Back to the future

LONDON – I just wrapped up a meeting with a group of journalists here in the U.K., as well as conducting an international media teleconference. It’s part of activity around the release of the new Boeing commercial airplanes market outlook. Tomorrow I’ll be briefing reporters in Paris just ahead of the big show at Le Bourget next week.

The Current Market Outlook (CMO) for 2007 will look familiar to those of you who’ve been following our commercial airplanes forecast over the past several years. It’s “back to the future,” so to speak. But there are a few interesting new things to talk about this year.

One of the big points of this forecast is that the market continues to grow and liberalize. Over the next 20 years, we see a further diversification of airplane demand, both by region and by airline business model.

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In 2026, single-aisles will have the largest market share by number of units.

By 2026 the world airplane fleet will be significantly rejuvenated, because of new airplanes entering the marketplace. And it’s important to point out that freighters will continue to play a big role in the market.

Think about this piece of data: 80% of the airplanes that will be flying in the year 2026 will be airplanes that are not currently flying today. It’s going to be a new airplane fleet - allowing airlines to grow responsibly with the world. Improved efficiencies and the commitment to environmental performance in airplane design means that the future fleet will have the minimum possible impact on the environment, while at the same time allowing people to benefit from the essential connections that only air travel can deliver.

Over the forecast period, many more markets will receive a strong boost as governments ease regulations, and the Open Skies agreements between the European Union and the United States and Canada go into effect.

There is also strong anticipation of Chinese domestic market liberalization. And markets in North Africa and additional cities in Asia are opening up.

Developing regions are becoming more influential. That’s why the Current Market Outlook includes our analysis of CIS (Commonwealth of Independent States) markets - including Russia - for the first time.

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In 2026, the world fleet will have more than 36,400 aircraft in a wide mix of regions and operating segments

Looking at the data by region, over the next 20 years, the center of gravity of the world airline fleet will move substantially towards the Asia-Pacific region. We think this will lead to more balanced airplane demand worldwide.

Other key points in our forecast:

  • Innovations will bring more comfort and a better cabin environment for passengers.
  • Rapidly expanding low-cost airlines will bring affordable air travel within reach of many more people worldwide, accounting for more than a third of the market for new airplanes.
  • Just over half the new deliveries will go to traditional carriers - that will provide a strong focus on service innovation and network development.
  • Freighter demand will be robust, due to the need for fuel efficiency, higher reliability and utilization, and long-range capabilities.

It’s clear from going though the CMO process and seeing the amazing work our forecast team has put together, that we continue to have the right products to meet the needs of airlines today and into the future. We also continue to build our services business to help airlines with training and infrastructure. We help them address these issues and provide services to better focus on their customers – the passengers.

By the way, being new to this assignment, I had to ask the question, “How well have we done with the forecast in the past?” What I found out is that if we look back to the late 1980s and early 1990s, we’ve done a pretty good job at estimating air travel growth and air traffic.

Turns out, though, we had underestimated the demand for single-aisles, due to the low-cost carrier phenomenon and the power of liberalization. We also slightly underestimated the need for twin-aisles, and we significantly overestimated the need for big widebodies.

Overall we tend to be conservative in our forecasts – which I think is a good thing.

Anyway, I’m “outatime.” But we’ll talk again from Paris.

Comments (5)

G (France):

You had underestimated the demand for single-aisles. You also slightly underestimated the need for twin-aisles, and you significantly overestimated the need for big widebodies.

In other words, you think that the average airplane size will decrease.

Saj (London, UK):

Underestimating is far better than being overly ambitious.

After pouring billions into the A380, it will serve only a niche market with almost no opportunity to grow the way the 747 did.

The onslaught of point-to-point flights, more airports and smaller longer range airplanes like the 767, 777 and 787 renders the Boeing market fragmentation theory correct- its taken Airbus 35 years to realise it with its (late) A350- which incidentally will bring virtually no value to airlines, despite being almost a half decade late to the market.

Its traditional heavy metal fuselage will be no match for the composite, weight saving 787's, and whatever fuel efficiency the A350 has from engines will be burned up by its inferior and heavier fuselage.

Rob Diehl (Langley, WA):

The real story here is the market potential for a 737/A320 replacement. The first to come up with a viable replacement that provides significant improvements in efficiency will dominate this market, the way the 787 is dominating the twin isle market.
If the new Easy Jet concept is viable (http://www.flightglobal.com/articles/2007/06/14/214641/easyjet-reveals-eco-friendly-aircraft-concept.html), Boeing should be all over it. Brand-A is in no position to start a project like this right now, what with dealing with the A-380 fiasco and just starting in the development of the A-350.

PH (San Francisco, US):

Randy is noting that past Boeing-issued CMO estimates have ovestated the average size of the airplanes as weighted by actual demand. And yet even with those overestimates, Boeing still made the decision to go forward with a more efficient long-range widebody 787 rather than develop a truly enormous new plane such as the Airbus A380. I'd say that was a good commercial decision....

Patrick (Phoenix, AZ):

Thank you for continuing to post very informative blogs. On a recent post (June 13th) on your blog (you discussed that there will be a future need of 28,600 new airplanes by 2026.

One interesting figure you posted was the prediction that up to 13% of the current outlook for new aircraft was regional aircraft. I know some aircraft (ex. wide body) are more profitable than others (ex. narrow body), and therefore regional aircraft do not translate into 13% of the predicted 2.8 trillion dollars in orders or roughly $364,000,000,000.

However, it seems like a large market chunk. If Boeing isn’t in it, than your competitors may be. That only strengthens the competition. I am perplexed as to why Boeing doesn’t have an entry into this market. I know there are many companies competing for such market share, such as Embrear’s E-jets, Bombardier’s CRJ series, Sukhoi’s future SuperJet, as well as China’s future ARJ-21, loosely based on the old DC-9/MD-80 series, to name a few.

Perhaps the market isn’t as profitable, partly because of low profit margins/aircraft and many competitors, partly because resources may be better used elsewhere. Boeing is a great company, and I’m sure its leadership knows what it is doing.

I am just confused as to why Boeing isn’t in the 70-100 seat market. If I am not mistaken, the B737-600 is the smallest Boeing, seating around 110 passengers.

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