|
Growing Demand and Fleet Renewal Generate $2.8 Trillion
An understanding of the drivers behind these overall market figures is essential, not only to guide strategic business decisions at Boeing, but to help our airline customers plan their fleets, and to help aircraft financiers and investors evaluate and manage economic risk. Boeing spends a great deal of time analyzing geopolitical and economic volatility and its impact on our business. Yet, looking back over the past 20 years, we see that air traffic grew at an average annual rate of 4.8%, increasing by a factor of 2.5 – despite several recessions, the 1991 gulf war, the Asian currency crisis, the downturn after the September 11 attacks, and the SARS epidemic. Though we are unable to predict all the challenges that will crop up during the next 20 years, we can project with some confidence that, on average, air traffic will grow at an annual rate of 5.0%, driven by 3.1% growth of the global economy. At this rate, the number of revenue passenger kilometers flown will nearly triple by 2026.
Several developments will help financiers manage economic risk during the next 20 years. First, the airplane market is becoming more diverse geographically. Consistent with this development, this year’s forecast includes the fleet of the Commonwealth of Independent States for the first time. Inclusion of the CIS fleet contributes to the increased projection for passenger fleet, freighter fleet, and total fleet numbers for this year, compared to last year’s report. Fueling the diversification of the market is the Asia-Pacific region, which will become a third major presence, alongside traditional market giants North America and Europe. Together, the three regions will account for more than 80% of airplane delivery value over the next 20 years, with about a third going to Asia-Pacific and a quarter each to North America and Europe, including the CIS. The important Middle East market, and rapidly growing Latin America and Africa markets, though small compared to the top three markets, will account for 15% of the delivery dollars through 2026. This diversity of demand presents more opportunities for airplane owners to place airplane assets in the event of a regional downturn. Second, global liberalization is driving the evolution of airline business models. A wider diversity of business strategies will allow the industry as a whole to withstand a downturn that affects primarily one airline type. Third, a very large and rapidly growing global fleet will require a continuous replacement of older airplanes. Roughly 35% of the demand for new airplanes will come from replacement of older airplanes. Replacing older airplanes with new, fuel-efficient airplanes, such as the 787, will help airlines and the industry meet future environmental standards and regulations. Several market forces will remain stable. The majority of low-cost carriers will continue to rely primarily on single-aisle airplanes. Low-cost carriers in short-haul markets will generate 37% of the world’s demand for new airplanes. Global and broad network carriers will generate 54% of the demand for new airplanes. Network carriers will continue to rely on mid-size twin-aisle airplanes for long-haul service, both to increase frequency and expand nonstop service to new markets. Particularly within Asia, mid-size twin-aisle airplanes will augment service on high-density routes currently served by larger airplanes. Together, single-aisle and twin-aisle airplanes in the 100- to 400-seat categories will account for almost all of the growth over the next 20 years. Boeing product strategy emphasizes this rapidly growing sector, while continuing to recognize the important replacement market for airplanes above 400 seats. Air cargo carriers will continue to operate about 11% of the world airplane fleet, as the freighter fleet doubles in size from 1,980 freighters to 3,980 freighters during the next 20 years. About three quarters of the freighters joining the fleet will be converted from passenger and combi airplanes. The 870 projected new production freighters delivered during the period will be valued at nearly $200 billion. About 61% of the air cargo fleet additions will be widebody airplanes. Many operators, particularly express carriers, tend to replace retiring standard-body freighters with widebody airplanes, which will contribute to an increase in widebody share, from 58% today to 64% in 2026. Air traffic growth rates will vary from region to region, with the rapidly expanding economies of the Asia-Pacific region leading the established economies of North America and Europe. Airlines purchase airplanes in response to specific market demands. In Europe, where air traffic growth will average 4.6% per year, a proliferation of long-haul frequencies to Asia and across the Atlantic will drive twin-aisle airplanes to rise from a 15% share to a 20% share of the European fleet. Continued rise of low-cost carriers, flying short distances within Europe, will give single-aisle airplanes the largest share of new airplane orders. In the Asia-Pacific region, where the air traffic growth rate exceeds the world average, the largest and fastest growing segment of the market comprises the routes within the region. This includes the domestic China market, which is projected to exceed the world average to grow at an annual rate of almost 9%.
A strong and growing global economy will drive vibrant growth in the aviation industry over the next 20 years. Liberalization of markets and the establishment of new international financing structures will enhance the liquidity of airplane assets and provide new ways to manage economic risk effectively. Boeing Capital Corporation is actively engaged with industry organizations working to enhance the commercial airplane financing environment. We’re dedicated to bringing airplane investors and financiers together with airline customers to facilitate all types of airplane transactions, including sales, leases, title transfers, and airplane upgrades and conversions. |
||||||
