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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Brazilian Aviation
Agenda 2020
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1
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Mission
“
To encourage the habit of
flying in Brazil by planning,
implementing, and supporting
actions and programs to
promote the growth of civil
aviation in a consistent
and sustainable way, for
both passenger and cargo
transportation.
”
2
Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
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ABEAR members
99% of the
domestic market**
3
Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
www.abear.com.br
Program areas
Competitiveness
Creation of an environment favorable to the development of the airline industry,
with cost review and infrastructure improvements, to provide products and
services of increasing quality. ABEAR’s proposals include dialogue and
participation in airport concession processes.
Sustainability
Adoption of sustainable practices across all links in the industry chain,
with investments focused on:
» Development of sustainable aviation biofuel
» Continuous review of air traffic control procedures, to allow more
direct flights and less waiting time in the air
» Review of the airlines’ operational and administrative procedures,
with a view to reducing environmental impact
People
Relationship with consumers. Investment in training, education, and specialization
of professionals working in air transportation and supporting industries.
4
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Generation of employment and income
1.2 million
US$ 30.4 billion
179,000 direct
432,000 indirect
276,000 induced*
329,000 by the effect on tourism
US$ 1.7 billion in direct wages paid
US$ 10 billion direct
US$ 8.3 billion indirect
US$ 4.6 billion induced*
US$ 7.5 billion by the effect on tourism
US$ 9.2 billion
US$ 4.2 billion
US$ 4 billion direct
US$ 3.3 billion indirect
US$ 1.9 billion induced*
Effect on tourism not measured
Embraer is the world’s 3rd largest
aircraft manufacturer, producing about
200 aircraft per year
jobs
in taxes paid
added to GDP
in sales of aircraft
and equipment
Conversion rate: US$ 1 = R$ 2.4. **Effect of the consumption of direct and indirect employees
Sources: Study by Oxford Economics-IATA 2009; Estimate by Bain & Co; Wages reported by the ABEAR members; Embraer
5
Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Turnover of goods and services
US$ 50.1 billion
was the turnover
of air transportation in Brazil’s trade turnover
(imports plus exports) in 2012
This represents 10.7% of the total turnover
(of US$ 466 billion), but only 0.2%
of the total weight carried – proof of the
high value added of the goods carried
In the domestic market, the airline industry accounts
for 0.4% of the total weight carried
Sources: MDIC; CNT
6
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Brazil: the world’s third largest domestic market
Growth is the result of economic development
and reduction in airfares
Safety
and speed
Passengers carried
(domestic, in millions)
700
640
ABEAR member airlines have carried
about 400 million passengers over the
past six years - with no accidents
600
500
400
300
293
200
89
100
58
55
0
USA
China
Brazil
India
Japan
Source: OACI 2012
7
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
More passengers each year
Growth in domestic and international travels
from 2002* to 2012 is 180%
Passengers carried in Brazil
(domestic and international, in millions)
180%
growth
100
93
101
79
80
65
60
40
36
33
2002
2003
37
45
49
54
58
20
0
2004
2005
2006
2007
2008
2009
2010
2011
*In 2002, pricing freedom becomes effective in Brazil’s domestic air transportation
Source: ANAC 2012. Includes regular and non-regular, fare-paying and non-fare-paying air passengers, as well as
frequent-flyer program passengers, recorded by Brazilian airlines in all Brazilian airports.
8
2012
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
An expanding market
Brazilians are flying more and more
Progress in the number of passengers
compared to population growth (2002-2012)
0.60
0.51
0.48
0.50
0.41
0.34
0.31
0.40
0.29
0.26
0.30
0.20
0.25
0.20
0.18
0.20
0.10
0.00
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
* ANAC; SRE; GEAC
The United States and Australia showed the highest ratios of air
passengers to population, with over 5 trips per inhabitant per year. Spain
has a ratio above 4. Other European nations such as France, Germany,
and Italy have ratios above 2. While the world’s most populous country,
China, has less than one trip per inhabitant.
9
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Flying is increasingly cost-effective
In 2002, there were no tickets for less than R$ 100 (US$ 41.7).
Today, they account for 13% of seats sold
Seats sold by average airfare ranges
From 2002 to 2012,
the average domestic fare
dropped by 43%, from
R$ 515,17 (US$ 214.65)
to R$ 294,83 (US$ 122.85)
Actual average airfare range (in R$)
2012
Fares less than R$ 100
(US$ 41.7)
2002 = 0% of seats
2012 = 16% of seats
30.84
30
21.27
19.04
0.40
1.50
1.02
0.62
0.40
0.29
0.19
0.13
0.38
10
>=
1.
50
0
0
50
an
1.
40
0
0
>=
30
1.
1.
<
d
d
an
d
an
20
0
>=
1.
>=
1.
40
<
1.
30
<
<
d
0
1.
10
0
0
1.
1.
20
10
0
<
d
Conversion rate: US$ 1 = R$ 2.4. Sources: ANAC/SRE/GEAC, “Tarifas Aéreas
Domésticas”, ANAC, August 9, 2013
0
0.94
0
1.01
an
d
an
0
90
>=
1.64
<
<
d
an
0
80
1.97
00
90
80
d
an
0
70
>=
0
0
0
<
<
an
0
60
1.47
2.81
an
3.17
2.09
70
0
d
<
d
>=
50
0
an
d
>=
3.15
60
0
50
0
<
40
>=
40
0
an
d
an
>=
30
0
0
20
>=
<
<
an
d
<
d
an
0
10
30
0
20
10
<
d
an
0
>=
0
4.89
>=
0.05
0
5.59
7.59
0
7.36
12.52
5.30
>=
13.16
5
>
13.78
17.56
10
Fares less than R$ 300
(US$ 125)
2002 = 23% of seats
2012 = 65% of seats
17.84
1.
15
0
Seats sold (%)
20
1.
00
25
>=
35
2002
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Democratization of air travel in Brazil
An effect of increasing income in Brazil and cheaper tickets
Average monthly income per household
(net of inflation, in R$)
20%
3,000
2,660
2,479
2,215
2,311
2,000
1,000
0
Source: IBGE; LCA Consultores
Cheaper
airfares
+
2006
2008
Increasing
income of
Brazilians
2010
2012(E)
=
The new
consumer is
flying more
11
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Consequences of economic growth
Increase in Brazilian
travel spending
(2000 to 2012)
Distribution of
passengers* by monthly
household income
Number of travels per year*
(% of passengers)
242%
6%
9%
36%
41%
19%
64%
85%
15%
10%
41%
Social
class
Up to 10
minimum
wages
AB
C
DE
It is in the new
middle class that
travel spending has
increased the most
over the past ten years
Source: Market research by Data Popular
* Domestic and international travels
12
More than
10 minimum
wages
36% of all passengers
carried by Brazilian
companies are
middle class
Source: Study on the Brazilian Air
Transportation Industry, BNDES, 2010
15 travels or more
3 travels
7 to 15 travels
2 travels
4 to 6 travels
1 travel
The high percentage
of first-time travelers
reinforces the
trend towards
democratization
Source: Study on the Brazilian Air
Transportation Industry, BNDES, 2010
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Investments to support growth
Brazil has one of the world’s youngest aircraft fleets,
with a constantly growing supply of flight seats
Average age of the fleet (years)
20
16.4
15
12.6
10
9.6
10
13.4
6.5
6.7
China Eastern
Average Brazil
China Airlines
Air France
Lufthansa
United Airlines
Delta
China
Brazil
China
France
Germany
United States
United States
5
0
13
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Supply of seats to meet the growing demand
The number of seats on flights continuously grows in Brazil
In 2013, for the first time
in over ten years, the number
is expected to be lower:
the estimate is 115
Available capacity in domestic flights (ASK billions)*
150
144%
116
120
103
100
50
0
49
2002
43
45
51
2003
2004
2005
57
2006
67
2007
75
2008
86
2009
2010
2011
2012
Source: ANAC
* Acronym for Available Seat Kilometer. The variable, which represents the supply of passenger air transportation, is obtained by multiplying
the number of available seats by the number of kilometers flown
14
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
More satisfied passengers
Respect for the consumer is a constant
point of attention for airlines
Industries that most
respect consumer rights
Number of comments* from passengers
Since 2010, the number
of comments from passengers
has decreased by more
than 60%**
1 is the one that least
respects and 15 is the one
that most respects
15
Cosmetics
14
Food and beverage
13
Automotive
12
Insurance
11
40,000
Civil aviation
10
39,579
Interstate buses
9
Electric power
8
30,000
Health plan
7
24,680
Wireline
6
20,000
Electrical/electronic
5
14,725
10,000
Broadband
4
Credit cards
3
Pay TV
2
0
1
2010
2011
*Reviews, complaints, questions, and compliments
**ANAC’s ombudsman report
Mobile phone
Banking
2012
Source: Instituto Ibero-Americano de
Relacionamento com Cliente (April 2013)
15
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Growth potential
Passenger transportation is forecast to grow by 109%
and cargo transportation by 58% until 2020
Potential number of passengers carried in Brazil
(domestic and international, in millions)
300
109%
211
191
200
172
156
100
114
127
141
101
105
2012
2013
2014
2015
2016
2017
2018
2019
2020
50
51
54
57
61
66
72
76
81
0
Exports + imports
by air
(US$ billions)
Source: Estimate by Bain & Co
16
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Generation of jobs
The projected growth for the airline industry has the potential
to generate 600,000 new jobs
Number of employees in the airline industry in Brazil (thousands)
660,000 new jobs
(about 100,000 direct
jobs in airlines)
2,000
1,875
1,785
1,500
1,097
1,000
939
297
254
249
500
319
267
1,215
329
276
345
289
1,344
387
390
419
432
453
1,518
411
434
1,695
458
363
305
213
334
0
1,178
1,275
1,431
1,605
478
325
344
364
384
483
405
507
425
Tourism
509
540
571
603
635
667
Induced
Indirect
Direct
138
161
173
179
187
197
210
223
236
249
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
262
276
2019
2020
Source: RAIS; ANAC; Study by Oxford-IATA; Estimate by Bain & Co
17
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Contribution to GDP
By 2020, the Brazilian airline industry is expected to add
R$ 146 billion to the country’s gross domestic product
For every 1% increase
in GDP, the airline industry
grows by 2.5%
Value directly added by the airline industry to GPD
(in billions of nominal R$)
300
R$ 146
billion
219
191
200
166
145
126
109
100
54
65
73
83
94
42
0
Share
in GDP
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
1.3%
1.4%
1.6%
1.7%
1.6%
1.7%
1.7%
1.8%
1.8%
1.9%
1.9%
2.0%
Source: Estimate by Bain & Co
18
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Poor geographic distribution
Passenger air transportation is currently
concentrated in a few regions
Air transportation by
IBGE mesoregion (2012)
98
Number of
airports*
18
24
56
97
Number of
passengers
(millions)
74
19 4
50
100
150
Regions with more than 5 million passengers
Regions with 1 to 5 million passengers
Regions with up to 1 million passengers
Regions without airports
Source: Estimate by Bain & Co
*Airports managed by Infraero and by DAESP
19
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Airport overload
Out of the twelve major airports in the country, eight
are already operating at or above their declared capacity
Declared capacity vs. use in major Brazilian airports
(in millions of passengers)
40
In 2012, the following airports were given
in concession to the private sector:
Guarulhos in São Paulo; Viracopos
in Campinas; and Juscelino Kubitschek
in Brasília. In 2013, Galeão in Rio de Janeiro
and Confins in Belo Horizonte
Use
31 32
Capacity
30
20
17 17
16 16 17 17
10 10
10
13
13
9 9
9
8
7
42
9
8
7
8
6
6 6
za
fe
Fo
rta
le
ci
Re
a
Cu
rit
ib
s
na
pi
m
Ca
de
Ri
o
Sources: Infraero; concessionaires
20
Ja
Ga nei
le ro
Be
ão
lo
Ho
r
Co izon
nfi te
ns
R
Sa io
nt de
os Ja
Du ne
m iro
on
t
Sa
lva
do
r
Po
rto
Al
eg
re
ília
as
Br
S
Co ão
ng Pa
on ul
ha o
s
S
Gu ão P
ar au
ul lo
ho
s
0
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
High operational costs
Fuel prices and taxes represent major bottlenecks
ATF Prices*
ICMS on ATF
Fuel accounts for up to 40%**
of the costs of an airline
Any difference in the ATF final price
has a great impact on business
Currently ICMS rates range from
4% to 25% in major airports
A result of the different tax rates, it is a common
practice for companies to plan the network
to fuel up at the point with the lowest ICMS
This practice has negative consequences for everyone:
» Environment: the higher fuel consumption increases pollutant gas emissions
» Airlines: operational inefficiencies
» State governments: the “tax rate war” reduces tax collection in states with higher ICMS rates
» Passengers: tickets become more expensive
*Aviation turbine fuel
** Public data of Gol, from January to September 2012
21
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Fuel cost
Pricing formulas and taxes raise the price of the input for domestic
aviation and affect the competitiveness of companies
Although approximately 75% of the volume is produced
in Brazil, ATF is priced on import parity
Estimated ATF price composition in Brazil
(as % of the price, average in 2009)
100
1.5
6.3
3.8
100
Others
ATF Price
6.9
80
81.5
Sum = 14.7%
60
40
20
0
US Platts
Sources: ANP; IATA
22
Freight
Pipelines and
storage
AFRMM
Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
www.abear.com.br
Aviation fuel price
(in US$ per gallon,
as of April 2013)
6.81
Lilongwe - Malawi
Bujumbura - Burundi
5.41
Kigale - Rwanda
5.28
Recife - Brazil
5.16
Guarulhos - Brazil
4.91
N’Djamena - Chad
4.77
Luanda - Angola
4.68
Harare - Zimbabwe
4.60
Brazzaville - Congo
4.50
Galeão - Brazil
4.40
Maputo - Mozambique
4.25
Libreville - Gabon
4.20
Abidjan - Ivory Coast
4.02
Accra - Ghana
4.01
Kinshasa - Congo
4.00
Kano - Nigeria
3.82
Guarulhos - Brazil
3.79
Galeão - Brazil
3.77
Lomé - Togo
3.74
Lusaka - Zambia
3.61
Dar As El Salam - Egypt
3.54
Ouagadougou - Burkina Faso
3.53
Lagos - Nigeria
3.52
Dakar - Senegal
3.50
Cairo - Egypt
3.35
Nairobi - Kenya
3.29
Amman - Jordan
3.28
Caracas - Venezuela
3.23
Santiago - Chile
3.21
Buenos Aires - Argentina
3.16
Madrid - Spain
Paris - France
Unlike domestic
flights, fuel for
international
flights is exempt
from ICMS
3.15
London - England
2.88
2.81
New York - United States
International flights,
exempt from ICMS
3.14
Miami - United States
Frankfurt - Germany
Domestic flights,
with ICMS
2.81
2.79
Sources: ANP; IATA
23
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Income
Despite the industry’s growth, airlines’ financial performance
is modest and very volatile
TAM and GOL historical net income (in R$ thousands)
2,000
TAM
1,500
GOL
1,000
500
0
-500
-1,000
-1,500
-2,000
Margin on
net revenue
2003
2004
2005
2006
2007
2008
2009
2010
2011
TAM
5%
8%
3%
8%
6%
-14%
13%
6%
-2%
GOL
8%
14%
16%
18%
5%
-19%
15%
3%
-10%
Source: CVM
Domestic airlines that have been shut down or have gone into receivership
TAVAJ
Transbrasil
2001
24
2002
Penta
2003
2004
Fly
Vasp
2005
NOAR
Varig Brasil
Passaredo
Pantanal
BRA
2006
2007
2008
2009
2010
Rico
2011
Meta
2012
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Investments in airport infrastructure
Growth in the airline industry will require R$ 42 to 57 billion
investment in airport infrastructure by 2020
Need for investment in airport infrastructure
(in R$ billion)
60
6
9
40
20
4
5
Highest
estimate
7
14
24
57
10
3
42
Lowest
estimate
17
0
Expansion
of the 20 largest
airports
Expansion
of other
airports
Number of new airports
New (more
than 1 million
passengers)
New (500,000
- 1 million
passengers)
New
(up to 500,000
passengers)
Total
15
23
33
71
Sources: Estimated by Bain & Co based on data from BNDES and Infraero
25
Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
www.abear.com.br
Expansion and construction
The economic development and emergence of new regions are great
opportunities to build or rehabilitate 71 – and expand 49 airports
Need for airports
by passenger traffic
90
85
80
70
60
New 56
40
50
40
New 15
30
20
10
0
12
Expansion 18
Expansion 21
Existing 11
0 to 1
million
Expansion 10
Existing 4
Existing 2
1 to 5
million
More than
5 million
Regions with more than 5 million passengers
Regions with 1 to 5 million passengers
Regions with up to 1 million passengers
Source: Estimate by Bain & Co
26
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Expansion of airports and air traffic control
Expanding hubs responsibly requires investing in air traffic
control and review of routes and flight procedures
Investment in
expansion and
construction of
new airports
Expansion and construction of new airports implies
the need to increase the capacity of existing airports,
so that already congested hubs, such as São Paulo,
can absorb a larger number of flights
Review of routes
and air traffic
control procedures
It is necessary to change routes and traffic control
procedures to reduce the average flight time, cutting
costs and promoting the market growth - in addition
to allowing saturated airports, such as São Paulo,
Rio de Janeiro, and Brasília, to receive more flights
27
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Investments in aircraft
For the industry to achieve its potential, airlines will have to invest
R$ 26 to 36 billion in aircraft by 2020
Need for investment in aircraft
(in R$ billion)
40
36
6
5
30
4
26
5
3
4
Lowest
estimate
3
4
10
3
3
2
3
Number
of new
aircraft
4
5
20
0
2
2013
2014
2015
2016
36
44
60
63
2017
69
2018
2019
2020
77
85
94
Note: average aircraft valuations are based on financial statements of Brazilian publicly traded companies
Source: Estimate by Bain & Co
28
Highest
estimate
6
Accumulated
total
526
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Potential for 2020*
Commitment and investments to resolve the industry’s problems
must take Brazilian air transportation to a new level
2012
Passengers
2020
101 million
110 million
211 million
Airports
96
71 airports
167
Direct domestic routes
479
316 routes
795
Employees
1.2 million
660,000 jobs
Fleet
450
airplanes*
526 airplanes**
Investments
Private: R$ 26-36 billion
1.9 million
976 airplanes**
Public: R$ 42-57 billion
*Approximate amounts and quantities **ABEAR Fleet
Source: Bain & Co; Infraero; Daesp; ANAC; IATA; HOTRAN
29
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Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Combined efforts
To develop to its potential, the airline industry needs close
collaboration between the government and private sector
Government
» Infrastructure: to enable investments
in expansion, maintenance, and
construction of airports, air traffic control,
and development of new air routes
» Costs:
• Unification of the ICMS rate
at 4% in all states
Private sector
» Investment: to ensure
investment in the new fleet
necessary to meet the
growing demand
» Efficiency: constant gain in
operational efficiency - to make air
tickets more accessible
• To start talks with Petrobras to
review the ATF pricing formula
»Quality and safety:
to continue to seek improvements
in user service
» Regulation: to ensure a regulatory
framework
» Expansion of the air network:
more destinations, more flights
» Sustainability
» Consumer care
30
www.abear.com.br
Associação Brasileira das Empresas Aéreas
(Brazilian Airlines Association)
Brazil will host major sporting events
2014 World Cup in 12 host cities and 2016
Olympic Games in Rio de Janeiro
Actions required for
the World Cup
Challenges for the World Cup
» Air Network Review
(affecting approximately 40%
of the current network)
» Weather (airports in Southern Brazil,
where the winter is more severe, do not
have proper equipment)
» Renovation of airports
» Long distances between
the host cities
Recife
Manaus
Currently
77 foreign airlines
fly to Brazil
Porto Alegre
3,779 km
Brasília
3,490 km
São Paulo
3,127 km
Fortaleza
In Comparison
Cologne 1,853 km
Cologne
2,008 km
Lisbon
Moscow
31