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Asia Pacific Airline Training Symposium

Asia Pacific Airline Training Symposium. The Business of Aviation Training: Set for Takeoff (? Or !) 8 September 2009 Steve Mann Project Director CAPA AeroPark. Why invest in training? (Answer: To prepare for the unexpected and uncertain )!. Your trial period is over!

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Asia Pacific Airline Training Symposium

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  1. Asia Pacific Airline Training Symposium The Business of Aviation Training: Set for Takeoff (? Or !) 8 September 2009 Steve Mann Project Director CAPA AeroPark

  2. Why invest in training? (Answer: To prepare for the unexpected and uncertain)! Your trial period is over! Please register to continue using this software OK Source: http://www.pilotfriend.com/humour/jokes/cartoons.htm APATS 2009 Hong Kong

  3. Aviation Training covers a wide spectrum of disciplines, in an ever-changing environment Industry Learning Safety & Security Industry Health Technical Skills Maintenance Eng. IT Aviation Law Air Traffic Mgmt Environmental Safety Management Systems Airline Finance & Accounting Regulation Pilot Training Aircraft Leasing Airline/Airport Management Airport Charges Cabin Crew Training Leadership Societal Trends Fares and Ticketing Cost Pressure Revenue Management Customer Service Sales Commercial Skills “Soft Skills” APATS 2009 Hong Kong

  4. Training caters to different markets, from more expensive, regulated training for the few to short courses for the many Regulated CPL Pilot Ab Initio 1 ½ yrs Lic. Aircraft Maintenance Eng 2 yrs ATCO Ab Initio 10 mths Pilot Type Rating 3 mths Course Cost/Length Aviation Degree 3/4 yrs Cabin Crew 3 mths Airport Operations 3 mths Aviation Mgmt 1 wk Fares & Ticketing 1 wk Potential No. of Students APATS 2009 Hong Kong

  5. The industry which supplies training is also fragmented from traditional in-house to external Specialist Training Organisations Governments OEMs Service Organisations Universities/Trade Colleges/ Academies In-house In-source • Advantages of In-house: • Core to product/reputation • Control over quality • Instant access • Lack of scale external providers • Scale provides low cost • Ability to in-source work for revenue • Arguments against In-house: • Do not need to own and run, LCC’s • Not always best quality in-house • Cost of instant access, breeds waste • 3rd party providers growing scale • Larger 3rd party volume reduces cost • Lack of commitment, marginal pricing APATS 2009 Hong Kong

  6. After a period of strong growth, the aviation industry responded with unprecedented aggression to the crisis Traffic Change Capacity Change Differential Traffic-Capacity 2008 – 2010 forecast 1971 1975 1980 1985 1990 1995 2000 2005 2010f Source: ICAO, IATA APATS 2009 Hong Kong

  7. Emerging markets grew strongly in the past decade in line with their economies CAGR% 2000 - 08 10.5% pa China RPK 10.2% pa China GDP Indexed 14.5% pa India RPK 7.3% pa India GDP Indexed Source: Centre for Asia Pacific Aviation Analysis, Boeing, IMF, Indian DGCA APATS 2009 Hong Kong

  8. Emerging markets are strongly represented in recent aircraft deliveries India Brazil UAE Mexico China Source: Centre for Asia Pacific Aviation, Ascend Jun 09, CAT Magazine Annual Training Survey Apr 09 (all sims) APATS 2009 Hong Kong

  9. Training industry development in emerging markets lag their aircraft deliveries UAE Mexico China India Brazil Note: Proxy for training industry development, sims per aircraft ordered from Jan 06 – Jun 09; Does not take aircraft/sim type into account Source: Centre for Asia Pacific Aviation, Ascend jun 09, CAT Magazine Annual Sim Survey Apr 09 APATS 2009 Hong Kong

  10. However, LCC’s accounted for almost all growth this decade, 22% in 09 vs 7% in 2000 Seats m Source: Centre for Asia Pacific Aviation and OAG APATS 2009 Hong Kong

  11. A recovery in confidence looks well established, for example in the US US Leading Economic Indicators Jan 06 – Jul 09 USA Leading Economic Indicators Source: Conference Board APATS 2009 Hong Kong

  12. And Asia is recovering strongly • World Bank President Zoelick said he now expected China’s economy to grow by nearly eight percent in 2009 … higher than the World Bank’s official forecast of 7.2% AFP, 2 Sept 09 • Hong Kong’s exports and economy may ‘fully recover’ by the middle of next year as global growth resumes, said Edward Leung, the chief economist at the government backed Hong Kong Trade Development Council Bloomberg ,3 Sept 09 • Bank of Japan Governor Masaaki Shirakawa said on Monday the Japanese economy is showing signs of recovery, though uncertainty over the outlook remains high Reuters, 31 Aug 09 • “…official data showed India's economy grew 6.1 percent in the three months to June, signalling the country was emerging from the negative effects of the global downturnAFP, 2 Sept 09 • Economists more upbeat… In the second quarter, Singapore emerged from a recession, posting a 20.7% jump in GDP Straits Times, 2 Sept 09 APATS 2009 Hong Kong

  13. The slowing rate of decline in passenger traffic is starting to look like a sustained trend… International demand, capacity & load factors:
Aug-2008 to Jul-2009 ACI total passenger number growth: Jul-08 to Jul-09 Source: Centre for Asia Pacific Aviation and IATA Source: Centre for Asia Pacific Aviation and ACI APATS 2009 Hong Kong

  14. The Middle East has maintained growth reportedly at weak yields IATA airlines RPK growth by region: Jul-08 to Jul-09 APATS 2009 Hong Kong

  15. Usually a lead indicator, the rate of decline for freight traffic is also slowing, albeit at poor yield ACI total cargo volume growth: Jul-08 to Jul-09 Source: Centre for Asia Pacific Aviation and ACI APATS 2009 Hong Kong

  16. A recent survey by CAPA found the majority saw profitable growth returning in 12-18 months • Fastest Growth next 12 months: • China (85%) • Middle East (76%) • India (43%) • Rest of Asia (33%) • Slowest Growth next 12 months • North America (72%) • Western Europe (64%) • Eastern Europe (36%) • = Africa (36%) Source: Centre for Asia Pacific Aviation Survey, Sept 09 APATS 2009 Hong Kong

  17. Current priorities are not a surprise: demand, cash and costs Source: Centre for Asia Pacific Aviation Survey, Sept 09 APATS 2009 Hong Kong

  18. Over the medium term, people and environmental issues are added to demand, cash and costs as key issues Source: Centre for Asia Pacific Aviation Survey, Sept 09 APATS 2009 Hong Kong

  19. Over the long term, Asia Pacific and the Middle East will see the greatest growth in traffic and fleet size Source: Boeing Current Market Outlook 2008 to 2028; Centre for Asia Pacific Aviation Analysis APATS 2009 Hong Kong

  20. Urbanisation, the motor of Chinese growth, isset to continue to drive growth Chinese Urbanisation (1950 – 2050f) * * China : Total Population (000’s) 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 13% Urbanisation % 13% 13% 14% 16% 17% 17% 17% 19% 23% 27% 31% 35% 40% 45% 49% 53% 56% 60% 63% 66% 70% 73% Source : United Nations, World Urbanization Prospects: The 2007 Revision APATS 2009 Hong Kong

  21. And the BRICS countries will climb up the rankings of aviation nations over the next 20 years Source: ACI Sept 08 APATS 2009 Hong Kong

  22. Take the Indian example: even with current surplus capacity, the skilled manpower requirements are significant. How strongly will demand ‘snap back’? Additional reqmt 2014 in high growth case Additional reqmt 2014 in low growth case 2008 Complement Source/Note: CAPA Analysis, Personnel numbers DGCA 2009, IMF GDP forecasts to 2014. Assumes 3% attrition rate for pilots and maintenance personnel and 8% for cabin crew, 2% per annum productivity improvement (or outsourcing) in maintenance personnel APATS 2009 Hong Kong

  23. Company positions are rewritten during a downturn with new winners emerging Source: Corporate Executive Board APATS 2009 Hong Kong

  24. As we look towards recovery on the horizon, how prepared are you? • After the biggest shock to the aviation industry ever, growth will return and with it, the skills shortage • Choices ahead: • Impact of the changing business models and strategies as legacy carriers evolve • No longer the traditional “lifelong airline man”; different backgrounds, skills • Narrowing the scope of proprietary vs open or shared, cf R&D • Challenging the autarky to keep up with the LCCs • Constrained capital • Realign to respond to growth shifting to emerging markets (especially BRICS countries) • Need for cost effective models, eg the $2,000 Nano car? • Is the ‘export model’ of training sustainable? • Renewed focus on employability • Great marketing emphasis on self-funded students? • Degree courses, continuous learning? non traditional career pathways? internationally recognised accreditation? Greater mobility • Evolving regulatory environment, eg • EASA, MPL • Impact of the “Environmental New Age” • Need for greater scale, broader discipline and market coverage to provide more compelling offer to major airlines • Functional silos or broader training service provider covering more disciplines? • Further consolidation, cross border activity?

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