Sentiment is overwhelmingly positive in the aviation industry currently, although respondents indicate that they are anticipating an increasingly competitive environment over the next five years.
90 percent of respondents report that current market conditions are favourable for their industry. Of those, 30 percent attribute their confidence to the availability of funding for investment, 28 percent to improved economic conditions in key markets, and 18 percent to continued lower oil prices.
Of the 10 percent who do not believe current market conditions are positive for their industry, a third blame increased competition from a combination of traditional competitors, new market entrants and new modes of transport. A further third point to overcapacity and a further third to economic uncertainty in key markets.
Looking ahead, 74 percent expect competition to become more aggressive over the next five years, and 83 percent believe that the number of routes and services offered will increase. Perhaps as a result of the expected increase in competition, just 34 percent forecast that fares will rise during this period, even though 72 percent expect an uptick in fuel costs.
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Respondents appear divided when asked what they view as the optimal investment opportunity for the aviation industry currently. While 25 percent point to the development of new markets, both geographical and sectoral, 17 percent point to the purchase or leasing of aircraft, favouring new rather than used aircraft, and narrow-body rather than wide-body or regional aircraft. A further 17 percent highlight infrastructure improvements. Unlike the rail, shipping and logistics industries, respondents’ enthusiasm for investment in new technology is more muted – just 5 percent believe that this is the optimal investment currently, compared with 20 percent of all respondents.
Aside from fuel efficient and low carbon technology, what form of technology will be the most significant driver of change in the aviation industry over the next five years?
Despite the limited interest in investment in new technology generally, big data and predictive analytics finds enthusiastic supporters amongst respondents from the aviation industry and throughout the transport sector. The ability to anticipate passengers’ behaviour, as well as maintenance issues and repairs, will be the form of technology that will be the biggest driver of change in the aviation industry over the next five years according to 47 percent, and is likely to give the operators who adopt this technology a clear competitive advantage.
Again, respondents are divided when asked to consider what poses the greatest challenge to the operational efficiency of the aviation industry. Inadequate infrastructure is a concern for 22 percent, while 15 percent highlight a lack of suitably qualified people, and another 15 percent highlight supply and demand imbalances.
What form of infrastructure investment would benefit the aviation industry the most over the next five years?
While respondents from the rail, shipping and logistics industries favour greater integration with other forms of transport, respondents from the aviation industry are more focused on increased capacity as the infrastructure investment that would benefit their industry the most over the next five years. The development of new airport capacity in emerging markets is supported by 32 percent, followed by 28 percent who would prefer to focus investment on air traffic control, and 25 percent who believe additional capacity at existing airports would benefit the industry most.
While the aviation industry is overwhelmingly optimistic currently, 34 percent are apprehensive about the threat posed to their industry by global political uncertainty and 20 percent by the threat of a global recession. Terrorism is seen as posing the greatest threat to the aviation industry over the next five years by 15 percent.
When asked which regulation has had the greatest impact on the aviation industry over the past decade, 30 percent point to an uncoordinated approach to aviation regulation globally, while 15 percent cite the regulation of competition and barriers to entry, and 13 percent mention fragmented and bilateral air service agreements.
Aside from infrastructure investment, which of the following forms of government support would help the aviation industry most?
Negotiating coordinated air service agreements comes top of the aviation industry’s wish list for government support. 25 percent believe that Open Skies agreements would be the most helpful form of government support for the aviation industry, followed by 18 percent who would like to see the removal of barriers to foreign investment – both key concerns for airlines with operations in Europe following the UK’s vote to leave the European Union. 16 percent would like passenger and fuel taxes to be lowered.
Which three countries offer the best investment opportunities for aviation over the next two to five years?
China offers the best investment opportunities over the next two to five years, according to 24 percent. India and the US are also popular markets for aviation investment, according to 16 percent and 11 percent respectively, with India overtaking the US in the past year. Regionally, Asia is the most popular investment market, favoured by 55 percent.
Respondents anticipate that capital markets will be a key source of funding over the next two years, according to 29 percent, followed by 25 percent who point to operating leases (which free up airline capital), and 24 percent who point to bank debt. Respondents are broadly satisfied that finance will remain available to the aviation industry – 65 percent believe that access to funding will remain at the same level over the next five years, while 22 percent believe that funding will become increasingly available.