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www.ascendworldwide.com
AEROSPACEINFORMATIONREDEFINED
The impact of economic stimulus on China’s airline industry
Gary CrichlowAviation Analyst, ASCEND
AEROSPACEINFORMATIONREDEFINED
7TH ANNUAL CHINA AIRFINANCE CONFERENCEJune 2009
Beijing, China
“The information contained in our databases and used in this presentation has been assembled from many sources, and whilst reasonable care has been taken to ensure accuracy, the information is supplied on the understanding that no legal liability whatsoever shall attach to Ascend Worldwide Limited, its offices, or employees in respect of any error or omission that may have occurred.”
www.ascendworldwide.com
AEROSPACEINFORMATIONREDEFINED
2
ASCEND: INFORMATION & CONSULTANCY SERVICES
DATA
ANALYSIS
MODELLINGADVISORY
MARKET
INSIG
HT
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AEROSPACEINFORMATIONREDEFINED
REGULATORY
OEM
FINANCE
INSURANCE
LEASING
MRO
COMPONENTS
OPERATORS
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AEROSPACEINFORMATIONREDEFINED
OUTLINE
GLOBAL MACRO-ECONOMIC PICTURE Demand drivers & industry trends
REGIONAL COMPARISONS CHINESE AVIATION MARKET OUTLOOK
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AEROSPACEINFORMATIONREDEFINED
IATA GLOBAL TRAFFIC & REVENUE TRENDS
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
E
2009
F
2010
2011
2012
2013
2014
GD
P y-
o-y
% c
hang
e
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
Pax RPK
/ airline revenue y-o-y % change
GDP growth (LHS)Passenger RPKs (RHS)Global airline revenues (RHS)
Source: IATA, IMF
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AEROSPACEINFORMATIONREDEFINED
PREMIUM TRAFFIC TRENDS
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%A
pr-0
7M
ay-0
7Ju
n-07
Jul-0
7A
ug-0
7Se
p-07
Oct
-07
Nov
-07
Dec
-07
Jan-
08Fe
b-08
Mar
-08
Apr
-08
May
-08
Jun-
08Ju
l-08
Aug
-08
Sep-
08O
ct-0
8N
ov-0
8D
ec-0
8Ja
n-09
Feb-
09M
ar-0
9A
pr-0
9
Prem
ium
reve
nue
y-o-
y gr
owth
(%)
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
Premium
volume y-o-y grow
th (%)
Premium volumes Premium revenuesSource: IATA
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AEROSPACEINFORMATIONREDEFINED
-6
-4
-2
0
2
4
6
8
10
12
14
World EU USA Lat. Am./Caribbean
DevelopingAsia
CHINAGD
P (c
onst
ant p
rices
) ann
ual %
cha
nge
(%)
2007 2008 2009
Source: International Monetary Fund World Economic Outlook, April 2009
REGIONAL COMPARISONS — GDP TRENDS
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AEROSPACEINFORMATIONREDEFINED
REGIONAL COMPARISONS — TRAFFIC TRENDS
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%M
ay-0
8
Jun-
08
Jul-0
8
Aug
-08
Sep
-08
Oct
-08
Nov
-08
Dec
-08
Jan-
09
Feb-
09
Mar
-09
Apr
-09
May
-09
Pass
enge
r RPK
cha
nge
y-o-
y
Air Transport AssociationAssoc. of Asia-Pacific AirlinesAssoc. of Latin American Airlines (ALTA)Assoc. of European Airlines
Source: Airline trade association websites, Ascend analysis
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AEROSPACEINFORMATIONREDEFINED
REGIONAL COMPARISONS — 1Q09 AIRLINE RESULTS
(800) (700) (600) (500) (400) (300) (200) (100) 0 100 200
Japan Airlines GroupKorean Air
Singapore AirlinesAirAsia
Air ChinaAir France-KLMBritish Airways
Lufthansa GroupRyanair
Turkish Airlines (THY)LAN Airlines
COPA AirlinesDelta Air LinesUnited Airlines
American AirlinesAir Canada
Frontier AirlinesAllegiant Air
AirTran AirwaysWestJet
Net 1Q09 profit (loss) (US$ millions)
North AmericaLatin AmericaEuropeAsia-Pacific
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AEROSPACEINFORMATIONREDEFINED
REGIONAL COMPARISONS — PLANNED CAPACITY
From IAE June 2009 Appraisers’ Event, ParisSource: OAG
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AEROSPACEINFORMATIONREDEFINED
-6
-4
-2
0
2
4
6
8
10
12
14
World EU USA Lat. Am./Caribbean
DevelopingAsia
CHINAGD
P (c
onst
ant p
rices
) ann
ual %
cha
nge
(%)
2007 2008 2009 2010 2011
Source: International Monetary Fund World Economic Outlook, April 2009
REGIONAL COMPARISONS — GDP FORECASTS
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AEROSPACEINFORMATIONREDEFINED
CHINESE ECONOMIC GROWTH …
IMF (April 2009): China 2009 GDP: 6.5% growth World 2009 GDP: 1.3% decline
World Bank (June 2009): China 2009 GDP: 7.2% growth
(revised upward from March 2009 forecast of 6.5%) World 2009 GDP forecast: 2.9% decline
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AEROSPACEINFORMATIONREDEFINED
… AND ITS IMPLICATIONS FOR TRAVEL DEMAND2008 MAINLAND CHINA PASSENGER TRAFFIC GROWTH
-6%
-4%
-2%
0%
2%
4%
6%
Total Domestic International
2008
Yea
r-on
-yea
r gro
wth
Source: CAAC, CAPA analysis
2009 comparisons will be difficult due to 2008 Olympics & natural disasters
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AEROSPACEINFORMATIONREDEFINED
CHINESE AVIATION MARKET — SIGNS OF RECOVERY
From IAE June 2009 Appraisers’ Event, Paris
Domestic market growth; international travel still sluggish
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AEROSPACEINFORMATIONREDEFINED
CHINESE AVIATION MARKET — LOOKING AHEAD
Huge growth potential BUT … … years of high growth may have masked structural inefficiencies Chinese economic stimulus helping BUT … … long-term strategies will need to be addressed Domestic market better-performing BUT … … needs restructure
China Eastern / Shanghai Airlines merger?
Mainland Chinese carriers — fragile balance sheets
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AEROSPACEINFORMATIONREDEFINED
FUNDING REQUIREMENTS
CHINESE AIRLINES DELIVERIES DUE JULY 2009–DECEMBER 2015
0
20
40
60
80
100
120
140
160
180
200
2009 2010 2011 2012 2013 2014 2015
No.
of a
ircra
ft
A380
777
787
A330
A320 family
737 NG
Harbin ERJ-145
E190
ARJ21
MA60
700+ aircraft due,$35bn+ (2009$)
Source: Ascend Online Fleets & Values (V1)
$4bn
$9bn $9bn
$7bn
$4bn
$1bn$0.7bn
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AEROSPACEINFORMATIONREDEFINED
SUMMARY
Air transport demand primarily driven by economic health Global GDP, international trade international travel, freight
Global financial system recovery is the key
Chinese domestic market seems to be recovering Domestic GDP slowed but still positive, economic stimulus &
support, market restructuring
There is a way to go yet
THANK YOU!
Hong Kong+852 2813 [email protected]
New York+1 212 551 1118 [email protected]
London+44 20 8564 6700 [email protected]
www.ascendworldwide.com | ascend.aviation2020.net | twitter.com/AscendAviation | linkedin.com: “Ascend Aviation Group”
The information contained in our databases and used in this presentation has been assembled from many sources, and whilst the utmost care has been taken to ensure accuracy, the information is supplied on the understanding that no legal liability whatsoever shall attach to Ascend, its subsidiaries, officers, or employees with respect to any error or
omission that may have occurred.
For further information please visit www.ascendworldwide.com