A new report published by a London-based international commercial law firm indicates significant positive sentiment in the aviation industry, with 90 percent of respondents reporting favourable market conditions.
Norton Rose Fulbright’s “Transport Survey 2017” finds that although feelings are generally optimistic, respondents in the aviation industry expect a more competitive environment. Thirty percent reported that their confidence stems from their ability to access investment funding, 28 percent argue that improved economic conditions in certain markets are the source of this confidence and 18 percent reported lower oil prices as the reason. A small percentage (10 percent) reported a pessimistic view for their industry, blaming increased competition. This included not only competition from traditional rivals, but also new market entrants and new types of transport.
Harry Theochari, Norton Rose Fulbright’s global head of transport, said technology is behind these new entrants. Technology has, for the first time, overtaken investment and infrastructure as the prime investment for the transport industry overall. Mr Theochari said enhancing logistics chains and improving end-to-end passenger travel with other parts of the industry are critical aspects of the transport industry. However, surprisingly, aviation is not concentrating on this. Rather, aviation is focusing on expanding seat numbers and capacity to become more agile.
Over the next five years, 74% of respondents expect more aggressive competition. Further, 83 percent believe that the number of routes and services will increase. Interestingly, the industry is split as to whether fares and freight costs will either increase or stay the same. However, 72 percent predict a rise in fuel costs.
The law firm’s survey also asked respondents what they believed was the optimal investment opportunity for aviation. Some pointed to new markets (25 percent), some to the purchasing and leasing of aircraft (17 percent), some to fleet upgrades (15 percent) and some to infrastructure improvements (17 percent). What makes aviation starkly different from other sectors of transport is that only five percent believe the optimal investment is new technology; other industries like rail and shipping were around 20 percent. Almost half of aviation respondents did, however, find that big data and predictive analytics will be the most significant catalyst for change (other than low carbon technology).
The survey found notable challenges for the sector. Twenty two percent found that inadequate infrastructure is the most significant challenge to the efficiency of the industry as a whole. This is not entirely surprising; airports in Asia, for instance, are becoming increasingly congested. Major infrastructure investments are critical for the sector’s future. Air traffic control investment (28 percent) and new airport capacity in emerging markets (32 percent) were found to be the most beneficial forms of infrastructure investment.
A significant threat to the industry was believed to be, also not surprisingly, instability in global politics. This is no doubt becoming clear with terrorism, the recent U.S. travel bans and the recent grounding of Qatar Airways. Further, 30 percent found fragmented aviation regulations from jurisdiction to jurisdiction being a significant challenge over the past 10 years.
Twenty four percent found that China will offer the best investment opportunities in the next two to five years. Asia, regionally, is also a largely popular investment destination; 55 percent of respondents favour it.
A full version of the insightful report can be downloaded here.