What Forecasted Market Shifts Mean for Financiers  

This year’s Current Market Outlook (CMO) comes amid significant industry turmoil, fueled by record-high energy prices and global economic deterioration. But we have learned during our 40 years of market forecasting that aviation is extremely resilient. As aircraft financiers, we recognize that it is the long-term perspective that must drive our investment decisions.

Walt Skowronski President Boeing Capital Corporation

Our latest forecast projects that a 3.2% global economic growth rate will translate into increased demand for airline passenger and cargo services of 5.0% and 5.8% respectively. Meeting this demand will require 29,400 aircraft with a value of $3.2 trillion, for a slightly smaller global fleet forecast than last year. Along with these strong growth numbers, this year’s forecast identifies two dynamics that have significant implications to aircraft financiers and investors.

First, replacement aircraft will be a larger share of future deliveries–43% as opposed to roughly a third today. Higher energy prices will drive carriers to update their fleets to the most fuel-efficient models and operators who deferred fleet replacement when fuel prices were low will take aggressive action to keep up.

Second, demand is shifting from regional jets to larger single-aisle jets. Higher fuel prices and elimination of scope clauses are making RJs economically unviable in competition with airplanes like Boeing’s Next Generation 737 family.

Boeing’s product strategy is well-positioned to meet the challenges and opportunities reflected in the CMO. The Next Generation 737 family is ideally suited to fill the needs of regional operators looking for greater efficiency. The 787 and 777 continue to shape the expanding opportunities for point-to-point travel. And the 747-8 is engineered to deliver new levels of efficiency to selected high-capacity city pairs.

Boeing has a substantial stake in the accuracy of the CMO, as it drives many of our key business decisions. Key trends identified in the CMO also affect the valuations of portfolio aircraft, impacting aircraft investors and financiers. We remain committed to sharing our analysis and perspectives with you through activities such as our annual financiers’ events, regional roundtables, speaking appearances, and this newsletter. We see ample evidence of our industry’s potential for long-term growth as well as enduring opportunities for investors.