20250108-004 Briefing on Air Service Development and Airline Industry Trends — original pdf

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AUS Air Service Update January 8, 2025 Air Service Development & Airline Industry Trends Why Air Service Needs Development Airlines are focused on maximizing profits Aircraft are moveable assets Identify opportunities for growth and weaknesses where an action may be needed The competition is global We’re focused on what’s best for the air service needs of our community 2 Airlines Have Various Factors That Help Narrow Down Opportunities Goal to maximize revenue and strategic priorities Influential Factors: Competition OA Projected Performance Vetting Process: Forecast Revenue Details List of Potentials Station Costs Data Analysis Aircraft Availability Scheduling Industry & Other Data: DOT O&D: Market size & Fares T100: Load Factor Population & Demographics Airline Trends Seasonality/ DOW Operational Viability Regulatory Issues Plan Executive Team And Board Approval 3 Functions of Network Planning The planning team must always be balancing many various functions that all play an integral role in building a successful network. Internal Reporting & Comm. Planning Market Exit Evaluations Capacity Adjustments Forecasting New Market Research Economic Outlooks Competitive Analysis Strategy Planning 4 Significant Consolidation Since Deregulation Consolidations results in 80% of Domestic Capacity (ASMs) provided by five carriers Present 1978 Northwest Republic Delta Western Pan Am United Continental Texas Int’l Eastern Frontier Southwest ATA American AirCal Ozark TWA Allegheny Piedmont PSA Alaska 5 (Delta receives Europe and Shuttle, United acquires Pacific and Asia) 1990 Northwest Delta United Continental Morris Air Muse Air Southwest ATA American Reno Air TWA USAir Trump Shuttle America West Alaska 2000 Northwest Delta United Continental AirTran Southwest ATA American TWA US Airways America West Alaska Virgin America Recent Industry Trends Aircraft Competition Relationships Infrastructure Global Economic ̶ Pratt & Whitney GTF Engine issue/grounding ̶ Expansion of A321XLR & 737 MAX flying ̶ A220 flexibility ̶ 737-7 /10 MAX certification delays ̶ Premium economy ̶ Boeing strike ̶ Overcapacity in domestic market? ̶ Types of revenue across competing network segments ̶ Alaska/Hawaiian Merger ̶ Spirit future? ̶ Fares and inflation ̶ Startup v. Startup ̶ Condor/Lufthansa agreement ̶ Alliances have covered for another partner, now can expand ̶ Joint Venture planning timeline ̶ Airline teams have changed ̶ Goals of interlining remain ̶ Codesharing ̶ Changes post pandemic (50 seaters) key airports challenging – even post pandemic (NY reductions) ̶ Airline gate squatting/grab ̶ CBP availability, hours ̶ Dublin capacity cap ̶ Japan’s ̶ Pace and recovery of China reopening ̶ Tourism flows ̶ Recent CAT 1 upgrade Mexico ̶ Regulatory constraints ̶ Safety oversight ̶ Currency challenges (Yen, Euro, GBP) ̶ Currency fluctuations USD ̶ Latin recovery, volatility, government changes ̶ Cargo flow has declined ̶ Access to slots at Outbound market 6 Airlines Continue to Face Challenges Aircraft Delays Boeing's production delays due to slowed line output, supplier and labor issues, delays in certifications for Max 7, Max 10, and 777X. Airbus facing strained supplier chain issues which is also slowing production. Increased Costs High labor costs due to pilot and flight attendant demand, inflation, elevated jet fuel cost. Business Travel Trends In 2023, the business travel industry had recovered approximately $675 billion of the $770 billion lost in 2020, according to GBTA BTI analysis, achieving 93% of the pre-pandemic peak of $1.43 trillion by the end of 2023 (Global Business Travel Association) Infrastructure Limited real estate at some airports, access to prime banks, and slots may be difficult. CBP availability and hours may also pose challenges. Source: Cirium schedules. 7 Production and Certification Delays Are Significantly Impacting Aircraft Deliveries 2024 now expect 46% fewer deliveries than expected Scheduled New Aircraft Deliveries* Current Fleet Plans 10/15/2024 Lease rates have increased significantly with these constraints 543 240 283 240 161 261 296 359 2019A 2020A 2021A 2022A 2023A 2024F Note: Airlines included are Alaska, Allegiant, American, Breeze, Delta, Frontier, Hawaiian, JetBlue, Southwest, Spirit and United as of October 15, 2024 Source: A4A, 12/21/2024 8 600 500 400 300 200 100 - AUS Air Service Overview 9 AUS Continues to Achieve Near Record High Passenger Levels Annual Passenger Traffic (Millions) • CY 2023 passengers up 27% compared to CY 2019 and up 5% from CY 2022 • May 2024 new peak month with 2,068,404 passengers • July 2024, June 2024, October 2023, July 2023, June 2023, October 2022 and May 2022 exceeded two million as well • AUS first exceed monthly 2019 passenger levels in November 2021 7.1 7.5 6.6 8.1 8.7 8.8 8.2 8.7 9.1 9.4 10.7 10.0 17.3 15.8 13.9 11.9 12.4 13.6 6.5 22.1 21.7 21.1 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 YE Nov '24 25.0 20.0 15.0 10.0 5.0 0.0 Source: ABIA. 10 AUS Future Capacity is Well Above 2019 Levels But Slightly Below 2024 Levels Change in Seat Capacity v. 2019 YoY Change in Seat Capacity Q1 2025 Q2 2025 Q1 2025 Q2 2025 34% 37% 45% 35% 25% 15% 5% -5% -15% Note: Includes domestic and international capacity. Source: Cirium schedules. 11 7% 9% 1% 0% 2% AUS U.S. Avg -2% CY2024 capacity was up 32% compared to CY2019 but down 6% YOY AUS is the 8th Fastest Growing Airport Among U.S. Large & Medium Hub Airports % Change in Seats: Q1 ‘25 v. Q1 ‘19 60% 58% 49% 37%36%35% 33% 32%31% 29%28% 70% 50% 40% 30% 20% 10% 0% -10% -20% -30% Source: Cirium domestic schedules (as of December 24, 2024). 12 21% 20%20% 17%17%16%14%14%14%12%12%11% 9% 8% 7% 7% 7% 6% 6% 6% 6% 5% 5% 4% 4% 4% 4% 3% 2% 2% 1% 1% 0% -1% -1% -1% -3% -3% -4% -4% -4% -6% -7% -9%-10%-10%-11%-11%-12%-13% -17%-17% -25%-26% AUS Change in Seats by Largest Airlines Despite some recent seat reductions, AUS seats are still up 33% since 2019 Q1 2025 vs. Q1 2019 Percent Change in Seats at AUS 127% 61% 58% 15% 13% 26% 12% 48% 33% NEW NEW NEW -15% -29% -17% -88% Q1 2025 vs. Q1 2024 Percent Change in Seats at AUS 392% 64% 24% 6% 6% 4% <1% -27% -8% -18% <1% <1% -3% -24% -43% -75% 100% 400% 80% 60% 40% 20% 0% -20% -40% -60% -80% -100% Note: Includes Top 15 Largest AUS Carriers. Shown by largest to smallest by seats Q1 2019, Q1 2024, and Q1 2025. Source: Cirium schedule data as of 12/23/2024 150% 100% 50% 0% -50% -100% 13 AUS Has Nonstop Service to 96* Destinations From 19 Carriers LHR AMS FRA Average Daily Nonstop Destinations Carriers Nonstop Departures Jan. 2024 84 19 229 Jan. 2025 76 19 207 Change -8 n.c. -21 Nonstop Seat Departures 34,365 31,365 -2,417 Average Seats/Aircraft 150 154 +4 Change % -10% n.c. -9% -7% +3% Year-Round (68) Seasonal (19) Special Event (6) Announced (3) 14 * Includes seasonal destinations Note: HNL ends March 26, 2025. Source: Cirium schedules for January 2025 plus seasonal and announced. Summary of AA Service Changes at AUS Served Pre- and Post- COVID (8) Added and Maintained Post-COVID (4) Added and Dropped Post-COVID (38) Special Events (8) Source: Cirium schedules as of January 2025 plus seasonal and announced. 15 Summary of Southwest Service Changes at AUS Served Pre- and Post- COVID (32) Added and Maintained Post-COVID (18) Added and Dropped Post-COVID (3) Special Events (3) Announced (3) Source: Cirium schedules as of January 2025 plus seasonal and announced. 16 Summary of Allegiant Service Changes at AUS Served Pre- and Post- COVID (5) Added and Maintained Post-COVID (7) Added and Dropped Post-COVID (13) Dropped Post-COVID (3) 17 Source: Cirium schedules as of January 2025 plus seasonal and announced. Summary of Delta Service Changes at AUS Served Pre- and Post- COVID (10) Added and Maintained Post-COVID (7) New in 2025 (6) Special Events (7) 18 Source: Cirium schedules as of January 2025 plus seasonal and announced. Summary of Service Changes at AUS (Non-AA, Outside 48 Contiguous States) Served Pre- and Post- COVID (7) Added Post-COVID (7) Added and Dropped Post-COVID (1) Dropped Post-COVID (1) Notes: Excludes AA. HNL ends March 26, 2025. Source: Cirium schedules as of January 2025. 19 AUS Air Service Development Goals & Objectives—focus international • Maintain and support all incumbent near international service, especially new service, and work with carriers to add days of the week and/or lengthen operating seasons • Pursue new near intl. service to leisure, VFR and business focused markets from all carrier types • Maintain and support all incumbent long haul international service and work with carriers to add days of the week and/or lengthen operating seasons • Pursue new long haul intl. service, especially new geographies: Asia, Middle East and South America • Continue to work with economic development, educational, political and tourism stakeholders to maximize air service utility for the Austin community • Maintain and support all incumbent domestic air service, especially new service • Work with incumbent and new carriers to replace recently discontinued service (where it makes sense) • Pursue new nonstop domestic markets with incumbent and new carriers (both top unserved O&D markets and other strategic markets) • Work with all carrier types (network, hybrid, LCC, ULCC) to maximize choice for AUS passengers 20 AUS Air Service Update January 8, 2025