CAPA Outlook: State of the Industry | November 2023

Transcript

Paul Burton:Good morning, everyone. Selamat pagi. Thank you so much for the kind invitation to speak to you this morning. My name is Paul Burton. I'm the Managing Director of Aviation Week Network based in Singapore. I've been in the region for, for 10 years now. It's always a great pleasure and an honoured to come back to Malaysia. Thank you to our hosts, Malaysia Airports, really for putting on such a magnificent first morning. I hope my team were listening to our previous speaker who was alluding to weekly KPIs and quarterly reviews. Could be an interesting development for you all. But, you know, aside from that, let me try to get some time back this morning for you. We have about 15 minutes or so and What I'm looking to achieve today is really walk through some of the CAPA and Aviation Week Network data that we produce on a daily, weekly, monthly basis. I'm like a kid in a candy store when I come to put these presentations together because we have so much quality information, data, forecasting that I can share with you. So I've tried to pick out some data views that I think will be of interest to this audience and running through them relatively quickly for you this morning. The first one comes from one of our data products, which is a 10-year forecast, fleet and MRO forecast. And I wanted to pick out some data from this that really brings to life the vibrancy and rapid development once again of the Asia market. This is new aircraft deliveries by region over the next 10 years. You can see split out here amongst different regions. If you add up India, which is about 2,000 new aircraft, China 2,273, and Asia-Pacific 4,203, You can see that those 3 regions combined have just under 40% of all new aircraft deliveries over the next 10 years. So a real powerhouse in terms of brand new aircraft. What do those deliveries look like? Well, unsurprisingly, about 75% are narrowbodies, and we're looking at around 6,400 new deliveries in Asia-Pacific and China, averaging from 26 onwards to around 600, 650 new aircraft a year, of which around 500 or so fall within the narrow-body type of aircraft. So if we fast forward, and we've heard a lot about crystal ball gazing over the past hour or so, This is our crystal ball for how the share of the market will look as of 2023. So in that year, around 5,900 aircraft will be in service in China alone at that year in 2023, which is around 30% additional aircraft to what we see this year. Asia Pacific, around 7,000 600 aircraft in service at that time, which is around 56% increase on where we are today. So huge growth we can see within China and, and Asia Pacific, India as well, which I haven't separated out, but not a dissimilar market share to Latin America, to the Middle East, Eastern Europe. So a huge growth in terms of the number of aircraft in service within the Indian market. And we could speak all morning about just that market and the challenges and the opportunities that exist within India. It really is forging ahead incredibly quickly in terms of a viable market for suppliers, for MROs, for airlines. Moving on a little bit now to some of the CAPA data that we produce for our CAPA members. This looks at recovery statistics around the region. I must have a word with our chart producers to try and make the colours a little different. But what we can see— sorry, if I can just go back to that one— what we can see really is a trend that we heard in our first panel, and that is that the Asia-Pacific international recovery at around 80% in July '23 is still lagging to an extent behind the international, the global international recovery. But travel, as I'll look at in the next slide, is back to around 85% of the 2019 volumes that we saw in the top 10 largest airports in Asia-Pacific. The region, I think, is dynamic and explosive in many, many different ways. From different connectivity, new route configurations. I'll come on in a moment to look at new low-cost carriers and their— some of their strategies and their fleet configurations, new partnerships. It really is— it's all to play for, I think, in this region from every different vantage point. And it's a really exciting, explosive time in the development of Asia-Pacific. Where we see some of that international recovery still kind of lagging to an extent, and as we heard from the Minister of Transport earlier, is the state of Chinese travel and that outbound tourism market from China. We heard pre-COVID in Malaysia it was 3 million pax, now it's just over 1 million. So perhaps that acceleration hasn't been quite quite as pronounced as the industry would have hoped, but we can see very positive indicators that it is starting to ramp up in, in the right way. So shifting gears just to look at the top 10 Asia-Pacific airports, this is all data from CAPA for our CAPA members, and what this demonstrates is the top 3 are Haneda and New Delhi and Guangzhou. Interestingly, if you look at the blue dots, so this is the load factor, you can see that it's really the Indian airports, Mumbai, New Delhi, that are hovering around 90% of that load factor. So in terms of the passengers to seats, they're very, very nearly operating at full capacity, whereas Haneda is just over 70%, with the difference being quite marked there. However, in terms of the overall passenger number, just over 35 million, Haneda tops the region for the first half of this year, and then quite a large drop down to Guangzhou, just under 30 million, and down to KLIA, just over 20 million. Load factors with KLIO, though, pretty healthy, nearly 80%. As you'd expect, given the lack of international traffic for Beijing Capital, Shenzhen, and indeed for Guangzhou, the load factor is relatively lower, underneath 70%. So the picture here, I think, is one of growth, but it's also one that indicates there's still quite a long way to go in terms of these airports really kind kind of right-sizing what they're looking to achieve. Just a couple of data points here that really shows how decimated the Chinese market was during COVID This is seat capacity for Guangzhou. You can see it was hovering for the longest time, for 2 years there, nearly 100% of pre-COVID levels. So the recovery here to Just under 40% of pre-COVID levels is really quite remarkable. And the number of domestic seats obviously oscillated quite wildly in relation to how the Chinese government decided to open up and then close again, then open up, then close again. But now we're looking for Guangzhou nearly over pre-COVID levels here of domestic seats. So that's a really healthy indicator. Looking at international arrivals coming into Japan, the majority of those from South Korea and Taiwan. USA starting to pick up, and, and mainland China really picking up in the last couple of months, to the extent that it might actually overtake USA in the coming months. Really interesting kind of dynamic that we've picked on to an extent this morning around LCCs and the opportunity that a number of LCCs are spotting in the marketplace. So I've picked out 6 here and you can see what we've— what I've done here is put together a brief snapshot of their fleet. And then from Aviation Week, I'm taking some of our data for tracked aircraft utilization. So we track all of the hours and cycles and flight hours that every aircraft undertakes. Unsurprisingly, you can see drastic growth in all of these LCCs, given the fact they're very new in terms of their journey as carriers. Focusing on the Qatar Air in India, Huge, huge growth here, both in terms of hours in the red bar, cycles in the brown bar, average flight hours increasing slightly in the light blue, days flown really increasing quite drastically as well. It's, you know, it really mimics the fact they've got 20 777 MAX 8s in service with 56 on order. So really looking to achieve significant growth very, very quickly, that low-cost carrier. A word we heard recently from our previous speaker in terms of service. I recently had the pleasure of flying Air Premia, which had the most remarkable legroom I've ever enjoyed in a premium economy. What it didn't have is vegetarian food, so if you're a vegetarian, you might want to let them know in advance. 15 hours from New York to Seoul with no food is quite challenging. But, you know, startup pains notwithstanding, an interesting model that they're looking to achieve there with Air Premia. Now, if I could have done an entire presentation on Thailand, where they're looking to establish 5 new airlines alone, and all having different parts of the market, all looking to achieve slightly different things, But the overarching question has to be, would that be sustainable 5, 10 years down the line? How would they dovetail with the national carriers? As we've heard, very critical that the national carriers and the LCCs are operating very, very distinctly. One would suspect that of those 5 in Thailand, if they all come to pass, if we look at their performance, they might be very, very patchy. Finally, I extracted this slide from a CAPA leadership briefing that is sent out every 2 weeks to our CAPA members. And I thought this was an interesting kind of sidebar from PATA on international visitor arrivals to the Asia-Pacific region over recent months. And you can see here that 23 arrivals have recovered to around 68%. So again, not, not as high as we might have thought, but certainly on, on the right path. And a lot of that, as we've alluded to, comes from the lack of kind of Chinese arrivals. But of that 68%, more— the number has more than doubled since 2022, a very positive indicator, of course. Arrivals from Europe are nearly 7/8 of COVID levels, pre-COVID levels, I beg your pardon. America's 85%, and Africa 80%. So we're very, very clearly on the path to regaining pre-COVID levels. But as with all of these metrics, I think the performance of China really is the key to not only reaching pre-COVID levels, but actually exceeding them. So I was always told when I put slides together that less is more. I ignored that advice completely for the next slide, which is a dashboard that Aviation Week Network produces for our subscribers, and it's just a one-stop shop of all key metrics that we produce, analysts produce, around aircraft deliveries, orders, schedules, RPKs, fuel price, etc. I don't intend to walk through this in any great detail, but when we send this out to you, I hope it'll be a very, very helpful snapshot and something that, you know, we, we provide on a monthly basis to our subscribers of our intelligence products that just helps them get a sense as to how the market's performing. And we want to see as much green on there as possible. And as you can see, green is now overwhelmingly the color of choice, which is a very good thing. With that, thank you so much for your kind attention. Pleased to let you know there'll be caffeine and delicious Malaysian snacks available for you outside. So we'll reconvene very soon. Thank you so much. Thank you.

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