Australia - Civil Aerospace: Increasing international passengers driving growth (Strategy, Performance and Risk Analysis)
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In Australia, matters related to Civil Aerospace are regulated by the civil aviation safety authority. The Australian government signed an open skies agreement with the Chinese government in December 2016. The agreement enables airline operators in Australia to operate flights to more Chinese cities and increase the frequency of flights on important routes between the two countries, thereby increasing passenger demand on routes between China and Australia. Australia generally scores less on the Global Risk Index Matrix than the global and regional median. Increasing public expenditure on capital incentive areas, such as health and manufacturing, has enabled the country to perform well on key macroeconomic indicators so it poses lesser macroeconomic risks than the global median.
Introduction of new routes and international tourists to drive air passenger growth
In Australia, the number of air passengers increased at a growth rate of 4%, from 69.8 million in 2015 to 72.6 million in 2016, and is expected to increase at a CAGR of 2.1% over the forecast period, from 73.7 million in 2017 to 80.2 million in 2021. The increase in the number of air passengers is primarily attributed to an increase in the number of international passengers, due to rising disposable incomes and the start of operations on new long-haul international routes, which were enabled by the open skies agreement between Australia and China
Increased single aircraft procurement to drive capital expenditure
Capital expenditure on aircraft in Australia increased at a growth rate of 8.7%, from US$2,271 million in 2015 to US$2,469 million in 2016, and is expected to increase at a CAGR of 3.1% over the forecast period, from US$2,150 million in 2017 to US$2,436 million in 2021, due to the increased procurement of single aisle aircraft, primarily by low-cost carriers.
Deliveries expected to decline in the forecast period
In Australia, the number of deliveries declined from 10 in 2015 to three in 2016 and is expected to post a CAGR of -2.6%, from 10 in 2017 to nine in 2021. The decline is due to fluctuating fuel prices and the competitive pricing policy followed by airline operators to attract more customers. As a result, airline profit margins are declining and this limits the purchase of new aircraft.
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