We at Boeing have been slicing and dicing quite a bit of data over the past few months to better understand the drivers behind the current upcycle and how those drivers are changing.

We believe that three new fundamental forces are shaping this and future cycles:
    •  Geographical diversification of demand
    •  Airline business model diversification
    •  Airplane replacement requirements across the global fleet

As financiers, we are always interested in managing and mitigating risk. Concentration increases risk. Diversification mitigates it. Now, for the first time in the aviation market, we have truly global distribution of aircraft demand and a much greater diversity of customer airline business models.

These developments should make global airplane demand more resilient to local shocks and disruptions, creating new opportunities to deploy or redeploy airplanes during periods of regional economic volatility.

In addition, the large size of today’s installed fleet portends a looming requirement for replacement airplanes. With more than 17,000 airplanes in service around the globe, a significant number of airplanes are due to reach their economic retirement age over the next two decades. In fact, replacement requirements will drive one-third of aircraft demand over the next 20 years.

Continued high fuel prices and stringent environmental regulations will increase the pressure to replace older, less efficient aircraft. Today’s load factors and airplane utilization are at all-time highs, so airlines cannot rely on increased productivity to meet growth and replacement requirements.

Growing diversification of demand is creating new ways to manage risk. The unavoidable requirement to replace aging and less efficient airplanes will sustain demand though normal business cycles. We believe that these factors will produce a more resilient and stable airplane market in the coming decades.