Four years after the publication of our first Transport survey, what does our latest survey released in March 2013 tell us about the aviation industry?
Of the transport industries reviewed, it appears that the aviation sector has had the most successful year with 50 per cent of respondents reporting an increase in turnover and only 16 per cent reporting an appreciable reduction in 2012. These financial results coupled with growth within the industry and a desire to venture into new markets suggests that, of the transport sectors, the aviation industry appears more robust in terms of recovering from the global economic slowdown than its rail or shipping counterparts.
The positive results in turnover appear to reflect an optimistic outlook in the sector which reports the largest growth in workforce – with 38 per cent of respondents stating that their workforce had increased in the past year – the greatest increase in the number of assets employed between 2010 and 2012 with 44 per cent reporting an increase and of the three industries, aviation respondents were more likely to have ordered (or contemplated ordering) new stock in 2012.
In addition to growth within the industry, of the three sectors it was aviation respondents who were most eager to venture into new market segments with 66 per cent (opposed to 58 per cent for shipping and rail) answering in the affirmative to having sought to change their position in terms of the market segments in which they operate, range of products or services offered or geographical focus. The respondents across all three transport sectors were most interested in entering into new geographical markets suggesting a trend that the industry is seeking to diversify from traditional markets.
Although the statistics suggest that the aviation industry appears relatively buoyant, the respondents noted that the two most significant challenges to their business between 2010 and 2012 were financial constraint (36 per cent) and increased operational capability (35 per cent).
The limited availability of bank funding has been the main financial constraint experienced by industry respondents. One interesting theme which has arisen from our survey is the apparent lack of financial diversification and an unwillingness to explore alternative financing opportunities within the aviation sector. Since we began our surveys in 2009, the three primary sources of funding have generally remained consistent with equity, bank debt and capital markets providing the primary sources of aviation funding. Although offbalance sheet finance has seen marginal increases in the past three years other sources of alternative financing play a relatively minor role in the industry. Additionally, only 38 per cent of aviation sector respondents stated that they were looking for new sources of financing which suggests that the traditional methods of funding are very much entrenched. Nevertheless, of the new sources considered, the two options aviation respondents seem most eager to explore are structured finance (25 per cent) and long term leasing (24 per cent).
Operational capacity has long been a concern for the industry with a large number of respondents citing existing airport capacity (41 per cent) and developing airport capacity in new or growing markets (32 per cent) as the primary infrastructure concerns. It is therefore no surprise that infrastructure investment has been ranked as the single most helpful form of government support to the aviation industry since we began our surveys in 2009. This year, infrastructure investment attracted over twice as many votes as the next most helpful form of support, which was deregulation, highlighting the importance the industry places on increasing infrastructure investment. The Transport survey, now in its fourth year, continues to provide the transport industry with an insightful indicator as to how the market has evolved and adapted to new challenges and conditions. Aviation strategies appear to have moved from a focus on retrenchment and disposals in 2009 to a predominant focus on alliances and joints ventures in 2012. The Transport survey will continue to track conditions, challenges and trends hinting at where the market is heading and how it intends to get there.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
