Airbus Global Market Forecast 2013-2032

8/20/2019 Airbus Global Market Forecast 2013-2032

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T R A F F I C E V O L U T I O N

P A S S E N G E R F L E E T I N S E R V I C E

F R E I G H T E R F L E E T I N S E R V I C E

I N T E R N A T I O N A L T R I P S I N T E R N A T I O N A L S T U D E N T S

G D P S H A R E O F E M E R G I N G E C O N O M

I E S

I N F L U E N C

E O F E M E R G

I N G M A R K E T

S

URBAN POPULATION

I N F L U E N C E O F T H E M I D D L E C L A S S

D I S P O S A B L E I N C O M

E

T ICK E T P RICE

F U E L P R I C E

N E W G

E N E R A T I

O N A I R C R

A F T

A V I A

T I O N M

E G A - C I T

I E S

A I R C R

A F T U T

I L I S A T I O N

L O A D

F A C T

O R S

F L E E T

I N

S E R V I C E

M I D D L E E A S T L A T I N A M E R I C A E U R O P E C I S

A S I A - P A C I F I C A F R I C A N O R T H A M E R I C A

G L O

B A L M

A R K E T

F U E L

C O N S U

M P T I O N

P E R

S E A T

Global Market Forecast

FutureJourneys2013 2032


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T R A F F I C E V O L U T I O N P A S S E N G E R F L E E T I N S E R V I C E



G D P S H A R E O F

E M E R G I N G E C O N O M

I E S

I N F L U E N C E

O F E M E R G I N

G M A R K E T S

URBAN POPULATION


D I S P O S A B L E

I N C O M E

T ICK E T P RICE

F U E L P R I C E

N E W G E

N E R A T I O

N A I R C R

A F T

A V I A

T I O N M

E G A - C I

T I E S

A I R C

R A F T

U T I L I S A

T I O N

L O

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I N

S E R V I C E



G L O

B A L M A R K E T

F U

E L C O N S U

M P T I O N

P E R

S E A T



T R A F F I C E V O L U T I O N P A S S E N G E R F L E E T I N S E R V I C E



G D P S H A R E O F

E M E R G I N G E C O N O M

I E S

I N F L U E N C E

O F E M E R G I N

G M A R K E T S

URBAN POPULATION


D I S P O S A B L E

I N C O M E

T ICK E T P RICE

F U E L P R I C E

N E W G E

N E R A T I O

N A I R C R

A F T

A V I A

T I O N M

E G A - C I

T I E S

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R A F T

U T I L I S A

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F L E E T

I N

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M P T I O N

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Contents

06. Demand for freighters 88

03. Traffic forecast 40

01. Executive summary 10

Introduction 07

02. Demand for air travel 14

Economy 16Market drivers 24Network development 33

04. Demand for passenger aircraft 48

Single-aisle 50 Twin-aisle 52 Very Large Aircraft 54

07. Summary & methodology 100

Summary of results 102Passenger methodology 108Freight methodology 112

05. Demand by region 58

Asia-Pacific 60Europe 64North America 68Middle East 72Latin America 76

CIS 80 Africa 84


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Global Market Forecast 76 Global Market Forecast

E-mail:[email protected]

www.airbus.com/company/market/gmf2013

Aviation at the centre of “Future Journeys”

With each successive Airbus Global Market Forecast(GMF) we seek to deliver a 20-year view of the demandfor civil passenger and freighter aircraft that will serve asa reference for airlines, airports, investors, governmentand non-government agencies, air transport andeconomic planners world-wide.

We chose the title for thi s year’s GMF “Future Journeys”to remind us that, behind the data, the analysis and thepredictions contained in our forecast, the communitythat constitutes the air transport industry essentiallyprovides journeys. These journeys involve real people,each with their own particular reason to embark uponeach journey.

Very soon after the first fli ghts of the early 1900 s, flyingbecame less about the challenge of flight itse lf and moreabout peoples’ journeys. As early as 1914 passengerflights were a regular occurrence and 1919 saw thecreation of the first airline that is still operating today.People were quick to grasp the benefits aviation couldbring to their journeys, beginning with the transport ofhigh-value freight in the form of air mail.

Aviation continued to innovate to facilita te this needwith a succession of significant airline firsts: acrossthe Atlantic and Pacific in the nineteen thirties and theintroduction of jet airliners in the fifties. Technologicaland operational firsts have continued to this day andbehind each of them are the demand of peoples’ livesand their journeys.

In this forecast we set out our view of the key economicand operational drivers of air transport markets in thenext 20 years and their implications on the demand forpassenger and freighter aircraft. But as in the past itis journeys, how they are performed, where they startand finish, when they happen and who will take themthat will define the future. This future will steer us all

towards the areas of innovation that will define theshape and structure of our industry at the end of thisforecast’s coverage in 2032 and beyond.

Our regular readers will notice some areas of greaterfocus in the 2013 GMF. It is our intent to provideyou with analysis based on the most comprehensivesets of data and calling on the very best forecastingtechniques to provide a useful source material for yourown analyses. We realise, however, that there is alwaysroom for further improvement and we look forward toyour feedback and your questions in order to make ourfuture forecasts even more robust.

Introduction


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2.4

2.2

2.0

1.8

1.6

1.4

1.2

1

Evolution of the aviation industry over the last 20 years

Base year 1992=1

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Growth in number of routes

Growth in per flight capacity

Growth in average distance

Growth in frequencies

Traffic in ASKs

70%CO

2 reduction

in the last 40 years

Global Market Forecast Global Market Forecast8 9

Aircraft size is growing

This growth has not been without a focus on theenvironment; new technologies have constantly drivendown aircraft noise and emissions levels. In the last 40years, noise has been reduced by 75% and CO

2 by

70%. This focus will continue into the future, with thelatest new products and derivatives either just comingonto the market or arriving in the next year or two likethe A350XWB and A320neo delivering between 15-25%lower fuel burn and associated CO

2 than the aircraft they

are replacing. It is not just new technologies; over recentyears a trend has developed to select larger aircraft. Thisis a simple way to reduce the fuel burn and cost per seat

for the airline and also to meet the growing demand onthe routes that they serve. If the number of seats offeredby the world’s airlines’ are divided by frequency, it can beclearly seen that average aircraft seating is increasing. Soit is no surprise that when it is possible, airlines chooselarger aircraft within each market segment to meettheir needs. Airlines are also up-gauging aircraft in theirexisting backlogs and densifying, (adding more seats)existing cabin configurations. Manufacturers in turn arelooking at ways to add seats to existing products andsome considering or launching larger variants of existingaircraft families in order to meet demand.

Ticket price has not grown

It is possible to believe that the ability to transport aperson to anywhere in the world, with less than a day’stravel time would come at a very significant cost to thetraveller. In fact, this was the case. In 1941, it could havecost the average American more than a year’s salary to flyfrom Los Angeles to Hong Kong. Today, they would haveto work less than a week to do the same trip. Accordingto data from Airlines for America, domestic US airfares(including fees) have reduced by 40% since the 1980s.

This decline has not just been in the US, there is little

doubt that it is possible for travellers from all corners ofthe world to identify flights they have made in the pastthat are now less expensive. Importantly, with cheaperflights has come a greater ability for people to fly, aiding avery real democratisation of flight world-wide.

There are few products in the world that have becomecheaper in this way, in fact it is a struggle to think of morethan a handful.

The demand for air transport will grow

Air traffic has doubled every 15 years in the past, and isexpected to double again in the next 15. It reboundedeach time demand was slowed by shocks, such asthe 2008 global financial crisis. This is evidence of thevalue people place on the ability to fly to do business,visit friends and family or simply to relax on holiday. Howmuch, how quickly and where air transportation will growis driven by a number of factors. Some are economicand others linked to demographics and socio-economicdevelopment. It is the job of the forecaster to determinewhich of these will help explain air transportation’s futureand which will shape its direction. People, where theychoose to live, the work they do and their aspirations are

all a big part of the story, and will drive factors such asurbanisation, wealth, disposable income and consumerspending, key factors in the growth of air transportation.In this year’s GMF, we will delve a little more deeply intothese factors to show how they in turn drive our forecastand results. However, it’s not just about the benefitsaviation can bring to people, but the benefits aviationcan bring to countries for example look at contributionto GDP. Report after report has shown the scale ofbenefits aviation brings in terms of jobs and economicdevelopment. Good reasons to ensure that aviation isable to reach its potential in the future.

REDUCING AIR FARES HELPING TO DEMOCRATISE AIR TRAVEL - THE US EXAMPLESource:Airlines for America,Airbu s

AVERAGE AIRCRAFT CAPACITY HAS GROWN BY MORE THAN 25% OVER THE LAST 20 YEARSSource:OAG,Airbus


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01

Executivesummary


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36%Share of passengerand freighter aircraftdelivered to Asia

20,000

18,000

12,000

8,000

4,000

0

20-year deliveries of new passenger and freighter aircraft

% units

Single-Aisle

& Small jet freighters

Small Twin-Aisle

& Regional freighters

Intermediate Twin-Aisle

& Long range freighters

Large aircraft

& Large freighters

69% 17% 8% 6%

% value 41% 26% 17% 16%

29,226New

deliveries

2013-2032

5,296Remarketed

& stay in service

1,859 Converted

1,39510,798

28,355 871

29,226Newdeliveries

PassengerFleet

Freighter Fleet

12,193Retired


Traffic

Airbus analysis shows that traffic growth betweenadvanced and emerging air transport markets will growat an average annual rate of 4.9%, and will represent30% of global traffic (RPKs) by 2032. Traffic betweenemerging markets will grow at an impressive 6.8% andwill represent just over 40% of passenger traffic. On aworld-wide basis, traffic growth is expected to average4.7% per year. Even though emerging markets are thekey and leading driver of future air transportation, theimportance of advanced aviation markets cannot beunder-estimated.

In fact by 2032, about 60% of all traffic will still involve theadvanced aviation markets, primarily North America andEurope. As in GMF 2012, traffic carried by airlines fromthe Middle East airlines is expected to grow at the highestrate of 7.1% per annum, accounting for 12% of all trafficcarried in 2032. But the three largest regions in terms ofairline domicile will continue to be Asia-Pacific, Europeand North America, accounting for 34%, 22% and 18%of global traffic respectively in 2032. World-wide freighttraffic is expected to grow slightly higher than passengertraffic at 4.8% per year.

Fleet and Deliveries

By 2032, the fleet of passenger aircraft (with 100 seatsor more) and freighter aircraft (10 t onnes or greater), willbe 36,556 aircraft more than doubling the 17,739 aircraftfleet in service today. Single-Aisle passenger aircraftrepresent the largest segment of the new deliveries with20,242 over the next 20 years. The demand for Twin-

Aisle aircraft will require 6,779 new passenger aircraft and494 freight aircraft. Due to the growth in traffic demandin Asia-Pacific, it is no surprise that 47% of the demand

for very large passenger aircraft (VLA) will be within thisregion. It is equally important to note that over 40% of allnew aircraft deliveries over 100 seats will be within North

America and Europe. Much of this demand, especiallyin North America, is for new, more fuel efficient aircraftto replace older less eco-efficient types. By 2032, theworld’s airlines will take delivery of more than 29,220 newpassenger and freighter aircraft worth US$ 4.4 trillion atcurrent list prices.

Background

In the last year, despite continuing social problemsand sluggish economic growth in parts of the world,aviation has continued to grow through developments inworld economic activity, demographics, positive socio-economic progress and simply the abilty of aviation todeliver real benefits to real people. This is something weare reminded of every year when putting together the

Airbus GMF as the data shows the further evolution ofair transport. Positively the trends driving aviation are notshort term in nature, propelling aviation through the last 30years to a point where air traffic has doubled, twice, over

that time. These trends will also form the basis on whichaviation will continue to grow in the coming 20 years, withaviation becoming increasingly accessible to people in allparts of the world. Each year, Airbus forecasters take thebest macro-economic and operational data and combineit with a forecasting methodology developed over 20years, performing more than 208 traffic flow forecasts,over 100,000 Origin and Destination (O&D) city-pairs andmodelling demand for nearly 750 individual airlines inorder to deliver the forecast.

Highlights

While GDP continues to be a strong explanitory variablefor aviation growth, Airbus’ traffic forecasts also testand use other variables. For example, the Chinesemarket is also driven by real consumption and trade,which are used to forecast future demand. Last year,Chinese domestic traffic was identified as the largestflow by the end of the forecast period, a view thatis re-asserted in this year’s forecast. The emergingmarkets as a whole, with their economic growth, largepopulations and growing middle-classes continue tobe strong drivers on the forecast, with Asia-Pacificbecoming more significant over time in terms of new

aircraft deliveries, for both passenger and freighter types. The Single-Aisle market continues to be the mostsignificant in terms of volumes. However, within thissegment the evolution in terms of aircraft size continues.

The largest segments, the 175 and 210 seat categories,with demand met by aircraft such as the A321 today,are forecast to take 44% of all Single-Aisle demand, withthe largest demand expected to remain in the 150 seatsegment. The forecast for larger Twin-Aisle categories,including the Very Large Aircraft, remain robust, drivenby growth of significant existing city pairs, hubs anddevelopment across all regions, but in particular Asia.

SINGLE-AISLE: 69% OF UNITS; WIDE-BODIES: 59% OF VALUEPassenger aircraft ( ≥ 100 seats) and jet freight aircraft (>10 tonnes)

NEW PASSENGER AIRCRAFT DELIVERED BY REGIONPassenger aircraft ≥100 seats

MORE THAN 29,200 NEW AIRCRAFT DELIVERIESPassenger aircraft ≥100 seats

2013-2022 2023-2032 2013-2032 % of 20 years total new deliveries

Africa 443 527 970 3%

Asia-Pacific 4,894 5,770 10,664 36%

CIS 587 508 1,095 4%

Europe 3,035 2,792 5,827 20%

Latin America 1,040 1,239 2,279 8%

Middle East 1,010 989 1,999 7%

North America 2,968 2,553 5,521 19%

Freighters 416 455 871 3%

World 14,393 14,833 29,226 100%


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Demandfor airtravel

02


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1 9 7 2

1 9 7 4

1 9 7 6

1 9 7 8

1 9 8 0

1 9 8 2

1 9 8 4

1 9 8 6

1 9 8 8

1 9 9 0

1 9 9 2

1 9 9 4

1 9 9 6

1 9 9 8

2 0 0 0

2 0 0 2

2 0 0 4

2 0 0 6

2 0 0 8

2 0 1 0

2 0 1 2

16%

14%

12%

10%

8%

6%

4%

2%

0%

-2%

-4%

Air Traffic growth (%) Real GDP growth (%) 8%

7%

6%

5%

4%

3%

2%

1%

0%

-1%

-2%

J F M A M J J A S O N D J F M A M J J A S O N D

World real GDP growth (%)

2012 2013

4.5%

4.0%

3.5%

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0%

Expected world economicgrowth for 2014

Expected world economicgrowth for 2013

3.8%

3.2%3.3%

3.3%

2.3% 2.3%

5Population ofemerging economies billionGlobal Market Forecast Global Market Forecast16 17

Economy

Commercial air transport development is driven by two main factors: economic growth and air ticket pricestimulation. Economic developments can be measured by several elements including private consumption,disposable income, exports, imports or tourism growth (national and international). However, the variablethat best combines these different dimensions is the more global Gross Domestic Product (GDP), as shownin the chart below.

WORLD TRANSPORT GROWTH IS CLOSELY CORRELATED TO ECONOMIC GROWTHSource:IHS Global Insight,ICAO, Airbus

Over the first half of 2013, negative news concerning theglobal economy has gradually slowed, with previouslyidentified threats beginning to look less likely to materialize.

Although Europe’s recent performance has been anissue for the gl obal economy, structural reforms made atthe European Union (European Central Bank) and at anational level have helped a more optimistic outlook.

The US economy faces some challenges in the form ofthe federal spending sequestration. Nevertheless, theunderlying fundamentals of the US economy remainsolid, which should translate into strengthening economicgrowth in the second half of 2013, especially given theresilience of the private sector.

The risk of a hard landing for China is also seen byeconomists as less likely than previously thought. With 2012economic growth at 7.8%, it is still a very impressive growthrate, even when compared to other emerging countries.

Finally, the on-going geopolitical tensions in the PersianGulf and the rest of the MENA (Middle East and North

Africa) region have helped to keep oil prices at elevatedlevels. Any adverse effects are however not expected toderail world economic growth.

All in all, previously identified risks are expected to translateinto loosening tensions, suggesting the idea that a morenegative scenario will be avoided for now and that theglobal economies on-going expansion has staying power.

This is illustrated by the fact that downward revisions ofshort term economic growth outlooks have stopped. Thisis the case for 2013 (expected world economic growthof 2.3% at the time of writing) and even more true for2014 economic growth which has been slightly revisedupwards recently (from 3.2% up to 3.3%).

Over the medium term, the global economy’s performanceis expected to improve gradually, thanks mainly to moreaggressive business investment, which in itself is fuelledby accumulated pent-up demand in developed andemerging economies. As a result, the pace of growthmay even strengthen and surpass the long-term trendlevel during 2015-2019, before gradually edging down toa rate close to its long-term trend (3.1% yearly growth)after 2020.

The post-crisis journey shows further disparities betweenemerging and developed countries and even betweendeveloped countries: those that are agile/competitive andthose more indebted/less competitive. Having been fasterto implement structural reforms and debt de-leveraging

measures, emerging countries have rebounded fasterand stronger to pursue their development growth,increasingly adopting some western consumptionpatterns including the use of air travel.

The 54 emerging economies we use in our segmentationhave an impressive cumulated population of almost 5billion people. Contrary to perception, these 54 emergingeconomies are very diverse and not only located in the

Asia-Pacific region but globally (11 in Latin America, 11in Africa, 8 in Middle East, 14 in Europe-CIS and 10 in

Asia-Pacific).

FORECAST WORLD ECONOMIC GROWTH RATES ARE NO LONGER BEING REVISED DOWNWARDSource:IHS Global Insight,Airbus


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Advanced or developing economies (150 countries) Emerging economies (54 countries)

EUROPE-CIS• 14 emerging economies

• 380 million people (2012)

LATIN AMERICA

• 11 emerging economies • 500 million people (2012)

AFRICA • 11 emerging

economies

• 430 million

people (2012)

MIDDLE EAST• 8 emerging economies

• 60 million people (2012)

ASIA-PACIFIC• 10 emerging

economies

• 3,500 million

people (2012)

1 9 9 2

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2 0 0 5

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2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

20%

18%

16%

14%

12%

10%

8%

6%

4%

2%

0%

Share of world trade (%)

16.3%

6.2%

4.6%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

Share of FDI towards emerging economies (%)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

12%

38% Advanced economies (31)

Emerging economies (54)

Developing economies (119)

World GDP growth share (%)

History Forecast

1992

to 1997

1997

to 2002

2002

to 2007

2007

to 2012

2012

to 2017

2017

to 2022

2022

to 2027

2027

to 2032

100%

80%

60%

40%

20%

0%

70%

55%

22%

25%

40%

75%

70%of the world economic growthfrom emerging economies (2027-2032)


DIVERSE EMERGING ECONOMIES, NOT JUST LOCATED IN ASIA-PACIFICSource:IHS Global Insight,Airbus

On their way to converge and eventually catch upwith more mature/advanced economies, emergingeconomies have been and will continue to be the singlemost important engine of the world economic growth.Between 1992 and 1997, the 54 emerging economiesidentified contributed to a 22% share of the worldeconomic growth, compared with a 75% share for the 31

more advanced economies. Over time these emergingeconomies have gradually increased their share of worldeconomic growth, up to 55% during the 2007-2012period (compared with 40% for the advanced economies).By the next decade, this trend is expected to continue toreach an impressive 70% of world economic growth fromemerging economies.

EMERGING ECONOMIES INCREASINGLY DRIVING WORLD ECONOMIC GROWTHSource:IHS Global Insight,Airbus

STRONG TRADE GROWTH BETWEEN EMERGING ECONOMIES* OVER THE LAST 10 YEARSSource:IMF, Airbus

As a result of their growing economic power, emergingeconomies have begun to build stronger political andcommercial links between themselves, furthering worldglobalisation. To illustrate this, trade between emerging

economies in 2002 represented 6% of the world’s totaltrade. Currently, this share has grown to an impressive16% and will continue to grow for the foreseeable future.

Another illustration of this world globalisation lies withcapital flows, which are increasingly spread amongst agrowing number of countries. Emerging countries, which

represented 12% of the world Foreign Direct Investment(FDI) in the early 2000s, currently represent more than onethird (38%) of world-wide FDI flows.

A GLOBAL WORLD: FOREIGN DIRECT INVESTMENT INCREASING LY DIRECTED TOWARDS EMERGING ECONOMIES*Source:World Bank,Ai rbus

* 54 emerging economies

* 54 emerging economies


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100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

Advanced-Emerging

Advanced-Advanced

Advanced-Developing

Emerging-Emerging

Developing-Developing

Developing-Emerging

Share of world offered capacity (%)

63%

47%

24%

22%

18%

12%

69%

14%

10%

3,000

2,500

2,000

1,500

1,000

500

0

Number of country pairs linked by air (scheduled service)

1 9 7 2

1 9 7 4

1 9 7 6

1 9 7 8

1 9 8 0

1 9 8 2

1 9 8 4

1 9 8 6

1 9 8 8

1 9 9 0

1 9 9 2

1 9 9 4

1 9 9 6

1 9 9 8

2 0 0 0

2 0 0 2

2 0 0 4

2 0 0 6

2 0 0 8

2 0 1 0

2 0 1 2

25

20

15

10

5

0

Unit cost (cents/RPK in 2012 US$)

1 9 8 0

1 9 8 1

1 9 8 2

1 9 8 3

1 9 8 4

1 9 8 5

1 9 8 6

1 9 8 7

1 9 8 8

1 9 8 9

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

160

150

140

130

120

110

100

90

80

Offered capacity (ASKs)(Base 100 in 2007)

2007 2008 2009 2010 2011 2012

To/from/within

advanced economies (31)

To/from/withinemerging economies (54)

ASKs

+55%

To/from/within

ASKs

+4%

To/from/within

22%

Share of world offered

capacity in 2012 foremerging nations


NE ARLY 3,000 COUNTRY PAIRS NOW SERVED WITH SCHEDULED AIR TRANSPORTSource:OAG,Airbus

A GLOBAL WORLD: AIR TRANSPORTS INCREASING DISTRIBUTIONSource:OAG,Airbus

SINCE 2007, AIR TRAVEL HAS GROWN 55% IN EMERGING ECONOMIESSource:OAG,Airbus

Overall, air transport growth during the last few years hasbeen highly dependent on the emerging markets, whichhave regularly grown at a double digit year-over-yearrate. Since 2007, passenger capacity offered to/from/

within emerging economies (measured in ASKs) hasgrown 55%, compared to a 4% growth in the capacityoffered to/from/within the advanced economies.

The reverse approach is also true: globalisation has beenhelped thanks to the development of air transportation.

Although there were 1,500 country pairs served with

scheduled air transport 40 years ago, this has increasedover time and is expected to reach 3,000 country pairsin the near future.

The second pillar of the commercial air transportdevelopment over time has been the air ticket pricestimulation with an average yearly decrease of 3% perunit of passenger traffic over the last 30 years (in realterms, inflation removed).

This impressive achievement was helped by outstanding

air transport productivity improvements from bothairline operations (aircraft utilisation, fleet maintenance,improved passenger load factors, etc) and more efficientand capable aircraft. Air transport liberalisation andemergence of low cost carriers have also played a decisiverole in this productivity improvement and price stimulation.

STRONG DECREASE OF COST PER UNIT OF TRAFFIC HELPING TO LOWER AIR FARESSource:ICAO,Airbus

It is not surprising to see how increasing globalisationhas democratised air transportation around the world,especially over the last 10 years. Passenger capacityoffered between emerging economies grew from 12%

in 2002 to 22% in 2012. Over the same period, offeredcapacity share between advanced economies hasdeclined from 63% to 47%.


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Demography

Air traffic

Economy

Connectivity


61%

Market drivers

It is well known that economic growth is a key factor when explaining air traffic growth. However, forecasterswill often look to demographic trends as another explanatory variable, as these also play a major role in airtraffic evolution: population growth, urbanisation and new middle-class emergence in developing countriesare all factors that explain why and how frequently people travel. Another lever of air traffic is the increasingconnectivity between people, between regions. At first, it can be viewed as a consequence of economicgrowth but it is also a facilitator: directly with the multiplication of new routes and the increasing capacityin airports which extend the supply for future journeys; and indirectly by stimulating the economy throughinfrastructure investments and the business they attract.

Urbanisation and emergence of a new global middle-class

According to the United Nations, Department ofEconomic and Social Affairs (DESA), the world’spopulation will grow to 8.4 billion people in 2032.

Associated wit h this, two other phenomena will o ccur:strong and rapid urbanisation, and middle-classgrowth in emerging countries, especially in Asia.

WORLD POPULATION (BILLIONS) – 1950-2050Source:United Nations DESA,Airbus

URBAN AND RURAL POPULATIONS1950-2050 (BILLIONS)Source:United Nations DESA,Airbus

Up to 2050, the world’s urban population will increaseat twice the pace of the global population. In 2032,61% of the world population will live in a city comparedto 52% in 2012. This will represent an increase of 1.5billion urban dwellers.

Uban share of world population in 2032


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East Asia & Pacific

South Asia

Sub-Saharan Africa

Middle East & North AfricaLatin America

& Caribbean

North America

Europe & Central Asia


Tokyo will remain the largest city with more than38 million inhabitants in 2025, followed by Delhi(33 million), Shanghai (28 million) and Mumbai (27 million),making these four Asian cities the most populated in theworld by 2025. Seven out of the top 10 cities with more

than 20 million of inhabitants in 2025 will be located in Asia, two in Latin America and one in Northern America. These are places where increasing numbers of people willlive, work and want to travel between and, therefore, focalpoints for a large amount of future aviation growth.

Historically, urbanisation goes hand in hand with theemergence of a middle-class. This is illustrated withWorld Bank data highlighting the strong relationshipbetween urban population share and GDP per capita

over time. One noticeable element is the fast evolutionin the last three decades of this relationship for Asiancountries, region which tends to overtake more advancedeconomies.

Based on a study published by OECD (The EmergingMiddle Class in Developing Countries - Working Paper

No. 285 ), the global middle-class (defined as householdswith daily expanditures between $10 and $100 perperson at purchasing power parity), will grow by 60%between 2012 and 2022 and by 134% in 2032. Mostof growth will come from Asia, which will represent 2/3

of the middle-class population in 2032, with 3.5 billionpeople. In parallel, middle-class consumption will grow atthe same pace. This will constitute a tremendous leverfor global consumption in the next two decades and amarker of the consumption shift to Asia, after the shift ofproduction. The world’s producers becoming the world’sconsumers.

LARGEST POPULATION CENTRES FOCUSED IN ASIA IN 2025Source:Uni ted Nations DESA,Airbus

TOP 20 CITIES IN THE WORLD – 1950-2025Source:Uni ted Nations DESA,Airbus

EVOLUTION OF THE RELATIONSHIP BETWEEN SHARE OF URBAN POPULATION AND GDP PER CAPITABY REGION – 1980-2011Source:OECD,Airbus

265 262 253

856

2,038

3,526

432

578

757

0

1,000

2,000

3,000

4,000

5,000

2012 2022 2032

Global Middle-Class*

(Millions of people)

% of world population

World population

62%46%32%

8,4007,8007,100

North America

Europe & CIS

Otherx2

x4 Asia-Pacific

3,576

5,211

2,228

675 698 675

GLOBAL MIDDLE-CLASS* EXPECTED TO RISE TO MORE THAN 5 BILLION PEOPLE BY 2032Source:Kharas and Gertz,Airbus

* Households with daily expenditures between $10 and $100 per person (at PPP)

An increasing proportion of the urban population will livein large urban agglomerations of over 5 million people.United Nations DESA anticipates that 23% of urbanpopulation, representing 1 billion people, will live in thesecities by 2025 compared to 18% in 2012.

The number of these cities will dramatically increasebetween 2012 and 2025 by more than 50%, jumpingto 96 cities of over 5 million. In other words, more largeurban centres, with more people.

1

2

3

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5

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7

8

9

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19

20

1

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7

8

9

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12

13

14

15

16

17

18

19

20

New York

Tokyo

London

Paris

Moscow

Buenos Aires

Chicago

Kolkata

Shanghai

Osaka

Los Angeles

Berlin

Philadelphia

Rio de Janeiro

Saint Petersburg

Mexico City

Mumbai

Detroit

Boston

Cairo

Tokyo

Delhi

Shanghai

Mumbai

Mexico City

New York

Sao Paulo

Dhaka

Beijing

Karachi

Lagos

Kolkata

Manila

Los Angeles

Shenzhen

Buenos Aires

Guangzhou

Istanbul

Cairo

Kinshasa

2025202020152010200520001995199019851980197519701965196019551950

Rank Rank


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10,000

50,000

100,000

2009 2020 2030

Middle class population(millions)

Middle class consumption(2005 PPP $ in billions)

1,000

5,000

10,000


PROPENSITY TO TRAVEL IN 2012 - INDIA AND CHINA ON THE UPWARD CURVESource:Sabre, IHS Global Insight,Airbus

MIDDLE-CLASS POPULATION AND CONSUMPTIONSource:OECD,Airbus

The aviation industry directly benefits from the growthin the number of new middle-class consumers and theprogression margin is huge. The propensity to travel

of Asian countries is not at the same level of maturitycompared to more developed economies, but they arecatching up fast.

As seen in the following chart, a small increase in GDPper capita results in a large i ncrease in trips per capita in

less developed economies but only a small increase inmature economies.

Reasons to travel

According to the World Tourism Organisation, a bil lionpeople travelled outside their own country in 2012, mainlyby air (52%) and for leisure or visiting friends and relatives(78%), this number will nearly double to 1.9 billion by2032, according to estimates.

Historically driven by Europe, international tourists areincreasingly coming from the Asia-Pacific. For the first

time, in 2012, China was the number one country interms of tourism spending with a total of $102 billion.

0 20 40 60 80 100

Malaysia

Russian Federation

United Kingdom

Germany

Turkey

Italy

Spain

China

United States

France

2012

2011

INTERNATIONAL TOURIST ARRIVALS (MILLIONS)Source:WTO,Airbus

TOP 10 TOURISM DESTINATIONS (MILLIONS)Source:WTO,Airbus

WH Y DO THEY TRAVEL?Source:WTO,Airbus

According to the World Travel & Tourism Council (WTTC),most of the spending on inbound and domestic travel

generated in 2012 came from leisure travel (76%). This isexpected to grow at 4.6% per year. The share of leisuretravel spending will continue to increase due to thegrowth of the new middle-class in emerging countries.

As a result, in ten years China is expected to becomethe number one contributor to travel and tourism GDP,overtaking the USA.Business travel represented 24% of travel and tourismspending in 2012 and is expected to grow at 4.1% per year.

To better understand the crucial role of business travel inthe economy, the WTTC launched a study with OxfordEconomics to evaluate the impact on global GDP andemployment of a 25% budget reduction in business travelduring two consecutive years. It was found that, afterfive years, Global GDP would be 5% lower compared tothe baseline forecast (no budget cut) and 30 million jobswould be lost.

WHERE DO THEY COME FROM?Source:WTO,Airbus

BUSINESS AND LEISURE TRAVELSource:WEF 2013 report on Travel & Tourism competitiveness,Airbus

International tourism is an i mportant source of revenuesfor all regions. For example, Europe was the mostpopular destination receiving more than half of all

international tourists in 2012, representing $458 billion(43% of tourism receipts), followed by Asia-Pacific (23%of tourists, 30% of receipts).


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Africa

(million)

Asia & Middle East

Europe & CIS

Latin America & Caribbean

North America

Pacific

-30 -20 -10 0 10 20 30 40 50

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Millions

1 9 7 5

1 9 7 6

1 9 7 7

1 9 7 8

1 9 7 9

1 9 8 0

1 9 8 1

1 9 8 2

1 9 8 3

1 9 8 4

1 9 8 5

1 9 8 6

1 9 8 7

1 9 8 8

1 9 8 9

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9


The chart below gives a snapshot of migrants world-wide,their region of citizenship and where they now reside.When looking at the migration flows in detail, most

migration is within the region. The main exception is themigration of 23.5 million people from Latin America toNorthern America.

MIGRATION BY ORIGIN AND DESTINATION REGIONSource:Uni ted Nations DESA,Airbus

EVOLUTION OF THE NUMBER OF STUDENTS STUDYING ABROADSource:OECD,Airbus

With the globalisation of the economy, more and morestudents feel that studying abroad is positive for their futurecareers. Governments also encourage their students tostudy abroad with programs, such as Erasmus exchangeprogram in Europe, with many universities also seeingforeign students as an important source of revenue.

As a result, the number of students enrolled outside theircountry of citizenship has increased to reach 3.7 millionstudents in 2009 (OECD). In a 2009 UNESCO report, theinternational student population in 2020 is expected tobe around seven million.

In terms of the flow of students, one million internationalstudents come from East Asia & Pacific. Approximatelyhalf of them are studying within the same region,whereas the other half is studying in North America

and Western Europe, which is the number one hostingregion with two million international students (GlobalEducation Digest 2012 - UNESCO).

Finally, simplification of visa policies, with more and morevisa on arrival programmes replacing the traditional visa,a form of deregulation, is also having a positive impact onair traffic growth.

VIS A POLICIES FACILITATEDSource:WTTC,Airbus

NET MIGRATION (TOTAL IMMIGRATION STOCK – TOTAL EMIGRATION STOCK) IN 2010Source:Uni ted Nations DESA,Airbus

Migration is also an air traffic vector. According to theUnited Nations DESA, Latin America, Asia and Africawere net emigration regions whereas Northern America,Europe and Oceania were net immigration regions in

2010. North America is the number one immigrationregion whereas Latin America is the number oneemigration region.

7millionInternational students by 2020


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T HE IMPACT ONE AIRPORT CAN HAVE…

Source:The economic value of Sydney airport - Deloitte Access Economics,Airbus

Sydney Airport’s total economic contribution The total economic contribution of the Sydney Airport precinct – that is, the economic contribution encompassingboth the direct and indirect impacts – in 2012 can be summarised as follows:• The activities of businesses operating on the Sydney Airport precinct contributed an estimated $9.3 billion in

value-added, with associated employment of 49,930 full time equivalent (FTE).• The contribution of tourism and freight facilitated by the airport represented a further $18.3 billion in value-added

and generated an estimated 234,000 FTE jobs.


Connectivity

Both the number of airports with at least one flight witha 100-seater aircraft or larger and the total number offlights have increased over time. This is a consequenceof economic globalisation and the increasing numberof tourists chich are likely to continue.

For example, Istanbul and Beijing plan to buildadditionnal airports before 2020, and according topress reports, China plans to build 82 new airportsbetween 2011 and 2015 to meet demand.

EVOLUTION OF THE NUMBER OF AIRPORTS AND NUMBER OF FLIGHTSSource:OAG,Airbus

The growth of aviation networks provides newopportunities for both tourism and business, makingthe aviation sector an important contributor to globaleconomic growth. According to an Oxford Economicsstudy included in the IATA Annual Review 2013, the

increase in connectivity in the past 20 years has providedan additional $200 billion in global GDP, and becauseGDP growth is a key driver for aviation sector, the latterindirectly benefits from greater connectivity. A kind ofvirtuous circle.

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

1972 1977 1982 1987 1992 1997 2002 2007 2012

Number of airports served by 100-seater aircraft and above and number of flights

Number of flights

(thousands)

Number of airports

Networkdevelopment

Air traffic has grown at a steady pace over the last 20 years. Since 1992, air traffic, as measured by revenuepassenger kilometres (RPK), has grown 4.7% annually.

0

50

100

150

200

250

300

1 9 9 0

1 9 9 2

1 9 9 4

1 9 9 6

1 9 9 8

2 0 0 0

2 0 0 2

2 0 0 4

2 0 0 6

2 0 0 8

2 0 1 0

2 0 1 2

Evolution of long-haul and short-haul traffic (seats offered), 1990-2012, Index 100 = 1990*

Short-haul

Long-haulCAGR

+4.2%

1990-2012

CAGR

+2.9%

1990-2012

Examining air traffic growth in seatsoffered by flight length between1990 and 2012, and despite thetwo major external shocks (2001-2002 and 2008-2010), both short-haul traffic (flights of less than

2,000 nm) and long-haul traffichave grown at a robust pace. Long-haul traffic grew faster than short-haul traffic, growing at an annual4.2% rate during 1990-2002,compared to 2.9% for short-haultraffic. Interestingly, while growingfaster, long-haul traffic was morenegatively impacted by adverseeconomic shocks, compared toshort-haul. This suggests thatlong-haul passengers are moreprice sensitive, as the cost of travelof one of these trips represents ahigher proportion of an individualincome.

LONG-HAUL TRAFFIC GROWS FASTER THAN SHORT-HAUL TRAFFIC,BUT IS MORE SENSITIVE TO EXTERNAL SHOCKSSource:OAG,Airbus

* Long-haul traffic:flight distance >2,000 nm

Note:month of September of each year


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0

50

100

150

200

250

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Evolution of long and short-haul traffic, 1992-2012, Index 100=1992

Routes

Capacity

Flights

ASK

28%

Average ASKs per airline operating on long-haul routes

Monthly ASKs (millions)

0

50

100

150

200

250

300

350

400

450

500

0

200

400

600

800

1,000

1,200

1,400

1 9 7 2

1 9 7 4

1 9 7 6

1 9 7 8

1 9 8 0

1 9 8 2

1 9 8 4

1 9 8 6

1 9 8 8

1 9 9 0

1 9 9 2

1 9 9 4

1 9 9 6

1 9 9 8

2 0 0 0

2 0 0 2

2 0 0 4

2 0 0 6

2 0 0 8

2 0 1 0

2 0 1 2

Numberof airlines

+35%

1972-1982

+55%

1982-1992

+15%

1992-2002

+50%

2002-2012

Since 2005, there are less airlinesoperating long-haul traffic

Average number of seats offered by city-pair

Base 100=1972

0

20

40

60

80

100

120

140

160

180

200

1 9 7 2

1 9 7 4

1 9 7 6

1 9 7 8

1 9 8 0

1 9 8 2

1 9 8 4

1 9 8 6

1 9 8 8

1 9 9 0

1 9 9 2

1 9 9 4

1 9 9 6

1 9 9 8

2 0 0 0

2 0 0 2

2 0 0 4

2 0 0 6

2 0 0 8

2 0 1 0

2 0 1 2

Short-haul

Long-haul


Airlines extend their networks by opening new routes, aswell as expanding the capacity of their existing networksby offering more frequencies and/or using higher capacityaircraft. As air passengers value both low prices andfrequent, convenient flights; understanding when a newroute can be opened and the application of capacity vsfrequency is the key for assessing how todays networkwill develop in the future.

Over the last 20 years, air traffic growth has been possiblethrough more frequent departures, which have increased44% since 1992; through an increase in the number ofnon-stop city pairs, which have grown 47% since1992,and through larger aircraft, whose average capacity grew28% over the same period.

AIR TRAFFIC GROWS THROUGH NETWORK AND CAPACITY EXPANSIONSSource:OAG,Airbus

AIR TRAFFIC IS GETTING MORE CONCENTRATEDSource:OAG,Airbus

SHORT-HAUL AND LONG-HAUL NETWORKS HAVE DEVELOPED DIFFERENTLY SINCE 2000Source:OAG,Airbus

Airlines are accommodating more traffic

What is the impact of increased air traffic on thecompetitive landscape? Except for the crisis periodfollowing 9/11, long-haul air traffic has still increasedat a faster rate than the number of long-haul operatingairlines. As a result, average capacity (ASKs) per operatorhas multiplied by 2.5 in around 30 years (1972 and 2002).Nevertheless, successive deregulation of air transport

and the development of emerging markets have givenopportunity to new entrants in long-haul markets. While70 airlines were operating long-haul routes in 1972, therewere more than 200 in 2005; however, long-haul traffic

has increased even faster. Airlines have extended theirnetworks and have organised it around major hubs, andsince 2007 the long-haul traffic concentration processhas become more significant. For the first time in 40years, the number of airlines operating on long-haulroutes is decreasing, primarily due to several significantmergers around the world. Code-share agreements

and joint ventures are becoming more commonbetween airlines and an increasing number of airlinesbelong to global alliances, all driving the concentrationof long-haul traffic.

Long-haul and short-haul networks haveexperienced different network development models

The average number of seats offered on short-haul routeshas been stable between 1985 and 2000 and has beendecreasing since 2000. This does not mean, of coursethat short-haul traffic is decreasing. However, the short-haul market has experienced many new routes openings,as opportunities arise, thus offering more direct services.

This process has been driven in part by the spread ofthe low-cost model more globally. On the other hand,long-haul traffic increases have been absorbed to agreater extent by the existing long-haul network. This isachieved by either the addition of frequency, new routesor increased aircraft capacity.

Note:Long-haul route >2000 nm - excluding domestic routes

Note:Long-haul route >2000 nm - excluding domestic routes

Average long-haul ASK per airline has increased by 50% over the last 10 years.

Long-haul network development is more concentrated than short-haul.

28%The growth in average

aircraft capacities since 1992


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1

1.5

2

2.5

3

3.5

4

4.5

Base 1=1972

Number of services evolution (routes by airline)

1972 1 982 1992 2 002 2012 2022 2032

Advanced-Emerging

Advanced-Advanced

Domestic USA

Emerging-Emerging

Domestic Australia

Domestic India


More new routesEstimating airline network futuredevelopment is a challenging, yetnecessary task which drives the overallshape and scope of the future aviationnetwork.

The overall number of routes operatedhas increased over time, althoughthe net addition of airport pairs onlyaccounts for 50% of the total newairport pairs opened between 1992and 2012. The remaining 50% areroutes that have previously beentried, dropped then re-opened whendevelopment of demand or otherpositive factors allow.

Shifting toward emerging countries

Very much like the total traffic evolution shift towardsemerging countries, a larger number of new routeopenings have come from the emerging economies. Thisexpansion is mainly driven by the liberalisation of aviationand the emergence of low-cost airlines, which help tomake air travel more convenient and affordable, therefore

increasing passenger demand. We forecast this trend willcontinue in the future, maintaining significant potential fornew routes between advanced countries. However, thebulk of the network development will involve at least oneemerging country per new route.

MORE HETEROGENEOUS TRAFFIC GROWTH BETWEEN CITIES IN EMERGING ECONOMIESSource:IHS Global Insight,Airbus

ONLY 40% OF TODAY’S NETWORK WAS THERE 20 YEARS AGOSource:OAG,Airbus

NEW ROUTE DEVELOPMENT TYPICALLY SLOWS AS MARKETS MATURE: MORE NEW ROUTES INVOLVINGEMERGING ECONOMIESSource:OAG,Airbus

AIRLINES TARGETING MORE RESILIENT NEW ROUTESSource:OAG,Airbus

Note:Domestic O&D city pairs with more than 40 daily passengers in 2012.Size of the bubble represents 2012 daily passengers

13,823 20,276-6,041 12,494

0

5,000

10,000

15,000

20,000

25,000

1992 2012

Number of airport pairs served

NEW

between

1992 and 2012

DROPPED

between

1992 and 2012

60%

62%

64%

66%

68%

70%

72%

74%

76%

78%

80%

New routes survival rate after 5 years

1 9 7 2

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1 9 9 8

2 0 0 0

2 0 0 2

2 0 0 4

2 0 0 6

Even though the network development process ofvarious airlines around the world involves techniquesranging from trial and error to very sophisticatedschedule optimisation engines, it appears that the

overall quality of new route forecasting has improvedover time. The survival rate of new routes after fiveyears of operation has increased from 65% in the 70’sto more than 75% today.

City-pair traffic forecast

By introducing more detailed data at a country and citypair level, we are able to increase the granularity of ourforecast. Starting from 208 traffic flows, we enlarge ourscope to consider more than 15,000 country pairs andmore than 250,000 city pairs.

When predicting passenger traffic between cities, itis important to consider the factors that make a cityattractive for passengers; amongst them are the size ofthe city’s population and its socio-economic development

(as measured, for example, by income per capita). This issignificant because different city pairs, even in the samecountry, may have different behaviours in terms of trafficand these need to be accounted for when studying howthe network will evolve.Interestingly, when examining expected passenger trafficgrowth between city pairs belonging to the same countryor region, city pairs in more mature economies are morelikely to behave in a similar manner, than city pairs inemerging economies.


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Trafficforecast

03


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-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

2008 2009 2010 2011 2012 2013 2014

Contribution to the world GDP growth, by region

Central America

Middle East

CIS

Pacific

Africa

Indian Sub

Europe

North America

PRC

World average

South America

Asia

World annual traffic (RPKs - trillions)

0.0

1.0

2.0

3.0

4.0

5.0

1970 1975 1980 1985 1990 1995 2000 2005 2010

Gulf CrisisOil Crisis AsianCrisis

WTC Attack Oil Crisis SARS

FinancialCrisis

Since 2000

61%

5.1

5.2

5.3

5.4

5.5

5.6

2011 2012

Contribution of each region* to the world traffic growth in 2012

world RPK traffic (trillions)

Middle East

Other

PRC

South East Asia


2012 was another good year for air transport

Despite the widespread economic concerns throughout2012, especially in Europe, it was a good year for airtransport. Air passenger demand grew 5.0%, slightlybelow the 5.8% observed in 2011.

Air traffic growth in 2012 was mainly driven throughthe strong performance of the fastest growing regions,including the PRC, South East Asia and the Middle

East. Very high load factors, reaching 79%, was anothertakeaway from 2012, illustrating the attention that airlinesgive to managing aircraft capacity. This means that onaverage more than three quarters of all aircraft and flightsare full. This underlines how increasingly eco-efficient aform of mass transportation aviation is.

THE WORLD ECONOMY WILL PROGRESSIVELY GET BACK TO ITS LONG-TERM POTENTIAL IN 2014Source:IHS Global Insight (January 2013),Airbus

ALMOST 50% OF THE TOTAL RPK TRAFFIC GROWTH IN 2012 CAME FROM THE PRC, SOUTH EAST ASIA AND MIDDLE EAST

Source:Airbus

The speed at which air transport returned to its long-termtrajectory after a shock has even outperformed the worldeconomic recovery. While economic activity is expectedto recover its 3.2% long-term potential by 2014, worldtraffic recovered to its long-term trend one year after its2009 drop.Many factors have permitted the impressive and steadygrowth of air transport. Some key factors have been:• Growing population, in particular, the expanding

urban population.• Macro-economic growth, which has spilled over to

wealth creation, allowing people to travel more, or quitesimply for the first time.

• Greater globalisation, leading to the need for more airtraffic rights and a greater spread of economic activityand air travel.

• Liberalisation of air transport, which has allowednew services or airline business models, like Low CostCarriers, which have become one of the key driversover the last decade .

• Entry into service of more capable long-range aircraft.

Air transport continues to be a growth industry, resilient to external shocks, as it has been since the startof the jet age. The industry’s resilience is illustrated in the rapid recovery of world passenger traffic afterthe 2008-2009 economic downturn. Over the period 2009-2012, world passenger traffic, as measured byRevenue Passenger Kilometres (RPK), has grown at an average 5.9% annually, above the 4.1% observedduring 2000-2008.

AIR TRAVEL HAS PROVED TO BE RESILIENT TO EXTERNAL SHOCKSSource:ICAO,Airbus

*Traffic from/to/within the region Intercontinental traffic:50% allocated to each region


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0

2

4

6

8

10

12

14

16

1972 1977 1982 1987 1992 1997 2002 2007 2012 2017 2022 2027 2032

Air traffic has doubledevery 15 years Air traffic will double

in the next 15 years

AirbusGMF 2013

ICAOtotal traffic

World annual RPK (trillion) 20 years

+4.7%world annualtraffic growth

2022-2032

+4.4%

2012-2022

+5.1%

0

2

4

6

8

10

12

14

16

2012 2032

Contribution of each region* to the World RPK traffic growth (2012-2032)

World RPK traffic (trillions)

Mature

Emerging

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2 0 1 2

2 0 1 3

2 0 1 4

2 0 1 5

2 0 1 6

2 0 1 7

2 0 1 8

2 0 1 9

2 0 2 0

2 0 2 1

2 0 2 2

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2 0 2 6

2 0 2 7

2 0 2 8

2 0 2 9

2 0 3 0

2 0 3 1

2 0 3 2

Share of world RPK, by type of flow

20 years

World annual traffic growth

Advanced-Emerging

Emerging-Emerging

29%43%

41%28%

30%29%

Advanced-Advanced

+6.8%

+2.6%

+4.9%

0 200 400 600 800 1,000 1,200 1,400

Domestic PRCDomestic USA

Intra Western EuropeWestern Europe |} USA

Asia |} Western EuropeDomestic India

Asia |} PRCDomestic Brazil

Intra AsiaWestern Europe |} Middle East

Western Europe |} South AmericaDomestic Asia

Asia |} Middle EastWestern Europe |} PRC

Indian Sub |} Middle East Asia |} USA PRC |} USA

Central Europe |} Western EuropeSouth America |} USA

Indian Sub |} USA

7.0%1.9%2.9%3.0%4.3%9.8%6.2%7.0%6.1%4.8%4.8%5.7%8.0%5.7%6.1%4.2%6.5%5.9%5.3%6.6%

20-year CAGR

2012-2032 billions RPK

2012

2032


EMERGING MARKETS WILL DRIVE TRAFFIC GROWTH

Air traffic and macro-economic theory

Air transport is an example of relative convergence theoryat work. Meaning that air travel should grow fasterin regions where today’s population has a smallerpropensity to fly, than in advanced economies, whoalready fly in large numbers. Good macro-economicperformance of these emerging economies, in turncreates new potential for air travel demand.

Exemplifying this idea, starting from a lower share in2012, air traffic between emerging regions will growat a strong 6.8% annual pace over the next 20 years,to reach a 41% share of world RPKs by 2032. Thisgrowth is well above the 2.6% expected annual growthbetween advanced economies over the same period.

The second feature to highlight is the reduction ofemphasis on mature markets. With emerging regionsgrowing faster than advanced economies, althoughtheir growth is still high, forecast traffic growth willbe less concentrated. Supporting this idea, the indexof concentration (as measured by the Herfindahl–Hirschman Index) of the largest 50 traffic flows isexpected to decrease 27% from 2012 to 2032. Note thata lower index means that the demand of air transport isless concentrated on mature markets.If we now focus on the differences between originand destination (O&D) traffic flows, there are twocomplementary ways to look at it. On the one hand, to

look at the largest O&D t raffic flows, and on the other, toconsider the fastest growing.When looking at the first dimension, Domestic PRC willbe the largest region in 2032, thanks to an impressive7.0% annual growth, representing 10.4% of total worldRPKs. With an expected growth of 1.9% per annum,domestic USA ranks second, reaching 8.5% of total2032 world traffic, followed by Intra Western Europeand Western Europe-USA. The latter two will accountfor 5.1% and 4.2% of world air travel demand in 2032,respectively. These figures also demonstrate thatadvanced economies will continue to play a major role infuture air transport growth.

When looking more in detail at what is behind theexpected traffic growth over the next 20 years, there areseveral features to highlight.

The first is the two speed air transport growth model,which is likely to dominate in the future. On the one hand,

the fastest growing are the emerging regions, which willdrive future demand. On the other hand, the advancedeconomies, with more moderate growth rates, are stillexpected to be amongst the largest traffic regions in2032.

TRAFFIC WILL DOUBLE IN THE NEXT 15 YEARSSource:ICAO,Airbus

EMERGING REGIONS WILL DRIVE THE WORLD TRAFFIC GROWTH, BUT ADVANCED ECONOMIESWILL REMAIN FOREMOSTSource:Airbus

*Traffic from/to/within the region Intercontinental traffic: 50% allocated to each region

LARGEST O&D FLOWS

The long-term perspective

We expect world traffic to double over the next 15 years,reaching the 11 trillion RPK threshold by 2027. On a 2012-2032 forecast horizon, we maintain our expectation that

world traffic will grow at an average 4.7% annually, witha 5.1% average annual increase in the first decade and a4.4% expansion per year over the second.


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0 50 100 150 200 250 300 350

Domestic IndiaIndian Sub |} South America

Indian Sub |} PRC Africa Sub Sahara|} Middle East

Middle East |} South America Asia |} Indian Sub

Middle East |} South AfricaMiddle East |} Russia

Central Europe |} Middle East Asia |} Middle EastNorth Africa |} PRC

Africa Sub Sahara|} JapanPRC |} Russia

CIS |} PRCMiddle East |} PRC

North Africa |} South AfricaJapan |} Middle East

Central America |} South America Africa Sub Sahara|} CIS

Indian Sub |} South Africa

9.8%9.6%9.1%8.9%8.9%8.7%8.5%8.5%8.3%8.0%8.0%7.8%7.7%7.7%7.7%7.5%7.5%7.5%7.5%7.5%

20-year CAGR

2012-2032 billions RPK

2012

2032

Asia - Pacific

Europe

North America

Middle East

Latin America

CIS

Africa

29%

26%

25%

8%

5%

4%

3%

5.5%

3.8%

3.0%

7.1%

6.0%

5.8%

5.1%

34%

22%

18%

12%

7%

4%

3%

0 1,000 2,000 3,000 4,000 5,000

% of 2012

world RPK

20-year

CAGR

% of 2032

world RPK

20 years

+4.7%world annualtraffic growth

2012

2032


Airlines in Asia-Pacific and Middle East driving traffic growth

On a regional basis, the airlines located in the MiddleEast, Latin America and Asia-Pacific will enjoy higherthan average traffic development, growing at 7.1%,6.0% and 5.5% respectively. This is fuelled by theaspirations of airlines to benefit from privileged accessto fast growing markets which will generate a higherability and desire to travel as time passes.

Airlines based in Africa and in the CIS are also expectedto register growth higher than the world’s 4.7% averageannual growth to 2032. Finally, North America andEurope, which have more mature growth rates areexpected to grow at a slower pace, +3.0% and +3.8%,respectively, but will still contribute 40% of the world’sair traffic by 2032.

FASTEST GROWING O&D FLOWS

LCCs will fly an increasing amount of air traffic

Low-Cost Carriers (LCCs) are now a global phenomenon,especially in Europe and increasingly in Asia, the MiddleEast and Africa. As the propensity to travel is highlycorrelated with economic growth and air ticket pricestimulation, LCCs have been able to open new marketsand allow more people to fly more often.Distinguished by their fleet simplicity, their predominanceon short-haul routes, fast turnaround times and rapidgrowth, we expect LCCs to continue to increase theirglobal traffic market share to reach 21% by 2032, above

the 17% they represent today. Regionally, some short-haul markets such as the Intra-Europe or Domestic

ASEAN for instance, are expected to have greater lowcost market presence, potentially taking a 60% share ofthe short-haul market on these flows by 2032.However, it is clear that whether considered low costor full service, airlines are taking the best from eachother’s models. This makes a clear differentiation moredifficult in some cases, particularly as we project 20years into the future.

ASIA-PACIFIC TO LEAD IN WORLD TRAFFIC BY 2032

GLOBAL NETWORK CARRIERS ARE THE LARGEST IN 2012, BUT LOW-COST CARRIERS ARE THE FASTESTGROWING BETWEEN 2012 AND 2032

The fastest growing O&D passenger traffic flowsforecast between 2012 and 2032 will be in emergingeconomies. Domestic India ranks first, with an annualaverage increase of 9.8%; followed closely by O&Dpassenger traffic between Indian Sub-Continent andSouth America, with 9.6% forecast annually; and lastly

passenger traffic between the Indian Sub-Continentand PRC, with a 9.1% annual growth forecast overthe period. This is not surprising when we considerthat over recent years, air traffic from/to/within theseemerging economies have been steadily growing at atwo-digit a year rate.

21%Share of LCC traffic in 2032.


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Demand forpassengeraircraft

04


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New

deliveries

6,779

Beginning 2013

Replacement

2,512

Growth

4,267

Stay in service & Remarketed

887

Fleet size

2032

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

3,399

7,666


TWIN-AISLE FLEET IN SERVICE EVOLUTIONSource:Airbus

NEW DELIVERIES OF TWIN-AISLE AIRCRAFT

Twin-Aisle A FOCUS FOR NEW TECHNOLOGY

In terms of the size of aircraft, the Twin-Aisle segmentincorporates aircraft between 250 and 400 seats.

The centre of gravity in this segment is in the 250-300categories, which is expected to represent 70% of the

Twin-Aisle demand, a market where the A350XWB,

A330 and 787 compete today. But, aircraft in the 350-400 category will still represent nearly 2,100 units overthe next 20 years, a segment where the A350-1000XWBand other competing types will meet demand in the yearsto come.

NEW DELIVERIES OF TWIN-AISLE AIRCRAFT BY REGION

Like the smaller Single-Aisle aircraft, Twin-Aisle aircraft

also provide a varied and broad operational capabilityto the market. These aircraft take passengers on their

journeys on high density, short-haul routes, like manyin China or other parts of Asia, or low-density long-haulroutes, many between the more mature markets andemerging economies. Some 37% of all RPKs were flownon the 3,399 Twin-Aisle aircraft in service at the beginningof 2013. By 2032, the fleet of Twin-Aisle aircraft will morethan double to almost 7,670 aircraft. These aircraft will beused to connect major aviation hubs across the globe,but also to connect major hubs to secondary cities. 37%of the deliveries, 2,510 aircraft, will replace existing, lessfuel efficient aircraft with new, eco-efficient aircraft like the

A350XWB. Some 4,270 aircraft will be used for growth. Asia-Pacific will be the largest contributor to the demandfor growth in this market segment with nearly half of all

Twin-Aisle deliveries over the next 20 years.

The future importance of this segment of aircraft is clear: not only because it will generate value from aircraftdeliveries over the next 20 years, but because of the effort aircraft manufacturers will make to deliver aircraft, withthe latest technologies, meeting airline demand, which has already created a significant backlog for these types.


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250

200

150

100

50

0

Top 10 A380 airports ranked by average weekly departures

Dubai Singapore LondonHeathrow

Par is-CDG Bangkok Sydney Los Angeles

Nar ita F rank furt HongKong

Thai

Singapore

Malaysian

Emirates

Air France

Qantas

Emirates

Singapore

Lufthansa

Emirates

Thai

Singapore

Air France

Thai

Singapore

Lufthansa

Thai

Singapore

Qantas

Malaysian

Emirates

British Airways

Singapore

Qantas

Malaysian

Emirates

British Airways

Thai

Emirates

Singapore

Qantas

Emirates

China Southern

Singapore

Qantas

Korean

Emirates

China Southern

Malaysian

Air France


Today, some airlines are operating the A380 for example,at an extremely comfortable 407 seats. Offering airlinesthe opportunity to pamper their high yield passengers,and at the same time giving passengers at the back ofthe plane more space and comfort than other aircrafttypes. Airline customers have chosen various seatingconfigurations from this luxurious arrangement, rightup to single class layouts of 840 seats, 13 less thanthe maximum capacity of 853 seats. This gives airlines’the flexibility to mix comfort, revenue and cost per seatto more precisely match their own distinct brandsand business models. Today, A380 configurations aretypically between 500-520 seats, and include threeand four class configurations.

At an operating level, this capacity flexibilit y allowsairlines to deploy the right capacity at the right time,critical to optimally serve their trunk routes, which arethe driver of revenue on their networks. Long-haulflights, especially between mature and expandingmarkets, are characterised by two daily demandpeaks. VLAs allow an airline to capture thesepeaks in the most cost efficient way by reducingor eliminating the need for closely spaced multipledepartures

Airbus Global Market Forecast 2013-2032

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