air traffic demand forecast -...

AIR TRAFFIC DEMAND FORECAST

GDP Forecast for Hong Kong and World Markets

Preliminary Passenger Traffic Forecast Based on

GDP

Preliminary Cargo Traffic Forecast Based on GDP

Reality Check with Industries

Revised Passenger Traffic Forecast

Revised Cargo Traffic Forecast

Sensitivity Analysis

Air Traffic Movement Forecast

+-

Adjustment Factors

GDP Based Preliminary Forecast Adjustments and Finalised Forecast

Movement Forecast

Sensitivity Analysis

A Structured Air Traffic Demand Forecast ProcessFigure

3.1

Thefirststepofthemasterplanningprocessistodeterminethelong-termairtrafficdemandforecastupto2030.InternationalAirTransportAssociation(IATA)Consultinghasbeencommissionedtoundertakethistask,whichisaverystructuredprocessinvolving–

(a)Evaluatingthebestmodeltoapplyfortheforecast;

(b)Compilinggrossdomesticproduct(GDP)forecast;

(c)ProducingpreliminarytrafficforecastsbasedonGDP;

(d)Adjustingtrafficforecastsbaseduponthelatestmarketchanges;

(e)Carryingoutrealitycheckswithaviation-relatedindustries;

(f)Determiningasetofprimaryprojectionsforpassengerandcargotrafficandairtrafficmovements(ATMs,alsoknownasflightmovements);and

(g)Conductingsensitivityanalysistoproducearangeofestimatesforhigh,lowandbasecases.

GDP FORECASTCompilingaGDPforecastisaveryimportantstepasitprovidestheessentialbuildingblockfortheentiretrafficdemandforecast.IATAConsulting’sresearchclearly

demonstratedthatairtrafficgrowthbearsastrongcorrelationwiththeglobalGDPgrowth.Figure3.2showsthetwotrendsinthepastfourdecades.

AsHongKongisaninternationalcitywithanopenmarketandexternally-orientedeconomy,thecorrelationbetweenairtrafficgrowthandGDPgrowthinHongKongisevenmorepronounced,ascanbeseenfromtheclosecorrelationbetweenhistoricaltrafficderivedfromtheregressionformulaeusedbyIATAConsultingandtheactualtraffic(seeFigures3.3and3.4).Forpassengerdemandforecast,IATAConsultingadoptedsimplelinearregressionbasedonHongKong

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Global Air Traffic versus Economic GrowthFigure

3.2

Source:TrafficdatafromInternationalCivilAviationOrganization(ICAO)andInternationalAirTransportAssociation(IATA),GDPdatafromInternationalMonetaryFund(IMF)andEconomistIntelligenceUnit(EIU)

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Source:AAHKtrafficdata,IATAConsultingestimates

Comparison between Actual and Derived HKIA Cargo Traffic Based on Hong Kong GDP and Global GDP

Figure

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Comparison between Actual and Derived HKIA Passenger Traffic Based on Hong Kong GDP

Figure

3.3

Source:AirportAuthorityHongKong(AAHK)trafficdata,IATAConsultingestimates

GDP.Forcargodemandforecast,IATAConsultingadoptedmultiplelinearregressionbasedonHongKongandglobalGDP.

DespitetheglobaleconomicslowdownandSevereAcuteRespiratorySyndrome(SARS)epidemicin2001-2003,HongKong’sGDPexperiencedanincreasebyalmost4%perannumbetween2004and2009.Followingtherecoveryfromtheglobalfinancialcrisisandeconomicdownturnin2008-2009,theGovernmentestimated6.5%GDPgrowthfor20102.OnthebasisofinputfromEconomistIntelligenceUnit(EIU)3ofJuly2009andGlobalInsight4(July2009),IATAConsultingcompiledthefollowingGDPforecastbetween2008and2030–

(a)HongKong’sGDPwillgrowataCompoundAnnualGrowthRate(CAGR)of3.2%;

(b)Mainland’sGDPwillgrowataCAGRof7%;and

(c)TheglobaleconomywillgrowataCAGRof4%.

2 HKSARGovernment,November2010.3 TheEconomistIntelligenceUnit(EIU)

istheworld’sleadingresourceforeconomicandbusinessresearch,forecastingandanalysis.Foundedin1946asanin-houseresearchunitforTheEconomist,itnowdeliverstrustedbusinessintelligenceandadvicetoover1.5milliondecision-makersfromtheworld’sleadingcompanies,financialinstitutions,governmentsanduniversities.

4 GlobalInsightwasfoundedin2001throughthemergerofWhartonEconometricForecastingAssociatesandDataResources,Inc.InOctober2008,GlobalInsightbecamepartoftheInformationHandlingServices(IHS)family.BasedintheNewEnglandRegionintheUS,IHSGlobalInsightprovidescomprehensiveeconomic,financial,andpoliticalcountryandindustryintelligenceproductstosupportplanninganddecisionmaking.

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Five Major GPRD AirportsFigure

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Guangzhou

Shenzhen

Hong Kong

Macao

Zhuhai

Landsat-7SatelliteImageprovidedbyGeocarto

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millions of passenger trips millions of tonnes

203020252020201520082004

Actual Forecast

CargoPassenger

CAGR 2008-2030Passenger/Cargo = 5.9%

Note:GPRDairportsincludeHongKong,Guangzhou,Shenzhen,MacaoandZhuhaiairports

Source:CivilAviationAdministrationofChina(CAAC),AAHKforactualfigures,IATAConsultingforecast

GPRD Airports Passenger and Cargo Traffic ForecastFigure

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5 WorldBank,IATAConsultingestimatesbasedonGlobalInsight.6 ThePRDcomprisesDongguan,Foshan,Guangzhou,Huizhou,Jiangmen,Shenzhen,

Zhaoqing,ZhongshanandZhuhai.

AVIATION MARKET OuTLOOK : THE MAINLAND AND GPRDIATAConsultingforecaststhatairtraffictoandfromtheMainlandwillreachnearly2.1billiontripsby2030,whilecargotrafficwillreach44milliontonnes.Thisprojectionissupportedbyanumberofobservations.Onthepassengerside,theWorldTourismOrganisationforecaststhattheMainlandwillbecometheworld’sfourth-largesttouristsourcemarketandthelargestdomestictouristmarketby2015.TheMainland’sGDPpercapitawillreachapproximatelyUS$14,000in20305,andastheeconomygrows,thedesireandabilityofthepeopleontheMainlandtotravelbothdomesticallyandinternationallywillgrowrapidly.

TheMainlandisalsothemanufacturingcapitaloftheworld,anditscargomustbedeliveredtotheiroverseasdestinationsaroundtheworld.Risingforeigndirectinvestment,improvinglivingstandards,moreliberaltradepoliciesandagrowingexpresscargoandlogisticssectorsupportarobustcargogrowthprojection.Also,cargotrafficofMainlandairportshasincreasedbyaCAGRofover10%eachyearinthepastdecade,reaching9.5milliontonnesin2009.TheMainland’ssubstantialtradevolumeandgrowingeconomywillbekeyfactorsinitscargogrowth.

ThePearlRiverDelta(PRD)6–HKIA’scatchmentarea–isoneoftheMainland’smostdiverseandfastestgrowingregions.ItisoneoftheMainland’scentresofmanufacturingandmostaffluentareas.Withthe

air traffic deMand forecast

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Annual Passenger Demand by 2020 – 233 Million

Annual Passenger Demand by 2030 – 387 Million

Anticipated AnnualHandling Capacity of GPRDAirports – 200 Million*

Unfulfilled Demand – 33 Million

(in passenger trips) Unfulfilled Demand – 147 Million

Anticipated AnnualHandling Capacity of GPRDAirports – 240 Million*

*ForHKIA,thecapacityassumedis60millionbasedoncompletionofthecommittedMidfieldPhase1Development

Source:CAAC,IATAConsultinganalysisandestimates

GPRD Airports Capacity and Forecast Passenger Demand (2020 and 2030)

Figure

3.7

7 TheGreaterPRDcomprisesPRDplusHongKongandMacao.

continuousgrowthintradeandintheoveralleconomy,IATAConsultingestimatesthattheaviationmarketintheGreaterPRD(GPRD)7willgrowto387millionpassengertripsand18milliontonnesofcargoby2030(seeFigure3.5).

WithintheGPRD,therearefivemajorairports,namely,HKIA,GuangzhouBaiyunInternationalAirport,ShenzhenBao’anInternationalAirport,MacaoInternationalAirportandZhuhaiAirport(seeFigure3.6).Havingtakenintoaccounttheanticipatedincreaseinthehandlingcapacityofthefiveairportsinthenext20years,IATAConsultingforecaststhattherewouldstillbeasignificantunfulfilleddemandforairservicesbothinthemediumtermupto2020andinthelongtermupto2030(seeFigure3.7).

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In2008,wehandledabout80%ofGPRDairports’internationalpassengers(excludingHongKong–Mainlandtraffic)andabout90%ofitsinternationalcargothroughput.Aslongasourhandlingcapacityisnotconstrained,wearewellpositionedtocontinuetocaptureahandsomeportionofthisgrowingmarketbyleveragingourextensiveinternationalairnetwork.

ADjuSTMENT FACTORS RELEVANT TO HKIAIATAConsultinghasspecificallylookedintoarangeofspecialfactors(namely,airservicesagreements,cross-straitdirectflights,tradeagreements,travelpolicy,tourismdevelopment,cross-boundaryinfrastructuredevelopment,passengers’travellingpreferences,modalcompetitionfromcontainerisedshipping,developmentsof

surroundingairportsandairlines’strategies)thatmightaffectitsairtrafficdemandforecast.Most,ifnotall,ofthemhavebeenfoundtobeeitherhavingnegligibleimpactorhavealreadybeenfactoredintoIATAConsulting’seconomicmodels.Theassessmentsonthetwomostfrequentlycitedfactorsaresetoutbelow.

Cross-Strait Direct FlightsHongKong/TaiwanhasformanyyearsbeenthebusiestairrouteoutofHKIAwithcurrentlyabout50flightsperday.Beforecross-straitdirectflightsfirstcommencedinJuly2008,passengertrafficsegmentspotentiallyimpactedbydirectflightsconstitutedabout16%(i.e.7.7million)ofourtotalthroughputin2007,whichhasbeendecreasedto10%(i.e.4.9million)in2010.Cargotrafficwasreducedfrom17%(i.e.0.6milliontonnes)

ofourthroughputin2007to13%(i.e.0.5milliontonnes)in2010.However,thisshort-termnegativeimpacthasbeenpartlymitigatedbytherelaxationofthepolicyforMainlanderstovisitTaiwanandthenewdemandforairtravelstimulatedbyincreasedcross-straiteconomicactivities.In2010,overallpassengerandcargotrafficbetweenHongKongandTaiwangrew4%and14%respectively,over2009.Lookingahead,increasingtourismandtradeactivitiesacrossthestraitisexpectedtostimulatefurthergrowthintheHongKong/Taiwanpassengerandcargomarket.

High-Speed RailThehigh-speedrailwouldcutcurrentrailtraveltimebynearlytwothirdsandisthereforegenerallyexpectedtocompetewithairservicesonshort-haulandoverlappingmarkets.WiththedevelopmentoftheExpress


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Train Non-competitive

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Note:Airtraveltimeincludesanadditionalthree-hourdwellandaccesstimeontopoftheflightduration.

Source:IATAConsultingestimates,TransportandHousingBureau

Projected High-Speed Rail Travel Time versus Air Travel Time from Hong Kong in 2020

Figure

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Chinese Railway Infrastructure Development MapFigure

3.8

Source:TransportandHousingBureau

( )Beijing (8 hrs)

Legend

Major Mainland Cities connected toGuangzhou-Shenzhen-Hong Kong Express Rail Link

( )Zhengzhou (6 hrs)

Beijing-Guangzhou Passenger Line and Hangzhou-Fuzhou-Shenzhen Passenger Line

Guangzhou-Shenzhen-Hong Kong Express Rail Link

Other Proposed Passenger Line

( )Wuhan (4 hrs)

( )Xi’an (8 hrs)

( )Shanghai (6 hrs)

( )Chengdu (12 hrs)

Other Proposed Passenger Line

“9+2”Pan-Pearl River Delta Region “9+2” Area( )

Nanjing (5 hrs)

( )Changsha (3 hrs)

( )Hangzhou (7 hrs)

( )

( )Nanchang (5 hrs)

( )Chongqing (10 hrs)

Hangzhou-Fuzhou-Beijing-Guangzhou Passenger ( )Fuzhou (5 hrs)

( )Xiamen (4 hrs)

( )

gShenzhen Passenger Line

Beijing Guangzhou PassengerLine

)Kunming (8 hrs)

( )Nanning (4 hrs)

( )Shantou (2 hrs)

Guangzhou-Shenzhen-HongKong Express Rail Link

RailLink(XRL)connectingHongKongtotheMainland’shigh-speedtrainnetwork,andfurtherexpansionofthehigh-speedrailnetworkwithintheMainland(seeFigure3.8),thehigh-speedrailcouldpotentiallyaffectthecompetitivenessofairtravelbetweenHongKongandshort-haulMainlanddestinationslikeShantou,Changsha,Nanning,Xiamen,Wuhan,Nanjing,NanchangandFuzhou(seeFigure3.9).However,alltheseregionalMainlandroutescombinedcontributedonlyabout3%ofHKIA’spassengerthroughputin2010.Therefore,anynegativeimpactfromXRLwouldunlikelybesignificant.Ontheotherhand,trainsprovide

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millions of tonnes CAGR 2008-2030

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millions of tonnes 2015 2020 2025 2030

High 4.7 6.1 7.9 9.8

Base 4.4 5.7 7.2 8.9

Low 4.2 5.2 6.5 8.0

Source:IATAConsultingestimates;AAHKstatisticsforactualfigures

HKIA Cargo Traffic Projection (Up to 2030)Figure

3.12

HKIA Passenger Traffic Projection (Up to 2030)Figure

3.11

millions of passenger trips

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HKIA Air Traffic Movement Projection (Up to 2030)Figure

3.10

thousands

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High 362 448 548 652

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Low 332 394 470 552


convenientandfrequentlink-uptosecond-tierandthird-tierlocationsoutsidemajorcities,thuspotentiallyenlargingthecatchmentareaforHKIA.ExperiencesinEuropeandJapanindicatethattheintroductionofhigh-speedrailmaynegativelyaffectshort-haulandoverlappingmarketsbutitcanincreasepeople’swillingnesstotraveland,inthemediumtolongterm,increasetheoverallmarketsizeforbothrailandairtransportation,therebycompensating(or,asinmostcases,over-compensating)forthepotentialairtrafficlossonindividualshort-haulroutes.

AIR TRAFFIC DEMAND FORECASTAccordingtotheGDPregressionbasedforecastingmodel,andtaking


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Traffic Forecasts from Boeing and AirbusFigure

3.13

cagr 2009-2028 Boeing airbus

Asia Pacific Region

Passenger 6.3% 6.1%

Cargo 6% 6.3%

China

Passenger 7.6% 7.3%

Cargo 6.6% 7.8%

World

Passenger 4.7% 4.5%

Cargo 5.2% 5%

intoaccountvariousaspectsofHKIA’smarketenvironment,suchasindustrytrends,regionalmarketdynamics,changesinpoliciesandsoon,IATAConsultingestimatesthatairtrafficdemandforecastsforHKIAwillfallwithintherangeof89–105millionpassengersand8–9.8milliontonnesofcargoby2030,growingatrespectiveCAGRsof2.8%–3.6%and3.7%–4.6%between2008and2030.Flightmovementswillreachabout550,000–650,000,growingataCAGRof2.8%–3.6%.

TheIATAConsultinganalysisincluded,amongotherthings,a“realitycheck”ofitstrafficforecastagainsttheprojectionsoftheglobalaircraftmanufacturingindustry,whichareconsideredtobeparticularlyrelevant.TrafficforecastsfrombothBoeingandAirbusindicatethatover

thenext20years,globalpassengerandcargotrafficwilleachgrowataround5%ayear.AsiaPacific–drivenbytheMainland–willseeevenhighergrowth,atabout6%,duetotheregion’sdevelopmentpotential.Theseprojectionshave

alreadytakenintoaccounttherecentfinancialandeconomiceventsof2008-2009.Theyalsoacknowledgethetraditionalresilienceofairtraveltoexternalshocksandthestronglong-termfundamentalsoftheindustry.

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