There’s no doubt 2011 was a more challenging market than our customers anticipated. So what’s in store as we get deeper into 2012?
For airlines, the name of the game is profitability—and it’s good to see that IATA is forecasting modest profitability for the year. This is really a testament to our customers who’ve managed their capacity and costs despite high fuel costs and a sluggish economy. While it will be a challenging year, I’m still expecting to see passenger traffic grow by 5 percent. The cargo market should start to rebound in the second half of the year, although growth will be below the long-term average.
With our strong backlog and a market that keeps growing, every indicator shows that we’re on the right track as we increase our rates to keep up with the true demand in the market. That demand is coming from emerging and developing economies, growth from low-cost carriers, and the need to replace older aircraft with more fuel-efficient airplanes. In fact, we see more replacement than growth in both North America and Europe over the next 20 years. The chart below shows some of the key drivers of market growth.
Next week, we’ll unveil our delivery guidance for 2012 as we release our earnings report. As we start up the new year, it should be very exciting— especially with the 737 MAX as we take the more than 1,000 orders and commitments for the airplane and bring them to the bank.