77 percent of respondents from the aviation industry report that market conditions are positive for the industry currently, compared with 88 percent in 2015.
This continuing optimism can be largely attributed to lower oil prices, airlines’ most significant operating cost. Of those respondents who view current conditions as positive, 46 percent cite the oil price, compared with 18 percent who pointed to lower oil and fuel prices when questioned in 2015. The availability of funding is the second positive reason, but the threat of an economic slowdown appears to be having a limited impact on confidence. For those who do not believe current conditions are positive for the aviation industry, 46% highlight economic uncertainty in key markets.
If yes, what is the principal reason for your view?
If no, what is the principal reason for your view?
While lower oil prices are assisting the aviation industry, just 23 percent expect fuel prices to remain at their current levels over the next five years and a mere 4 percent believe fuel costs will fall further. Despite the likely impact of higher fuel costs on profitability, 67 percent anticipate that fares and freight costs will remain unchanged or will decrease over this period. Respondents appear more confident that growth in demand will continue and are anticipating higher passenger numbers and freight volumes and an increase in the number of routes and services offered. With the aviation industry enjoying high levels of interest from both new and experienced investors and financiers, almost half expect the availability of funding to remain unchanged, while 33 percent believe funding will become increasingly available. On the whole, respondents are satisfied that current levels of investment in infrastructure and in technology will be maintained or increased.
Fares / freight costs will
Investment in infrastructure will
Passenger numbers / freight volumes will
The number of routes/services offered will
The availability of funds will
Investment in technology will
Fuel costs will
Which three countries offer the best investment opportunities for the aviation industry over the next two to five years?
In common with the rail and shipping industries, Asia Pacific is seen as the region offering the best investment opportunities over the next two to five years. This is in line with industry forecasts indicating that Asia will become the world’s largest aviation market within the next 20 years. 44 percent highlight investment in Asia Pacific markets, followed by 17 percent who favour North America. By country, China is the most popular market, followed by the US and India.
The opportunity for consolidation remains a continuing theme for the aviation industry, albeit expressed in a different way this year. 28 percent believe that a merger or acquisition offers the optimal investment opportunity, up from 5 percent in 2015, while the proportion of respondents who favour less formal co-operation via joint ventures, alliances and pools has fallen from 28 percent to 11 percent in the past year. Infrastructure improvements are seen as a growing opportunity by 21 percent up from 13 percent in 2015.
Infrastructure investment and regulation are recurring themes in the aviation industry. Inadequate infrastructure is seen as the greatest challenge to the operational efficiency of the aviation industry by 27 percent, while 19 percent cite general regulatory controls as an issue for the efficient running of the industry.
Although more respondents believe inadequate infrastructure creates a greater operational challenge for the aviation industry than general regulatory controls, deregulation is viewed as the most helpful form of government support for the industry, closely followed by infrastructure investment. A need for greater global co-operation to tackle terrorism is also highlighted.
Respondents are divided about what type of regulation has had the greatest impact on aviation over the past decade, citing fragmented global regulation, the regulation of competition and barriers to entry and, to a lesser extent, trade and financial sanctions and increased environmental regulation. Respondents also note that new security measures have had a particular impact on the aviation industry, together with the implementation of new regulation in response to geopolitical developments.
What form of technology will be the most significant driver of change in the aviation industry over the next five years?
When asked which form of technology will be the most significant driver of change in the industry over the next five years, 52 percent point to fuel-efficient engine technology, again serving to underline the impact of fuel prices on the aviation industry. Respondents also highlight 3D printing and predictive analytics.
Like the shipping industry, aviation respondents believe the greatest threat to the aviation industry over the next five years is a global recession, but a considerable proportion are also concerned about the impact of an increase in terrorism.
The capital markets are expected to be a main source for the acquisition of aircraft over the next two years, together with operating leases, which free up capital, both selected by 25 percent, followed closely by bank debt, cited by 23 percent. Equity is also expected to have a role to play, according to 10 percent.
Which of the following will form the most important part of aviation businesses’ strategy over the next 12 months?
Pursuing mergers and acquisitions is thought by 23 percent to form the most important part of aviation businesses’ strategies over the next 12 months, while 16 percent favour the formation of joint ventures, alliances and pools. A further 19 percent believe that reallocating existing capacity from stagnant to growth sectors and clients will be key.