Rapid developments in technology are transforming the outlook for the transport sector and will provide the best investment opportunities for the sector, according to the eighth The way ahead Transport survey from global law firm Norton Rose Fulbright.
Sentiment is overwhelmingly positive in the aviation industry, with 90 percent of respondents reporting that current market conditions are favourable for their industry.
Some 57 percent of respondents from the aviation industry have called for additional capacity in emerging markets rather than closer integration with other forms of transport.
A fifth of a total of 196 respondents view new technology as the optimal investment opportunity for their industry, ahead of investment in infrastructure improvements. Big data and predictive analytics are expected to be the most significant drivers of change in the transportation sector over the next five years according to 43 percent of respondents. However, as the sector increasingly looks to digitalisation 82 percent of respondents anticipate an increase in cyber-attacks over the next five years.
Harry Theochari, global head of transport, Norton Rose Fulbright, comments: “Technology investment is on the rise and that seems likely to continue. Big data and predictive analytics give operators the ability to anticipate repairs and maintenance and to better understand and forecast consumer behaviour giving those operators a significant competitive advantage at a time of increasingly fierce competition across the sector.”
The impact of global political uncertainty (29%) and a global recession (22%), are seen as the greatest threats to the sector over the next five years.
Just 22 percent of respondents from the aviation and shipping industry believe finance will be increasingly available over the next five years. The aviation share may be offset by the shipping responses here since aviation finance remains liquid.
Respondents appear divided when asked what they view as the optimal investment opportunity for the sector. While 25 percent point to the development of new markets, both geographical and sectoral, 17 percent point to the purchase or leasing of aircraft, favouring new rather than used aircraft, and narrow-body rather than wide-body or regional aircraft. A further 17 percent highlight infrastructure improvements.
Some 57 percent of respondents believe that increased airport capacity in emerging markets and at existing airports is the infrastructure investment that would benefit their industry the most over the next five years. Twenty-eight percent prefer to focus investment on air traffic control.
China offers the best investment opportunities over the next two to five years, according to 24 percent. India and the US are also popular markets for aviation investment, according to 16 percent and 11 percent respectively, with India overtaking the US in the past year. Regionally, Asia is the most popular investment market, favoured by 55 percent.
Despite the limited interest in investment in new technology generally, big data and predictive analytics finds enthusiastic supporters amongst respondents from the aviation industry
The ability to anticipate passengers’ behaviour, as well as maintenance issues and repairs, will be the biggest driver of change in the aviation industry over the next five years according to 47 percent, and is likely to give the operators who adopt this technology a clear competitive advantage.
When asked which regulation has had the greatest impact on the aviation industry over the past decade, 30 percent pointed to an uncoordinated approach to aviation regulation globally, while 15 percent cite the regulation of competition and barriers to entry, and 13 percent mentioned fragmented and bilateral air service agreements.
Negotiating coordinated air service agreements comes top of the aviation industry’s wish list for government support. 25 percent believe that Open Skies agreements would be the most helpful form of government support for the aviation industry, followed by 18 percent who would like to see the removal of barriers to foreign investment – both key concerns for airlines with operations in Europe following the UK’s vote to leave the European Union. 16 percent would like passenger and fuel taxes to be lowered.
Some 29 percent of respondents anticipate that capital markets will be a key source of funding over the next two years, followed by 25 percent who point to operating leases (which free up airline capital), and 24 percent who point to bank debt. Respondents are broadly satisfied that finance will remain available to the aviation industry – 65 percent believe that access to funding will remain at the same level over the next five years, while 22 percent believe that funding will become increasingly available.