Geneva – The International Air Transport Association (IATA) released its updated passenger growth forecast, projecting that passenger numbers are expected to reach 7 billion by 2034 with a 3.8% average annual growth in demand (2014 baseline year). That is more than double the 3.3 billion who flew in 2014 and exactly twice as many as the 3.5 billion expected in 2015.
Previously, IATA forecast 7.4 billion passengers in 2034 based on a 4.1% average annual growth rate. The revised result reflects negative developments in the global economy that are expected to dampen demand for air transport, especially slower economic growth projections for China.
The five fastest-increasing markets in terms of additional passengers per year over the forecast period will be China (758 million new passengers for a total of 1.196 billion), the US (523 million new passengers for a total of 1.156billion), India (275 million new passengers for a total of 378 million), Indonesia (132 million new passengers for a total of 219 million) and Brazil (104 million new passengers for a total of 202 million).
- Seven of the ten fastest-growing markets in percentage terms will be in Africa. The top ten will be: Malawi, Rwanda, Sierra Leone, Central African Republic, Serbia, Tanzania, Uganda, Papua New Guinea, Ethiopia and Vietnam. Each of these markets is expected to grow by 7-8% each year on average over the next 20 years, doubling in size each decade.
In terms of routes, Asian, South American and African destinations will see the fastest growth, reflecting economic and demographic growth in those markets. Indonesia-East Timor will be the fastest growing route, at 13.9%, followed by India-Hong Kong (10.4%), Within Honduras (10.3%), Within Pakistan (9.9%) and UAE-Ethiopia (9.5%)
“The demand for air transport continues to grow. There is much work to be done to prepare for the 7 billion passengers expected to take the skies in 2034,” said Tony Tyler, IATA’s Director General and CEO.
“Economic and political events over the last year have impacted some of the fundamentals for growth. As a result, we expect some 400 million fewer people to be traveling in 2034 than we did at this time last year. Air transport is a critical part of the global economy. And policy-makers should take note of its sensitivity. The economic impact of 400 million fewer travelers is significant. Each is a lost opportunity to explore, create social and cultural value, and generate economic and employment opportunities. It is important that we don’t create additional headwinds with excessive taxation, onerous regulation or infrastructure deficiencies,” said Tyler.
A sizable gulf has opened up between the performance of air passenger markets in the BRIC economies (Brazil, Russia, India and China). China and India are growing fast, with annual growth this year-to-date of 12.5% and 16.5% respectively. India has bounced back from a subdued 2014, and is seeing a strong increase in domestic frequencies. Although China’s growth rate has moderated, it is still on course to add an additional 230 million passenger journeys between 2014 and 2019. This is more than double the other three BRIC nations put together. Brazil and Russia, by contrast, are struggling. Falling oil and other commodity prices are partly to blame. Economic sanctions have also affected the Russian economy. It is notable that airlines in Brazil pay some of the highest fuel charges in the world; bringing the country’s fuel policy in line with global standards would certainly be a boost for air transport.
The prospects for more open travel between the rest of the world and Cuba and Iran offer exciting possibilities for business, tourism and development as diplomatic relations warm up. Of the two markets, Iran offers the greater potential. Although Cuba is the largest Caribbean country by population, passenger growth would be from a low base of 5 million passengers today to around 13 million by 2034, in the best-case scenario. Iran, by contrast, already has a market of 12 million passengers, mostly domestic flyers. If strong GDP growth is accompanied with a full normalization of international relations and the end to sanctions, the total size of the Iran market could be 43.6 million passengers by 2034.
“There is a great deal of scope for economic development in Cuba and Iran, and air transport can play an enormous role in that. Relative to their economic development, the people of Iran and Cuba fly less than the global average. In Iran, full integration in the global economy could mean a difference in passenger growth of around 13 million extra travelers a year,” said Tyler.
China is expected to overtake the United States as the world’s largest passenger market (defined by traffic to, from and within) by 2029. In 2034 China will account for some 1.19 billion passengers, 758 million more than 2014 with an average annual growth rate of 5.2%. Traffic to, from and within the US is expected to grow at an average annual growth rate of 3.1% that will see 1.16 billion passengers by 2034 (523 million more than 2014). India will displace the United Kingdom as the third-largest market in 2026, with Indonesia rising to number 5 in the world.
Haikou, China-based HNA Group, the parent of Hainan Airlines, has agreed to buy a 23.7% stake in Azul Brazilian Airlines for $450 million.
Azul said in a statement that HNA has made a “firm commitment” to acquire the holding. HNA is aggressively acquiring aviation assets globally; it just gained European Commission approval to buy 100% of European ground handling company Swissport.
Azul CEO David Neeleman noted HNA is making a major investment in the Brazilian market at a time when Brazil’s economy is struggling. HNA views Azul as “a solid investment with high growth potential,” he said, adding, “The investment of $450 million, considering Brazil’s current macroeconomic situation, demonstrates that we have a winning business model and that the HNA Group, as a large investor, has absolute confidence in Azul’s team.”
HNA president Adam Tan said in a statement, “HNA Group is committed to expanding in the airline industry through strategic investments in companies with strong market positions and excellent management teams. We are pleased to partner with Azul in order to bring more choice and convenience to our customers traveling to and from Brazil.”
HNA and Azul said their partnership “will result in commercial agreements, joint negotiation efforts, and adjustments in aircraft allocation” and “also enables [Azul’s] entry into the Asian market.”
HNA joins United Airlines as an investor in Azul. United earlier this year agreed to acquire a 5% stake in Azul for $100 million.
Azul, founded in 2008 by Neeleman (who also founded JetBlue Airways), was a domestic-only operator until late 2014, when it launched services to the US. In late 2014, the airline also signed a purchase agreement for 35 Airbus A320neos and announced it would lease another 28 A320neos.
-Total revenues amounted to 2,689.7 million, 12.3% more than in the first 9 months of 2014.
-Commercial revenues increased in this period up to 687.8 million euros, up 15%.
-Growth in passenger traffic was consolidated, with 161.2 million January through September, up 5.2%.
Aena S.A. has reached a net profit of 639.2 million euros January through September, representing 83.8% rise over the same period in 2014, as a result of business development and the reduction of debt and financial expenses.
Total revenues reported by Aena in the first nine months of 2015 increased to 2,689.7 million euros, an increase of 12.3% over 2014. Of these, the most outstanding is ordinary commercial revenue (inside and outside the terminal), which grew by 15% compared to the same period of 2014, reaching 687.8 million euros. Also noteworthy is the contribution to revenues from international operations, to which Luton Airport contributes 147.7 million euros.
The effort made to reduce costs carried out in recent years is reflected in the maintenance of efficiency during the first nine months of 2015 (+ 0.9% in operating expenses, excluding
Luton), well below the growth experienced in passenger traffic.
Aena experienced, in the first nine months of the year, a reduction in the consolidated net financial debt as a result of strong cash flow generation, net financial debt. On 30 September, net financial debt (1) totalled 9,523 million euros compared to 10,733 million euros at the close of 2014.
Thus, as regards the consolidated gross operating profit (EBITDA) (2), Aena obtained between January and September 2015, a total of 1,592.4 million euros, 11.6% more than in the first nine months of 2014.
This significant growth in the EBITDA is due to the consolidation of passenger traffic growth (+ 5.2% between January and September 2015), the growth in commercial revenues (15%), and the first-time consolidation of Luton Airport (50.6 million euros of EBITDA) and to the maintenance of cost efficiency.
Passenger Traffic Statistics
In the period between January and September 2015, airports in the Aena network continued to consolidate the growth trend in passenger traffic, with increases recorded continuously for 23 months. The number of passengers exceeded 161.2 million, 5.2% more than in the first nine months of 2014. This increase is based on the rise in international traffic (5%) and on the consolidation of national passengers (5.8%).
The latest passenger traffic data published through October 2015 confirm this growth trend: + 5.4% for the entire network (+ 7.8% in October) and + 12.1% Adolfo Suarez Madrid-Barajas Airport (+ 13.5% in October).
(1) Calculated as Current Financial Debt plus Non-current Financial Debt minus Cash and Cash Equivalents.
(2) Calculated as Total Revenue minus Total Expenses plus Depreciation of Tangible Assets.
UK long-haul specialist Virgin Atlantic has set up a new subsidiary to operate services to the Caribbean.
The new subsidiary, Virgin Atlantic International (VAI), has been granted an air operator’s certificate by the UK Civil Aviation Authority and is expected to begin operations by the end of December, using two of Virgin Atlantic’s Airbus A330-300s.
VAI will be used “to operate certain Caribbean services on Virgin Atlantic’s behalf,” Virgin Atlantic said in a brief statement. The new company will use the parent company’s pilots and cabin crew and there will be no discernible difference in the service compared to that of Virgin Atlantic.
Virgin Atlantic declined to give further details of the new operation. “It’s not something we’re talking about,” spokeswoman Anna Catchpole said. “It’s commercially sensitive, so we can’t release the reasons behind [the new company]. It’s an internal thing.”
Virgin Atlantic has a substantial roster of Caribbean and West Indies destinations, including Antigua, Barbados, Bahamas, Cuba, Jamaica and St Lucia.
The European Commission has given the go-ahead for Hainan Airlines’ parent HNA Group to acquire 100% of European ground handling company Swissport.
Over the summer, HNA Group signed an agreement to acquire Swissport from private equity firm PAI Partners for approximately CHF2.7 billion. This deal has now been cleared.
“The Commission concluded that the proposed acquisition would raise no competition concerns because the companies' activities do not overlap,” the European regulator said in a statement.
Swissport is the world’s largest ground and cargo handler, processing 224 million passengers and approximately 4.1 million tonnes of cargo per year, generating a CHF3 billion turnover. It will remain a stand-alone business following the acquisition.
HNA Group, which owns 10 listed holdings companies and more than 30 companies overseas, said it is acquiring Swissport to develop its network of aviation, airport, logistics and tourism services.
“The business presence of HNA Group, in particular its extensive knowledge of the China market, will also assist Swissport to more effectively expand emerging markets including China, which will enhance and optimize the global presence of both parties,” HNA Group vice chairman and president Tan Xiangdong said when the deal was announced in July.
With a workforce of around 60,000 personnel, Swissport is active at more than 270 stations in 48 countries, performing services for around 700 airlines.
Delta Air Lines has expressed its intention to increase its holding in Grupo Aeromexico to as much as 49%.
Atlanta-based Delta acquired a 4.17% stake in Mexico City-based Aeromexico for $65 million in 2012. Delta said it plans to acquire up to 32% more of Aeromexico through a cash tender offer of MXP43.59 ($2.60) per share, or 52% more than the price at which Aeromexico’s shares are currently trading. Delta already holds an option to acquire an additional 8.1% stake in Aeromexico and Delta’s pension trust holds options to acquire 4.6%. Therefore, if Delta’s tender offer is successful, Delta and its pension trust would collectively own or have options to acquire up to 49% of Aeromexico.
Delta and Aeromexico are seeking antitrust immunity from the US and Mexican governments to create a joint venture for Mexico-US transborder flying.
Delta president Ed Bastian said in a statement that the tender offer “demonstrates Delta’s confidence in Mexico’s future and deepens our relationship with Aeromexico, cementing Delta’s long-term commitment to the customers we serve to, from and through Latin America.”
Delta said it will commence the tender offer when it gains required regulatory approvals in Mexico and the US. The transaction must also be approved by both airlines’ boards of directors.
World-class safety, smart regulation, a low cost environment, appropriate infrastructure, and sustainability are the recipe to ensure African aviation growth.
A continent that saw the loss of Metrojet flight 9268 on 31 October, safety was better in 2014 with zero hull losses in Africa. However, the all-accident rate for the region last year was 11.18 for every one million flights, far higher than the global average of 1.92. And as of October, only 17 out of 54 African States complied with 60% or more of the ICAO standards and recommended practices.
To help with safety, the IATA Standard Safety Assessment allows the smallest carrier to benchmark its safety performance. This program was unveiled in Africa in June 2015 and two workshops have taken place since.
“We would like to see national civil aviation authorities given greater resources and operational independence, and where necessary, rely on regional pooling initiatives across the continent to promote safety,” said Tyler, speaking at AFRAA in Brazzaville on 9 November.
The smart regulation Tyler referred too includes market liberalization, as set out at the African civil aviation ministers meeting in Yamoussoukro in Côte d’Ivoire in November 1999 – known as the Yamoussoukro decision. IATA studied what such liberalization could mean for 12 key markets across Africa. It found that intra-African liberalization between these 12 markets would provide 155,000 jobs and $1.3 billion in annual gross domestic product. “A potential five million extra passengers a year would have the chance to travel,” Tyler told the AFRAA meeting.
A low cost environment on the continent is also important for IATA because of all the taxes that African states can apply to airlines. These include, jet fuel taxes, passenger taxes, solidarity taxes, tourism taxes, fiscal stamp taxes, value-added taxes, sales taxes, and transportation taxes.
Taxing fuel contributes to it being about 30% of airlines’ costs. African taxation makes fuel 20% more expensive than anywhere else. Tyler also pointed out in his speech that governments across Africa levy some 15% of all the aviation taxes worldwide. Airport charges on the continent are also among the highest in the world.
San Juan, Puerto Rico - The International Air Transport Association (IATA) welcomed the improvements in safety that have resulted from strong partnerships among aviation stakeholders in Latin America and the Caribbean, and urged governments in the region to use this as a template for working together in other areas.
Speaking at the Latin America and Caribbean Air Transport Association (ALTA) Airline Leaders Forum, Tony Tyler, IATA’s Director General and CEO, said that governments and industry have worked together for several years to drive safety improvements, contributing to a better than 50% reduction in jet hull loss accidents in 2014, compared to the average of the previous five years. “Our success in safety is proof that the partnership of government and industry is powerful. We need to apply this formula to other areas that are holding back aviation’s ability to be a catalyst for economic development and job creation,” said Tyler.
Tyler noted that in places like China, Singapore and the Middle East, governments have used the power of aviation’s connectivity to help build their economies and create wealth. “There is no reason that more governments in Latin America and the Caribbean cannot apply it to enable aviation to deliver a powerful economic boost at a time when many countries here are struggling.”
Tyler urged governments to use the same cooperative approach to accelerate infrastructure development, which lags behind demand for aviation connectivity.
- “Inadequate aviation infrastructure is an economic handicap. We forecast regional demand in 2034 of 525 million annual passengers, more than double the 240 million passengers expected this year. Yet, key airports in Argentina, Brazil, Colombia, Ecuador, Mexico, and Peru already face growth constraints.”
Additionally, governments here should reform taxes and charges policies that impose crippling costs on the industry and overall economy.
- “The region is rife with unreasonable tax and charges policies that hurt travel and constrain economic development. Brazil’s airlines pay some of the highest fuel charges in the world, 17% above the global average. Ecuador is looking at a similar pricing model that could raise fuel costs there by as much as 30%. Panama plans to raise air navigation charges 97% over three years. Peru levies an unjustified 16% VAT on air traffic control charges. Governments need to recognize that aviation’s greatest contribution is not in providing tax receipts to the treasury but in the growth and development it stimulates,” said Tyler.
Governments also need to honor their obligations under international agreements that allow their citizens to benefit from the global connectivity aviation provides.
- “Venezuela refuses to permit airlines to repatriate $3.8 billion of their own money. The negative impact is dramatic. Passenger traffic for Venezuela fell 17% in the 12 months through 31 August 2015 compared to the prior 12 month period. Airlines operating to Argentina are also seeing restrictions on repatriating funds. We are seeking to meet with the new government as soon as it is in office to find a solution that will preserve connectivity and the vital economic benefits it brings.”
Consumer rights regulation is another area that is ripe for a more collaborative approach, one that recognizes that airlines, governments and passengers share a common goal of getting to destinations safely, reliably and on-time.
- "We have seen a proliferation of prescriptive, un-harmonized passenger rights regimes that create difficulties for the industry and confusion for our customers. Furthermore, the purpose of many of these regulations appears to be to defend passengers from airlines. This results in rules which actually reduce consumer protection and convenience – through higher fares, less choice, and more confusion—and which raise costs for airlines that must comply with a plethora of differing and often conflicting regulatory regimes.”
The air transport sector already makes an enormous contribution to the region. It supports 4.9 million jobs including tourism-related jobs and contributes $153 billion to GDP. “Aviation can do far more if governments adopt the winning formula that has brought so much success elsewhere,” Tyler said.
Portuguese national carrier TAP Portugal has signed a firm order with Airbus for 53 aircraft from the European manufacturer, it announced Nov. 13.
The deal will see TAP Portugal taking 14 A330-900neo plus 39 A320neo family models, consisting of 15 A320neos and 24 A321neos. The carrier is already an all-Airbus customer, with a current fleet of 43 A320 family models (21 A319, 19 A320 and three A321s) plus 14 A330-200 and four A340-300 widebodies.
The aircraft will join the airline as part of its fleet renewal announced by the airline’s new majority owner Atlantic Gateway. As part of the agreement, TAP Portugal is substituting its previous order of 12 A350-900s with the A330-900neo.
“Our latest order for 14 Airbus A330-900neo aircraft and 39 A320neo family aircraft reflects our ongoing commitment to provide our customers with the next generation of fuel efficient aircraft,” TAP CEO Fernando Pinto said. “The A330neo, like the A320neo family, will give us the flexibility to enter new markets and improve the frequency of existing ones.”
“With this order for 53 brand new aircraft TAP is reborn,” said Airbus COO-customers John Leahy. “These aircraft are the right aircraft for TAP’s current missions and growth markets. The combination of the A330neo and A320neo families … fleet will allow the airline to reap the benefits of Airbus’ unique aircraft commonality.”
The A330-800neo and A330-900neo were launched in July 2014, with first deliveries scheduled to start in 4Q 2017. The A330neo incorporates Rolls-Royce Trent 7000 engines, aerodynamic enhancements and new cabin features, with Airbus forecasting a 14% improvement in fuel consumption per seat compared to current A330s. Additionally, range increases by around 400 nautical miles.