The shape of air travel

markets over the next 20 years

Brian Pearce, Chief Economist
www.iata.org/pax-forecast

To represent, lead and serve the airline industry

IATA Economics www.iata.org/pax-forecast 2
 Air travel likely to double over next 20 years
Outlook for worldwide O-D passenger trips, million
9,000

8,000 Liberal
policies
scenario
2014-2034
7,000
Current 1.8-2.8x growth
policies
6,000
2.3-5 billion
additional O-D
5,000 passenger trips

Closing
borders
4,000
scenario

3,000

2,000
2014 2019 2024 2029 2034
Source: IATA/Tourism Economics ‘Air Passenger Forecasts’
IATA Economics www.iata.org/pax-forecast 3
 But growth differs widely by market
Additional million O-D passengers a year by 2034
900

800

700

600

500

400

300

200

100

Source: IATA/Tourism Economics ‘Air Passenger Forecasts’

IATA Economics www.iata.org/pax-forecast 4
 Developing economies show fastest growth
% y/y Drivers of passenger growth (2014-2034, %CAGR, selected countries) % y/y
8% 8%
Living Standards Population & Demographics Travel cost Overall growth

6% 6%

4% 4%

2% 2%

0% 0%

-2% -2%

Source: IATA/Tourism Economics ‘Air Passenger Forecasts’

IATA Economics www.iata.org/pax-forecast 5
 But US sees 2nd largest rise in numbers
Drivers of additional passenger numbers, million
900 900

800 800
Living standards Demographics Price and other Overall growth
700 700

600 600

500 500

400 400

300 300

200 200

100 100

0 0

-100 -100

-200 -200

Source: IATA/Tourism Economics ‘Air Passenger Forecasts’

IATA Economics www.iata.org/pax-forecast 6
 Living standards are important up to a point
10.00
New Zealand
Maldives Bahamas Singapore Norway
Hong Kong Iceland Switzerland
Seychelles Australia
UK Luxembourg
Flights per capita* (2013, logarithmic scale)

Brazil
Sweden Qatar
1.00 USA

Japan France

Russia
0.10 China

0.01

Uganda

0.00
40 50 0 60 10
70 20
80 30 90 100 110 120
GDP per capita (2013, US$ '000s)
Source: IATA/Tourism Economics ‘Air Passenger Forecasts’
IATA Economics www.iata.org/pax-forecast 7
 They are certainly key for emerging markets
10.00

Maldives
Seychelles
Belize

Malaysia Barbados
1.00 Indonesia
Flights per capita* (2013, logarithmic scale)

Russia

Uruguay
0.10 China Brazil

Slovakia
India Gabon

Swaziland

0.01

Uganda

Middle-income High-income
Low-income
0.00
0 2 4 6 8 10 12 14 16 18 20
GDP per capita (2013, US$ '000s)

Source: IATA/Tourism Economics ‘Air Passenger Forecasts’

IATA Economics www.iata.org/pax-forecast 8
 Countries becoming ‘middle’ or ‘high’ income

Source: IATA/Tourism Economics ‘Air Passenger Forecasts’

IATA Economics www.iata.org/pax-forecast 9
 Frequency of trips rises disproportionately

Trips/ Months
year/ before
person next trip
Low-income 0.04 300
Middle-income 0.29 41
High-income 1.48 8

Below US$20K per person 0.27 44

Above US$20K per person 1.80 7

Source: IATA/Tourism Economics ‘Air Passenger Forecasts’

IATA Economics www.iata.org/pax-forecast 10
 Demographic change dramatically different
Demographic change, 2014-2034
25%

20% Population change

'Flying' population change
15%

10%
% change 2014-2034

5%

0%

-5%

-10%

-15%

-20%

-25%
India Indonesia Turkey US Brazil France China Germany Japan Russia
Source: IATA/Tourism Economics ‘Air Passenger Forecasts’
IATA Economics www.iata.org/pax-forecast 11
 Working-age population makes more trips
Ratio of air passengers by age group to population by age group compared to average
1.8

'Over-
1.6
represented'
age groups
1.4

1.2

1.0
'Under-
0.8 represented'
age groups
0.6

0.4

0.2

0.0
0 to 14 15 to 19 20 to 24 25 to 34 35 to 44 45 to 54 55 to 59 60 to 64 65 to 74 75+

Source: UK CAA
IATA Economics www.iata.org/pax-forecast 12
 Emerging market population much younger
Old-age dependency ratio, %
(65+/15-64)
60 Japan

Germany
50

40
US
30
China
Brazil
20
Turkey
Indonesia
10 India

0
2014 2019 2024 2029 2034

Source: IATA/Tourism Economics ‘Air Passenger Forecasts’

IATA Economics www.iata.org/economics 13
 Trend in cost of travel is still downwards
Unit cost and the price of air transport, adjusted for inflation
1.5
2.8
1.4
US$ in 2013 prices to fly a tonne kilometer

2.6

US$ in 2013 prices per tonne kilometer

1.3
2.4
1.2
2.2
Unit cost (US$/ATK)
1.1
2.0
1.0
1.8
Price (US$/RTK)
0.9 1.6
0.8 1.4

0.7 1.2

0.6 1.0

0.5 0.8
1970 1980 1990 2000 2010

Source: IATA/Tourism Economics ‘Air Passenger Forecasts’

IATA Economics www.iata.org/pax-forecast 14
 Scope for lower fares on a number of markets
Passenger yields and average trip length
0.19

0.17 Within Africa

Passenger yields, US$ per RPK

Within South America

0.15
Within East Asia
Within ASEAN
0.13

North-South
0.11 Within ASEAN- America
Europe E Asia
Pacific
0.09 China-North America
Middle East-
rest of world North ASEAN-North America
ASEAN-Africa
Atlantic
0.07 Europe-
Australia
ASEAN-Europe
0.05
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000
Average trip length (kms)
Source: IATA/Tourism Economics ‘Air Passenger Forecasts’
IATA Economics www.iata.org/pax-forecast 15
 Resulting in much change over next 20 years
Rank by size of O-D passenger flows in, out & within country
0 rank
2013 0
2034 rank
US 1 1 China

China 2 2 US

UK 3 3 India

Japan 4 4 UK

Germany 5 5 Brazil

Spain 6 6 Indonesia

France 7 7 Spain

Italy 8 8 Germany

India 9 9 Japan

Brazil 10 10 France
2017

2025
2013
2014
2015
2016

2018
2019
2020
2021
2022
2023
2024

2026
2027
2028
2029
2030
2031
2032
2033
2034
Source: IATA/Tourism Economics ‘Air Passenger Forecasts’
IATA Economics www.iata.org/pax-forecast 16
 Thank you for listening

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dgoodger@tourismeconomics.com

IATA Economics www.iata.org/pax-forecast 17