russia crisis and high oil prices throughout the year (Brent yearly average at $99/bll, down “only” 8% compared with 2013):

• +6% estimated yearly traffic growth (in RPKs)

• increase in passenger load factor estimated at 0.3 percentage point in 2014 reaching the record level of 80%, on average globally, and up to 85% for domestic US

Last year provided a much more supportive demand environment for the air freight market thanks to improvements in business confidence and a pick-up in World trade growth. This led to encouraging overall freight traffic results in 2014:

• +4.5% yearly traffic growth (in FTKs)

• increase in freight load factor estimated around 1 percentage point in 2014 (up to 46%)

Many factors can explain the strong development of the air transport over the last 40 years (more liberalisation, ticket price reduction…) but the most important has been economic growth which has allowed air transport to become affordable for many more people. As a result, one interesting ratio to consider is the relationship between economic growth and air transport growth or simply put: what percentage of air transport growth comes from what level of economic growth? Looking at this evolution over time, it appears this ratio has changed, from 3.1 in the seventies (every percent of economic growth translated on average throughout the decade into +3.1 percent of passenger air transport growth), down to 1.9 in the eighties, 1.8 in the nineties and 1.4 from the beginning of this century.

It is also interesting to note that the regular decrease of the air transport and economic growth ratio was suspended beyond 2010, and has in fact increased up to 2.1 since the beginning of the decade. It is still too early to draw firm conclusions, but this evolution could mean additional potential for the air transport development. One of the explanations could be the recent development of Low Cost Carriers now common globally and helping to stimulate air transport.

Another explanation could be the growing reliance of World economic growth to its private consumption component. World private consumption is expected to grow at a +3.1% compound average growth rate over the next 20 years. This means it would represent 58% of the World economy by 2034, this compares to 27% for fixed investment and 15% for government consumption.

Private consumption

TO SUPPORT

58%OF THE WORLD ECONOMY BY 2034

Air transport and economic growth ratio

3.1% IN THE 70’s

1.9% IN THE 80’s

1.8% IN THE 90’s

1.4% IN THE 00’s

2.1% IN THE 10’s

20,000

10,000

30,000

40,000

50,000

60,000

70,000

80,000

20342030202520202015201020052000

0

History

World privateconsumption

Forecast

Billion real $2010

+2.6%CAGR*20002014

+3.1%CAGR*20142034

WORLD ECONOMY GROWTH MORE AND MORE RELIANT ON PRIVATE CONSUMPTION GROWTHSources: IHS Economics, Airbus* Compound Annual Growth Rate

Growth (%)

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

2015201020052000199519901985198019751970

70’s: 3.1%

80’s: 1.9%

90’s: 1.8% 00’s: 1.4%

10’s: 2.1%

DESPITE “SOFT” ECONOMIC GROWTH AFTER THE 2008/2009 FINANCIAL CRISIS, PASSENGER AIR TRANSPORTATION GROWTH REMAINED IMPRESSIVESources: ICAO, IHS Economics, Airbus

Air traffic growth to real GDP economic growth ratio

Air traffic (RPKs)

Real GDP


But emerging economies have not been immune from the difficulties facing the global economy. Since the financial crisis in 2008-09 and the subsequent European debt crisis, the consumer demand on which these economies depend has substantially weakened and the sluggish global economy has produced a downward pressure on the exporters in the emerging markets.

In the past decade, a number of emerging economies have enjoyed rapid economic growth, supported by exports and investment. As international trade proliferated in the late 1990s into the new century, these economies positioned themselves as labour-intensive destinations because of their low labour costs and abundant workforces, providing a competitive advantage in becoming successful export-led economies.The subsequent high level of accumulated capital derived from exports has been invested in infrastructure improvements, spurring greater industrialisation and increased productivity. China is often cited as the prime example of this export-led growth model, a model that has successfully contributed to an average annual GDP growth rate above 10% for the last decade.

Emerging markets

TO REPRESENT

43%OF THE WORLD PRIVATE CONSUMPTION BY 2034, UP FROM

31% CURRENTLY

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20342030202520202015201020052000

History Forecast

31%

43%

Share of private consumption (%)

20142015

Brent oil price (US$ per bbl. in constant 2015 $s)

History Forecast

0

20

40

60

80

100

120

140

160

203520302025202020152010200520001995

This reliance on consumer demand in the developed markets and the inherent vulnerability to any slump in mature economies are why emerging economies are seeking to move away from an export and investment-led growth model to one focusing on greater domestic spending. Policy makers in the emerging markets are well aware that the conventional export-led growth model used by Asian economies in the past is unlikely to be sustainable over the longer-term and that economic growth increasingly needs to come from domestic consumption.

The weight of the contribution of private consumption contribution to the economies of emerging countries is still quite low in relative terms. For example, China’s household consumption accounts for just 36% of its GDP, while household consumption in the US, UK, Germany and Japan accounts respectively for 68%, 64%, 55% and 60% of GDP. Policy makers in emerging markets have already taken

steps to adjust their growth models toward more domestic consumption-centric economies. As a consequence of this rebalancing, it is expected that private consumption in emerging markets will rise from 31% of the World private consumption currently to an estimated 43% by 2034.Recent oil price declines (oil price halved in the six months from July 2014 to January 2015) have given consumers more purchasing power, which is expected to directly stimulate short term private consumption. This new oil price reality materialised due to the continued success of US tight oil production, OPEC’s position, and “soft” global economic growth hence refined product demand. Oil prices could potentially remain at the current relatively low levels for some time, providing geopolitical tensions remain manageable. In the very long term, the view that high oil prices are necessary to incentivise new development and replace “cheap” conventional oil production declines remains part of oil price’s outlook.

Oil prices

IN THE LONG-RUN, GROWING OIL DEMAND AND LIMITED RESERVES ARE EXPECTED TO BRING PRICES BACK TO THEIR TREND LEVELS

PRIVATE CONSUMPTION TO BECOME A MORE IMPORTANT GROWTH DRIVER IN EMERGING MARKETSSources: IHS Economics, Airbus

SHORT TO MEDIUM TERM FORECASTS HAVE BEEN REVISED DOWNSources: IHS Energy, Oxford Economics

Advanced economies

IHS Energy

Emerging economies

Oxford Economies (2015)


The plunge in oil prices represents a transfer from oil producer countries to oil consumers (estimated at $2.1 trillion) and is expected to support a long-awaited acceleration in global economic growth, raising real GDP growth by about a half percentage point in 2015. The big beneficiaries include the United States, the Eurozone, Japan, China, India and many oil-importing countries of Asia, Central Europe and East Africa.

However, lower oil prices translate into revenue losses for oil companies and governments in oil-producing countries. The net positive impact on the global economy reflects the tendency of oil-importing countries to spend a larger share of their “windfall” than oil-exporting countries. The end result will be a pickup in global economic growth from 2.6% in 2014 up to 3% in 2015.

The air transport industry has gone through many “shocks” over time, economic (Asian crisis in 1998, “subprime” crisis in 2008…), geopolitical (oil crisis in 1973 and 1979, gulf crisis in 1991, 9/11 in 2001…), climatic (earthquake, tsunami or volcanic eruption…) or pandemic (SARS in 2003, H1N1 swine flu in 2009, Ebola in 2014). These “shocks” impacted the economy and in some cases people’s willingness to fly, hence an impact on air traffic and airline results at local, regional or worldwide levels. However, despite these shocks, air transport has demonstrated its extraordinary resilience over time, with none of these events having long term impact. In fact passenger air traffic has quadrupled

over the last 30 years, growing at a 5.3% compound average growth rate since the 70’s. This has been possible thanks to the development of emerging markets over time and wealth becoming more evenly distributed globally. Twenty years ago, 70% of the World’s population represented less than 10% of the global wealth. This has evolved to around 20% currently, this share is expected to reach more than 30% over the next 20 years.

Air transport has become much more diversified over time. Again twenty years ago, 70% of the World’s population accounted for less than 10% of the World air traffic.

This has evolved to around 20% currently, with this share expected to reach 30% over the next 20 years.

Air transport is fortunate that its benefits and structure have enabled it to weather these difficult periods. But in addition to these, it has been the people and the businesses in the industry that have always managed to find innovative ways to deliver airline services, materials, parts, and aircraft to the World, despite the challenges they faced, and doubtless will continue to in the future.

Oil prices

DECREASE COULD STIMULATE WORLD REAL GDP GROWTH BY ABOUT AHALF PERCENTAGE POINT

IN 2015

3.52015 real GDP growth (%)

$80-$90 $60-$70* $40-$50*Brent oil price

3.0

2.5

2.0

Range uncertainty

Range uncertainty

World population* (%)

World GDP*(%)

100%

90%

80%

70%

60%50%

40%

30%

20%

10%0%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

World population* (%)

World traf�c*(%)

100%

90%

80%

70%

60%50%

40%

30%

20%

10%0%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

By 2034

70%OF THE WORLD’S POPULATION EXPECTED TO REPRESENT MORE THAN

30%OF THE WORLD’S WEALTH (TO COMPARE WITH LESS THAN

10% 20 YEARS AGO)

By 2034

70%OF THE WORLD’S POPULATION EXPECTED TO REPRESENT ALMOST

30%OF THE WORLD’S TRAFFIC (TO COMPARE WITH LESS THAN

10% 20 YEARS AGO)

THE LOWER THE OIL PRICE IN 2015, THE HIGHER THE GLOBAL ECONOMIC GROWTHSources: IHS Economics, Airbus*IHS baseline for 2015 real GDP growth

AIRLINE PROFITABILITY, TIME FOR A NEW ERA?Sources: ICAO, IATA, Airbus

WEALTH INCREASINGLY DISPERSED WORLD-WIDESources: IHS Economics, Airbus* on a country basis => each point represents one country

AIR TRANSPORT INCREASINGLY DISPERSED WORLD-WIDESources: IHS Economics, Airbus* on a country basis => each point represents one country

2015 airline profitability

EXPECTED TO REACH

US$50 BILLIONWHICHCORRESPONDS

TO A 7%OPERATING MARGIN

As a consequence of an improving economic outlook in conjunction with lower oil prices, airline profitability is expected to improve again in 2015 in all regions as shown into last IATA June 2015 “Economic performance of the industry”:• $50.1 billion record operating profits expected in 2015, up from

$33.9 billion in 2014 (and $25.3 in 2013)• 6.9% operating margin up from 4.6% in 2014 (and 3.5% in 2013)

-20

-10

0

10

20

30

40

50

2015 F201020052000199519901985198019751970

Airline pro�tability, looking good

1994

1994

2014

2014

2034

2034



MarketDrivers

Air traffic forecasters use different types of indicators to explain how air traffic growth has been achieved:

• Economic, as described in the previous chapter.

• Demographic: population growth, urba-nisation and middle class development in emerging countrie s.

• Greater connectivity between people/ regions: efficient mobility, network deve-lopment and airports capacity increase, indirectly stimulating the economy through infrastructure investments and the business they attract.

DOMESTIC>2 billion

Statistical discrepancyand ‘excursionists’

Tourists travellingby air ~500 million

(>50% of total)

NUMBER OFINTERNATIONALTOURISTS >1 billion

Leisure~50%

VFR~30%

Business~15%

(round-trips)

INTERNATIONALTRAFFIC>1 billion

Short-haul~70% ~30%

Long-haul

Almost 1/3 of the number of passengers in the World

USA

~650 million

China

~350 million

other Domestic

~1billion

WORLD AIRPASSENGER

TRAFFIC >3 billion

CONNECTIVITY

DEMOGRAPHY

AIR TRAFFIC

ECONOMY

MOBILITY IN 2014Tourist: overnight-stay visitorLong-haul: GC distance > 2,000 NMSources: UNWTO, Sabre GDD, OAG, RITA, CAAC


LIBERALISATION AND GLOBALISATION HAVE DRIVEN WORLD TRAFFIC GROWTHSources: ICAO WASA database, Airbus

CORRELATION BETWEEN THE MIGRANTS AND THE NUMBER OF AIR PASSENGERSSources: UNPD, Sabre GDD, Airbus

GLOBALISATION FOR PEOPLE HAS NOT REACHED ITS FULL POTENTIALMigration data: only available are 1990, 2000, 2010, 2013. Extra/Interpolation for the other years.Sources: UNWTO, UNPD, IHS Global Insight, Airbus

DISTRIBUTION BY TRIP PURPOSE IN 2013Sources: UNWTO, Airbus

IMPACT OF THE CHINA-ASEAN AIR TRANSPORT AGREEMENTON THE NUMBER OF SERVICESLCC: AirAsia, Cebu Pacific, Citilink, Jetstar, PAL Express, Scoot, Spring Airlines, TigerAirSources: OAG (September data), Airbus

More than 3 billion scheduled and non- scheduled passengers took a flight in 2014, almost half of the World’s population. Around two billion of them took a domestic flight, led by the USA (~650 million) and China (~350 million), together representing almost one third of global passengers. In addition, more than a billion passengers flew internationally. The internationalisation of air transport has been made possible by a greater co- operation between nations, illustrated by the number of bilateral air service agreements between countries, which has gradually increased to more than 2,500 Worldwide by 2014.

Internationalisation has also occurred at the global level. International long-haul (>=2,000 NM) traffic has grown faster than short-haul over the last ten years, to reach 30% of all international passengers.

The United Nations World Tourism Organisation (UNWTO) recorded more than a billion international tourists in 2014, more than 50% of these carried by plane. UNWTO classifies the purpose of tourist trips in three main categories:

• Holidays, recreation and other forms of leisure (52% of international tourists).

• Business and professional purposes (14%).

• Religious reasons, health treatment and/or visiting friends and relatives (27%).

Visiting friends and relatives (VFR), a travel category in its own right, is often thought as particularly resistant to crises, simply because people like to meet the people closest to them in person. Data analysis also confirms a large correlation between international migration and the number of air passengers in the World.

0

500

1,000

1,500

2,000

2,500

3,000

20102005200019951990198519801975197019651960195519501945

Number of bilateral air services agreements in the WorldNumber of air passengers (Origin-Destination) (million)

Distance distribution of international migrants and air passengers in the World, in 2014

Origin-destination distance (km)

Migrants (million)350

300

250

200

150

100

50

0

70

60

50

40

30

20

10

00 1,000 3,000 5,000 7,000 9,000 11,000 13,000 >15,000

Evolution of trade, tourism and migration

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20142012201020082006200420022000199819960%

5%

10%

15%

20%

25%

30%

35%Share of international trade in World GDP (right axis)

Share of international touristsin World Population (left axis)

Share of international migrantsin World Population (left axis)

More than

2,550BILATERAL AIR SERVICE AGREEMENTS BETWEEN MORE THAN

170 COUNTRIES, ALMOST 15,000 POSSIBLE COUNTRY-PAIRS

Number of airport-pairsBETWEEN CHINA AND ASEAN DURING 2009-2014

x2

At the regional level, higher integration of countries in parallel with the development of short-haul airlines have stimulated air traffic development. This is shown for example by the multi-lateral agreements between China and ASEAN in 2010, where the number of airport-pairs between the two areas has doubled in four years.

52%

7%

27%

14%

Leisure

Business

VFR

Non-specified

The United Nations Population Division (UNPD) stated there are more than 230 million international migrants in the World, which represents around 3% of the World population. Other studies suggest this number could be even higher. A recent Gallup survey, conducted in 154 countries between 2010 and 2012, has estimated the potential number of permanent adult migrants in the World, at about 13% of the World population.

The globalisation of human beings is not as complete as the globalisation of merchandise and capital. Significant improvements in terms of international mobility may be achieved in the future, to the benefit of countries’ economies and air transport. As an example, the facilitation of visa procedures between China and the USA has stimulated air passenger traffic between the two countries.

Regularly served airport-pairs between China and ASEAN

2009

2014

78 Airport-pairsLCC MARKET SHARE (ASK): 18%

156 Airport-pairsLCC MARKET SHARE (ASK): 29%

Number of air passengers (left axis)

Migrant stock (right axis)



Net migration in current and future aviation mega-cities, in 2014

-100

-50

0

50

100

150

200

250

300

350

8580757065605550454035302520151050-2%

-1%

0%

1%

2%

3%

4%

5%

Annual number of tourists between China and USA (million)

0.0

0.5

1.0

1.5

2.0

2.5

201220112010200920082007200620052004200320022001200019991998

One variable that is used to describe aviation growth is population. Not a surprise perhaps, the more people there are the more potential air passengers. Between 1950 and today, the World’s population almost tripled, now totaling more than seven billion people. Due to a demographic boom, Asia-Pacific has been the biggest contributor, accounting for more than 50% of global population growth between 1950 and 2010. Due to productivity improvements in the agricultural sector leading to a rural exodus in many countries, but also more recently thanks to organic growth of cities. Increasing urbanisation has been observed globally over the last

The largest metropolises have become “global cities”, the traditional destination for international migrants, and where international community areas develop. Among the 91 current and future aviation mega-cities, cities visited by more than 10,000 international long-haul (>=2,000 NM) air passengers per day, data shows that 80% of them had positive net migration rates in 2014 (domestic and international migration combined). Urban agglomerations are an example of more efficient societies, provided negative externalities such as congestion and pollution are efficiently managed: they concentrate activities in a relatively small area, provide economies of scale, lower transportation costs and enable the dissemination of goods and services.

70 years: 30% of the World’s population lived in urban agglomerations in 1950, with more than 50% today. In their baseline scenario, analysts from the United Nations Population Division expect global population to increase by more than 30% to 2050; growing at a slower pace than in the past, as most of the regions have now started their demographic transition. The only exception to this rule is Africa, whose young and quickly growing population will more than double by 2050, reaching 2.4 billion, and contributing 50% of the World’s population growth between 2010 and 2050. They also project urbanisation to continue, with two

thirds of the World’s population expected to be living in urban agglomerations by 2050. Asia-Pacific will remain the main contributor as many of its countries have relatively low levels of urbanisation today, accounting for more than 50% of the World urban population growth to 2050, followed by Africa, contributing by more than 30%.

2009 -2012

x3

Visitors from China to the USA

A HIGH GROWTH IN NUMBER OF CHINESE VISITORS TO THE USA IN THE RECENT YEARSSources: UNWTO, US Department of State, Airbus

AVIATION MEGA-CITIES STILL ATTRACTIVE FOR MIGRANTSDomestic and international migrants included.Sources: Oxford Economics, Airbus

Visitors from China Visitors from USANet migration volume (thousands)

Share of city populationNon-immigrant visas issued


World population evolution and share of urban agglomeration evolution (billion)

0

1

2

3

4

5

6

7

8

9

10

205020402030202020102000199019801970196019500%

10%

20%

30%

40%

50%

60%

70%

80%

World population evolution, by region (billion)

0

2

4

6

8

10

20502040203020202010200019901980197019601950

Income distribution in selected areas

0%10%20%30%40%50%60%70%80%90%

100%

25,00020,00015,00010,0007,0003,5002,0001,0007505002001000

Infrastructure rating* in andvanced and emerging regions (1=low, 10=high)

0123456789

10

20182013200820031998

Airports capacity* utilisation in 2011 and 2020

0%20%40%60%80%

100%120%140%160%180%200%

307280260240220200180160140120100806040201

Maximum capacity utilisation

High-quality telecommunications, transport and energy infrastructure are necessary for urban agglomerations to fully benefit from the economic potential of urbanisation, to efficiently harness globalisation and to accommodate increasing international mobility. While the infrastructure in emerging markets is still lagging behind mature markets, they are rapidly catching up. On a scale from 1 (low quality) to 10 (high quality), the rating of advanced countries has been stable at around 9 over the last 15 years, the rating of emerging countries increased from 4 in 1998 to 6 in 2013, and is expected to reach 7 around 2020.

In the case of air transport, a lack of good airport infrastructure has at times prevented some cities from having access to the full benefits brought by aviation, not only emerging but also some advanced countries. Airport modernisation will be necessary to accommodate traffic growth in a sustainable way. In a recent study, Airbus estimated the airport capacity of more than 300 selected airports in Europe and in a number of emerging countries. From this it could be seen that a significant number of airports are already at more than 60-70% of their maximum capacity, already generating issues in terms of flight scheduling, especially during peak hours. Assuming that airport capacity remains the same until 2020, the GMF forecasts that in the region of 30 airports may surpass the 100% threshold, with 50 airports at more than 80% of their capacity.

It is important to point out however, that improvement in Air Traffic Management (ATM) systems have, up until now, allowed airports to surpass the theoretical 100% capacity utilisation in the past and we believe that advances in Air Traffic Management and aircraft operations increasingly facilitated by technology on board the aircraft over time will also help.

Urbanisation will continue to accompany air traffic growth. New potential air transport consumers from the middle classes will emerge from urban agglomerations, where workers are able to earn higher wages. Analysis of income distribution in aviation mega-cities compared to the World average confirm that the bigger the city, the larger the potential for consumption.

THE BIGGER THE CITY, THE LARGER THE POTENTIAL FOR CONSUMPTIONShare of total households earning more than each income threshold.Aviation mega-city: receiving more than 10,000 international long-haul passengers dailySources: Oxford Economics, Airbus

CONGESTION SLOWS THE PACE OF GROWTH AT SEVERAL AIRPORTS*2011 estimated capacity in more than 300 airports in several emerging countries and Europe**Airports ranked by 2020 capacity utilisationSources: Airbus Market Research and Forecasts

INFRASTRUCTURE QUALITY IN EMERGING COUNTRIES HAS INCREASED*Based on 35 emerging and 25 advanced major countries**Aggregating individual countries rating, weighting by GDPSources: EIU, Airbus

MORE THAN TWO THIRDS OF THE WORLD’S POPULATION WILL BE URBAN IN 2050Sources: UN Population Division, Airbus

THE WORLD’S POPULATION IS EXPECTED TO REACH 9.5 BILLION IN 2050Sources: UN Population Division, Airbus

World average

2011 capacity utilisation

Advanced

Aviation mega-cities

2020 capacity utilisation

Emerging

Africa

Rural

Asia-Pacific

Urban

Latin America

Middle East North America

Europe

CIS

Urban share

Network and traffic forecast

Network Development

Over the past ten years air traffic has continued its strong growth. In spite of the major financial crisis in 2008, available seats increased by 57%. In 2014, the growth rate for passenger traffic was 6%, one of the strongest periods of growth since the beginning of the decade.

MORE TRAFFIC, MORE SERVICES

To support the increase in demand, airlines around the World have responded by developing their networks. Service was extended to new airport pairs, and more airlines started flying on existing routes. Combined, services offered to air travellers have expanded by 31 percent, nearly a third, since 2004.

Most of this growth has come from the 26 percent increase in the number of city pairs connected by air, while additional airlines on existing routes contributed five percent.

More services

SINCE 2004

+31%

DESPITE A MAJOR CRISIS IN 2008, AIRLINES HAVE OFFERED MORE SERVICES* TO THEIR CUSTOMERSNote: as of September*Service is defined as a new airport pair or a new airline operating an existing airport pairSources: OAG, Airbus

Base 100 in 2004

80

90

100

110

120

130

140

150

160

170

201420122010200820062004

ASKs: +57% Services: +31% City pairs: +26%



According to our forecast, by 2034, almost 8,700 new services will be offered to passengers compared to today. These new routes will represent 18% of total RPKs in 2034, with the majority of growth therefore developing on today’s routes.

2014-2034 NEW SERVICESSource: Airbus


MORE TRAFFIC, BIGGER AIRCRAFT

In parallel to the development of air services, airlines are increasingly using larger aircraft. Over the past ten years, the number of seats per flight has grown by 20 percent, the highest ten-year increase since the seventies.Average aircraft size varies greatly by an airline’s region of domicile. Middle Eastern carriers on average use the largest aircraft, with an average 208 seats per flight. At the other end of the spectrum with significant domestic and intra-regional flying are North and Central America with 102 and 88 seats respectively.

Bigger aircraft

SINCE 2004

+20%SEATS PER FLIGHT

Middle East aircraft size

x2NORTH AMERICAN AIRCRAFT SIZE

Airport congestion

10,000MONTHLY LANDINGS PER RUNWAY AT LONDON HEATHROWAIRCRAFT SIZE IS DIFFERENT FROM REGION TO REGION

Note: as of September 2014Sources: OAG, Airbus

MONTHLY LANDINGS AT TOP 100 AIRPORTSNotes: Square size: ASKsSquare colour: nr of landings per runway Sources: OAG (September 2014), Airbus

0 50 100 150 200 250

Central America

North America

Paci�c

Africa

Latin America

C.I.S.

Europe

People Republic of China

Indian Sub-continent

Asia

Middle East

Seats per �ights

208

183

155

154

148

133

130

122

120

102

88

AMS BKK PVG

ICN ORD

SFO

JFK

NRT

LAX

FRA

CDG

LHR DXB

GRU MAD CTU

ORY

KIX

LIS SHA

SZX

CLT

MAN

URC SAN

HEL HGH

CPH DUB

YUL GIG

LGW

MNL

DEN

MEXLAS BOS

DME JNB

SVO IAD

CKG DEL

ARN

BQG

SGN

DUS

PMI

LGA

PTY OS

L

FLL

CKG

LIM

SCL

CAI

BOM

HNL

RUH

XIY

TLV

BNE

FCO

MCO

BRU

BCN

YVR

MUC

MIA

MEL

IAH

AUH

SEA

CAN

DOH

EWRDFW

JED ZRH DTW

PHL

PHX MSP PER EZE VIE

KMG

MXP

DPS

AKL

TPE

YYZ HND

KUL SYD

ATL IST

HKG SIN

PEK

The trend towards larger aircraft is a result of airline efforts to become more productive through the transportation of passengers at a lower cost per seat. Increasingly, it is also a question of congestion, as more airports reach their limits in terms of slot capacity and air traffic management also becomes a constraint. At these airports, an increase in traffic is only possible by using larger aircraft in the short to medium term. For example at Heathrow, one of the busiest airport in the World, there was an average 10,000 monthly landings per runway in 2014.

AVIATION MEGA-CITIES, BIG TODAY, BIGGER TOMORROW

In 2014, five more urban centres became Aviation Mega-Cities – aviation hubs with more than 10,000 long-haul passengers daily. The largest is London, with 120,000 passengers – the only city today handling more than 100,000 long-haul passengers. Dubai, the main hub of the Middle East is second largest, with 98,000 passengers. However, 20 years from now, the ten largest aviation mega-cities will have daily traffic of

over 100,000. Together, these ten cities will transport 1.5 million long-haul passengers each day.

Four out of the five largest aviation mega-cities today are in the “advanced” World. In spite of lower growth compared to emerging countries, their traffic is expected to double – keeping them, together with Dubai, at the top of the list in 2034.

The next five cities are all in Asia. The largest Chinese hubs, Shanghai and Beijing will handle four times more traffic and it is estimated that they will become larger than London today. In 2034, there will be a total of 91 aviation mega-cities, almost twice as many as in 2014. Over four million long-haul travellers will travel to, from, or through these cities every day.

1,000 5,500 10,000

MORE PASSENGERS, MORE AVIATION MEGA-CITIESSource: Airbus

10,000 230,000

2014

2034

AVIATION MEGA-CITIES


PASSENGER TRAFFIC

A major enabler for economic development, air transport is also robust and traditionally recovers quickly following downturns. Due to the value people place on its benefits it is also a growth industry. Measured in RPKs, passenger traffic has increased by a third since the 2008 financial crisis, with an average annual growth rate of 5.8% over the last five years. Momentum continued in 2014, with traffic increasing by 5.9%, well above the long term trend.

Traffic Forecast

AIR TRAVEL HAS PROVED TO BE RESILIENT TO EXTERNAL SHOCKSSources: ICAO, Airbus GMF 2015RPK = Revenue Passenger Kilometer

World annual traf�c (trillion RPK)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

20142011200720032001199919951991198719831979197519711967

62%

OilCrisis

OilCrisis

GulfCrisis

AsianCrisis

FinancialCrisis

SARS9/11

62%GROWTH OVER THE LAST TEN YEARS

Air transport is a growth market


GLOBAL TRENDS

Passenger air traffic has doubled every 15 years since the early eighties. While the World endured various crisis episodes, difficult periods for the industry and those in it, the long term growth trend was quickly re-established. Today, solid growth drivers for the air transport industry are in place, with at its forefront the economic dynamism of emerging countries. With this underlying strength, demand is set to continue and is even expected to double again in the next 15 years. The Airbus 20 year forecast shows an expected average annual growth rate of 4.6%. This number

is the result of a strong first decade at a 5.2% average growth rate, with a slightly lower rate for the second decade, at 4.0%. However, this second decade still delivers nearly 25% more new traffic in absolute terms than the first 10 years.The growth of international traffic will be slightly higher than the growth on intra-regional and domestic flows. As a result, international long-haul traffic will still represent the largest share of the demand for air travel, accounting for 45% of the World RPKs.

EMERGING ECONOMIES DRIVING DEMAND GROWTH

Over the next twenty years, whilst traffic to and from the “advanced” aviation markets will continue to grow, traffic to and from today’s emerging markets will grow strongly both in terms of actual traffic and its share. In 2034, more than 70% of the RPKs will be flown from, to and between emerging regions.

TRAFFIC WILL DOUBLE IN THE NEXT 15 YEARSSources: ICAO, Airbus GMF 2015RPK = Revenue Passenger Kilometer

INTERNATIONAL LONG-HAUL TRAFFIC WILL STILL REPRESENT THE LARGEST SHARE OF TRAFFIC WORLDWIDESources: ICAO, Sabre GDD, Airbus GMF 2015Long-haul: O&D distance >2000 NM

EMERGING REGIONS WILL ACCOUNT FOR THE LARGEST SHARE OF ORIGIN AND DESTINATION TRAFFIC WORLDWIDESource: Airbus GMF 2015

Air Traffic Forecast

AIR TRAFFIC WILL GROW AT AN AVERAGE ANNUAL RATE OF

4.6%OVER THE NEXT 20 YEARS

Long-Haul demand leads the market

INTERNATIONAL LONG-HAUL TRAFFIC WILL CONTINUE TO REPRESENT ABOUT

45%OF THE WORLD RPKs IN THE NEXT 20 YEARS


0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

2034202920242019201420092004199919941989198419791974

Air traf�c has doubledevery 15 years

Air traf�c will doublein the next 15 years

ICAOtotal traf�c

AirbusGMF 2015

0

2

4

6

8

10

12

14

16

203420142002


23%

32%

45%

44%

32%

24%

ICAOtotal traf�c

AirbusGMF 2015

2014-2034AAGR

InternationalShort-Haul+4.5%

Domestic+4.5%

InternationalLong-Haul+4.7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20342014

Share of the World traf�c by type of �ow (RPKs) 2014-2034AAGR

+5.0%

+2.6%

+6.6%

34%32%

30%43%

36%

25%

Advanced - Emerging

Emerging- Emerging

Advanced - Advanced

EMERGING REGIONS WILL DRIVE WORLD TRAFFIC GROWTH

TRAFFIC FROM / TO / WITHIN EMERGING REGIONS WILL ACCOUNT FOR

70%OF WORLD RPKs

2034

2014-2024

+5.2%2024-2034

+4.0%

2014-2034+4.6%


LARGE MARKETS ARE FLOURISHING

In 2034, sixteen out of the twenty largest origin and destination traffic flows, will involve emerging regions. Domestic PRC traffic will become the largest market, growing nearly four fold by 2034. Some smaller markets will experience staggering growth: the domestic Indian market for example will grow nearly six fold over the next twenty years.

EVOLVING STRUCTURE OF THE AIR TRANSPORT MARKET

Sources: Sabre GDD, Airbus

Regional share of annual traf�c (RPK)

2004

41%

2014

51%

2034

62%

Europe

North America

CIS

Africa

Middle East

Latin America

2014

Asia-Pacific

2034DOMESTIC PRC WILL BE THE LARGEST O&D TRAFFIC FLOW IN 2034Source: Airbus GMF 2015

Annual O&D traf�c per �ow (billion RPK)

0 200 400 600 800 1000 1200 1400 1600 1800

Asia Advanced - Asia Emerging

Sub Sahara Africa - Western Europe

Middle East - USA

Australia & New Zealand - Western Europe

Central Europe - Western Europe

Indian Subcontinent - USA

Western Europe - PRC

Domestic Brazil

South America - USA

Asia Emerging - Western Europe

Western Europe -South America

PRC - USA

Indian Subcontinent -Middle East

Domestic India

Western Europe -Middle East

Domestic Asia Emerging

Western Europe - USA

Intra Western Europe

Domestic USA

Domestic PRC x3.8

x1.4

x1.7

x1.7

x3.7

x2.4

x5.8

x3.4

x4.1

x2.2

x2.4

x2.8

x2.9

x3.0

x3.8

x2.5

x2.4

x4.1

x2.5

x3.1

Asia-Pacific leading growth

HALF OF THE 2034 TOP TWENTY TRAFFIC FLOWS WILL INVOLVE ASIA-PACIFIC

NEW MARKET STRUCTURE

Relative convergence theory applies perfectly: the propensity to travel in emerging regions will progressively catch up with advanced economies and market size between the regions will converge towards the demographic share between regions. The pace of this process depends on the economic performance and the level of liberalisation in emerging regions. Unsurprisingly, Asia-Pacific will become the largest market by 2034, responsible for 40% of the World RPKs.


Share of World RPK traf�c by airline type

73%

4%4%

4%4%

17%

21%

1%

2%

70%2014

2034

LCC TRAFFIC GROWTH

Low cost carrier (LCCs) expansion is another aspect of the markets structure that will evolve. Low cost carriers are today present at a global level, at times with differing models and market penetration levels. Simple fleet structure, fast turnaround time, rationalised structural costs and a focus on ancillary revenues, enable LCCs to acquire market share and importantly open new routes and markets. LCC presence in a market stimulates growth. Another independent variable that can be used in forecasting traffic is airline yield, which in turn is driven by ticket price, a key tool in the LCC competitive tool box.

At a worldwide level, the rapid expansion of LCCs will potentially result in a market share of 21% in 2034, four points above the current the level. LCC penetration is the highest in the intra-regional market in Europe (nearly 40% of ASKs), domestic markets in Emerging Asian countries (nearly 60% of ASKs) and domestic markets in the Indian Sub-continent (nearly 65% of ASKs). Low cost carriers are also now beginning to expand in Africa and the Middle East.

ABOUT THE GMF TRAFFIC FORECAST

The aim of the Airbus GMF is to forecast the long-term evolution of the demand for air transport. Short-term downside and upside market variations due to potential future crisis episodes or favourable conditions are not directly visible in our results. However, we base our analysis on extensive historical data, which includes all of the difficulties experienced in the past. As a result of this and the methodology adopted, the long term trend we forecast in 2000 is in line with our latest forecast, despite the turbulence faced in 2001 and 2009. Clearly the traffic and revenues lost during these difficult periods are an issue for the industry, and businesses need to make sometimes difficult decisions to get through them effectively. However, demand for air travel is such that traffic has been seen to recover to the long term trend, even to that projected more than a decade ago.

LOW-COST CARRIERS EXPECTED TO BE THE FASTEST GROWING AIRLINES BETWEEN 2014 AND 2034Sources: Sabre, Airbus GMF 2015

CharterRegional and Affiliate Small Network

LCCGlobal & Major Network

GMF 2015

GMF 2008

GMF 2000

DESPITE “UPS AND DOWN”, GMF TRAFFIC FORECASTS TRACK THE LONG TERM TRENDSources: ICAO, Airbus GMF 2015

World annual traf�c (RPKs - trillions)

0

2

4

6

8

10

12

202620242022202020182016201420122010200820062004200220001998

GMF long term validity

GMF 2000 LONG TERM FORECAST IS STILL IN LINE WITH OUR LATEST FORECAST

Historical

LCCs will continue capturing market share

In 2034,LCCS WILL FLY

21% OF THE WORLD RPKS


Demand for passenger

aircraft

AircraftDemand

AVERAGE AIRCRAFT CAPACITY PER FLIGHT HAS INCREASED OVER TIMESources: Airbus, OAG September month for each year

130

135

140

145

150

155

160

165

170

175

2014201220072002199719921987198219771972

Average capacity per �ight, aircraft above 100 seats

Once passenger traffic demand has been determined through network development models and detailed traffic forecasts, this must be turned into a forecast of the types of aircraft, by seat segment, which will be needed to meet passenger and airline demands over the coming years. Other dynamic factors also must be considered these include aircraft replacement trends, developments in productivity (seats, speed and utilisation). These trends will help to determine aircraft demand. The good news is the historical trend in these areas have been positive helping to make the civil aviation industry increasingly efficient, important as the industry continues to grow in the coming years. Average aircraft size

for example is increasing, simply taking the average capacity per flight over time, aircraft size has grown on average from 139 seats to over 170 seats since the early 1970’s. A second period of average aircraft size growth is beginning with today’s backlog, airlines switching to larger variants from that originally ordered and manufacturer product development decisions, making it clear the future is larger aircraft from single-aisle types to twin-aisles. Whilst there will be new route opportunities, indeed thousands of opportunities are indicated from our analysis, by 2034, 70% of the global network growth and 80% of traffic will be centred on today’s routes.

Load factors have grown 17 percentage points over the same period to a yearly average of almost 80%, how many cars do you see with four of the five car seats filled. Airport connectivity has almost doubled, airport movements have more than doubled. Global access to aviation has never been greater. Whilst all in the industry are acutely aware that a balance must be met between the socio economic benefits of aviation verses the environmental cost, the more than 30% reduction in fuel burn per ASK in the last 15 years is evidence of or focus on meeting our widely stated environmental commitments for the future.

0

50

100

150

200

250

20142010200520001995199019851980

+46%

Avg. number of yearly offered seats per aircraft (thousands)

World passenger load factors (%)

50%

55%

60%

65%

70%

75%

80%

85%

20142010200520001995199019851980

+17pp

MORE PRODUCTIVE SEATS…Sources: OAG, Ascend, ICAO, Airbus GMF 2015

Yearly offered seats per aircraft

Load factors


AIRCRAFT SUPPLY

Having defined demand, most forecasters must then also consider supply, i.e. what aircraft type will actually meet this demand. This view is commercially sensitive as it defines an organisations view on market share and even potential new product offerings. Due to this sensitivity this view is purely internal, it is clear that the level of new product development seen in the last 10 years, the quality of those products and their respective significant backlogs will mean that in large part demand in the next

20 years will be met by these products and or their derivatives, either as new deliveries or “second hand” re-marketed aircraft.

Single-aisle and widebody products cover a staggering spectrum in turns of both capacity options and range of operation. Manufacturers have continued to strive to meet the individual requirements of airlines and their passengers. For the single-aisle these aircraft range from 100 to 240 seats, with the A321 offering this highest

seating configuration, with the possibility on the range side of flying 4000nm. For the wide-body types there is operational overlap with the single-aisle, with lower seating limits around 200 seats increasing to 600 or even higher with the A380.

This overlap has developed as the capability of both segments of today’s aircraft have grown, leaving already seamless coverage between the single-aisle and widebody markets.

THE IMPORTANCE OF THE “BIG POINTS”

It is expected that long-haul traffic will further concentrate around Aviation Mega-Cities. For example, since 2009 more than 80% of the total traffic to/from/within Latin America has passed through just 10 airports and in Asia-Pacific the top 20 largest airports are responsible for almost 50% of the total traffic.

At a global level today there are 47 Aviation Mega-Cities (AMCs) who account for more than 90% of long-haul passengers. As a result Very Large Aircrafts (VLA) like the A380 have become a common tool to relieve the effect of increasing airport congestion.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

60005600520048004400400036003200280024002000160012008004000

Share of global seats offered

Sector Length (nm)

Single-Aisle

Single-Aisle operates 15%of seats over 2,000nm

Wide-Bodies operates 10%of seats below 2,000nm

Wide-Body

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

203420242014

Monthly international long-haul passengers (Millions)

Long-haul, �ight distance >2,000nm, excl. domestic traf�c

WIDE-BODIES OFFER 10% OF SEATS OPERATED BELOW 2,000NM Note: September 2014Sources: OAG, Airbus

AMC to AMC

TO REPRESENT

77%OF ALL LONG HAUL TRAFFIC

Aviation Mega-City to Aviation Mega-City

Aviation Mega-City to Secondary City

Secondary City to Secondary City

Sources: Sabre (September 2014 data), Airbus


These Aviation Mega-Cities not only represent centres of air traffic but are also significant centres of wealth. According to IHS Global Insight, GDP per capita in AMCs is four times larger than the World average. This difference is even more evident within emerging economies where urbanisation is a key element of growth.

47AVIATION MEGA-CITIES

North America

Latin America

Africa

Middle East

Asia-Pacific

CIS

Europe+25%

+90%

+320%

+160%+290%

+300%

+60%

Aviation Mega-Cities a focus for Wealth

% Difference AMCs vs regional average

THE BIGGER THE CITY, THE WEALTHIER THE POPULATIONSources: Oxford Economics, UNPD, IHS Global Insight, Airbus GMF 2015


As a result of this concentration of wealth, unsurprisingly the number of premium passengers (first and business class) is higher than for other routings. For example, in 2014 14% of passengers between AMCs were premium passengers, where as for routes not including AMCs, this figure was just 8%.

Percentage of premium passengers on route types

0%

2%

4%

6%

8%

10%

12%

14%

16%

Secondary Cityto Secondary City

Aviation Mega-City<> Secondary City

Aviation Mega-Cityto Aviation Mega-City

14%

10%

8%

Share of each region

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

32%28%

21%

13%

9%

37%

5%

6%

10%

10%

10%

31%

4%

5%

12%

28%

6%

25%

4%3%2%

ROUTES BETWEEN AVIATION MEGA-CITIES HAVE HIGHER PERCENTAGES OF PREMIUM PAXSources: Sabre (September 2014 data), AirbusCities with more than 10,000 daily passengers, Long-haul, flight distance >2,000nm, excl. domestic traffic

NUMBER OF OPERATORS DURING 20 FIRST YEARS IN SERVICE HAS INCREASED OVER TIMESources: Ascend, Airbus

SOME REGIONS ARE CONCENTRATING 2ND-HAND AIRCRAFTSources: Ascend, Airbus

NOT EVERY AIRCRAFT DELIVERED IS NEW

A newly delivered aircraft can expect to have several owners over its 20 to 30 years life. It might be owned by several airlines, potentially from different continents, potentially with different business models. It might also be owned by leasing companies that today manage a significant share of the current fleet in service. Examining the current fleet in service, roughly one third of twin-aisle aircraft have an operating lease. This share is even higher for the single-aisle. almost half of these aircraft are owned by lessors.

As well as owners, their role may change during its life, converted for example into a freight or private/corporate role. Understanding the market and formulating future demand also needs an understanding of the aircraft aftermarket, a market that like other elements of our industry is evolving. For example 30 years ago an aircraft averaged two operators during the first 20 years of its life. Today, an aircraft averages three operators.

The reasons for this development include the fact that aircraft financing is more efficient, airline segmentation has increased with the emergence of a broad range of different airline business models, including low-cost airlines and seasonal charters. An aircraft is an asset that is even more liquid today than 30 years ago.

As well as difference between aircraft segments there is also regional variation. Comparing the share of used aircraft in each region shows that airlines in Europe, the CIS and Africa have been more active in taking multi-owned aircraft; North America for example, has a smaller share, possibly indicating a tendency to keep their aircraft longer.

Average number of operators

Average number of operators during the �rst

20 years of the aircraft life

1985 1990 1995 2000 2005 2010 2015Year of BuiltYear of Built +20

1.5

2.0

2.5

3.0

3.5

1995199019851980197519701965

CIS

Europe

Asia-Pacific

Africa

Latin America

Middle East

North America

Percentage of premium passenger on AMC

14%2014


1% 85%14%

7% 59%34%

1% 88%11%

2% 76%22%

GLOBAL NETWORK NORTH AMERICA

LCCs

OTHERS*

14,116 (44%) 5,544 (17%)

1% 79%20%

LATIN AMERICA & CARIBBEAN

2,510 (8%)

3% 75%22%

AFRICA

1,117 (4%)

16% 38%

46%

MIDDLE EAST

1,117 (7%)

2% 85%13%

CIS

1,288 (4%)

5% 66%29%

ASIA-PACIFIC

12,596 (40%)

3% 79%18%

EUROPE

6,365 (20%)

9,321 (29%)

8,345 (26%)

*Charters, Regional, Smalland Major network airlines

New deliveries by region

10%

47%43%

US$ 4.7 trillion

1,275

22,927

7,579

31,781 aircraft

New deliveries

Market value New deliveries by neutral category Fleet evolution

17,354

18,395

13,386

3,968Beginning 2015 2034

Growth

Replaced

Stay in service& remarketed

100 125 150 175 210 250 300 350 400 VLA

US$ 2.2 trillion

1,296

3,478

7,4596,872

3,822

2,5742,610

1,463932 1,275

US$ 2.0 trillion US$ 0.5 trillion

VLA

TA

SA

35,749


Demand by region

Asia- Pacific

ECONOMY

The region will be a major beneficiary of the decline in oil prices, for as long as they last, with for example China, Japan, India, and South Korea major net importers of oil. Weakness in prices of minerals and other commodities could however, less positively affect others in the region. Asia’s economic performance remains very dependent on exports, but domestic sources of growth, particularly private consumption, are expected to play a larger role in the coming years. Among emerging market regions, Asia-Pacific, will continue to have high economic growth. As in past, this is mainly due to the region’s combination of openness to trade, high domestic saving rates, and a relatively well-educated and disciplined labour force. Thanks to these favourable

TRADE AND IMMIGRATION DRIVING AIR TRAVEL GROWTHSources: WTO and UN data bank

factors, Asia-Pacific will continue to attract the bulk of global foreign investment flows heading to emerging markets. The region is also destined to become the World’s dominant manufacturing centre and the main consumer of non-oil primary commodities. The longer-term outlook for Asia’s potential growth depends crucially on the region’s ability to push through macro-economic policies aimed at boosting consumption and lowering savings rates. Asia-Pacific will continue to lead World economic growth, both in terms of real GDP with an average of 4.5% per year and in trade with an average of 5.3% per year, according to forecasts.

AIR TRAFFIC

Since the ‘90s, immigration within Asia- Pacific has grown rapidly, particularly from less-developed countries with greater labour surpluses to fast-growing newly industrialising countries. According to the United Nation (UN) data bank, there were almost 65 million immigrants from Asia-Pacific in 2013, of which 55% have moved intra-regionally within Asia-Pacific, 18% to North America and 16% to Europe. Likewise, according to World trade organisation (WTO) 43% of Asia-Pacific’s total trade in 2013 comes from within Asia-Pacific, 25% from the Middle East and another 22% from North America.Since both Trade and immigration are important drivers of air traffic, 55 % of Asia- Pacific’s total air traffic in 2014 was within Asia-Pacific. Intra-regional traffic will gain further importance in the next 20 years, reaching 60% by 2034.

Asia-Pacific

Middle East

Africa

Latin America

Europe

5%3% 3%

16%

18%

55%

Immigration fromAsia-Paci�c

Trade fromAsia-Paci�c

43%

22%

10%

0,4% 0,4%25%

North America


REGIONAL DIVERSITY

In addition to its vast historical and cultural diversity, countries in Asia-Pacific are also at various levels of economic growth. While, Australia/New Zealand and Asia developed countries will grow at an average rate of 1.5% and 2.9% per year respectively. Asia emerging, PRC and the Indian sub-continent will become the drivers of growth in the region, each forecast to grow at an average rate of 4.0%, 6.7% and 5.9% per annum respectively.

Asia-Pacific has experienced various levels of growth in low cost operations in recent years. The Indian subcontinent and Asia emerging LCCs have captured close to 65% and 60% of the total domestic traffic respectively, the market share of LCCs in Asia Developed and Aus/Nz have remained below 25%.LCC New operations in Asia Emerging have the benefit of less incumbency from existing airlines, benefiting from the growth in new flyers and developing liberalisation. On the other hand, within or between developed countries, the gap in terms of

product offering and business models between legacy carriers and LCCs has narrowed in recent years. The PRC however is an exception to this trend, where LCCs have captured above 10% market share intra-regionally and less than 5% domestically. There appears therefore to be opportunities for further development in LCC operations from, to, and within China, this would also serve to increase the connectivity between growing population centres within China and with the rest of the region.

Correspondingly, the rate at which air traffic has grown as well as the contribution of each sub region to Asia-Pacific’s total traffic has changed over the past 10 years. For instance, while, “Asia developed” delivered 39% of the total traffic to/from/within Asia-Pacific in 2004, today it accounts for 28% of the total traffic. Conversely, PRC has increased its share of the region’s traffic from 23% in 2004 to 31% in 2014.

The market share of the airlines operating specifically in each sub-region has followed a similar pattern, with airlines domiciled in the PRC increasing their market share from 26% of Asia-Pacific’s total Available Seat per Kilometre (ASK) in 2004 to 33% in 2014.

ASIA-PACIFIC TO GROW ABOVE WORLD AVERAGE, BUT AT DIFFERENT SPEEDSSources: IHS global insight, Airbus GMF

PRC HAS OVER TAKEN ASIA ADVANCED IN TERMS OF TRAFFIC VOLUMESources: OAG (Sept. data), Airbus

LCC’S CONTINUE THEIR DEVELOP- MENT IN ASIA-PACIFICIntra-regional: within Asia-PacificInter-regional: between Asia-Pacific and another region

LCC definition from Airbus GMF

Sources: OAG (Sept. data), Airbus

Real GDP average annual growth 2014-2024

Real consumption average annual growth rate (2014-2024)

8%

7%

6%

5%

4%

3%

2%

1%

0%0% 1% 2% 3% 4% 5% 6% 7% 8% 9%

World average

Asia Developed

Aus/NZ

Asia Emerging Indian Sub.

PRC

Evolution of traf�c volume (in billions of ASK)

0

20

40

60

80

100

20142013201220112010200920082007200620052004

Share of LCCs in 2014 by sub-region and type of market

0%

10%

20%

30%

40%

50%

60%

70%

Paci�cPRCAsia DevelopedAus./NzAsia EmergingIndian Sub

Asia DevelopedIntra-regional

Asia EmergingInter-continental

Aus/NZ

Pacific

Indian Sub.

PRCDomestic

9%

9%

7%

36%

27%

19%

2014

2004

17%

39%

25%11% 1%

1%

MARKET SHARE FROM, TO, AND WITHIN ASIA-PACIFIC BY AIRLINE DOMICILE AIRLINESources: OAG (Sept. data), Airbus

Asia Emerging

Asia Developed Indian Sub.

Pacific

PRC AUS/NZ

Airlines from PRC have increased market share from 25% to 36%


INDIA: DISPOSABLE INCOME + CONSUMPTION = AIR TRAVEL

India’s economy has accelerated quickly in the past two decades, with this evolution also evident in the spending power of its citizens. According to Oxford Economics, real average household disposable income has more than doubled since 1980 and it will continue to grow.With rising incomes, household consumption will further increase as will the number of Indian middle classes, estimates suggest the number of households with discretionary income (above $7,500 per annum) at 66 million households today. This number will treble to 180 million households by 2030. Households with disposable income of above $20,000 per year will represent 67 million which will be larger than the population of France.As the size of the middle income class grows, so will demand for air travel. The Airbus GMF forecasts passenger traffic to / from India to grow five fold in the next 20 years.

SPECIAL FOCUS ON CHINA

China’s three decades of rapid economic growth has moved millions of people out of poverty, and has established a thriving middle class. According to Oxford Economics. In 2014, China reported 90 million households with earnings above $20,000 per year, this is not dissimilar to the US where the number is 110 million households.By 2024, the number of households above this income bracket will grow three fold and will represent 300 million households.The various regions in China have contributed differently to this economic boom. The Eastern regions have witnessed most of the economic growth in the past, whereas the highest growth rate in the future will be in the Western region. For instance, Guangdong, Jiangsu and Shandong have reported a combined 1,630 billion USD in 2014, which represents 30% of China’s total real GDP. However, in terms of growth rates Western regions will experience higher rates within the next decade. This movement of economic activity westwards should be mirrored by aviation development, as cities in the centre and west grow and need improved transportation and connectivity with the rest of China and Asia. Aviation has demonstrated in the past that it is ideally suited for this purpose, being more cost and land effective than other mass transportation modes, not to mention the benefits of speed which are unmatched.

Household by income segment (millions of house hold)

28%

203020202014

Discretionaryincome

Basic needs

5276

114

60

27

19 17

7

2

1

20

13

Number of Households (in millions) earning above $20,000 annually

0

50

100

150

200

250

300

350

20242023202220212020201920182017201620152014

INDIAN MIDDLE INCOME TO GROW TO 174 MILLION HOUSEHOLDSSources: Oxford economics, Airbus

~300 MILLION HOUSEHOLDS IN CHINA WILL EARN ABOVE 20,000 A YEARSources: IHS and Airbus

CHINA DOMESTIC TRAFFIC IS MOVING WESTWARDSSources: IHS and Airbus

China

US

Emerging consumers ($7,500-$20,000)

Basic needs consumers (<$7,500)

High consumers (>$70,000)

Middle class consumers ($20,000-$70,000)

Number of new aircraft

New deliveriesby segment

6241,089

SmallTwin-Aisle

IntermediateTwin-Aisle

VeryLarge

Single-Aisle

2,554

8,329

Real Trade5.3%

Economy**

* Passenger aircraft ≥100 seats ** 2014-2034 CAGR

Intra-regional& domestic6.0%Inter-regional5.1%

Traf�c**

In 20155,275

In 203413,222

20 year newdeliveries

12,596

Totaltraf�c

5.6%

Real GDP

4.5%

Fleet in serviceFleet*

Replacement4,649

Stay in service & Remarketed 626

Fleet size*

2034

5,275

13,222

Fleet in serviceevolution

Beginning2015

Asia-Paci�c

6.0%

Africa

7.3%

NorthAmerica

4.9%

LatinAmerica

5.9%

MiddleEast

6.3%

CIS

5.9%Europe

4.4%

Domesticand

Intra-Regional Total RPKtraf�c growth

Asia-Paci�c

World

2014-2024 2024-2034 2014-2034

5.0%4.1%

4.6%

6.4%

4.8%

5.6%

New deliveries

12,596Growth7,947

Results RPK traffic growth from/toAsia-Pacific by region

7.5% - 8.0%

8.5% - 9.0%

8.0% - 8.5%

9.0% - 9.5%


Europe

ECONOMIC OUTLOOK

Whilst the Eurozone economy has had difficulty gaining momentum, consumer spending is accelerating. This together with some continued monetary stimulus through quantitative easing, euro depreciation, expanding export markets and low oil prices will all help support growth. In Central Europe, beyond near term deleveraging and structural reform priorities, it could be expected that a renewal of capital inflows, a rebound of exports and more robust domestic demand will help economic developments here.

Resilience

EUROPE’S AIR TRAFFIC GROWTH EXCEEDED ECONOMIC GROWTH OVER THE LAST TEN YEARS

Comparative growth of Europe GDP and ASKs from / to / within the region

-6%

-4%

-2%

0%

2%

4%

6%

8%

2014201320122011201020092008200720062005

EUROPEAN AIR TRANSPORT INDUSTRY GROWS FASTER THAN THE REGION’S ECONOMYASK = Available Seats KilometresSeptember operationsSources: OAG, IHS Global Insight, Airbus GMF 2015

Europe real GDPASK from / to / within Europe

NEEDS LEADING TO RESILIENCE

Air transport is a core industry in Europe. In 2014, it accounted for 4.1% of the region’s GDP, supporting more than 12 million jobs according to a recent ACI report. Europeans value air travel, inbound tourism is massive, and the industry adapts dynamically to the region’s diversity. All of these factors explain the resilience of European air transport. Despite stuttering economic performance in the Eurozone, ACI reported a 5.4% growth in 2014 in passenger traffic at Europe’s airports.

European airlines have proven to be creative in fostering growth over the past 15 years. Dynamic Low Cost Carriers, Global

mega-airlines and their alliances, with Europe now also benefitting from the emergence of various hybrid airline models. Traditional Full Service Carriers are creating subsidiaries with optimised cost structures, to appeal the budget travellers. Low Cost Carriers are adjusting their offer, choosing to refocus operations on primary airports, offering assigned seats and an increasing choice of “à la carte” services. Hybrid carriers are looking for the sweet spot, offering various levels of service; from the traditional, all inclusive travel to the minimum budget offer. In most cases, an efficient fleet and agile operations are the basis for profitability.

Monthly offered seats within Europe (millions)

0

10

20

30

40

50

60

70

80

2014201320122011201020092008200720062005200420032002200120001999

FSC: -1.0% Hybrid Carriers: +11.5%

LCC: +10.1%FSC low cost subsidiaries: +6.2%

EVOLVING BUSINESS MODELS SUPPORT GROWTHSeptember OperationsSources: OAG, Airbus GMF 2015

2009-2014 AAGR: +2.9%

Finding the sweet spot

EUROPEAN OPERATORS ARE ADAPTING THEIR OFFER TO MARKET DIVERSITY, LOOKING FOR NEW GROWTH DRIVERS


LAC65%

Worldwide60%

Asia-Paci�c36%

Africa58%

North America55%

A GIANT IN THE LONG HAUL MARKET

Thanks to its geographic positioning, strong tourism attractiveness and importance in the global economy, Europe leads the long haul market. 60% of the World’s long haul flights (over 6000km) depart or arrive in Europe.

It can only be expected that, as social and economic links between Europe and the emerging markets, the already extensive aviation network will grow, providing more opportunity to airlines both within the region and beyond.

EUROPE IS CENTRAL TO LONG HAUL AIR TRANSPORTNote: As of September 2014 All flights over 6000 km.Sources: OAG, Airbus GMF 2015 Heart of long

haul market

60% OF LONG HAUL FLIGHTS CONNECT TO EUROPE

DIVERSITY OF THE EUROPEAN MARKET

Europe’s average propensity to travel in 2014 was 1.2 trips per capita (US standing at 1.6 trips per capita). This figure hides a significant disparity of the propensity to travel across European countries. Many factors explain this diversity, such as the countries wealth, their geographical location, the dependence of their economy on international business, the development of the low cost carriers.The people of Western Europe for example are benefiting from aviation to a greater extent

than in Central Europe, with respective propensity to travel at 1.4 as compared to 0.4 trips per capita. Most of the European countries that present a lower maturity of the air transport market are experiencing robust economic growth. Over the next 20 years, we forecast that the passenger traffic from / to / within the region will grow at a yearly average rate of 4,6% in Central Europe, and 3.3% in Western Europe.

Share of long haul flights connecting to Europe


DIVERSITY OF THE EUROPEAN AIR TRANSPORT MARKET: PROPENSITY TO TRAVELNotes: Passengers originating from respective countryBubble size proportional to country populationSources: GDD, IHS Economics, Airbus

Propensity to travel

IN 2014, ON AVERAGE EACH EUROPEAN TOOK 1.2 TRIPS

SpainGreecePortugal

Turkey Italy

Bulgaria

SlovakiaRomania

PolandHungary

Czech Rep.France

Germany

UKIreland

Sweden

Norway

Switzerland

10.0

1.0

0.10 10 20 30 40 50 60 70 80 90 100

2014 trips per capita

2014 real GDP per capita(2010 $US thousands at Purchasing Power Parity)

O&D traffic growth forecast

CENTRAL EUROPE WILL HELP DRIVE THE REGION’S TRAFFIC GROWTH

EUROPE, A FOCUS FOR INTERNATIONAL TOURISM

Tourism is a major driver for European international traffic. As reported by the UNWTO, Europe attracted 588 million visitors in 2014, a 4% increase versus 2013. This represents nearly half of international tourisms total volume.Whilst three quarters of the visitors are concentrated in Western and Southern Europe, Northern European countries have experienced a solid 6.9% growth in 2014.

Share of international tourists arrivals

NorthernEurope14%

CentralEurope12%

SouthernEurope41%Western

Europe33%

Otherinternational

tourists arrivals

54%

International tourists

arrivals in Europe46%

EUROPE WELCOMED MORE THAN 500 MILLION TOURISTS IN 2014Note: 2014 estimates from UNWTO Sources: UNWTO, Airbus GMF 2015

Heart of international tourism

EUROPE CONCENTRATES NEARLY HALF OF INTERNATIONAL TOURIST ARRIVALS



156370

SmallTwin-Aisle


VeryLarge

Single-Aisle

787

5,052

Real Trade3.4%

Economy**



Traf�c**

In 20154,093

In 20347,208


6,365

Totaltraf�c

3.6%

Real GDP

1.7%


Replacement3,250

Stay in service& Remarketed 843

Fleet size*

2034

4,093

7,208


Beginning2015

Europe2.9%

Asia-Paci�c

4.4%

NorthAmerica

2.8%

LatinAmerica

3.5%

MiddleEast

4.6%

CIS

4.6%

Domesticand


Europe

World

2014-2024 2024-2034 2014-2034

5.0%4.1%

4.6%

3.9%

3.4%3.6%

New deliveries

6,365

Growth3,115

Africa

4.7%

Results RPK traffic growth from/toEurope by region

0.024 0.058


ECONOMY

Consumer spending sustained by strong employment growth, improved household finances, low gasoline price, housing market and capital expenditure recovery have helped drive US economic growth acceleration. Amongst mature advanced economies, North America will remain the growth leader thanks to a combination of favourable factors including abundant natural resources, highly developed financial institutions, rapid immigrant absorption, huge market size, science and technology leadership, and a tremendous capacity for innovation and entrepreneurship. US real GDP growth is forecast to average 2.5% per year in the 2014-2034 period, with greater business fixed investment and R&D spending offsetting the slowdown in labour force growth. By 2034, North America will still account for 21% of World economy (in real terms).

OUTSTANDING FINANCIAL RESULTS

North American airlines experienced their third consecutive year of increased profitability. Consolidation and lower fuel costs have contributed to record financial performance in 2014, accounting for 60% of the $19.9 net profit achieved worldwide. This represents more than $14 of net profit per passenger, almost double compared to 2013.

MARKET TRENDS

Source: Sabre, OAG, Airbus GMF 2015

0

2

4

6

8

10

12

14

20142013201220112010

Net pro�t ($ billion)

11.9

7.2

2.31.7

4.2

NORTH AMERICAN AIRLINE PROFITS INCREASING SINCE 2011Note: IATA forecast value for 2014Sources: ICAO, IATA, Airbus

North American airlines share of worldwide profit

2014 net profit

60%North America

SHARE OF LCCS IN DOMESTIC REGIONAL TRAFFIC

30%

SHARE OF CONNECTING ON LONG HAUL FOR REGION DOMICILED AIRLINES

73%

NUMBER OF MEGACITIES IN THE REGION IN 2034

18 INDEX OF COMPETITION BETWEEN AIRLINES ON ORIGIN

& DESTINATION LONG-HAUL TRAFFIC FROM/TO THE REGION

MARKET SHARE OF DOMICILED AIRLINES IN TRAFFIC WITH

OTHER REGIONS

0.67

56%


RENEWING AN AGEING FLEET

After decades of growth of the North American fleet in service in both single-aisle and twin-aisle segments, a decrease was observed during the 2000’s - a decade characterised by significant adverse events such as 9/11 or the 2008 financial crisis. During this period airlines applied strict capacity control to their operations to see them through these difficult periods. With the return of profitability since 2010, together with a favourable economic environment, a new era has begun with the increase of the number of single-aisle aircraft and the stabilisation of the number of twin-aisle servicing the market.

Together with positive developments in fleet size, there is also a trend towards the rejuvenation of the fleet, however, at the end of 2014, the average age of single-aisle and twin-aisle aircraft in the fleet is still around 12 and 15 years respectively against World average around 9 and 10 years. As a result, 50% of the North American fleet is aged 13 and above, a driver for the fleet replacement activity we have been witnessing in recent years is likely to continue.

CAPTURING THE UPCOMING TRAFFIC GROWTH

Solid economic perspectives, which stimulate business trips and purchasing power, together with a traditionally high propensity to travel will further highlight the North American market as one of the most important in the World.

Tourism and immigration will also play an important role in that growth. In recent years more people have come to North America to study, work or visit friends and relatives. International tourist arrivals, for example, jumped by more than 8% in 2014 with around 120 million people coming to the region (including Mexico according to UNWTO definition of North America). With the real potential for improved relationships with Cuba, more new inbound or outbound tourists can be expected with this country in the next years.

Number of aircraft

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2014200920041999199419891984

REGION’S FLEET SIZE RELATIVELY STABLENote: as of end yearSources: Ascend, Airbus

UNSURPRISINGLY THE REGION HAS A HIGH PROPENSITY TO FLYNotes: Passengers originating from respective countryBubble size proportional to country populationNonlinear regression weighted by country populationSources: Sabre, IHS Economics, Airbus

Twin-aisleSingle-aisle

2014 FLEET MIDDLE AGEDNote: as of 31/12/2014Sources: Ascend, Airbus

Number of aircraft

0

50

100

150

200

250

300

350

400

40363432302826242220181614121086420

Age (years)

Fleet age (years)

0

2

4

6

8

10

12

14

201420092004199919941989198419791974196919641959

NORTH AMERICAN FLEET NOT GETTING ANY YOUNGER - YETNotes: As of end year. 100-seater and aboveSources: Ascend, Airbus

World

North America

2014 real GDP per capita(2010 $US thousands at Purchasing Power Parity)

2014 trips per capita

Canada: 1.5 TPCUnited states: 1.6 TPC

100,00

10,00

1,00

0,10

0,01

0,000 10 20 30 40 50 60 70 80 90 100

Twin-aisle

Single-aisle




35194

SmallTwin-Aisle


VeryLarge

Single-Aisle

582

4,733

Real Trade4.6%

Economy**



Traf�c**

In 20154,182

In 20346,095


5,544

Totaltraf�c

3.4%

Real GDP

2.5%


Replacement3,631Stay in service& Remarketed 551

Fleet size*

2034

4,182

6,095


Beginning2015

Asia-Paci�c

4.9%

LatinAmerica

4.5%

MiddleEast

7.1%

CIS

4.4%Europe

2.8%

Domesticand

Intra-Regional

2014-2024 2024-2034 2014-2034

5.0%4.1%

4.6%

3.7%

3.1%

3.4%

New deliveries

5,544

Growth1,913

Africa

4.8%

NorthAmerica

1.8%

Total RPKtraf�c growth

NorthAmerica

World

The domestic US air transport market, the largest single market today, will remain enormous and is forecast to be the second biggest flow in the World with 90 billion RPKs by 2034. Traffic between the US and China is forecast to be the most dynamic of the North American regions flows with an average yearly growth of 7.3%. More concretely, growth at this level doubles the traffic every decade... some might say awesome. Traffic between Canada and China will also grow at an impressive pace of 6.7% per year over the next 20 years. We forecast that over the next 20 years more than 400 million additional passengers, more than the entire population of the US, will take off or land in North America, representing a 3.4% increase in RPK per year.

95

100

105

110

115

120

125

201420132012

International tourist arrivals (million)

106.4

110.5

119.5

2014 international tourist arrivals

+8.2%

NORTH AMERICA INTERNATIONAL TOURIST ARRIVALS REPRESENT 10% OF THE WORLD’S TOTALNotes: Mexico included in North AmericaSources: UNWTO, Airbus

Results RPK traffic growth from/toNorth America by region

NEW DELIVERIES

The GMF estimates that 5,544 new deliveries will be needed to replace a fleet older than the World average (3,631 aircraft) and to meet traffic growth (1,913 aircraft). Deliveries will comprise 4,733 single-aisle, 776 twin-aisle and 35 very-large aircraft. With their recent return to profit, North American airlines are ideally positioned to play the starring role of the always promising North American story.


MiddleEast

The region’s medium-term economic outlook remains supported by its substantial petroleum resources, close proximity to energy-hungry Asian economies, growing tourism potential and a strategically important geopolitical location. It is expected oil producers will continue to address their oil dependence by fostering development and activity in the non-oil sectors. Over the longer term, projections indicate real GDP growth for the region averaging 3.8% per year, clearly above the forecast World average growth of 3.2% over the next 20 years.

Air transport has been both a major driver and indicator of the growing importance of the Middle East in the global economy, also linking its main economic centres to the rest of the World. The extraordinary growth in both business and leisure passengers reflects the dynamism of the region, proving its success in diversifying beyond the energy sector and increasing its global footprint.

ASK* evolution (Base 100 in 2003) globally and from/to/within Middle-East

0

50

100

150

200

250

300

350

400

450

201420132012201120102009200820072006200520042003

MIDDLE EAST HAS EXPERIENCED CONTINUOUS GROWTH OVER THE LAST DECADESource: OAG – September of each year* Available Seat Kilometres on Passenger Aircraft >100 seats

Middle East World

From 2003 to 2014ASK FROM/TO/WITHIN MIDDLE EAST HAS GROWN FOUR TIMES

4

Over the past ten years, Middle Eastern airlines have spearheaded growth in the region. They have extended their presence to five continents, enabling air traffic to grow twice as fast as the economy. Since 2003, the capacity in terms of available seats has quadrupled to over 400 billion ASKs.Unprecedented network development has created an air transport network in which Middle Eastern cities have become major hubs, linked to aviation mega-cities around the World.


The development of air traffic in the Middle East is unique – it is the only region in the World where the twin-aisle fleet is bigger than the single aisle.This aircraft capacity has been a key enabler of airline growth in the region in recent years.Long-haul traffic has been crucial for the development of Middle Eastern carriers. Since 1995 the share of long haul traffic has increased from half to more than two thirds in 2014. Data shows that the strategic focus on this segment of the market was a resounding success: long haul traffic has been growing at 11 percent over the past 20 years, outperforming short haul by on average five percentage points.

Such high growth is enabled by a large proportion of connecting traffic. Middle East carriers have increased their share of connecting traffic over the past five years from 28 to 34 percent. Compared to other regions where connecting traffic represents less than 17 percent, Middle East and North America stand out with about a third of passengers connecting in the region.

It is also interesting to note that the share of connecting traffic passing through the Middle East, i.e. not starting or finishing their journeys there, is just 19% of the region total origin and destination traffic, especially as the perception is that the Middle East is just one large hub. Looking more deeply, just 15% of total Middle East O&D are in this inter regional “transiting” category for long haul passengers, with the remaining 5% on short-haul journeys.

MIDDLE EAST CARRIERS HAVE DIVERSIFIED THEIR DESTINATIONS OVER TIME

SHARE OF LONG-HAUL ASK IN 1995

SHARE OF LONG-HAUL ASK IN 2014

47%

69%

Share of Connecting passengersAMONG PASSENGERS TRANSPORTED BY MIDDLE EAST CARRIERS:

34%

Number of destinations served by Middle East airlines

0

10

20

30

40

50

60

70

80

2015201020052000199519901985198019751970

Share of Connecting Traf�c by airline domicile

0%

5%

10%

15%

20%

25%

30%

35%

40%

201420132012201120102009

Middle East Airlines ASK (billions)

Short-Haul <= 2,000nmLong-Haul > 2,000nm

70

60

50

40

30

20

10

01995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Short-Haul

Long-Haul

DESTINATIONS INCREASINGLY GLOBALSources: OAG (September of each year), Airbus

THE MIDDLE EAST HAS THE LARGEST SHARE OF CONNECTING TRAFFIC IN THE WORLDSources: Sabre, Airbus

LONG-HAUL TRAFFIC GROWTH AT THE HEART OF GROWTHNote: September ASK for each yearSources: OAG, Airbus

CIS

Latin America

Europe

Middle East

North America

North America

Asia-Pacific

CIS

Latin America

Asia-Pacific

Africa

Africa

Europe


Middle East AirlinesSHARE OF PASSENGERS TRANSITING AND NOT STARTING OR FINISHING THEIR TRIP IN MIDDLE EAST

19%

0

10

20

30

40

50

60

70

80

90

100

North AmericaMiddle East

Share of OD passengers

69%66%

31%

0%

15%

19%

A MIX OF CONNECTING AND DIRECT ORIGIN AND DESTINATION TRAFFICNote: as of 31/12/2013Sources: Ascend, Airbus

Direct Connecting outside the region

Connecting inside the region



377

551

SmallTwin-Aisle


VeryLarge

Single-Aisle

547

886

Real Trade4.2%

Economy**



Traf�c**

In 20151,018

In 20342,792


2,361

Totaltraf�c

6.0%

Real GDP

3.8%


Replacement587Stay in service& Remarketed 431

Fleet size*

2034

1,018

2,792


Beginning2015

MiddleEast

5.8%Africa

6.6%

NorthAmerica

7.1%

CIS

6.6%Europe

4.6%

Domesticand


MiddleEast

World

2014-2024 2024-2034 2014-2034

5.0%4.1%

4.6%

7.1%

4.8%

6.0%

New deliveries

2,361

Asia-Paci�c

6.3%

Growth1,774

LatinAmerica

7.7%

Results RPK traffic growth from/toMiddle East by region


Latin America& Caribbean

The regional economic outlook for Latin America and the Caribbean suggests modest growth in 2015, and acceleration in 2016. Lower oil prices are good news for Chile, Uruguay, and Caribbean and Central American nations, but not necessarily for oil exporting countries in the region. Compared with the pre-Asian crises years when the region also posted strong economic growth, the macro-economic fundamental conditions have improved substantially.

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

2017Q2

2016Q3

2015Q4

2015Q1

2014Q2

2013Q3

2012Q4

2012Q1

2011Q2

2010Q3

2009Q4

2009Q1

2008Q2

2007Q3

2006Q4

2006Q1

History Forecast

Real GDP growth, by region (%)

LATIN AMERICAN & CARIBBEAN ECONOMIC OUTLOOK POSITIVESources: IHS Global Insight (January 2015), Airbus Market Research and Forecasts

United States

Europe

Asia-Pacific



The region’s real GDP growth is expected to average 3.6% per year over the 2014-2034 period, above that forecast globally. Together with the large and growing urban populations, propensity to travel in the region is expected to develop further, with countries like Chile, Brazil and Colombia, reaching the levels achieved by more mature economies by 2034.

Traffic growth to/from/within Latin America and the Caribbean is expected to expand at an annual 4.7% rate, above the 4.6% World annual rate. Three out of the top twenty largest traffic flows continue to be linked to the region: Western Europe - South America, with an expected annual growth of 3.9%, South America - USA, with an average annual expansion of 4.9% and finally, Domestic Brazil, with a forecasted 5.4% annual increase. A sound long-term social and economic outlook; regional airline consolidation already in place, LCC stimu-lation, and a modern fleet of passenger aircraft all support the long-term development of this region as an aviation market. Traffic within the region (domestic and intra-regional) will help to drive passenger growth, representing more than 35% of the total by 2034, above the current share which is ~30%.Regional economic development and a growing middle class offer growth opportunities, both for legacy and low-cost carriers. Up until today, the LCC’s steady expansion was mainly concentrated on the Brazilian and Mexican domestic markets.

The region with the second largest urban population worldwide

80%2014

Percent of urban population, 2014 and 2030

82

80

73

71

54

48

40

0% 20% 40% 60% 80% 100%

Africa

Asia

World

Oceania

Europe


North America

120

125

130

135

140

145

150

155

160

20142012201020082006200420022000199819961994

Average seats per single-aisle �ight *

LATIN AMERICA & THE CARIBBEAN IS ONE OF THE MOST URBANIZED REGIONS WORLDWIDESources: United Nations, Department of Economic and Social Affairs, Population Division, 2014 revision

AIRCRAFT IN THE REGION ARE GETTING BIGGERNote: * Aircraft > 100 seatsSources: OAG, Airbus Market Research and Forecasts

2030

2014

It is expected however, that airlines offering low-cost services will find new markets, flying longer, thus also stimulating intra-regional traffic. Aircraft with greater range capabilities will facilitate this development. Opportunity also exists as intra-regional routes have not reached their potential. As an indication of this, the share of routes between the 20 largest cities in the region, with at least one flight per day, currently accounts for ~40% of total routes between big cities, well below the almost 100% that this same type of route represents in North America or Europe.Another positive feature to highlight is that airlines in the region have been and will continue to accommodate traffic growth through the use of larger aircraft. This has already been the case over the period 1994-2014, with airlines in Latin America expanding their average aircraft size per single-aisle flight at an annual pace of 0.8%, close to the 0.9% registered worldwide over the same period.

Latin America

1994-2014 ANNUAL GROWTH ON AVERAGE SINGLE-AISLE SEATS

0.8%

Seats per flight (Latin America)

Seats per flight (World)

Seats per flight (Caribbean)


LOW COST SERVICE DEVELOPING IN THE REGION – MORE TO COME

More than 110 million seats were offered by Low Cost carriers in 2014, on routes connecting Latin American airports. This represents a one third market share for intra-regional traffic. Over the last decade low cost carriers in Latin America have contributed to the surge in passenger traffic which averaged a 10.9% growth rate between 2004 and 2014. This compares to a slower growth rate of 6.4% in the period 1994-2004 where LCC operations were limited in Latin America. However disparities in LCC market penetration exist between the different countries of Latin America. LCCs account for more than 55% of the domestic market in Mexico and Brazil, there is still a lot of potential of growth in the other Latin American countries where they represent less than 2% of the traffic.

LCCs in Latin America

LCCS MARKET SHARE CONTINUOUSLY INCREASING IN LATIN AMERICA

THEIR GROWTH HAS ACCELERATED, ESPECIALLY DURING THE LAST 10 YEARS

Middle East Airlines ASK (milliards)70

60

50

40

30

20

10

0

0

5

10

15

20

25

30

20142012201020082006200420022000199819961994

Legacy airlines

LCCs

Monthly seats offered (millions)

35%

LCCS REPRESENT 35% OF LATIN AMERICA REGIONAL TRAFFICSource: OAG



28108

SmallTwin-Aisle


VeryLarge

Single-Aisle

382

1,992

Real Trade4.2%

Economy**



Traf�c**

In 20151,266

In 20342,801


2,510

Totaltraf�c

4.7%

Real GDP

3.6%


Replacement975Stay in service& Remarketed 291

Fleet size*

2034

1,266

2,801


Beginning2015

LatinAmerica

5.3%

Africa

5.0%

NorthAmerica

4.5%MiddleEast

7.7%

CIS

5.3%Europe

3.5%

Domesticand


LatinAmerica

World

2014-2024 2024-2034 2014-2034

5.0%

4.1%4.6%4.9% 4.4%

4.7%

New deliveries

2,510

Asia-Paci�c

5.9%

Growth1,535

Results RPK traffic growth from/toLatin America by region


RESILIENCY OF AIR TRAVEL

As in other regions air travel in the CIS has proved resilient to economic cycles, rebounding quickly from short-term perturbations. During the last financial crisis in 2009, the CIS economy shrunk by a dramatic 6.8 percent. Consumer and business confidence dropped and air traffic followed suit. But the following year traffic surged by 17 percent, surpassing historical average growth rates to return to the long-term trend.In the longer run, air travel consistently outperforms the economy. Over the past fifteen years, real GDP grew on average at 4.3 percent, while traffic increased by 8.5 percent in the region.

UNTAPPED POTENTIAL

Travel and tourism have the potential to become a much stronger driver for the region’s economies. Compared to the World average, only Georgia stands out with tourism contributing over 20 percent to its GDP. In the rest of the region, the increase in travel has yet to translate into higher employment and income. Nine out of ten countries rank below the 100 by employment in tourism, with levels significantly below the 9.5 percent World average. The share of Russian tourism in the World is less than one percent, while its economy represents 2.4 percent of global GDP.The situation could improve as CIS travelers turn from visiting major European destinations to discovering their own region, local economies will also no doubt benefit. With the right government support, increased income from tourism can boost investment in infrastructure and raise the level of services. Even a small fraction of roughly $50 billion that Russian tourists spent on international travel in 2013 would provide a significant boost to the local tourism industry.Air transportation remains expensive in CIS countries, as many markets are dominated by national carriers. Measures such as the right to introduce non-refundable tickets will decrease prices and as a result is likely to attract more passengers to air travel.

AIR TRAVEL IS RESILIENT TO SHORT-TERM ECONOMIC DOWNTURNSSources: OAG, IHS, Airbus

UNTAPPED TOURISM POTENTIALSources: WTTC, Airbus

GDP

ASK

SINCE 2000 TRAFFIC GREW TWICE AS FAST AS THE ECONOMY

CAGR ASKs 8.5%CAGR GDP 4.2%

EXCELLENT PROSPECTS FOR TRAVEL AND TOURISM TO BECOME A STRONG DRIVER OF INVESTMENT, JOBS AND INCOME IN THE REGION

Another difficulty is the time and cost in getting a visa to some of the countries in the region. Simplification, as in other countries, who have improved their entry procedures, would stimulate tourism demand and traffic for the airlines serving the region.

1999 level = 100

0

50

100

150

200

250

300

350

400

20142010200620021998

Total contribution to GDP in 2014 (%)

0

5

10

15

20

25

Arm

enia

Azer

baija

n

Bela

rus

Geor

gia

Kaza

khst

an

Kyrg

yzst

an

Mol

dova

Ukra

ine

Uzbe

kist

an

World9.5%

Russ

ia

CISECONOMIC OUTLOOK

Fluctuations in oil prices coupled with well-known political difficulties in the region have stalled growth in Russia. 2015 will be challenging, but the Rubble’s flexible exchange rate and strong reserves will help soften the blow to the largest economy in the region. Any downturn is expected to be short-lived and at time of writing, the CIS as a whole is forecast to return to positive growth in 2016.In 2014, a number of the countries in the region maintained solid economic performance. Uzbekistan and Moldovan

real GDP grew by 6.9 percent and 4.3 percent respectively. In 2015, CIS countries excluding Russia will continue to grow at 2.4 percent according to the IMF.Long run level of growth in the region will depend on governments’ commitment to diversify and modernise economies, release the potential of the middle classes, increase incentives for growth, and attract foreign direct investment and new technologies. Real GDP is forecast to grow on average 2.7 percent over the next 20 years.


BUILDING STRONG TIES WITH DEVELOPING MARKETS

Over the past ten years, the number of passengers flying to and from emerging economies has reached 34 million in 2013, compared to less than ten million in 2004. Travel to Asia-Pacific has increased by a multiple of four. On average, the yearly growth in travel with developing markets was 15.8 percent, 4.3 percent above the rate with developed countries. With further strengthening of trade with fast-growing economies the trend is likely to continue.Stronger ties with fast-growing economies are reflected in the number of cities connecting the CIS to other emerging countries. In 2014, the network consisted of 317 city pairs compared to only 51 in 2004.In terms of international air traffic volume, Europe remained the most important region with almost 28 million passengers transported in 2013. Middle East and North

Africa grew at an astounding annual rate of 18.4 percent. In part, this growth was driven by the arrival of low cost carriers in several CIS countries. Excluding Russia, the number of Middle Eastern cities served increased from two in 2009 to 21 in 2014. In terms of offered capacity low cost carriers’ market share in 2014 is up by 21 percent.

CAGR WITH EMERGING COUNTRIES

15.8%BUILDING STRONG TIES WITH EMERGING COUNTRIESSources: Sabre, Airbus

CONNECTING WITH THE EMERGING ECONOMIES

Sources: OAG, Airbus

Advanced countriesEmerging countries

EUROPE STILL DOMINATES, MIDDLE EAST AND NORTH AFRICA INCREASINGLY IMPORTANTSources: Sabre, Airbus

20132003

Passengers (millions)

0

5

10

15

20

25

30

35

40

201420122010200820062004


0

5

10

15

20

25

AmericasMiddle East andNorth Africa

EuropeAsia-Paci�c

x 4.4

x 3.8

x 8.7

x 2.3


0

1

2

3

4

5

6

7

8

9

AmericasMiddle East andNorth Africa

EuropeAsia-Paci�c

x 3.3

x 2.8

x 4.2

x 2.1

2004 2014

Russia CIS excluding Russia

51

317

OVER 4000 MONTHLY SEATS

OVER 4000 MONTHLY SEATS

city pairs

city pairs

2004

2014




2425

SmallTwin-Aisle


VeryLarge

Single-Aisle

138

1,101

Real Trade2.0%

Economy**



Traf�c**

In 2015922

In 20342,016


1,288

Totaltraf�c

4.8%

Real GDP

2.1%


Replacement194


Fleet size*

2034

922

2,016


Beginning2015

CIS4.3%

Asia-Paci�c

5.9%

NorthAmerica

4.4%

LatinAmerica

5.3%

MiddleEast

6.6%

Europe

4.6%

Domesticand


CIS

World

2014-2024 2024-2034 2014-2034

5.0%

4.1%

4.6%

5.5%

4.2%4.8%

New deliveries

1,288Growth1,094

Africa

5.0%

ResultsGROWTH IN DOMESTIC TRAVEL

Russia is looking forward to a renaissance in domestic travel as the latest economic slowdown and local currency fluctuations are making it more affordable for Russians to visit domestic destinations instead of taking outbound trips. Figures for 2014, are encouraging: Russian carriers transported 17.9 percent more passengers on domestic flights.The high cost of transportation within Russia is still the main barrier. With the absence of low cost carriers on domestic routes, the cost of the airfare is estimated to often represent 50 percent of a tourist’s total expenditure on a trip. The government is supporting the development of domestic tourism through a federal target programme called Domestic and Inbound Tourism Development 2011-2018, which aims to increase the number of domestic trips by 150 percent.

FOCUS ON: TOURISM IN RUSSIA

Russia attracts tourists with a unique blend of old and new attractions. Although less visited than some other European destinations, Moscow and St Petersburg have already become synonymous with ‘culture-infused opulence’. Luxury tourism is flourishing, supported by high end hotels, shopping, and world-renowned artistic performances.Beyond the big cities, Russia is the largest country in the World, spanning two continents and boasting 23 UNESCO heritage sites, 41 national parks and 101 nature reserves. More than 5 million tourists visited Sochi in 2014, and 35 percent more visitors are estimated in 2015. With the 2016 Ice Hockey World Championship, 2017 FIFA Confederation and 2018 FIFA World Cup all scheduled in Russia, sports tourism will continue to play a major role.

Favourable exchange rates of the Ruble will further boost inbound international tourism. According to Xinhua news agency, Russia has already become the most attractive shopping destination for Chinese tourists, surpassing Japan, South Korea, Thailand and the US.Preliminary figures for 2014, suggest that China is taking the lead in terms of tourist visits to Russia (10-15 percent growth). Inbound tourism from Korea has increased by 70 percent after a visa simplification process introduced in 2013, while inbound tourism from Turkey has increased by 13 percent.

RUSSIAN CARRIERS TRANSPORTED 10% MORE PASSENGERS IN 2014Sources: Russian Ministry of Tourism, Airbus

CIS InternationalDomestic


0

10

20

30

40

50

60

70

80

90

100

20142013

NUMBER OF PASSENGERS FLYING ON DOMESTIC ROUTES INCREASED BY

17.9%in 2014


Africa

It would be hard to find anyone who would disagree that Africa has significant potential in terms of its economic development, growth opportunities and air travel. Covering about 30 million km , Africa is comprised of 54 countries, more than any other continent, even surpassing Europe with 47, and Asia with 44. These countries bring numerous assets, including young diverse populations, and reserves of valuable and much sought after natural resources. The diversity of its peoples and languages are matched only by the diversity in its ground transportation infrastructure, from its modern highways to at times impassible tracks. Aviation is and will continue to be the best way to connect Africa’s countries, not only to each other, but with the peoples and markets in the rest of the World.

AFRICA’S POPULATION SET TO GROW

Africa has striking demographics. Its population doubled between 1982-2009 according to the UN, and is today estimated at 1.1 billion representing approximately 15% of the World’s population, growing faster even than China and India. It is estimated that one in five people will live in Africa by the end of our forecast period in 2034.

SHARE OF WORLD POPULATION LIVING IN AFRICASources: IHS Global Insight, Airbus

12.6%1994 15.7%2014 20.1%2034

In 2034,MORE THAN ONE FIFTH OF THE WORLD’S POPULATION WILL BE LIVING IN AFRICA

1/5


ALMOST 13% OF TOTAL AFRICAN IMPORTS AND EXPORTS ARE WITHIN AFRICA

Africa’s population is the youngest in the World, with 41% of Africans below 14 years of age, globally this figure is 27%. This young population which is expected to double by 2045, will lead to a quite significant working age population (15-64 years) within the next 20 years, both a benefit and a challenge. The working age population in Africa rose by 30%, to reach over 570 million people between 2000 and 2010. With these levels of growth, it is expected that the continent’s potential labor force will reach a billion people by 2040, exceeding that of China and India.Importantly this young population is also getting better access to education. Between 1992 and 2012, the share of Africans enrolled in secondary education (regardless of age) rose from 23% to 41% in the Sub-Saharan region and 80% in North African countries.

Some 40% of the African population currently lives in urban areas, an urbanisation level already greater than India. There are 54 African cities with more than one million people and this number is forecast to grow to 93 by 2030. According to the United Nations, the share of Africans living in urban areas will reach 50% by 2034. Trade and social exchanges between these urban areas will contribute greatly to African domestic and intra-regional traffic growth.In terms of consumption per capita, the African continent will be amongst the most dynamic. Indeed, with a share of households with discretionary income projected to exceed 50 percent by 2020 (reaching 128 million in 2020), Africans’ purchasing power is also expected to grow over the next 20-years helping to fuel the region’s long-term growth.

AFRICA’S ATTRACTIVENESS

Since the beginning of this century, the diversification of Africa’s partnerships and its integration within the World economy has certainly led to the acceleration in the region’s economic attractiveness and an improvement in business climate. Despite inequalities between different African regions attractiveness, foreign direct investment flows rose by 4% in 2013 to reach $57 billion, with a greater focus in consumer-oriented industries illustrating the continent’s increasing proportion of households with discretionary income leading to a rise in consumer spending.With a less restrictive environment, a better education system and a greater exposure to the global market, Africa has managed to substantially improve its productivity over time, this expected to continue in the coming years.

African population

~60%OF AFRICANS ARE BELOW 24 YEARS OLD

44%OF THE WORLD POPULATION IS BELOW THIS AGE

Secondary Education enrolment ratio

SUB-SAHARAN AFRICA HAS NEARLY DOUBLED OVER THE LAST

20 years

URBAN POPULATION EXPECTED TO REACH

49% IN 2034(VS 61% FOR THE WORLD AVERAGE)

AFRICA’S 20-YEAR CONSUMPTION PER CAPITA (2.4%) WILL EXCEED THAT OF WORLD AVERAGE (2.3%)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20122007200219971992

Population age, 2010

80+

75-79

70-74

65-69

60-64

55-59

50-54

45-49

40-44

35-39

30-34

25-29

20-24

15-19

10-14

5-9

0-40%50% 50%100% 100%

IMPORTANT FOR THE FUTURE, EDUCATION IS GROWING IN AFRICASources: UNESCO Institute for Statistics, The World Bank

SHARE OF THE AFRICAN

POPULATION LIVING IN URBAN AREAS

Sources: UN Population Division, Department of

Economic and Social Affairs, (2014 revision)

AFRICA’S POPULATION IS YOUNGSources: UN Population Division, Department of Economic and Social Affairs (2012 revision), Airbus

World

Male pop. in the World

Female pop. in the World

Male pop. in Africa

Female pop. in Africa

South-Asia

Middle East & North Africa

East-Asia & Pacific

Sub-Saharan Africa

OECD-members

0%

10%

20%

30%

40%

50%

60%

203420242014200419941984

28%33%

36%40%

44%49%

Million USD Share of Intra-African trade

1,400,000

1,200,000

1,000,000

800,000

600,000

400,000

200,000

02004 2005 2006 2007 2008 2009 2010 2011 2012

16%

14%

12%

10%

8%

6%

4%

2%

0%

CONSUMPTION PER CAPITA 20-YEAR

GROWTH PER ANNUM

Sources: IHS Global Insight, Airbus

INTRA-REGIONAL TRADE GRADUALLY INCREASING IN IMPORTANCEIntra-African trade: Imports and exports.Sources: Compendium of Intra-African and Related Foreign Trade Statistics 2013, ECA / African Statistical Yearbook 2014, Airbus

4% 0%

Total African trade

Intra-African trade




3158

SmallTwin-Aisle


VeryLarge

Single-Aisle

194

834

Real Trade5.0%

Economy**



Traf�c**

In 2015598

In 20341,615


1,117

Totaltraf�c

5.6%

Real GDP

4.6%

Fleet in serviceFleet* Replacement

100


Fleet size*

2034

598

1,615


Beginning2015

Africa6.4%

Asia-Paci�c

7.3%

NorthAmerica

4.8%

LatinAmerica

5.0%

MiddleEast

6.6%

CIS

5.0%Europe

4.7%

Domesticand


Africa

World

2014-2024 2024-2034 2014-2034

5.0%4.1%

4.6%

6.2%

5.1%

5.6%

New deliveries

1,117Growth1,017

There appears to be more opportunity for intra-African trade. Whilst total African trade almost tripled between 2004 and 2012, African intra-regional trade represented just 13% of total commerce in 2012, compared to trade between emerging-Asian countries which amounted to 53% for the same period.In recent years China has grown its links with Africa, trade as well as Chinese Foreign Direct Investment which has significantly increased over the last decade. While Chinese imports from Africa grew fourteen times between 2003 and 2013 to reach 113bn USD, Chinese flows into Africa reached over 2.5bn USD in 2012 for a cumulated FDI flow of over 21bn USD. Over the period 2003-2013, international origin and destination traffic between Africa and China has grown more than ten times with nearly 1.5 million monthly O&D passengers travelling by air between the two.

AIR TRAFFIC POTENTIAL

Inter-continental traffic with Africa is largely focused on Europe, which accounts for almost 60%. However, in recent years, Asia-Pacific and the Middle East have increasingly gained importance representing more than 20% of traffic in 2014 compared to 15% ten years ago. This progression is supported by Africa’s exposure to business opportunities with other emerging economies, particularly in Asia and the focus of carriers from the Middle East who see opportunity in increasingly connecting Africa with the Asia-Pacific region. Domestic traffic within African countries remains the primary market for African air travellers. However, Intra-regional traffic between African countries has grown faster than domestic traffic over the last 10 years, supported by growing African urban populations and African intra-regional trade.

0

20,000

40,000

60,000

80,000

100,000

120,000

20132003

Chinese Imports from Africa,Million USD

x 14

0

10

20

30

40

50

60

70

20132003

Chinese migrants in Africa,thousand people

x 1.5

0

5,000

10,000

15,000

20,000

25,000

20122003

Chinese FDI Stocks in Africa,Million USD

x 44

International O&D Traf�c,thousand monthly Passengers

0

500

1,000

1,500

2,000

20132003

x 10.5

AFRICA’S LINKS TO CHINA GROWING* Origin and DestinationSources: IHS Global Insight, UNCTAD, Chinese Ministry of Commerce, UNPD, Sabre GDD, Airbus

TRAFFIC TO/FROM/WITHIN AFRICA*Origin and Destination*Year 2014 is based on estimate from month of September 2014 (x12)Sources: Sabre GDD, Airbus

Europe

Intra-Africa

Asia-Pacific

CIS

North America

Middle EastLatin America

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2014201320122011201020092008200720062005200420032002

Thousand O&D passengers from/to/within Africa*

CHINESE IMPORTS FROM AFRICA

x14 in 10 years

INTERNATIONAL O&D PASSENGER TRAFFIC

x10.5 in 10 years

Results RPK traffic growth from/toAfrica by region

INTERNATIONAL O&D TRAFFIC FROM/TO AFRICA

2004-2014

+132%



Freighterforecast

Air Freight

Thanks to a more supportive economic environment driven by the emerging markets and the US, all regions of the air freight World benefited from the recovery. With US GDP growing at around 3.0%, and the Chinese economy expanding by an impressive 7.4% in 2014, some airlines and airports even recorded unprecedented cargo volumes in 2014.

Air freight is an important element of World trade, each year it transports more than one third of all trade by value. With higher business and consumer confidence even more products are being transported on the main deck or cargo holds of aircraft, both boosting productivity and yields.

GROWTH IS BACK… AND STRONG

After having stagnated or even decreased for almost three years, the air freight industry resumed its progress in 2014 by posting 4.5% growth compared to 2013. Additionally, in the summer of 2014, total air freight traffic surpassed for the first time the peak it reached in 2011.

10

11

12

13

14

15

16

17

18

01/1507/1401/1407/1301/1301/13201/1207/1101/1107/1001/1007/0901/0907/0801/0807/0701/07

Billion FTKs (Freight tonne kilometres) – quarterly adjusted

2014 growthrate estimate+4.5%

THE AIR FREIGHT INDUSTRY IS GROWING AGAINSources: Seabury, IATA, Airbus

Air freight volumes just surpassed the 2011 peak

GROWTH DRIVERS:

• REGIONAL TRAFFIC• EMERGING ECONOMIES• EXPRESS TRAFFIC

Monthly air freight traffic evolution


80%80%

Hong Kong

5985nm

Los Angeles

0

100

200

300

400

500

20342032203020282026202420222020201820162014201220102008200620042002200019981996

Billion Freight tonne kilometres

History Forecast AdvancedAdvanced

2.6%

EmergingEmerging

6.1%

AdvancedEmerging

4.9%

EmergingAdvanced

4.9%

80%

Growth Rate2014-2034

Annual growth rate 2014-2034

4.4%INCLUDES BELLY AND MAIN DECK

TOTAL AIR FREIGHT TRAFFIC GROWTHSources: Airbus GMF 2015, Seabury, IATA

At the beginning of 2015, oil prices had reached an eight year low at ~ $50 per barrel. This is good news for the industry as these lower fuel prices offer a period for airlines to improve profitability through the reduced costs on offer and an opportunity to prepare for future.

Air freight is forecast to grow at 4.4% over the next 20 years. This will be largely driven by emerging markets where both general and express cargo are expected to continue to expand.

MAIN DECK VS BELLY CAPACITY

Just over 50% of the cargo traffic in 2014 was transported in the “belly” hold of passenger aircraft, that is in the space below the main deck where passenger luggage is also stowed. The market share for belly capacity is expected to continue to grow in the future especially on inter-continental routes. This is due to the addition of more larger more capable passenger aircraft on these flows, increasing the underfloor space available for freight operations. The need for these additional aircraft is being driven by passenger traffic growth

higher than freight traffic growth. In 2014, passenger traffic grew by an estimated 6% while it is forecast to grow 4.6% per year over the next two decades. This belly capacity effect on the use and demand for dedicated freighters was apparent over the period 2011-2013, where cargo demand was flat whilst at the same time passenger traffic was recovering quickly from the effects of the financial crisis of 2008/2009. This was especially true on the trans-Pacific segment where additional belly capacity pressured main deck freighter activity.

During this period, over 100,747 freighters were parked due to lack of demand.

In parallel, new wide-body types will be even more cargo friendly; the A350-1000 for example will be able to carry 21t between Hong Kong and Los Angeles, while a 747-400 today can carry just 8t. These new, more cargo capable aircraft types are another reason cargo will increasingly find its way in to the belly holds of passenger aircraft.

A350-1000 WILL BE ABLE TO CARRY UP TO 22T ON THE TRANS PACIFICJAR 5% International flight profile85% Annual wind reliabilitySpeed: LRC

A350-1000

STRUCTURAL PAYLOAD

22,200KGVOLUMETRIC PAYLOAD

20,900KG


North America

Latin America

Africa

Middle East Asia-Paci�c

Europe & CIS991795

462337

804

309172

65

89 50

16977

These two effects combined, higher passenger growth rates and more capable long-haul aircraft will reduce the need for long range dedicated freighters in the future as belly capacity will capture more and more of the long-haul cargo demand.

RESULTS: MID-SIZE FREIGHTERS, VERSATILE AND COMPLEMENTARY TO BELLY CAPACITY UTILISATION

Three trends that Airbus foresees for the future of the air cargo industry:

• Express will continue to develop more rapidly than general cargo, this driven by both international traffic and domestic and regional traffic in emerging regions such as China and South East Asia. This will drive the need for more fuel efficient aircraft capable of carrying large vo-lumes of low density goods. At Airbus, the A321P2F or the A330-300P2F are well suited for these kinds of missions.

0

100

200

300

400

500

20342014

Billion Freight tonne kilometres

57%

51%

Cargo traf�cgrowth4.4%

Belly traf�cgrowth4.8%

Freighter deliveries over the next 20 years

0

500

1,000

1,500

Largefreighters

Mid-Sizefreighters

Smallfreighters

617609

1,130

WORLDWIDE SHARE OF BELLY CARGO VS MAIN DECKSource: Airbus GMF 2015

FREIGHTERS DELIVERIES OVER THE NEXT 20 YEARSSource: Airbus GMF 2015

THE FUTURE FREIGHTER FLEET DISTRIBUTION WILL REFLECT THE GROWING INFLUENCE OF EMERGING MARKETSSources: Airbus GMF 2014, ASCEND

Belly outpace cargo growth

THE IMPACT OF NEW BELLY CAPABLE WIDEBODY PASSENGER AIRCRAFT WILL BE MAINLY ON LONG HAUL FLOWS

Freighter deliveriesEXPRESS AND REGIONAL TRAFFIC WILL BOOST THE SMALL AND MID SIZE MARKET

BELLY CAPACITY WILL DRAMATICALLY IMPACT LARGE FREIGHTER PROSPECTS

Belly cargoMain deck cargo

• Medium haul regional traffic will surge, with the development of cargo networks in regions such as intra-Asia, within Africa and Latin America. This will drive the need for mid-size aircraft, which are both versatile and a compromise between profit generation and risk miti-gation during market downturns.

• Belly capacity will continue to grow es-pecially on long haul routes where new cargo friendly passenger wide-bodies are expected to progressively replace large freighters thanks to very competi-tive economics.

World fleet

The North American fleet is mainly a replacement market

The Asia-Pacific fleet is set to triple

20151,633

20342,687



Summary & methodology

Summaryof results


Origin-Destination Flow

Asia advanced - Asia emerging 5.9%

Asia advanced - Australia/NZ 2.3%

Asia advanced - Canada 3.3%

Asia advanced - Caribbean 3.4%

Asia advanced - Central America 3.3%

Asia advanced - Central Europe 3.6%

Asia advanced - CIS 5.2%

Asia advanced - Indian SC 7.0%

Asia advanced - Japan 2.3%

Asia advanced - Middle East 5.9%

Asia advanced - North Africa 4.9%

Asia advanced - Pacific 2.7%

Asia advanced - PRC 6.0%

Asia advanced - Russia 5.2%

Asia advanced - South Africa 6.8%

Asia advanced - South America 5.8%

Asia advanced - Sub Sahara Africa 5.9%

Asia advanced - USA 3.6%

Asia advanced - Western Europe 3.5%

Asia emerging - Australia/NZ 5.1%

Asia emerging - Canada 3.5%

Asia emerging - Caribbean 3.8%

Asia emerging - Central America 2.4%

Asia emerging - Central Europe 4.8%

Asia emerging - CIS 5.2%

Asia emerging - Indian SC 8.1%

Asia emerging - Japan 3.6%

Asia emerging - Middle East 6.2%

Asia emerging - North Africa 6.4%

Asia emerging - Pacific 4.9%

Asia emerging - PRC 7.2%

Asia emerging - Russia 5.2%

Asia emerging - South Africa 7.0%

Asia emerging - South America 7.6%

Asia emerging - Sub Sahara Africa 6.2%

Asia emerging - USA 3.8%

Asia emerging - Western Europe 4.4%

Australia/NZ - Canada 3.5%

Australia/NZ - Caribbean 3.6%

Australia/NZ - Central America 3.1%

Australia/NZ - Central Europe 4.4%

Australia/NZ - CIS 4.6%

Australia/NZ - Indian SC 4.3%

Australia/NZ - Japan 3.0%

Australia/NZ - Middle East 5.4%

Australia/NZ - North Africa 4.8%

Australia/NZ - Pacific 3.2%

Australia/NZ - PRC 5.6%

Australia/NZ - Russia 4.7%

Australia/NZ - South Africa 6.7%

Australia/NZ - South America 6.4%

Australia/NZ - Sub Sahara Africa 5.8%

Australia/NZ - USA 3.2%

Australia/NZ - Western Europe 4.5%

Canada - Caribbean 5.2%

Canada - Central America 4.9%

Canada - Central Europe 3.4%

Canada - CIS 4.3%

Canada - Indian SC 5.7%

Canada - Japan 1.2%

Canada - Middle East 5.9%

Canada - North Africa 4.7%

Canada - Pacific 1.7%

Canada - PRC 6.1%

Canada - Russia 3.9%

Canada - South Africa 4.5%

Canada - South America 5.2%

Canada - Sub Sahara Africa 3.7%

Canada - USA 2.5%

Canada - Western Europe 2.7%

Caribbean - Central America 4.4%

Caribbean - Central Europe 2.4%

Caribbean - CIS 2.3%

Caribbean - Indian SC 5.0%

Caribbean - Japan 2.2%

Caribbean - Middle East 4.4%

Caribbean - North Africa 2.3%

Caribbean - Pacific 2.7%

Caribbean - PRC 5.3%

Caribbean - Russia 6.0%

Caribbean - South Africa 3.4%

Caribbean - South America 5.8%

Caribbean - Sub Sahara Africa 3.9%

Caribbean - USA 2.7%

Caribbean - Western Europe 2.3%

Central America - Central Europe 3.6%

Central America - CIS 3.7%

Central America - Indian SC 5.0%

Central America - Japan 3.6%

Central America - Middle East 5.5%

Central America - North Africa 3.9%

Central America - Pacific 1.5%

Central America - PRC 6.0%

Central America - Russia 5.0%

Central America - South Africa 4.3%

Central America - South America 6.6%

Central America - Sub Sahara Africa 3.1%

Central America - USA 5.0%

Central America - Western Europe 3.5%

Central Europe - CIS 4.7%

Central Europe - Indian SC 5.4%

Central Europe - Japan 3.9%

Central Europe - Middle East 6.7%

Central Europe - North Africa 4.7%

Central Europe - Pacific 3.5%

Central Europe - PRC 6.0%

Central Europe - Russia 4.8%

Central Europe - South Africa 5.7%

Central Europe - South America 4.1%

Central Europe - Sub Sahara Africa 5.3%

Central Europe - USA 3.6%

Central Europe - Western Europe 4.7%

CIS - Indian SC 5.3%

CIS - Japan 4.1%

CIS - Middle East 5.1%

CIS - North Africa 5.0%

Origin-Destination Flow2014-2034 RPK CAGR 2014-2034 RPK CAGR

CIS - Pacific 4.6%

CIS - PRC 6.8%

CIS - Russia 4.6%

CIS - South Africa 5.8%

CIS - South America 5.4%

CIS - Sub Sahara Africa 6.1%

CIS - USA 4.6%

CIS - Western Europe 5.0%

Domestic Asia advanced 0.9%

Domestic Asia emerging 6.7%

Domestic Australia/NZ 3.1%

Domestic Brazil 5.4%

Domestic Canada 2.4%

Domestic Caribbean 0.9%

Domestic Central America 0.9%

Domestic Central Europe 4.3%

Domestic CIS 4.8%

Domestic India 9.2%

Domestic Indian SC 3.0%

Domestic Japan 1.4%

Domestic Mexico 4.8%

Domestic Middle East 3.7%

Domestic North Africa 4.5%

Domestic Pacific 3.0%

Domestic PRC 6.8%

Domestic Russia 4.2%

Domestic South Africa 5.0%

Domestic South America 5.6%

Domestic Sub Sahara Africa 7.0%

Domestic Turkey 6.3%

Domestic USA 1.7%

Domestic Western Europe 1.5%

Indian SC - Japan 5.8%

Indian SC - Middle East 6.3%

Indian SC - North Africa 6.2%

Indian SC - Pacific 3.5%

Indian SC - PRC 9.4%

Indian SC - Russia 6.2%

Indian SC - South Africa 6.9%

Indian SC - South America 8.2%

Indian SC - Sub Sahara Africa 6.6%

Indian SC - USA 6.9%

Indian SC - Western Europe 4.6%

Intra Asia advanced 4.4%

Intra Asia emerging 6.9%

Intra Australia/NZ 2.8%

Intra Caribbean 0.9%

Intra Central America 4.9%

Intra Central Europe 4.4%

Intra CIS 4.4%

Intra Indian SC 3.3%

Intra Middle East 6.0%

Intra North Africa 4.3%

Intra Pacific 2.7%

Intra South America 4.6%

Intra Sub Sahara Africa 7.1%

Intra Western Europe 2.7%

Japan - Middle East 6.5%

Japan - North Africa 6.8%

Japan - Pacific 2.7%

Japan - PRC 3.1%

Japan - Russia 2.5%

Japan - South Africa 5.9%

Japan - South America 5.6%

Japan - Sub Sahara Africa 6.5%

Japan - USA 2.3%

Japan - Western Europe 3.0%

Mexico - USA 3.8%

Middle East - North Africa 6.1%

Middle East - Pacific 4.9%

Middle East - PRC 7.3%

Middle East - Russia 7.9%

Middle East - South Africa 7.1%

Middle East - South America 8.2%

Middle East - Sub Sahara Africa 7.1%

Middle East - USA 7.3%

Middle East - Western Europe 4.5%

North Africa - Pacific 4.5%

North Africa - PRC 8.4%

North Africa - Russia 4.5%

North Africa - South Africa 7.0%

North Africa - South America 6.0%

North Africa - Sub Sahara Africa 7.1%

North Africa - USA 4.5%

North Africa - Western Europe 4.5%

Pacific - PRC 6.2%

Pacific - Russia 2.8%

Pacific - South Africa 6.4%

Pacific - South America 6.4%

Pacific - Sub Sahara Africa 4.9%

Pacific - USA 1.3%

Pacific - Western Europe 2.6%

PRC - Russia 6.7%

PRC - South Africa 7.1%

PRC - South America 6.7%

PRC - Sub Sahara Africa 8.7%

PRC - USA 6.6%

PRC - Western Europe 5.3%

Russia - South Africa 6.2%

Russia - South America 5.0%

Russia - Sub Sahara Africa 6.1%

Russia - USA 4.3%

Russia - Western Europe 4.4%

South Africa - South America 5.6%

South Africa - Sub Sahara Africa 7.2%

South Africa - USA 5.4%

South Africa - Western Europe 4.9%

South America - Sub Sahara Africa 5.3%

South America - USA 5.2%

South America - Western Europe 4.0%

Sub Sahara Africa - USA 4.9%

Sub Sahara Africa - Western Europe 4.7%

USA - Western Europe 2.8%

Origin-Destination Flow Origin-Destination Flow2014-2034 RPK CAGR 2014-2034 RPK CAGR

PASSENGER TRAFFIC FLOW


SUMMARY DATA

Africa Asia-Pacific CIS Europe

Latin America

& Caribbean

Middle East North America 20 Year new

deliveries

Single-Aisle 834 8,329 1,101 5,052 1,992 886 4,733 22,927

Small Twin-Aisle 194 2,554 138 787 382 547 582 5,184

Intermediate Twin-Aisle 58 1,089 25 370 108 551 194 2,395

Very Large Aircraft 31 624 24 156 28 377 35 1,275

TOTAL 1,117 12,596 1,288 6,365 2,510 2,361 5,544 31,781


Latin America

& Caribbean Middle East North

America 20 Year new

deliveries

Single-Aisle 834 8,329 1,101 5,052 1,992 886 4,733 22,927

Small Twin-Aisle 198 2,579 140 796 389 552 718 5,372

Intermediate Twin-Aisle 62 1,179 39 413 132 596 314 2,734

Very Large Aircraft 36 726 32 192 29 423 113 1,550

TOTAL 1,130 12,813 1,312 6,453 2,542 2,457 5,878 32,585


Latin America

& Caribbean


deliveries

Small - - - - - - - -

Mid-size 6 72 13 37 31 30 223 412

Large 7 145 11 51 1 66 111 392

TOTAL 13 217 24 88 32 96 334 804

NEW PASSENGER AIRCRAFT DELIVERIES BY REGION


Latin America

& Caribbean


deliveries

Small 38 319 8 81 84 5 74 609

Mid-size 24 113 22 122 37 25 375 718

Large 10 77 14 28 - 19 77 225

TOTAL 72 509 44 231 121 49 526 1,552

CONVERTED FREIGHT AIRCRAFT DELIVERIES BY REGION


Latin America

& Caribbean


deliveries

Small 38 319 8 81 84 5 74 609

Mid-size 30 185 35 159 68 55 598 1,130

Large 17 222 25 79 1 85 188 617

TOTAL 85 726 68 319 153 145 860 2,356

TOTAL FREIGHT AIRCRAFT DELIVERIES BY REGION NEW PASSENGER & FREIGHT AIRCRAFT DELIVERIES BY REGION

NEW FREIGHT AIRCRAFT DELIVERIES BY REGION


GMF PROCESS STEPS Demand Forecast

Backlogs and retirements assumptions

Capacity Frequency

Model

AirlineCalibration

Airline Fleet

Build-Up

Airlines Operations

Forecast

Traf�c Forecast

Network Forecast

New Deliveries

FORECASTING TRAFFIC

The objective of the traffic forecast is to assess the quantity of passengers travelling by air. Initially, all countries are grouped into 21 traffic regions, based on geographical proximity and level of socio-economic development. Each region pair defines a non-oriented traffic flow, assuming that outbound and inbound passenger traffic is balanced. Whenever a part of a traffic region develops significantly different from the rest of the region, a new, specific flow is created, taking into consideration some more country-related specific characteristics. This process resulted in 203 flows for the GMF 2015. The main input data for the traffic forecast are historical traffic volumes as well as large sets

of historical and forecasted socio-economic data from external data providers. For each traffic flow several socio-economic variables are selected and input in econometric equations with the aim to identify the one set or combination of variables that explains best the historical traffic evolution. Once the model and variables with the best fit are identified, the forecasted economic data are used to derive the future traffic volume. This forecast of passengers on-board is then reprocessed to estimate Origin / Destination demand at the region pair level, which is subsequently broken down at the country pair and at the airport pair level.

The making of the Airbus Global Market Forecast follows a process which has been continuously developed and improved for more than 20 years. Each major change in the industry (such as the appearance of low cost business models or the strong development of hub and spoke operations) have been the occasion for Airbus to refine and improve its modelling in order to best identify and forecast current and future trends.

The GMF process consists in three main steps: the traffic forecast giving the overall shape of traffic evolution, the network forecast identifying the future evolution of the airlines networks, and the demand forecast estimating the number of aircraft which will be required to accommodate the traffic growth.

Passengermethodology


THE AIRLINE CALIBRATION PROCESS

GMF 2015 covers 651 passenger airlines and their subsidiaries worldwide.As a first step and for each of these airlines, a dedicated calibration process is carried out. It aims to take the best of several sources of information concerning the airlines in order to understand how an airline is operating each of its aircraft. Precise fleet data allows us to calibrate the detailed operations of a given airline (either scheduled or unscheduled) and therefore deduce which type of aircraft has been flying on which sector for a particular month of the year. This detailed adjustment allows us effectively apply the way an airline utilizes its aircraft on its network.

0

20

40

60

80

100

120

USASubSahara

SouthAmerica

PRCPaci�cNorthAfrica

MiddleEast

IndianSubcontinent

EuropeCISCentralEurope

CentralAmerica

CanadaAsia

Number of airlines

68

30 2831

22

46

28 28

22

83

4035

79

111

Number of airlines

Installed seats in service

47%

19%

6%

18%

3%

7%

32%

5%

8%

29%

8%

18%

651 AIRLINES AND THEIR SUBSIDIARIES ARE ANALYZED- AIRLINES DISTRIBUTION PER REGION

651 AIRLINES AND THEIR SUBSIDIARIES ARE ANALYZED- AIRLINES DISTRIBUTION PER TYPE

Global Network LCC

Major Network Regional

Small Network Non Scheduled / Charter

FORECASTING NETWORK

Airline networks evolve over time and airlines keep on adding and removing routes from their network, changing the supply of travel from the passenger standpoint. The evolution of the network with new opened and closed routes shifts the demand from one routing to another, with an impact sometimes even visible at a level as high as the traffic flow level. Furthermore new routes tend to fragment the market as they partially absorb traffic from the existing network and therefore impact the route-per-route traffic evolution. The network forecast aims at quantifying these impacts.Among the very large set of potential new routes, a subset of reasonable candidates is devised for each airline, based on the carrier’s current network and the potential size of new markets. This set of routes is fed into a ‘Quality of Service Index’- based model, which determines for each new route the traffic potential and the point in time when it could be opened.

FORECASTING AIRCRAFT DEMAND

The demand forecast aims to estimate the number of aircraft which will be required over the next 20-years to satisfy the World’s traffic growth. The new demand identified by the Airbus GMF (on top of current fleet and known orders) is expressed in neutral seats categories. The use of such virtual aircraft allows a view of future demand unconstrained by the product supply. This “theoretical” demand represents a solution which would best match the airlines needs in terms of aircraft size, if no considerations of supply (specific product performance, production availability, etc.) are made. Based on this undistorted view, the results can be used to consider such things as new product introduction, size requirements and timing. By examining the market at a route by route and airline by airline level then also allows a large number of other uses from discussions with airlines to our supplier partners for example.

Open Demand

Backlog

Stay in service

FORECASTING AIRCRAFT DEMAND

Real aircraft(existing product)

Virtual aircraft by seat category

Real aircraft(existing product)

Real aircraft(known product)


AIRLINE FLEET BUILD-UP

Once the overall neutral demand is forecast, each airline fleet build-up can be carried out. This demand is re-allocated to the existing fleet and the known orders.

Generic assumptions are made for each region regarding the retirement age of the fleets but these schemes are adapted for each airline. Elements such as replacement plans (new aircraft replacing older types), end of contract lease, airline business models or economic and financial environment have to be taken into account in determining replacements.The remaining demand which cannot be satisfied by the current fleet or the known orders corresponds to the open market.

As well as identifying demand, the GMF also allows us to extract all forecast operational detail e.g, traffic flow, route, frequencies, utilization, load factors, etc.

2 HAND AIRCRAFT

The final step of the GMF process consists in estimating second hand deliveries as they account for a significant share of the total deliveries.

Survival curves applied to the GMF start fleet per aircraft type allow identification of the gap between the statistical World fleet attrition and the shape of those that “stay in service” from the GMF fleet build-ups. The delta corresponds to the maximum potential for second hand aircraft. In parallel to this, candidate aircraft are identified amongst the existing fleet and reallocated as deliveries to another airline if the corresponding demand exists.This study is carried out on a worldwide basis as a first step and then refined by region and by airline. At the end of the process, these “second hand” deliveries are subtracted from total deliveries, leaving only the “new deliveries” which are the figures displayed in this publication.

A DEDICATED MODEL HANDLES THE FREQUENCY AND/OR CAPACITY SPLIT

Typical evolution on a route enjoying growth:

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

250

200

150

100

50

0

Traf�c (RPK index 100 = year)

Frequencyincrease

Frequency&

Capacityincrease

Threshold dependingon market characteristics

Capacityincrease

THE AIRLINE OPERATION FORECAST

Once the calibration of an airline has been carried out, real aircraft are converted into virtual aircraft in a fashion that keeps the overall number of seats in the fleet constant. The whole forecast is then based on neutral category values, our seat categories e.g. 100, 125, 150, 210 for single aisle types and requirements.

Traffic growth rates are applied to each airline’s routes, also taking into consideration future developments, as anticipated in the network forecast process. There are few ways an airline can accommodate traffic growth: load factor improvement, improvement of its aircraft utilization, frequency or capacity increase.The split between frequency increase and / or capacity increase is one of the most important factors influencing the shape of the future demand. A dedicated model (the Airbus Capacity/Frequency Model)

has been developed to address this issue. The general principle is that airlines grow on a route by adding frequencies up until a minimum level of service is reached. Beyond this minimum level airlines grow with a mix of both frequency and capacity increase, until the maximum level of service is reached, above which time differentiation through additional frequencies does not bring any further value to the passenger. Above this maximum service level the most efficient way to accommodate further growth is to increase the average aircraft size to achieve lower costs per aircraft seat. Each market in the World has its own specificities. Passengers in North America for instance, are used to a very high level of service (i.e. very frequent flights between two airports) which is not true for other regions in the World.

A market in this case can be defined as a set of routes on a given traffic flow for a certain type of airlines business model. For each of these markets one or more airlines may compete and each route might have a different length. Taking all this into account allows us to specify how frequencies and capacity will develop over time, for a given traffic growth.

The calibration of this model has to be reviewed each year based on the market definitions and in light of any market evolution (e.g. infrastructure development plans).

As a result, the airline operation forecast outputs year by year, the demand in terms of aircraft numbers (yearly utilization, flight frequencies and capacity) expressed in neutral categories for the complete network of each airline.


The freighter forecast process can be divided into three main steps: the traffic forecast resulting from econometric projections for each directional flow, the integration of the belly traffic co-ordinated with the passenger aircraft forecast and the demand forecast evaluating how many freighters will be needed in the next 20 years (and whether they will be new build or converted freighters).

Freight forecast methodology

Freighterdemand

Retirement Aircraft

Econometricmodels

Historicaltraf�c dataanalysis

AirlineFleetcalibration

Cargocapacityneeded

Totaltraf�cforecast

Passengerforecast

Bellycapacityavailable

THE FREIGHTER FORECAST PROCESS


TRAFFIC FORECAST

Once the calibration of an airline has been carried out, the first step in the traffic forecast is assessing the relationship between macro-economic trends and the cargo traffic, GDP, Real Income, Investments, Exports/Imports, industrial production and many other parameters are used in our econometric models to assess the best comparison to growth in traffic. Alongside these macro-economic factors, the analysis of historical data allows us to identify and understand the multiple trends involved in the evolution of the market, such as modal shifts for certain commodities.

GDPRealconsumption

Air cargotrends

Forecast

200 airlines �eet plan

8,000 routes

150 �ows

Speci�c domesticmarkets models

Drivers

Models: correlating drivers with trends

Belly capacityFrom pax GMF

Fuel Price Commoditiesdemand

Conversionvs new built

Expressevolution

Utilisation calibrationLoad factors calibration

Exports/Imports

Consumerbehaviour

Industrialproduction

0

2

4

6

8

10

2032202620202014200820021998

GLOBAL INPUTS TO GENERATE A LONG TERM FORECAST FOR TRAFFIC & FLEETS


North America

795

34

Latin America

7721

Africa

5027

Europe & CIS

337

51

Middle East

6516

Asia-Paci�c

309

45

Airlines and freighter �eet in service in 2015

AIR FREIGHT INDUSTRY IN 2015

World figures 2015

BELLY CAPACITY AND BASE YEAR CALIBRATION

Once the traffic flow forecasts have been established. It is important to split the future demand between belly capacity and the dedicated freighters. Thanks to the passenger aircraft GMF, it is possible to estimate the belly capacity each airline will offer on its network. In addition, Airbus monitors how airlines use their belly holds to carry cargo to establish trends in belly capacity load factors. As a result, the combination of the airlines’ passenger network development and the cargo hold load factor evolution gives an estimation of the share of freight transported on the passenger aircraft belly on each flow.

In parallel, a calibration is conducted on today’s freighter fleet. An assessment of multiple data sources is performed to arrive at the best estimate of airlines’ network, aircraft utilisation and load factors for the base year. Projections based on historical data collected for more than a decade with current market perspectives gathered from stakeholders across the industry to ensure the latest data and trends are incorporated.

Fleet: 1,633

Operators: 197


FREIGHTER FORECAST

the freighter forecast for the next 20 years estimates the number of aircraft required to accommodate the cargo traffic growth. The demand is divised into four neutral size categories strarting at ten tonnes, including new build and converted aircraft. Thanks to these virtual categories, it is possible to assess witch aircraft size, on which flow, best suits the market. Our freighter forecast is the result of the analysis of the behaviour of nearly 200 different airlines.

When forecasting an airline’s choice of new build or converted freighters, a detailed study of historical trends is used to identify the trend in activity per aircraft size category.On top of using historical trends, an analysis of current and future fuel pricesis performed to simulate their effect on this decision making process.

FREIGHTER DELIVERIES WILL EXCEED 2,300 AIRCRAFT IN THE NEXT 20 YEARSDOMESTIC EXPRESS ANALYSIS

To address the specific question of the domestic express market, a dedicated forecast model has been developed and deals with four countries: the US, which today is the largest player in express traffic, as well as Brazil, India and China, who are all expected to become large consumers of express services over the next 20 years.This model analyses a distinctive set of parameters to understand the customers’ need for express services resulting from well-known or new behaviours, such as online purchasing, next-day delivery for business purposes, service reliability and traceability.The model for domestic express consists in two parts. The first estimates the US express traffic and fleets based on a 40 years historical data to identify the main drivers of growth. The second, used for the emerging markets, takes US express development as a benchmark, while taking into account the unique characteristics of each country including infrastructure development, labour costs, internet penetration, for example.

1 145

609

1,130

617

412

225

392

718

1,500

1,000

500

0

Freighter deliveries over the next 20 years

Small

10t < payload < 30t

Mid-Size

30t < payload < 80t

Large

payload < 80t


SAFE HARBOUR STATEMENT

DisclaimerThis presentation includes forward-looking statements. Words such as anticipates, believes, estimates, expects, intends, plans, projects, may, forecast and similar expressions are used to identify these forward-looking statements. Examples of forward-looking statements include statements made about strategy, ramp-up and delivery schedules, introduction of new products and services and market expectations, as well as statements regarding future performance and outlook. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements.

These factors include but are not limited to:

• Changes in general economic, political or market conditions, including the cyclical nature of some of Airbus Group businesses;

• Significant disruptions in air travel (inclu-ding as a result of terrorist attacks);

• Currency exchange rate fluctuations, in particular between the Euro and the U.S. dollar;

• The successful execution of internal performance plans, including cost reduction and productivity efforts;

• Product performance risks, as well as programme development and manage-ment risks;

• Customer, supplier and subcontractor performance or contract negotiations, including financing issues;

• Competition and consolidation in the aerospace and defence industry;

• Significant collective bargaining labour disputes;

• The outcome of political and legal processes, including the availability of government financing for certain pro-grammes and the size of defence and space procurement budgets;

• Research and development costs in connection with new products;

• Legal, financial and governmental risks related to international transactions;

• Legal and investigatory proceedings and other economic, political and tech-nological risks and uncertainties.

Any forward-looking statement contained in this presentation/publication speaks as of the date of this presentation/publication release. Airbus Group undertakes no obligation to publicly revise or update any forward-looking statements in light of new information, future events or otherwise.


AIRBUS S.A.S. 31707 Blagnac Cedex, France © AIRBUS S.A.S. 2015 - All rights reserved, Airbus, its logo and the product names are registered trademarks.

Concept design by Airbus Multi Media Support 20150603. Photos by Airbus, A. Gault, J. Pulitano, K. Ginn, P. Powietrzynski, D. Melekhin, Skyhobo, M. Buschbell Steeger, I. Terentyev, Alija, BFG Images, Nikada, L. Patrizi, O. Korshakov, WMG Image, S. Ramadier, A. Doumenjou, C. Koshorst. Computer rendering by Fixion.

Reference D14029463 issue 2. August, 2015. Printed in France by Art & Caractère.

Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS S.A.S. No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS S.A.S. This document and its content shall not be usedfor any purpose other than that for which it is supplied. The statements made herein do not constitute an offer.They are based on the mentioned assumptionsand are expressed in good faith. Where the supporting grounds for these statements are not shown, AIRBUS S.A.S. will be pleased to explain the basis thereof.

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