A FRESH START

As 2019 gets un­der­way, it is time to ex­plore the op­por­tu­ni­ties that the New Year brings with it. AVB com­piles some in­sider view­points and fore­casts for the year ahead

Aviation Business - - CONTENTS -

AS 2019 GETS UN­DER­WAY, IT IS TIME TO EX­PLORE THE OP­POR­TU­NI­TIES THAT THE NEW YEAR BRINGS WITH IT. AVB COM­PILES SOME IN­SIDER VIEW­POINTS AND FORE­CASTS FOR THE YEAR AHEAD

Though 2018 is al­ready well be­hind us, the im­pact that it had on the world of avi­a­tion has been sub­stan­tial. While the year con­tin­ued to be try­ing times for many air­lines across the globe, chal­lenged by in­creased com­pe­ti­tion, the con­tin­u­ous drum of pricey fuel costs, as well as grow­ing de­mand, much in the way of for­ward progress was achieved across the in­dus­try.

New part­ner­ships and agree­ments have been forged be­tween car­ri­ers over the last year, con­nect­ing net­works and open­ing new op­por­tu­ni­ties for pas­sen­gers. At the same time, air­lines have be­gun to in­vest into fresh tal­ent pools in or­der to fill the quo­tas needed to meet the de­mand of the mar­ket.

On the air­port side, we see progress to­wards tack­ling car­bon emis­sions and re­duc­ing costs. At the same time, avi­a­tion fa­cil­i­ties have be­gun to in­tro­duce novel smart tech­nolo­gies in an ef­fort to stream­line daily op­er­a­tions. Trans­lat­ing to the pas­sen­ger ex­pe­ri­ence, trav­ellers are en­joy­ing faster pro­cess­ing times with the ad­vent of smart gates and more self-ser­vice points along the jour­ney.

We now turn our at­ten­tion to the New Year and set our sights on the op­por­tu­ni­ties and chal­lenges that 2019 has in store for the global avi­a­tion in­dus­try.

The air­line per­spec­tive

As part of its an­nual Global Me­dia Day, the In­ter­na­tional Air Trans­port As­so­ci­a­tion un­veiled its fore­casts for

2019. Dur­ing the event that was held last month at IATA’s ex­ec­u­tive head­quar­ters in Geneva, Switzer­land, the avi­a­tion as­so­ci­a­tion pro­jected that the global air­line in­dus­try will achieve net prof­its of $35.5bn in 2019, which is slightly more than the re­vised $32.3bn pro­jected profit in 2018.

IATA also noted that over­all in­dus­try rev­enues are fore­casted to reach $885bn, a 7.7% in­crease over the $821bn pro­jected in 2018, while pas­sen­ger num­bers are ex­pected to reach 4.59 bil­lion, up from 2018’s fig­ure of 4.34 bil­lion. Re­turn on in­vested cap­i­tal is ex­pected to re­main un­changed, sit­ting at 8.6%, the mar­gin on net post-tax prof­its is set to ex­pe­ri­ence a mea­gre in­crease from 3.9% up to 4.0% in 2019.

Lastly, IATA ex­pects that there will be slower de­mand growth for pas­sen­ger traf­fic, which will re­duce by five per­cent yearon-year to reach 6.0% in 2019.

A com­bi­na­tion of lower oil prices and pos­i­tive eco­nomic growth will ex­tend the run of prof­its for the global air­line in­dus­try, who suf­fered over 2018 over ris­ing costs. The or­gan­i­sa­tion ex­pects that 2019 will serve as the tenth year of profit and the fifth con­sec­u­tive year in which air­lines will de­liver a re­turn on cap­i­tal that ex­ceeds the in­dus­try’s cost of cap­i­tal.

“We had ex­pected that ris­ing costs would weaken profitabil­ity in 2019. But the sharp fall in oil prices and solid GDP growth pro­jec­tions have pro­vided a buf­fer,” said Alexan­dre de Ju­niac, IATA’s Di­rec­tor Gen­eral and CEO.

“So we are cau­tiously op­ti­mistic that the run of solid value cre­ation for in­vestors will con­tinue for at least an­other year. But there are down­side risks as the eco­nomic and po­lit­i­cal en­vi­ron­ments re­main volatile.”

Other key per­form­ers for 2019 as high-

We had ex­pected that ris­ing costs would weaken profitabil­ity in 2019. But the sharp fall in oil prices and solid GDP growth pro­jec­tions have pro­vided a buf­fer.” Alexan­dre de Ju­niac

lighted by IATA in­clude a pos­i­tive out­look in pas­sen­ger traf­fic (RPKs), which is ex­pected to in­crease to 6% in the New Year. Not only does this out­pace the fore­cast ca­pac­ity (ASKs) in­crease of 5.8%, the RPK per­for­mance is well above the 20-year trend growth rate.

As a re­sult, load fac­tors will in­crease and sup­port a 1.4% in­crease in yields. Pas­sen­ger rev­enues, mi­nus an­cil­lar­ies, are ex­pected to reach $606bn.

The pos­i­tive out­look also trans­lates to the Mid­dle East re­gion. Ac­cord­ing to IATA, Mid­dle East car­ri­ers are ex­pected to re­port an $800m net profit for 2019, a sig­nif­i­cant in­crease over the $600m re­ported in 2018. The or­gan­i­sa­tion also noted the pro­jected net profit per pas­sen­ger for the New Year will be $3.33, equat­ing to a 1.2% net mar­gin.

High­light­ing the fac­tors that have af­fected the re­gion over the last year, IATA shared that the im­pact of low oil rev­enues and con­flict, along with com­pe­ti­tion from ‘su­per-con­nec­tors’ and set­backs of spe­cific busi­ness mod­els, have led to re­duced ca­pac­ity growth. Fol­low­ing a decade-long, dou­ble-digit growth, pas­sen­ger ca­pac­ity growth was halved to 6.7% in 2017.

The global trade as­so­ci­a­tion also noted that the re­gion’s 4.7% ca­pac­ity growth in 2018, is ex­pected to slightly re­duce to 4.1% in 2019. This, in com­bi­na­tion with re­struc­tur­ing, is help­ing to stim­u­late re­cov­ery within the re­gion.

Keep­ing the gears turn­ing

Switch­ing gears to fo­cus on the MRO space, a key driver that has and con­tin­ues to dom­i­nate the dis­ci­pline lies with tech­nol­ogy. As a re­puted name with the world of MRO, Lufthansa Tech­nik is one of the few ser­vice providers that main­tain an ac­tive R&D arm that is fo­cused on de­vis­ing new so­lu­tions fit for the age of Big Data and MRO 4.0.

These in­clude ex­plor­ing the pos­si­bil­i­ties of ad­di­tive man­u­fac­tur­ing, adop­tion of A/C health mon­i­tor­ing & pre­dic­tive main­te­nance, au­to­ma­tion, as well as po­ten­tial ap­pli­ca­tions of ar­ti­fi­cial learn­ing, to name a few.

Ad­di­tion­ally, the com­pany’s also re­cently un­veiled AVIATAR, neu­tral and mod­u­lar IT-plat­form for dig­i­tal fleet so­lu­tions. The plat­form gives op­er­a­tors re­al­time ac­cess to crit­i­cal data as­so­ci­ated with their fleets, which can be an­a­lysed util­is­ing data an­a­lyt­ics and shared with their re­spec­tive MRO part­ners.

Apart from com­pet­i­tive prices, a key fac­tor in meet­ing de­mands of air­lines will be the abil­ity to help them to shape the mar­ket by in­di­vid­ual and in­no­va­tive tech­ni­cal and ser­vice so­lu­tions.” Ziad al Hazmi

“Dig­i­tal so­lu­tions for air­craft fleets are chang­ing the avi­a­tion in­dus­try in an un­prece­dented way. In the dig­i­tal world, air­lines face sev­eral chal­lenges,” ex­plains Ziad al Hazmi, CEO Lufthansa Tech­nik Mid­dle East.

“The new­est-tech­nol­ogy air­craft, such as the Air­bus A350 and the Boe­ing 787, gen­er­ate 50 times more data than older types. The rapidly in­creas­ing data vol­umes must be eval­u­ated and an­a­lysed and only those air­lines equipped with the right so­lu­tions will be com­pet­i­tive in the mar­kets of the fu­ture.”

The CEO also noted a ris­ing chal­lenge sur­round­ing the own­er­ship of such data, though he is quick to say that air­lines should “own the data gen­er­ated by their air­craft and no­body else”. This would en­able them to de­cide which of their part­ners would have ac­cess to the data, as well as the level of ex­po­sure that nets the “best ser­vices for the air­lines”.

“A key fac­tor in meet­ing de­mands of air­lines will be the abil­ity to help them to shape the mar­ket by in­di­vid­ual and in­no­va­tive tech­ni­cal and ser­vice so­lu­tions. This in­cludes a global lo­ca­tion net­work, for ex­am­ple, which can of­fer cus­tomers re­gional ser­vices as well as new part­ner­ships with them, e.g. in the field of dig­i­tal MRO ser­vices and de­vel­op­ment of in­no­va­tive tech­nolo­gies,” com­mented Al Hazmi.

“More and more cus­tomers are re­quest­ing value-added ser­vices on-site, hence more on wing ser­vices, which we are in­vest­ing in lo­cally.

I think what is hap- pen­ing is that the rise of the smart air­port con­cept is af­fect­ing op­er­a­tions more than it is af­fect­ing di­rect pas­sen­ger in­ter­ac­tion at the mo­ment.” Michael Ib­bit­son

Reimag­in­ing air­ports

While the con­cept of smart air­ports is not new to avi­a­tion, it has only been within the last year or so that we’ve seen smart tech­nolo­gies re­ally come into play in ter­mi­nals. It is a trend that is ex­pected to carry over on over 2019 and be­yond. AVB con­nected with Dubai Air­ports to gain in­sights on the type of tech­nolo­gies be­ing in­tro­duced to Dubai In­ter­na­tional Air­port.

“I think what is hap­pen­ing is that the rise of the smart air­port con­cept is af­fect­ing op­er­a­tions more than it is af­fect­ing di­rect pas­sen­ger in­ter­ac­tion at the mo­ment,” com­ments Michael Ib­bit­son, ex­ec­u­tive vice pres­i­dent of Tech­nol­ogy and In­fra­struc­ture, Dubai Air­ports.

“For ex­am­ple, we de­ploy sen­sors that mea­sure all the queues … we have an app that we rolled out to all of our staff, as well as the en­ti­ties that op­er­ate in the ter­mi­nal. That in­cludes Emi­rates, fly­dubai, dnata, as well as po­lice and im­mi­gra­tion.

“That [app] al­lows them to see what’s hap­pen­ing in real-time at dif­fer­ent points at the air­port, at places where you tra­di­tion­ally have queues … They [users] can see ahead of time, up to 12 hours in ad­vance, where they might be higher than nor­mal traf­fic.”

Other smart tech­nolo­gies be­ing in­tro­duced at the air­port in­cludes the de­ploy- ment of tem­per­a­ture sen­sors that help main­tain am­bi­ent tem­per­a­ture and re­duce costs. Out on the air­field, the util­i­sa­tion of sen­sors in con­junc­tion with data an­a­lyt­ics has en­abled the air­port op­er­a­tor to con­nect and mon­i­tor its in­fra­struc­ture. This has al­lowed Dubai Air­ports to move to­wards a pre­dic­tive main­te­nance model, in­stead of pre­ven­tive main­te­nance

On the pas­sen­ger pro­cess­ing side, while con­fi­dent that the pop­u­lar­ity of smart gates and other self-ser­vice points will con­tinue over 2019, Ib­bit­son as­serts that a lot more needs to be done with bio­met­rics.

“Right now, most of the bio­met­ric sys­tems they only ad­dress get­ting on the first plane at the point of ori­gin. We need some­thing bet­ter as an in­dus­try. We need some­thing that al­lows us to use a bio­met­ric iden­tity or sig­na­ture to pass all check­points, through­out the en­tire jour­ney,” ex­plains Ib­bit­son.

“That is some­thing that we are look­ing at and work­ing glob­ally with IATA and with a num­ber of other air­ports and air­lines, in a pro­gramme called the OneID … in­stead of just hav­ing de­par­ture only bio­met­rics, we will move to full jour­ney and re­turn jour­ney bio­met­rics. Even­tu­ally, we hope to be able to get that bio­met­ric in­for­ma­tion when you make a book­ing through your smart­phone, in­stead of re­ly­ing on the in­fra­struc­ture at the air­port,” he con­cludes.

IATA re­ports that over­all in­dus­try rev­enues is fore­casted to reach $885bn over 2019.

Ziad al Hazmi, CEO Lufthansa Tech­nik Mid­dle East.

Alexan­dre de Ju­niac, IATA’s Di­rec­tor Gen­eral and CEO.

IATA ex­pects that there will be slower de­mand growth for pas­sen­ger traf­fic, which will re­duce by five per­cent year-on-year to reach 6.0% in 2019.

Michael Ib­bit­son, ex­ec­u­tive vice pres­i­dent of Tech­nol­ogy and In­fra­struc­ture, Dubai Air­ports.

Newspapers in English

Newspapers from UAE

© PressReader. All rights reserved.