Airbus 2015 Annual Report Download - page 61

AIRBUS GROUP REGISTRATION DOCUMENT 2015 l 29 l
Informationon GroupActivities
Registration Document 2015
1.
1.1 Presentation of the Group
The no-frills/ low-cost carriers also constitute a significant
sector, and are expected to continue growing around the world,
particularly in Asia, where emerging markets and continued
deregulation should provide increased opportunities. While
Airbus single-aisle aircraft continue to be a popular choice for
these carriers, demand for Airbus’ range of twin-aisle aircraft
may also increase as some of these carriers develop or further
develop their long-range operations.
Overall growth. The long-term market for passenger aircraft
depends primarily on passenger demand for air travel, which
is itself primarily driven by economic or GDP growth, fare levels
and demographic growth. Measured in revenue passenger
kilometres, air travel increased in every year from 1967 to
2000, except for 1991 due to the Gulf War, resulting in an
average annual growth rate of 7.9% for the period. Demand
for air transportation also proved resilient in the years following
2001, when successive shocks, including 9/11 and SARS in
Asia, dampened demand. Nevertheless, the market quickly
recovered.
More recently, the financial crisis and global economic difficulties
witnessed at the end of 2008 and into 2009 resulted in only
the third period of negative traffic growth during the jet age,
and a cyclical downturn for airlines in terms of traffic (both
passenger and cargo), yields and profitability. Preliminary
figures released at the end of 2015, by the International Civil
Aviation Organisation (ICAO), confirmed that some 3.5billion
passengers made use of the global air transport network for their
business and tourism needs in 2015. The annual passenger total
is up 6.4% compared to 2014. They also stated the number of
departures reached approximately 34million globally, and world
passenger traffic, expressed in terms of total scheduled revenue
passenger-kilometres (RPKs), posted an increase of 6.8% with
approximately 6,562billion revenue passenger kilometres being
performed.
In the long-term, Airbus believes that air travel remains a growth
business. Based on internal estimates, Airbus anticipates a
growth rate of 4.6% annually during the period 2014-2034. If the
actual growth rate equals or exceeds this level, Airbus expects
that passenger traffic, as measured in revenue passenger
kilometres, would more than double in the next fifteen years.
Cyclicality. Despite an overall growth trend in air travel, aircraft
order intake can vary significantly from year to year, due to the
volatility of airline profitability, cyclicality of the world economy,
aircraft replacement waves and occasional unforeseen events
which can depress demand for air travel. However, new product
offerings and growth across the market has resulted in good
levels of order activity in recent years. In the last four years,
order totals comfortably exceeded record Airbus deliveries thus
strengthening both order book and backlog totals.
Despite some cyclicality in air traffic, Airbus aims to secure
stable delivery rates from year to year, supported by a strong
backlog of orders and a regionally diverse customer base. At the
end of 2015, Airbus’ commercial backlog stood at 6,831aircraft,
representing more than ten years of production at current rates.
Through careful backlog management, close monitoring of the
customer base and a prudent approach to production increases,
Airbus has successfully increased annual deliveries for 14years
running, even through the economic crisis of 2008-2009.
Regulation / Deregulation. National and international
regulation (and deregulation) of international air services and
major domestic air travel markets affect demand for passenger
aircraft as well. In 1978, the US deregulated its domestic air
transportation system, followed by Europe in 1985. The more
recently negotiated “Open Skies Agreement” between the
US and Europe, which became effective in 2008, allows any
European or US airline to fly any route between any city in the
EU and any city in the US. Other regions and countries are
also progressively deregulating, particularly in Asia. This trend
is expected to continue, facilitating and in some cases driving
demand. In addition to providing greater market access (which
may have formerly been limited), deregulation may allow for the
creation and growth of new airlines or new airline models, as
has been the case with the no-frills/ low-cost airline model,
which has increased in importance throughout major domestic
and intra-regional markets since deregulation (e.g., in the US
and Europe).
Airline network development: “hub” and “point-to-point”
networks. Following deregulation, major airlines have sought
to tailor their route networks and fleets to continuing changes
in customer demand. Accordingly, where origin and destination
demand prove sufficiently strong, airlines often employ direct,
or “point-to-point” route services. However, where demand
between two destinations proves insufficient, airlines have
developed highly efficient “hub and spoke” systems, which
provide passengers with access to a far greater number of
air travel destinations through one or more flight connections.
The chosen system of route networks in turn affects aircraft
demand, as hubs permit fleet standardisation around both
smaller aircraft types for the short, high frequency and lower
density routes that feed the hubs (between hubs and spokes)
and larger aircraft types for the longer and higher density
routes between hubs (hub-to-hub), themselves large point-
to-point markets. As deregulation has led airlines to diversify
their route network strategies, it has at the same time therefore
encouraged the development of a wider range of aircraft in
order to implement such strategies (although the trend has
been towards larger-sized aircraft within each market segment
as discussed below).
Airbus, like others in the industry, believes that route networks
will continue to grow through expansion of capacity on existing
routes and through the introduction of new routes, which will
largely be typified by having a major hub city at least at one
end of the route. These new route markets are expected to be
well served by Airbus’ latest product offering, the A350XWB.
In addition, the A380 has been designed primarily to meet the
Financial Statements 2015
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Annual Report 2015 Financial Statements 2015
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