Future Payloads The Airbus Cargo Global Market Forecast 2013-2032 Presented by: Andreas Hermann, Vice President Freighters David Prevor, Head of Market Research and Forecast
Airbus GMF 2013 key numbers 20 year annual FTK growth 20 year demand for aircraft deliveries Business volume for new freighters Proportion of future freighters Total 2730 Small 22% 4.8% New 871 $234bn Mid-size Large 45% 33% Page 2
Recent years have not been kind to air cargo Brent oil price (current US$ per bbl) Air freight yields (US$ per kg) 150 History Forecast 1.5 100 1.3 1.1 50 0.9 0.7 0 0.5 Drop in air freight demand Air freight overcapacity 96 747Fs grounded High fuel price Declining yields Nevertheless, the world still needs air cargo Source: IATA, ACAS bbl = barrel Page 3
Air cargo forms a small portion of global tonnage but a large part of global trade value 1% of world trade tonnage Air Sea, Rail & Road 33% of world trade value Air Sea, Rail & Road Air cargo is extremely valuable to world trade Source: Seabury Page 4
Air cargo value is intrinsically linked to time Two major modes of distribution exist: - GENERAL CARGO - airport to airport services - EXPRESS CARGO - door to door services High value exports - Electronics - Consumer supply chains Industrial supply chains - Zero stock - Just in time Consumer goods - Perishables - Fashion - e-commerce Certain industries simply could not exist without air cargo distribution Page 5
Time sensitive express goods proved more resilient to the recent downturn International air freight growth 30% Express 25% 20% 15% 10% 5% 0% -5% -10% -15% General Cargo 25% 20% 11% 8% 4% 4% 1% -1% -3% -5% -7% -12% 2007 2008 2009 2010 2011 2012 Express Cargo experienced only one year of negative growth since 2008 General cargo suffered four years of negative growth since 2008 Time makes the world go round Source: Seabury Page 6
Recently world traffic has been heading in the right direction World freight traffic growth World FTKs - year-over-year monthly evolution (%) 10% World traffic is up a solid 3.6% August 2013 5% 0% European consumer confidence at a two year high -5% -10% J M M J S N J M M J S N J M M J 2011 2012 Traffic has bottomed out and is steadily increasing again 2013 US GDP growth has stabilised PRC economy rapid slow down was avoided Source: IATA, IHS Global Insight, Airbus Page 7
Freight traffic growth and GDP are closely linked GDP and FTKs year on year growth evolution GDP FTK 10% 8% GDP FTK 25% 20% 2013 YoY growth (estimate) GDP 2.1% 6% 4% 2% 0% -2% -4% 15% 10% 5% 0% -5% -10% FTK 2.2% World FTKs are often a key indicator to World GDP -6% -15% 1989 1993 1997 2001 2005 2009 2013 est. World GDP has also bottomed out and is steadily increasing again Together traffic and world GDP show signs of recovery Source: DOT, IATA, IHS Global Insight Page 8
World GDP is set to nearly double over 20 years Total worldwide GDP evolution (Nominal PPP in $US trillion) 300 Distribution of worldwide GDP 5% 250 History Developing Forecast 49% 46% 200 150 Emerging Advanced 60% 2012 100 6% 50 46% 49% 34% 34% 60% 0 2000 2004 2008 2012 2016 2020 2024 2028 2032 Emerging economies will account for 60% of world GDP in 2032 2032 Source: IHS Global Insight - PPP = Purchasing power parity Page 9
Cargo traffic and world trade are also well linked World trade and FTKs growth evolution 25% 20% World Trade FTK World trade shows signs of modest growth 15% 10% 5% 0% Consumer confidence is up -5% -10% -15% 1989 1992 1995 1998 2001 2004 2007 2010 2013 est As traffic recovers, world trade also shows signs of improvement World trade is driven by emerging markets, which are experiencing solid trade momentum Source: ICAO, IATA Page 10
World trade is set to double by 2032 Total world trade evolution (Trillion $US) 45 40 35 30 25 20 15 10 5 Developing Emerging Advanced History Forecast 0 1992 1996 2000 2004 2008 2012 2016 2020 2024 2028 2032 In the future, the traditional air cargo trade links will further diversify x3 World trade over the next 20 years is worth $540 trillion Air Cargo trade over the next 20 years will be worth $180 trillion Over the next 20 years emerging countries trade will almost triple Source: IHS Global Insight, Airbus, Seabury Page 11
New trade links will alter the current trunk routes World trade in 2012 and 2032 by region Trade (billions $US) 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 Asia/Pacific Europe North America Latin America Africa CIS 2012 trade 2032 trade In 2012, 47% of Europe trade was within the European community Tomorrow, traffic within Asia-Pacific will be equivalent to PRC-North America trade lane Middle East Geographic locations for supply and demand will be different - traffic and cargo capacity will follow Latin America and Africa will form large parts of future traffic Source: IHS Global Insight, EC 2012 Page 12
Global supply: production centres will shift even further into emerging economies Industrial Production by market (base year 2012 = 100) 300 250 200 2032 2012 1992 X2.1 X2.8 Further re-localisation of production to low labour cost countries 150 100 X1.5 50 0 Advanced Developing Emerging In the future, air cargo traffic between production centres will be redefined Todays traditional East-West trunk routes will diversify Source: IHS Global Insight, Airbus Page 13
Global demand: purchasing power will follow suit Global Middle Class* (Millions of people) Asia-Pacific middle class evolution Asia-Pacific 5,211 X2.4 5,000 4,000 3,000 Other Europe, N.America & CIS 2,228 60% X4 42% 19% 38% From1/3 in 2012 2,000 1,000 0 46% 49% 34% 2012 2032 15% 18% 68% To 2/3 in 2032 In the future, capacity between global demand centres will be redefined Asia-Pacific middle classes will increase four fold by 2032 Source: Kharas and Gertz, Airbus * Households with daily expenditures between $10 and $100 per person (at PPP) Page 14
Supply and demand will further gravitate towards Asia-Pacific Nominal GDP in trillion US$ 100 North America 80 EU Asia-Pacific Big 5* 60 X2 In 2012 Asia-Pacific GDP had already matched EU and North America 40 20 0 1992 2012 2032 Asia Pacific will retain its economical pole position By 2032, Asia-Pacific will be the same size as the EU and North America added together Source: IHS Global Insight - * China/Japan/India/Australia/South Korea Page 15
Yet diverse emerging economies are not just located in Asia-Pacific 380 million people Eastern Europe & CIS 500 million people 60 million people Middle East 3500 million people Asia-Pacific Latin America Growing population and consumption will drive trade and air freight 430 million people Africa Source: IHS Global Insight, Airbus Page 16
Latin America and Africa to lead the growth along with Asia-Pacific GDP growth rate, historical and forecast 6% 1992-2012 2012-2032 5% 4% 3% 2% 4.4% 3.9% 1.9% 1.8% 2.6% 2.5% 3.9% 3.2% 4.6% 3.7% 3.9% 4.6% 1.9% 3.2% Latin America GDP will double in the next 20 years 1% 0% High-tech production and growing middle classes will alter air cargo traffic and capacity needs African GDP will grow 2.5 fold in the next 20 years Source: IHS Global Insight Page 17
Macro-economic highlights over the next 20 years World GDP will double Emerging economies GDP to triple World trade will double Air trade is worth $ 180 trillion World industrial production will double 3 billion more middle class population Global consumption will almost triple Global dynamics are changing, air cargo dynamics must also adapt Page 18
GMF freight forecast overview o 20 years freighter aircraft demand forecast of jet freighters over 10 tonnes o Traffic forecast modeling 150 distinct traffic flows o Fleet build-ups covering 197 freight carriers o Freighters fleet divided in 3 segments: o Small jet freighters: 10-30 tonnes o Mid-sized freighters: 30-80 tonnes o Large freighters: >80 tonnes Source: GMF 2013 Page 19
Global inputs to generate a long term vision Express evolution Belly capacity From pax GMF Conversion vs new built Air cargo trends Fuel Price Drivers Commodities demand 10 8 6 4 2 0 Models: correlating drivers with trends 200 airlines fleet plan 8000 routes 150 flows Specific domestic markets models Forecast 4.8% 871 new deliveries 1237 mid size freighters Real consumption Consumer behaviour GDP Exports /Imports Industrial production Source: GMF 2013 Page 20
4.8% world FTK growth, driven by the strong traffic growth of emerging countries Freight traffic growth FTKs (billions) 600 500 400 300 200 100 Developed to Developed Emerging to Emerging Emerging to Developed Developed to Emerging History Forecast 0 1996 2000 2004 2008 2012 2016 2020 2024 2028 2032 Growth Rate 2013-2032 2.9% 6.2% 5.2% 5.3% Future traffic with emerging economies will alter today s freighter fleets and networks 80% of traffic in 2032 20 year world annual FTK growth 4.8 % Total traffic growth includes main deck and belly capacity Source: GMF 2013 Page 21
The proportion of belly capacity will remain stable Belly share on international traffic FTKs (billions) 500 400 300 200 100 0 Dedicated freighters Belly cargo 54% 46% 50% CAGR International 5.0% 51% FTK 2012 FTK 2032 Wide-body belly capacity will still meet its usual challenges Future deliveries of widebody aircraft will not dramatically impact the split between belly and main deck cargo Source: IATA WATTS 2013 for split in 2012 - Airbus GMF 2013-2032 for future traffic growth and belly capacity growth Page 22
Certain factors will continue to limit the global use of belly cargo Departure and arrival times Payload (t) Range limitations Range (nm) Cargo or tourist destination Type and size of cargo As a result passenger belly load factors do not exceed 40-50% Dedicated freighters remain an essential part of world cargo Source: ICAO and IATA WATTS 2013 Page 23
World traffic growth FTK traffic per region (billions) 0 50 100 150 200 250 % of 2012 world FTK 20-year growth % of 2032 world FTK Asia-Pacific 2012 traffic 2032 traffic 36% 5.5% 41% North America 30% 3.9% 24% Europe 21% 4.8% 20% Latin America 7% 5.1% 7% Africa Middle East 20-year world annual traffic growth 4.8% 3% 3% 5.1% 4.8% 3% 3% CIS 1% 5.1% 1% Asia-Pacific to lead world traffic by 2032 Source: Airbus GMF 2013 Page 24
Asia-Pacific to lead in world traffic by 2032 2032 FTK traffic per region (billions) 0 50 100 150 200 250 % of 2012 world FTK 20-year growth % of 2032 world FTK Asia-Pacific 2032 traffic 12% Domestic China 36% 5.5% 41% North America 26% Domestic US 30% 3.9% 24% Europe 21% 4.8% 20% Latin America Africa Middle East 20-year world annual traffic growth 4.8% 7% 3% 3% 5.1% 5.1% 4.8% 7% 3% 3% CIS 1% 5.1% 1% Domestic operations will form a large portion of future traffic Source: Airbus GMF 2013 Page 25
The Chinese domestic express market is booming PRC domestic air cargo traffic (FTK billions) 25 20 15 10 Express General Cargo History Forecast A booming Chinese express market will create the demand for small and mid-size freighters 5 0 Chinese domestic express will thrive like the US integrator markets of the 1980s and 1990s Chinese domestic express market will grow at 11% year on year Source : Seabury, IATA, Airbus GMF Page 26
Freighter fleet will increase to almost 3000 aircraft over 20 years Freighter fleet 3,000 2,905 2,500 New Build 871 2,000 1,500 1,645 1,000 Conversion 1859 500 0 Beginning 2013 2032 Like today, the future fleet will be a mix of converted and new freighters Stay in service and recycled 175 Source: Airbus GMF 2013 Page 27
Freighter fleet will increase to almost 3000 aircraft over 20 years Freighter fleet 3,000 2,905 2,500 2,000 1,500 1,645 Growth 1260 2013 average fleet age 1,000 Replacement 1470 50% 500 0 175 Beginning 2013 2032 22 years 50% of the future fleet are for replacement, driven by current aging fleets Source: Airbus GMF 2013 Page 28
Freighter fleet will increase to almost 3000 aircraft over 20 years Freighter fleet 3,000 2,500 2905 Asia-Pacific 970 33% 2,000 1,500 1,000 1645 Asia-Pacific 314 19% Rest of the world 1331 Rest of the world 1935 Asia-Pacific freighter fleet will more than triple over the next 20 years 500 0 Beginning 2013 2032 33% of 2032 freighter fleet will be domiciled in Asia-Pacific Source: Airbus GMF 2013 Page 29
China will account for over half of the Asia-Pacific deliveries Freighter deliveries (New build & converted) over the next 20 years 450 400 350 300 250 200 150 100 50 0 Replacement Growth Rest of Asia-Pacific PRC 204 342 73% 147 228 80% 173 354 Small Mid-Size Large China will be the driving force behind Asia-Pacific freighter requirements 62% 80% of mid-size freighters demand driven by growth in Asia-Pacific Chinese traffic to the rest of the world is set to grow 6.6% year on year Domestic Chinese traffic growth will be 7.5% year on year Source: Airbus GMF 2013 Page 30
The future freighter fleet distribution will reflect the growing influence of emerging markets World fleet 2032: 2905 2013: 1645 1062 798 North America 139 77 480 339 Europe & CIS 89 Latin America 56 Africa 164 61 Middle East 970 314 Asia Pacific North America fleet is mainly a replacement market Asia Pacific fleet is set to triple as growth market Source: Airbus GMF 2013, ASCEND Page 31
Freighter deliveries will reach over 2700 aircraft in the next 20 years Freighter deliveries over the next 20 years 1,500 1,000 500 0 New freighters: 871 Conversions: 1,859 605 1237 413 824 888 458 430 Small Mid-Size Large 10t < payload < 30t 30t < payload < 80t payload > 80t Continued strong traffic growth will drive demand for more than 2700 freighters, of which 870 will be new build 2013-2032 deliveries Small: 605 Mid-Size: 1237 Large: 888 Mid-size drivers: High replacement need in the US and EU Large growth in Asia Pacific and new routes in Middle East, Latin America and Africa Source: Airbus GMF 2013 Page 32
Airbus recognises the need for mid-size freighters 50% of all new build freighters will be mid-size New build for higher utilisation operations Almost half of converted freighters will be mid-size A330 Freighters: From short regional express routes to long haul general cargo Converted for lower utilisation operations Page 33
The large size fits all air cargo model no longer works 100t + Freighters To serve high demand trunk routes with sustained high load factors Mid-size Freighters For diversified networks For profitable operations all year round For when belly cargo is not appropriate Belly capacity Limited to passenger aircraft networks The A330F concept: Filling a gap in the middle of the market Page 34
Todays large freighters only work on the heaviest trade lanes Freighter costs per tonne carried COC/t $2,300 $2,100 $1,900 $1,700 $1,500 $1,300 $1,100 $900 $700-35% High risk 747-400F $500 A330F 777F $300 20 30 40 50 60 70 80 90 100 110 120 Demand (tonne) As the global economy changes shape, airlines must adapt their capacity and network Large freighters need high demand and high payloads all year Mid-size freighters are more efficient when fuel, demand or yields fluctuate COC*: Cash Operating Costs - Includes Fuel, Maintenance, Nav&Landing fees, Crew costs 3,000nm sector JAR 5% flight profile Page 35
The A330F concept: Connecting diverse economies with diverse networks 103,500 flight hours 29,000 take-offs 99.5% reliability Flying East-West, North-South, long-haul, short-haul, regional operations and to new markets Source: Airbus (Data up to July 2013) OR = >15 delays + Cancellations + Diversions + IFTBs Page 36
It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change. Charles Darwin Airbus Cargo GMF 2013 key numbers 20 year annual FTK growth 20 year demand for aircraft Business volume for new freighters Mid-size proportion of future freighters Total 2730 4.8% New 871 $234bn 45% Airbus provides the right products for a changing market A330 Freighters Shaping the future of air freight Page 37
QUESTIONS? Page 38
This document and all information contained herein is the sole property of AIRBUS S.A.S. No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS S.A.S. This document and its content shall not be used for any purpose other than that for which it is supplied. The statements made herein do not constitute an offer. They are based on the mentioned assumptions and are expressed in good faith. Where the supporting grounds for these statements are not shown, AIRBUS S.A.S. will be pleased to explain the basis thereof. AIRBUS, its logo, A300, A310, A318, A319, A320, A321, A330, A340, A350, A380, A400M are registered trademarks. Page 39