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
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
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.