Sweden - Civil Aerospace: A capital and personnel intensive industry (Strategy, Performance and Risk Analysis)
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Sweden’s GDP growth has been stimulated by increases in investments and exports, along with a rebound in government spending. The central bank’s initiative to cut interest rates in 2016 has affected the economy positively. Lower interest rates will lead to increases in individuals’ spending and investments. According to the 2017 Index of Economic Freedom, Sweden was ranked 19th out of 186 economies. On the other hand, according to the World Bank, Sweden was ranked 10th out of 190 countries in terms of ease of doing business. Sweden’s transparent and efficient regulatory environment promotes strong entrepreneurial activity. The Swedish Civil Aviation Administration (SCAA) is a state owned organization responsible for the civil aviation administration in Sweden.
Increase in number of air passengers
An increasing number of long haul routes and the growing demand for passenger routes could lead to an increase in the number of seats available, seats sold, passenger revenue, the number of air passengers and active fleet size. The capital expenditure stood at US$80.0 million in 2016 and is forecast to decline at -2.1% CAGR from US$100.0 million in 2017 to US$85.0 million in 2021. The decline is attributed to the decrease in capital expenditure on regional aircraft.
Available seat kilometers (ASKs) to increase further
ASKs in Sweden increased at a growth rate of 1.1% from 47.7 billion in 2015 to 48.2 billion in 2016 and are forecast to increase at 1.8% CAGR from 49.7 billion in 2017 to 53.4 billion in 2021. The expected growth is primarily due to the increase in the frequency of flights on major domestic and international routes as well as the growth in aircraft fleet size.
MRO expenditure to increase
MRO expenditure grew by 17.6% from US$326.9 million in 2015 to US$384.4 million in 2016. Similarly, it is forecast to increase at 1.3% CAGR from US$371.6 million in 2017 to US$391.9 million in 2021. The increase in MRO expenditure is primarily due to the fleet modernization and overhauling initiatives undertaken by major airlines in the country necessitated by the increasing average age of the fleet.
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