market overview project (pcso)
DESCRIPTION
TRANSCRIPT
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Market overview
Michael Davies
Customer Business
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Overview
Latest traffic statistics
US airline yields and costs
Capacity reductions
Outlook for traffic
Key issues & uncertainties
Aircraft delivery forecasts
Discussion
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2001-02 passenger traffic growth RPKs – key markets
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
Jan
Feb Mar
Apr
May Ju
nJu
lAug S
ep Oct
Nov
Dec Ja
nFeb M
arApr
May
June
US domestic
Transatlantic
Europe Intra
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AEA weekly traffic RPKs
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
Sep 0
9
Sep 2
3
Oct
07
Oct
21
Nov 0
4
Nov 1
8
Dec
02
Dec
16
Dec
30
Jan
13
Jan
27
Feb 1
0
Feb 2
4
Mar
10
Mar
24
7-Apr
21-A
pr
5-M
ay
19-M
ay
2-Jun
16-J
un
30-J
un
Eur
NA
Asia
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US airlines’ 2001-02 traffic Transpacific passenger & total international cargo
-45%
-35%
-25%
-15%
-5%
5%
15%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr
Transpacific Pax.
International Cargo
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North American domestic traffic 2001-02
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Continental
American
Delta
Southwest
AirTran
AMR Eagle
Continental Express
Majors
Low Cost/
Regionals
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October 2001 passenger load factor Change vs. Oct 2000
58%
62%
66%
70%
74%
78%
82%
Britis
h AW
KLM
Air F
rance
Am
eric
an
Delta
Contin
enta
l
Nort
hwes
t
Cath
ay
Oct 2000
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58%
62%
66%
70%
74%
78%
82%
Britis
h AW
KLM
Air F
rance
Am
eric
an
Delta
Contin
enta
l
Nort
hwes
t
Cath
ay
May 2002 passenger load factor Change vs. May 2001
May 2001
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58%
62%
66%
70%
74%
78%
82%
Britis
h AW
KLM
Air F
rance
Am
eric
an
Delta
Contin
enta
l
Nort
hwes
t
Cath
ay
June 2002 passenger load factor Change vs. Jun 2001
Jun 2001
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Key Rolls-Royce customers’ traffic change
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
British Airways
American
Cathay
Singapore
Emirates
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US domestic yields – absolute levels
6
7
8
9
10
11
12
13
14
15
16
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M
2000 2001
US¢
Yields : c/RPM
Revenues : c/ASM
Source : Air Transport Association
2002
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US airlines’ costs up, revenues down
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J
1999 2000 2001 2002
-5
-4
-3
-2
-1
0
1
2
3
Unit costs
Operating profit ($bn)
Unit revenues
Change (year-on-year) Profit ($bn)
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Airline net profits
-$10,000
-$5,000
$0
$5,000
$10,000
$15,000
1995 1996 1997 1998 1999 2000 2001
Variation of reported
2001 final figures
with year 2000
figures
$m
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106
108
110
112
114
116
118
120
Jan
Feb Mar
Apr
May
Jun
Jul
Aug
Sep Oct
Nov
Dec
Jan
Feb Mar
Apr
May
Jun
US
UK
Economic leading indicators 2001-2002 Source : Conference Board, composite leading indices
Decline Aug-Oct Recovery since Dec
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GDP growth forecasts for 2002
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
USA Japan Germany UK France China
Aug-01
Dec-01
Jun-02
Source : Consensus Forecasts
Sharp upturn in June forecast
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Industry monitor – June 2002
GDP
Pax. traffic
L.F.
Profits
Orders
Deliveries
Composite
leading inds. (Indiv.countries)
Asia Pacific Europe Middle East North Asia N.America
Cargo traffic
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Stored aircraft – monthly totals
Inc.freighters
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2200
2400
No
of
air
cra
ft
Regional Jets
Widebody
Narrowbody
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Stored aircraft – monthly totals Rolls-Royce only
Inc.freighters
0
50
100
150
200
250
300
350
400
450
Aug S
ep Oct
Nov
Dec Ja
nFeb
Mar
Apr
May
Forec
ast
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Aircraft available for sale or lease
Source : Airline Monitor/BACK
0
200
400
600
800
1000
1200
Jan-99 Apr Jul Oct Jan-00 Apr Jul Oct Jan-01 Apr Jul Oct Jan-02 Apr
New WB
New NB
Old WB
Old NB
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Stored aircraft summary : by engine mfr
213
711
240
1178
379
1222
478
2115
0
500
1000
1500
2000
2500
R-R P&W GE Total
August
May
Includes Reg Jets)
IAE split 50/50 PW/R-R
Total also includes 14/36 Honeywell
Inc.freighters
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Stored aircraft summary : by aircraft category
732
1480
384
511
62
124
0
500
1000
1500
2000
2500
August May
Regional Jet
Widebody
Narrowbody
Inc.freighters
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Stored aircraft summary : by age band
37 51 65
122
261
642
158120
243 254
522
753
0
100
200
300
400
500
600
700
800
0-5 5-10 10-15 15-20 20-25 25+
August
March
Inc.freighters
e.g. 0-5 = 1997-2001 build
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Incremental stored aircraft since Aug 2001 by age band
0
50
100
150
200
250
0-5 5-10 10-15 15-20 20-25 25+
R-R
P&W
GE
Likely to return to service Not likely to return to service
Age Inc.freighters
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Schedule reductions by airline Nov 2001 actual vs planned
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
SR EI VS AZ LH IB BA KL AF UA TZ AA NW AC DL WN CX KE SQ CI MH JL QF GF EK
Middle Eastern
N.American
Asian
European Total world schedule -10.2%
-parked aircraft -5%
-reduced flying -5%
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Schedule reductions by airline May 2001 vs May 2002, source OAG Feb 2002
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
SR EI KL VS BA IB LH AF AZ UA NW AA DL AC WN TZ MH CX JL QF KE CI SQ GF EK
Middle EastAsiaNorth AmericaEurope
Total world schedule -7.5%
Lufthansa – decide in next 2 weeks how much to add back – lifted hiring freeze
Air France – stable capacity
Austrian – adding, but will remain 5% below 2001
KLM – cutting 5% from summer 2001
Thomas Cook – reviewing planned cuts for summer
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Schedule reductions by airline Aug 2002 vs Aug 2001, source OAG June 2002
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
EI KL VS BA IB LH AF AZ UA NW AA DL AC WN TZ MH CX JL QF KE CI SQ GF EK
Middle EastAsiaNorth AmericaEurope
Total world schedule -7.0%
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Monthly traffic forecast - US domestic
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
Mar-
01
Apr-
01
May-
01
Jun-
01
Jul-
01
Aug-
01
Sep-
01
Oct-
01
Nov-
01
Dec-
01
Jan-
02
Feb-
02
Mar-
02
Apr-
02
May-
02
Jun-
02
Jul-
02
Aug-
02
Sep-
02
Oct-
02
Nov-
02
Dec-
02
Jan-
03
Feb-
03
Mar-
03
Apr-
03
May-
03
Jun-
03
Forecast RPKs
Actual RPKs
Gulf War (ATA RPKs)
Growth over 2000
Jul90
Mar91
RPKs ASKs
2001 : -6.8% -4.3%
2002 : -1.2% -1.6%
2003 : +12.8% +11.3%
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Monthly traffic forecast – North Atlantic
-60%
-40%
-20%
0%
20%
40%
60%
80%
Mar-
01
Apr-
01
May-
01
Jun-
01
Jul-
01
Aug-
01
Sep-
01
Oct-
01
Nov-
01
Dec-
01
Jan-
02
Feb-
02
Mar-
02
Apr-
02
May-
02
Jun-
02
Jul-
02
Aug-
02
Sep-
02
Oct-
02
Nov-
02
Dec-
02
Jan-
03
Feb-
03
Mar-
03
Apr-
03
May-
03
Jun-
03
Forecast RPKs
Actual RPKs
Gulf War (AEA+DoT RPKs)
Growth over 2000
Jul 90
Feb 91
Oct 91
RPKs ASKs
2001 : -10.1% -3.2%
2002 : +0.3% -0.6%
2003 : +17.9% +14.6%
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Monthly traffic forecast – Europe-Asia
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
Mar-
01
Apr-
01
May-
01
Jun-
01
Jul-
01
Aug-
01
Sep-
01
Oct-
01
Nov-
01
Dec-
01
Jan-
02
Feb-
02
Mar-
02
Apr-
02
May-
02
Jun-
02
Jul-
02
Aug-
02
Sep-
02
Oct-
02
Nov-
02
Dec-
02
Jan-
03
Feb-
03
Mar-
03
Apr-
03
May-
03
Jun-
03
Forecast RPKs
Actual AEA RPKs
Gulf War (AEA - RPKs)
Growth over 2000
Jul90
Feb91
RPKs ASKs
2001 : -6.6% -3.8%
2002 : +0.2% -0.7%
2003 : +14.1% +12.1%
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Monthly traffic forecast – Intra Europe (sched)
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
Mar-
01
Apr-
01
May-
01
Jun-
01
Jul-
01
Aug-
01
Sep-
01
Oct-
01
Nov-
01
Dec-
01
Jan-
02
Feb-
02
Mar-
02
Apr-
02
May-
02
Jun-
02
Jul-
02
Aug-
02
Sep-
02
Oct-
02
Nov-
02
Dec-
02
Jan-
03
Feb-
03
Mar-
03
Apr-
03
May-
03
Jun-
03
Forecast RPKs
Actual RPKs
Gulf War (AEA - RPKs)
Growth over 2000
Jul90
Feb91
RPKs ASKs
2001 : +0.6% +3.4%
2002 : +4.6% +0.6%
2003 : +7.1% +5.8%
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Rolls-Royce N.America traffic & GDP forecast
80
90
100
110
120
130
140
150
160
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Nov 00 GDP
Nov 01 GDP
Nov 00 RPKs
Nov 01 RPKs
2001 -7%
2002 -1%
Index (2000=100)
2003 +14%
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Rolls-Royce European traffic & GDP forecast
80
90
100
110
120
130
140
150
160
170
180
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Nov 00 GDP
Nov 01 GDP
Nov 00 RPKs
Nov 01 RPKs
2001 -2%
2002 -0%
Index (2000=100)
2003 +12%
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Rolls-Royce Asian traffic & GDP forecast
80
100
120
140
160
180
200
220
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Nov 00 GDP
Nov 01 GDP
Nov 00 RPKs
Nov 01 RPKs
2001 -1%
2002 +3%
Index (2000=100)
2003 +11%
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Rolls-Royce world traffic forecast (RPKs)
0
1000
2000
3000
4000
5000
6000
7000
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
Nov-00Nov-01History1983 forecast1991 forecast1989 forecast1993 forecast1996 forecast1999 forecast
RPKs (bn)
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Rolls-Royce world traffic & GDP forecast
0
50
100
150
200
250
300
350 Nov 00 GDP
Nov 01 GDP
Nov 00 RPKs
Nov 01 RPKs
2003 +12%
1991 –3%
2001 –4%
2002 +0%
Index (1990=100)
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‘Airline Monitor’ world traffic forecast (RPKs)
0
1000
2000
3000
4000
5000
6000
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Jul-01
Oct-01
History
Trend
10% Traffic rebound in 2003
1991 –3%
2001 –6%
2002 +2%
RPKs (bn) Forecast made in October 2001
Reviewed in Jan – no change as yet
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‘Aviation Strategy’ world traffic forecast (RPKs)
2000 RPKs based on Airline Monitor data for reference
0
1000
2000
3000
4000
5000
6000
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Jul-01
Oct-01
Feb-02
History
Trend14% Traffic rebound in 2003
(vs 17% previously)
1991 –3%
2001 –5% (-6% originally forecast)
2002 -1% (vs –5%)
RPKs (bn) Forecast made in October 2001
Reviewed in Feb – less severe
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80
90
100
110
120
130
140
2000 2001 2002 2003 2004 2005
Pre Sep-11thCurrent 'high'Current 'mid'Current 'low'Gulf War
Traffic growth scenarios
2002 2003 2004
High +6% +8% 8%
Mid +0% +12% 8%
Low -1% +10% 8%
RPK Index (2000=100)
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Regional traffic summary
Near-term growth Long-term levels
2001 2002 2003 2010 traffic level
Europe -2% -0% +12% 97% of previous forecast
N.America -7% -1% +14% 96% of previous forecast
Asia/Pacific -1% +3% +11% 92% of previous forecast
WORLD -4% +0% +12% 95% of previous forecast
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200
300
400
500
600
700
800
900
1000
2001 2002 2003 2004 2005
High case
Mid point
Low case
Airline Monitor
Aircraft delivery forecasts 2001-2005 Panel of industry forecasters – Dec 2001
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200
300
400
500
600
700
800
900
2001 2002 2003 2004 2005
High
Average
Low
Airline Monitor
Aircraft delivery forecasts 2001-2005 80+ seat aircraft
Latest analyst views (Boeing+Airbus) :
Morgan Stanley : 2003 = 555, 2004 = 660
JPMorgan : 2003 = 530, 2004 = 540, 2005 = 625
CSFB : 2003 = 553
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200
300
400
500
600
700
800
900
1000
2001 2002 2003 2004 2005 2006
Mar-01
Feb-02
Aircraft delivery forecasts 2001-2005 Rolls-Royce forecast (100+ seat pax aircraft)
871 deliveries removed
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Fleet evolution – ‘mid’ traffic scenario 100+ seater passenger aircraft
10000
10500
11000
11500
12000
12500
13000
2000 2001 2002 2003 2004
End year In service fleet
New deliveries
Retirements/into store
Return from store
c500 aircraft ‘retired’ early
(I.e. assumed not to return)
Fleet required to match
traffic growth (@ constant prod’y)
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Fleet evolution – 3 traffic scenarios 100+ seater passenger aircraft
10000
10500
11000
11500
12000
12500
13000
2000 2001 2002 2003 2004
End year In service fleet
New deliveries
Retirements/into store
Return from store
c500 aircraft ‘retired’ early
(I.e. assumed not to return)
1998 1999
1999 & 2000 saw significant
Load factor & utilisation growth
Fleet required to match
traffic growth (@ constant prod’y)
Airline net profit $8.2bn $8.5bn $4.7bn -$12.0bn -$8bn?* -$0.5bn?* $3.5bn?*
Load factor 69.3% 69.8% 72.4% 69.1% 70.5% 72.0% 72.5%
* Airline Monitor estimates
2002 updated May ‘02
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Aircraft delivery forecasts Passenger aircraft only
0
500
1000
1500
2000
2500
3000
717 737 A320 757 767 A330 A340 777 747 A380
2001-10
2002-11