Air travel market recovering
Passenger
air traffic rose 8 percent in 2010, after declining about 2 percent in 2009.
The persistent resilience of air travel is expected to sustain 6 percent growth
in 2011 and keep the growth rate at or above the historical trend through the
middle of the decade.
Although
volatile fuel costs, political upheaval in the Middle East and North Africa,
and unresolved government debt in many industrialized economies create risk of
a renewed downturn, commercial aviation has weathered such shocks to the system
in the past. Recovery has followed each event as the industry reliably returned
to its long-term growth rate of approximately 5 percent per year. We see that
same resilience come into play as airlines have skillfully managed capacity to
maintain profitability in face of the variety of challenges that have beset the
industry as the world economy emerges from the global recession.
Purpose of the forecast
The
Current Market Outlook is our
long-term forecast of air traffic volumes and airplane demand. Each year's
forecast starts from a blank computer screen, so we can factor the current
business conditions and developments into our analysis of the long-term drivers
of air travel.
The
forecast details demand for passenger and freighter airplanes, both for fleet growth
and for replacement of airplanes that retire during the forecast period.
We
have shared the forecast with the public since 1964 to help airlines,
suppliers, and the financial community make informed decisions.
The shape of the market
The
long-range forecast for 2011 anticipates delivery of 33,500 new airplanes over
the next 20 years, valued at more than $4.0 trillion. Looking back at our
forecasts over the past 10 years reveals that our projections for long-term
market growth tend to be conservative, compared to actual industry performance.
We
have been admirably accurate, however, on the crucial forecast of the market
share that each airplane size category will capture. Single-aisle airplanes
account for the majority of deliveries over the next 20 years-70 percent of the
airplanes and 48 percent of the value. Rapidly expanding air service within
China and other emerging economies and the spread of low-cost carrier (LCC)
business models throughout the world drive this market segment. The twin-aisle market,
which includes efficient long-range airplanes such as the Boeing 787 and 777,
is the fastest growing segment of the market, accounting for 22 percent of the
delivery units and 43 percent of the delivery dollars. High fuel costs are
compelling airlines to accelerate replacement of older airplanes. In addition,
the increased capabilities of the latest long-range, twin-aisle airplanes
create opportunities for operators to take advantage of the ongoing
liberalization of air transport markets to open new nonstop routes.
MARKET DEVELOPPEMENTS
Near-term environment
Recent data suggests that
the global economy continues to recover, though as expected, the pace of growth
has moderated compared to the strong rebound in late 2010. Emerging economies,
led by China, outpace the average world GDP growth, while the established
economies of the United States, Europe, and Japan are expanding at a more
modest rate. High oil prices and price volatility resulting from the political
unrest in the Middle East pose the primary threats to continued recovery.
Passenger
traffic rebound
Mirroring the economic
recovery, passenger traffic will be buoyed by growing demand in emerging
markets and bolstered by low-cost carriers. These drivers will help keep
worldwide demand for air transport at or above the historical 5 percent growth
trend, as the effects of recent shocks subside in the second half of 2011.
Air cargo
recovery
Air cargo traffic surged to
recover prior peak volumes more quickly than expected in 2010. Growth in air
cargo will retreat toward the long-term trend in 2011 as moderating economic
growth, rising fuel prices, and supply chain disruptions from the Japan
earthquake work affect the industry.
Airline
profitability revives
Airlines are managing
capacity to maintain yields and profitability in the face of challenging
external events, including the political upheaval in the Middle East, the
earthquake in Japan, and the continued volatility of fuel cost. Although global
airline profitability is expected to decline from last year's record levels, it
will remain positive-despite the more than 30 percent jump in fuel prices
compared to last year. Currently, airlines are projected to earn US$4 billion
in net profits in 2011, compared to US$18 billion earned in 2010. Airlines in
Asia are forecast to be the most profitable, driven by growing demand within
the region. North American airlines will follow closely, boosted by capacity
discipline in the US domestic market.
FORECAST SUMMARY
New business models, emerging economies support airplane
demand
Worldwide economic activity
is the most powerful driver of growth in commercial air transport and the
resulting demand for airplanes. The global gross domestic product (GDP) is
projected to grow at an average of 3.3 percent per year for the next 20 years.
Reflecting this economic growth, worldwide passenger traffic will average 5.1
percent growth and cargo traffic will average 5.6 percent growth over the
forecast period.
To meet this increased
demand for air transportation, the number of airplanes in the worldwide fleet
will grow at an annual rate of 3.6 percent, nearly doubling from around 19,400
airplanes today to more than 39,500 airplanes in 2030. Airplane deliveries, for
fleet growth and replacement of aging airplanes, will total 33,500 over the
next 20 years, with a value of US$4.0 trillion.
Low-cost
carriers expanding across all regions
Commercial aviation
continues to change in response to market opportunities and challenges. New
airline business models and the dynamic growth of air travel in emerging
economies throughout the world are diversifying the demand for airplanes. As
global air travel declined in 2009, there were still many markets and business
models that experienced growth. Over the next 20 years, 78 percent of demand for
new airplanes will come from outside North America, with about 34 percent of
deliveries going to the Asia Pacific region. The low-cost carrier (LCC) model
continues to expand across all regions, with LCC fleets expected to grow at an
annual rate of 5.7 percent.
The Boeing forecast
continues to predict that the greatest demand for new aircraft, by country,
will come from the United States, followed by China. Remarkably, the United
Arab Emirates, with a population of less than 9 million people, yet home to several
highly competitive airlines, will be the third largest market by value.
METHODOLOGY
Practical value
Boeing uses the long-term
forecast contained in the Current Market
Outlook to guide product strategy and to develop long-term business
planning. We have shared this information with the public since 1964 to help airlines,
suppliers, and financiers make informed business decisions.
Cyclicality
in air travel demand
Global and regional
economic cycles profoundly affect air travel demand, so it is essential to take
the current phase of the economic cycle into account in developing the
long-term forecast. When consumer confidence and business confidence fall, as
they did during the recession that began in 2008, air travel demand follows
suit. But historically, air travel has proved resilient. Perturbations from the
long-term trend are typically relatively short lived, lasting about a year. As
confidence rises, air travel often surges, surpassing historical average growth
rates to return to the long-term trend. Adjusting for the cycle is part of the
forecast process.
The air
travel demand forecast process
The air travel demand
forecast is developed by constructing and matching both a top-down and a
bottom-up approach. Traffic between individual countries is forecast based on
economic predictions, growth momentum, historical trends, and projections of
the relative openness of bilateral air services and domestic regulation.
Government statistics on inbound and outbound tourism receipts help to identify
and cross-check trends. We also factor in the potential positive or negative
effects of specific developments peculiar to each region, such as population
dynamics, shifts toward or away from other modes of transport, including
high-speed rail, and emergence of new direct air services between countries.
The individual countries
are grouped into 11 geographical regions that generate 63 air traffic flows
between and within the regions. Next we reconcile the "bottom-up"
projection, which is constructed from country-level economic, demographic, air
transport, and travel data, with the "top-down" projection, which is
obtained by dividing top-level global data into the same regional flows,
allowing for shifts in shares between regions. The regional traffic forecasts
are then used to help develop the airplane demand forecast.
Drivers
of air travel
Growth in air travel,
measured in revenue passenger-kilometers (RPK), has historically outpaced
economic growth, represented by GDP, by approximately 1.5 to 2.0 percent. This
leads us to conclude that about 60 to 80 percent of air travel growth can be
attributed to economic growth, which in turn is driven, in part, by
international trade. This is consistent with the observation that countries
whose economies are tied to trade tend to have higher rates of air travel. Air
travel revenues consistently total about 1 percent of GDP in countries around
the world, regardless of the size of the national economy. Globally, air travel
has historically trended toward this consistent share of GDP, such that
countries that are below or above this level will generally move toward it over
the long term.
The remaining 20 to 40
percent of air travel growth results from the stimulation provided by the value
travelers place on the speed and convenience that only air travel can offer.
For example, travelers value choice of arrival and departure times, routings,
nonstop flights, choice of carriers, service class, and fares. Liberalization
is the primary driver enabling value creation in the global air transport
network. Liberalization typically gives rise to a "bump" in traffic
demand. Studies suggest that as the relative openness of a country's bilateral
air service rises from the 20th percentile to the 70th, the resulting increase
in traffic can boost air travel demand by an additional 30 percent.
Often, economic growth,
induced directly and indirectly by improved air services, creates a virtuous
circle that leads to further air transport growth, which in turn leads to added
economic growth, and so on.
The percentage of air
transport growth that comes from economic development compared to the
percentage that comes from the value of air travel services is an indicator of
the maturity of an air travel market. Although individual regions may exhibit
signs of slowing due to maturing markets, other regions continue to grow
vigorously. Current global percentages do not indicate that the market is
nearing maturity in aggregate.
FLEET DEVELOPMENT
Fleet size will double
Boeing forecasts that the
fleet will grow from about 19,400 planes in 2010 to more than 39,500 by 2030.
The need to replace older, less efficient airplanes will account for 40 percent
of the projected market for new airplanes. The 2011 forecast anticipates 13,360
airplanes will be replaced over the next 20 years. This reflects rising fuel
prices and the increasing economic burden of using older, less capable, and
less efficient airplanes. At this replacement rate, 85 percent of the fleet
operating in 2030 will have been delivered after 2011.
Surging
demand for single-aisle aircraft
Today, there are 12,100
single-aisle airplanes in operation around the world, representing 62 percent
of the total jet fleet. The single-aisle fleet is forecast to more than double,
reaching 27,750 airplanes or 70 percent of the total fleet by 2030, largely
reflecting the rapid expansion of air services in Asia, the rise of
intraregional air travel in emerging economies, and the growth and geographic
expansion of the low-cost-carrier model.
The fastest growing market
will be for twin-aisle airplanes. This segment is expected to grow at an
average annual rate of 4.4 percent. The twin-aisle fleet will grow from 3,640
airplanes in operation today to 8,570 airplanes in 2030. In 20 years, much of
the in-service fleet will be newer aircraft, such as the Boeing 787 and 777,
which offer more passenger comfort, improved efficiency, and better
environmental performance than the airplanes they replace.
There is expected to be
modest growth in the large aircraft fleet over the long term. The number of
large airplanes in the fleet will grow from about 770 today to 1,140 in 2030.
Nearly all the gain in large aircraft is coming from the freighter market. The
number of large passenger airplanes in operation today is around 450. The large
airplane passenger fleet will remain at approximately that level over the long
term.
Modest
upgauging
The average seat count of
airplanes in the fleet will verge upward incrementally as fuel and operating
cost pressures encourage airlines to go to larger seat counts within all
airplane size categories. In particular, due to better economics, small
regional jets will be replaced with larger regional jets and small single-aisle
airplanes on short-haul routes. Introduction of the 787 and, eventually, the
A350 will spur airlines to trade up as airplanes in the 767 and A330 size
category begin to reach retirement age. Within the large airplane segment,
airlines will look to upgauge from the 747-400 to the 747-8 or A380.
NEW AIRPLANES
Strong demand for single-aisle airplanes
The short- to medium-haul
market has been the fastest growing segment of the commercial aviation industry
over the past decade, creating a strong demand for single-aisle airplanes. In
2010, 830 new single-aisle airplanes were delivered-the second-largest quantity
in a single year. The expansion of low-cost carriers, growth in intra-China
flights, and a substantial need for replacement aircraft will keep the demand
for single-aisle airplanes strong into the future.
Among the 33,500 airplanes
to be delivered over the next 20 years, 23,370 will be single-aisle airplanes.
(This is 70 percent of the total number of aircraft, and 48 percent by value.)
In addition to growth in this sector of the industry, the demand for new
single-aisle airplanes is due to a need to replace older aircraft, such as 737
Classics, early A320s, and MD-80s/90s. It is expected that there will be a wave
of single-aisle retirements starting around 2016 as a number of airplanes become
25 years old-a typical retirement age for jet aircraft.
New airplanes
drive twin-aisle demand
The imminent introduction
of the Boeing 787 Dreamliner, and later of the Airbus A350, is driving the
resurgent demand for twin-aisle airplanes, as these new airplanes offer
significant efficiency improvements over the aircraft they are replacing. Over
the next 20 years, 7,330 new twin-aisle deliveries are expected. This
represents 22 percent of total deliveries, or 43 percent of total market value.
About 40 percent of the demand for twin aisles will come from the Asia Pacific
region. Increasing liberalization and the region's vast geography will promote
the opening of new air routes between a growing number of origins and
destinations.
Asia leads
demand for large airplanes
Approximately 43 percent of
large airplane deliveries over the next 20 years are expected to go to Asia,
with China and Southeast Asia accounting for most of the delivery demand. The
Middle East, with its already substantial backlog of aircraft in this category,
accounts for another 22 percent of the large airplane market. The 820 new large
airplanes (such as the 747-8 Intercontinental and the A380) forecast to be
delivered worldwide represent only 2 percent of total airplane deliveries. Yet
with a value of US$270 billion, large airplanes account for 7 percent of the
total market value. Nearly half of those airplanes are already on order. A
substantial portion of large airplane demand is for freighters, due to their
efficiency in serving this market.
FREIGHTER MARKET
Resilient demand for air cargo
Air cargo traffic (based on
revenue tonne-kilometers) is expected to grow at an average annual rate of 5.6
percent over the next 20 years. Growing world trade, increasing demand for
transport of perishable and time-sensitive commodities, and the need to replace
aging airplanes will create a requirement for 2,960 freighter deliveries over
the next 20 years. About 1,990 of these will be conversions from passenger
service, and 970 airplanes with a value of US$250 billion will be delivered
new. The air cargo fleet will grow at an annual rate of 3.5 percent, nearly
doubling from 1,760 airplanes in 2010 to 3,500 in 2030.
Standard-body
freighter market favors conversions
The largest segment of this
market by number of airplanes is standard-body freighters, with a total
requirement for 1,240 airplanes. Airplanes converted from passenger to cargo
have low capital costs that make them attractive for standard-body freight
operations.
Express
carriers driving medium widebody market
Of the 720 medium widebody
freighters to be delivered during the forecast period, 280 will be new,
purpose-built freighters. This freighter segment is largely driven by express
carriers with time-sensitive cargo. The larger capacity of medium widebody
versus standard-body freighters provides operating cost advantages in this
market. Though large freighters hold a greater economic advantage in range and
tonne-kilometers, the lower trip costs of medium widebody freighters offer
greater flexibility in the scheduling and frequency of shipments.
Intercontinental
market favors new large freighters
In the large freighter
segment, more than half of the demand will be for new airplanes. The purchase
price of converted large freighters is very attractive, and conversions will
continue to play an important supporting role. However, the performance and
reliability advantages of new, purpose-built freighters are significant for
intercontinental cargo operations, where larger, heavier payloads and range are
crucial. Of the 1,000 large freighter deliveries, 690 will be new airplanes.
PILOT AND TECHNICIAN OUTLOOK
Pilot and technician training requirement
As the world commercial
fleet expands to more than 39,500 airplanes over the next 20 years, the world's
airlines will need to add 460,000 pilots and 650,000 maintenance technicians,
both to fly and maintain the new airplanes and to replace current personnel who
are due to retire during the period.
Airplane manufacturers and
the aviation industry must keep pace with technology-including online and
mobile computing-in order to match the learning styles of tech-savvy pilots and
technicians. The growing diversity of pilots and maintenance technicians in
training will require instructors to have cross-cultural and cross-generational
skills in addition to digital training tools and up-to-date knowledge of the
airplanes. Training programs will need to be tailored to enable airplane
operators to gain the optimum advantage of the innovative features offered on
the latest generation of airplanes, such as the 787 Dreamliner.
Pilot outlook
The signs of a global pilot
shortage are mounting as airlines expand their fleets and flight schedules to
meet surging demand in emerging markets. Asian airlines in particular are
experiencing delays and operational interruptions due to pilot scheduling
constraints. The forecast doubling of the worldwide commercial fleet emphasizes
the increasing need for well-trained aviation personnel.
The largest projected
growth in pilot demand continues to come from the Asia Pacific region, with a
requirement for 183,200 pilots over the next 20 years. China's expected
requirement for 72,700 pilots is the region's largest. Europe will need 92,500
pilots, North America 82,800, Latin America 41,200, the Middle East 36,600,
Africa 14,300, and the CIS 9,900.
Technician
outlook
The demand for trained
maintenance personnel will grow in proportion to the expanding global fleet.
Many emerging markets currently recruit trained personnel from outside the
region to fulfill their growing need for maintenance mechanics, technicians,
and managers. There will be a strong need for basic skills training in these
emerging markets to develop a local source of technicians.
The need for maintenance
personnel will grow most rapidly in the Asia Pacific region, which will require
247,400 new personnel. China's requirement will be the region's greatest, with
an expected need for 108,300 maintenance personnel. North America will need to
add 134,800 maintenance personnel, Europe 129,600, the Middle East 53,000,
Latin America 52,500, Africa 19,200, and the CIS 13,500.
WORLD REGIONS
Regional distinctions
Differences in the air
transport markets of the various regions and the continuous evolution of
airline business models cause airplane demand to vary from one region to
another. As new airlines emerge, more mature airlines seek ways to preserve and
increase their share of the passenger market. Market growth strategies include
increasing frequency of service, expanding the number of city pairs served,
offering new products, and introducing products to serve the business
passenger-all while staying true to the airline's brand image. The business
models of mature airlines are also evolving through mergers and acquisitions;
joint ventures with alliance partners; innovative long-haul products, such as
Air New Zealand's Skycouch(tm); introduction of premium economy class products;
and reassessment of short-haul services.
Each region's airplane
demand reflects its unique market characteristics. For example, demand in North
America and Europe concentrates on single-aisle jetliners, driven primarily by
the need to replace aging airplanes. In Asia Pacific and the Middle East, on
the other hand, the passenger market favors business models that rely heavily
on twin-aisle airplanes, so twin-aisle jetliners account for a larger share of
total airplane demand in those regions than in other regions.
Globalized
demand
At a global level, the
number of airplanes in the world fleet grows an average 3.6 percent each year.
At the same time, passenger traffic, measured in revenue passenger-kilometers,
grows 5.1 percent per year. Cargo traffic, measured in revenue
tonne-kilometers, grows 5.6 percent a year. The increasing geographical
diversity of the aviation industry underlies this expansion and significantly
increases the industry's resilience to regional fluctuations. Notably, some
regions were less affected than others by the recent economic crisis and a few
regions even continued to grow through the global downturn.
ASIA PACIFIC
Growing markets
The global economic
downturn did not overwhelm the vigor of this region's economies-most were able
to sustain growth. Recovery on the global scale and the region's intrinsic
economic strength are expected to lead to rapid expansion in the coming years.
The region's economy will significantly outpace the world's average growth
rate, expanding at a rate of 4.7 percent per year for the next 20 years, with
China and India leading the way. The region's share of the world GDP will
expand from 27 percent today to 35 percent by 2030.
Rising
traffic levels
During the next 20 years,
approximately half of the world's air traffic growth will be driven by travel
to, from, or within the Asia Pacific region. Total air traffic for the region
will grow 6.7 percent per year during the period. Fueled by development of the
region's national economies and the increasing accessibility of air transport
services, traffic within the region will grow faster than traffic to and from
the region. Short-haul flying, including domestic and international travel
within the region, will grow 7 percent per year.
Air cargo plays a critical
role in the region's economy, transporting goods over difficult terrain and
vast stretches of ocean. Some of the world's largest and most efficient cargo
operators are located in Asia, competing to transport high-value and
time-sensitive exports to markets outside the region. Air cargo growth will
total 6.3 percent per year during the next 20 years. To service this demand,
carriers within the region are expected to take 360 new freighters, with an
additional 510 conversions.
To modernize their fleets
and meet the growing demand for air transport, Asia Pacific airlines will need
11,450 new airplanes valued at $1.5 trillion over the next 20 years. The number
of airplanes in the Asia Pacific fleet will nearly triple, from 4,410 airplanes
in 2010 to 13,480 airplanes in 2030.
Liberalization
of markets
The structure of the
airline industry in Asia Pacific is changing as regulations are liberalized and
carriers find innovative ways to expand beyond national boundaries to serve
burgeoning demand. The impact of liberalization is particularly dramatic in the
case of low-cost airlines, which are stimulating air travel by lowering fares
and opening new markets. In order to compete, established airlines are forming
low-cost units, further expanding the affordability and availability of air
travel. Where market development has outpaced official liberalization of
markets, new airlines have been launched as international joint ventures,
carrying established travel brands into new markets.
CHINA
China market – A 10-year reflection
China, for more than a
decade, has been forecast by the Boeing Current Market Outlook to be the second
largest market for new airplanes (after the United States). Its progress over
the past decade attests to the region's tremendous potential.
The number of passengers
carried by China's airlines in 2010 was 3.5 times the total in 2000. The
in-service jet fleet more than tripled to 1,750 airplanes by 2010, up from 560
airplanes in 2000. In mainland China, the number of commercial aviation
airports increased from 139 in 2000 to 175 in 2010. Volumes of passengers,
freight, and airplane arrivals and departures at airports in 2010 increased
dramatically (4.2, 3.6, and 3.1 times, respectively) over 2000 levels. The domestic
network of mainland carriers expanded to 1,032 city pairs in 2010 (from 624 in
2000), while their international footprint more than doubled to 258 city pairs
in 2010 (from 108 in 2000).
In 2010, for the first time
ever, China's Big Three and Cathay Pacific were among the world's top 15
carriers, measured in revenue passenger-kilometers; none was on the list in
2000. In addition, Beijing Capital became the second busiest passenger airport.
Hong Kong airport surpassed Memphis to become the top cargo airport by tonnage,
with Shanghai Pudong airport coming in third.
Plans for
full-spectrum expansion
Looking ahead, China has
articulated policies and macro plans to encourage the international expansion
of its airlines and address issues regarding air traffic management and
infrastructure. By 2015, China will add 55 new airports, bringing the total
available for commercial aviation use to at least 230. As the nation's
high-speed rail network begins full operation, the trains will connect
neighboring cities and transport passengers to airports for longer haul air
travel. In addition, China is developing indigenous commercial airplanes.
The second
largest market
In retrospect, China's air
travel has been sustained by strong economic growth, increased trade, rising
personal income, and progress in market liberalization. At the same time, the
rapid increase in air travel, combined with unparalleled connectivity, has
fostered economic and social interaction within China as well as between China
and the rest of the world.
Over the next 20 years,
China's gross domestic product is forecast to grow at an average annual rate of
7.0 percent, with the demand for air travel growing at an annual rate of 7.6
percent. As the world's second largest market, China's airlines by 2030 will
need 5,000 new airplanes valued at $600 billion.
SOUTH ASIA
Strong traffic growth
Travel to, from, and within
South Asia is expected to achieve an average annual growth rate of 8.1 percent
over the next 20 years, significantly outpacing all other regions in this
report. The economic and demographic trends driving the expansion of air travel
are very strong. In 2010, the combined population of South Asian countries
totaled 1.65 billion people. Residents, on average, are relatively young by
world standards. Real gross domestic product (GDP), per capita, has expanded
significantly, growing at an average annual rate of 7.2 percent from 2000 to
2010.
The commercial aviation
industry has been helped by liberalization in key markets, including the
domestic Indian market and travel between India and the Middle East.
Liberalization is allowing airlines to open more routes, add more frequencies,
and experiment with new business models. Reforms have also increased
competition between airlines, thereby lowering prices. As a result, air
services within the region have become more convenient and less expensive. This
has happened at a time when people's ability to travel has increased.
India's
airlines expand
India's airlines suffered a
period of declining traffic from mid-2008 to mid-2009. While this downturn was
largely the result of the global economic downturn, difficulties were
compounded by an ill-timed influx of new capacity, resulting in unsustainable
price competition between airlines. But the industry has weathered these
challenges, and the healthier carriers are once again expanding.
Although service to the
largest cities is generally strong, airlines are considering options for
serving smaller cities with smaller aircraft. As this service develops, air
travel will become accessible to a broader section of the Indian population,
and traffic feeds into the main routes will be stronger.
Indian international air
traffic weathered economic hard times much better than did domestic traffic.
After a brief period of declining international passenger counts in early 2009,
strong growth resumed and it is expected to continue. Particularly robust
traffic gains are expected for routes between India and the Middle East, which
have been given a boost by the entry of low-cost carriers.
Growing
international trade and tourism
Outside of India, South
Asian airlines are preparing to meet a growing demand for service resulting
from increased international trade and the increasing ability of resident
populations to travel abroad. Intraregional tourism is already well
established, including active routes between India, the Maldives, and Sri
Lanka. As household incomes rise, vacation travel both within and outside the
region is expected to grow.
NORTHEAST ASIA
Modest economic growth
Northeast Asia's gross
domestic product is forecast to grow 1.3 percent annually for the next 20
years. This modest growth projection for the region reflects the heavy
influence of Japan, which is experiencing lower birth rates and a declining
working-age population. The region's economy will benefit somewhat from Korea's
developing economy, which will grow at a faster rate as its industrial base
broadens.
In general, Northeast
Asia's nations are relatively small, in terms of total area, and somewhat
isolated by water. The region's air travel grew rapidly in the 1990s, but
growth has dampened over the past decade. This slowdown is due to a variety of
factors, including the Asian financial crisis, concerns about SARS, the
sluggish performance of the economy, and, most recently, disruptions caused by
earthquakes and tsunamis.
Cumulative growth in air
travel capacity has reached only 5 percent over the past 10 years. Capacity
between Northeast Asia and North America has dropped significantly as airlines
have extended direct nonstop service into other markets in the Asia Pacific
region. At the same time, capacity between Northeast Asia and other markets in
the Asia Pacific region has grown by 36 percent since 2000.
Easing
operating restrictions
Northeast Asia's air travel
is forecast to grow 4.3 percent annually over the next 20 years. Operating
restrictions within the region are gradually easing. Restrictions involving the
United States, Europe, China, and other Asia Pacific nations are also
liberalizing, encouraging major network carriers and low-cost airlines to open
new markets and to expand services in existing markets. The combined effect of
liberalization and rapid economic growth is driving passenger traffic between
Northeast Asia and other Asia Pacific countries to grow at a brisk pace.
Airport capacity is increasing, particularly at Tokyo's Haneda and Narita
airports. Improved market access; ongoing airport development; increased
competition; and expansion of low-cost service to, from, and within the region
will nurture the continued growth of air travel.
Fleet modernization
continues
Northeast Asia's airlines
will need 1,250 new airplanes over the next 20 years. Airlines in Japan and
South Korea have wisely continued to modernize their fleets in recent years,
demonstrating their focus on longer term planning. The number of regional jets,
including the anticipated Mitsubishi MRJ, is forecast to grow slightly.
Single-aisle airplanes for intra- and inter-regional service by major carriers
and low-cost airlines will account for 46 percent of new deliveries.
New twin-aisle airplanes,
with compelling market economics and flexibility to serve long-range markets,
will account for 40 percent of new deliveries. The number of large airplanes in
the region's fleet is expected to remain relatively constant. However, their
percentage share of the total fleet will decrease, due to the economic and
operational advantages of midsize twin-aisle airplanes.
SOUTHEAST ASIA
Airlines expand operations
Airlines in Southeast Asia
have emerged from the global economic downturn in a much stronger position.
Low-cost carriers expanded and gained market share, and their attractive fares
and new routes continue to stimulate demand. Legacy carriers restructured both
their operations and their finances to grow and become more competitive.
Regional markets will continue to grow rapidly as the Association of Southeast
Asian Nations (ASEAN) strengthens ties for business and leisure travel, both
within ASEAN and with China and Taiwan. Travelers are also increasingly likely
to include multiple stops on their itineraries as low fares and integration of
regional networks make this more attractive. Southeast Asian airlines have
dramatically increased their orders for new airplanes in an effort to meet
growing demand and open up new, direct, longer range markets. New, efficient
airplanes with improved capabilities and lower operating costs are integral to
the carriers' business strategies.
Liberalization
opens routes
Regulatory changes and
infrastructure improvements are crucial to air travel expansion. Relaxation of
market regulations among ASEAN nations, as well as in the cross-strait market
between Taiwan and China, has removed many traditional barriers to growth. For
example, more than 400 passenger flights per week are now scheduled between
Taiwan and China, where service had previously been strictly limited to charter
flights. Scheduled service will soon increase to more than 700 flights per week.
Flights among ASEAN capital cities have also increased, marking an intermediate
step in the path to a unified regional aviation market. Several carriers, not
waiting for regulatory liberalization, are aggressively expanding into new
markets by acquiring or partnering with other Southeast Asian
carriers-operating their fleets as extensions of their own networks.
Governments and airport authorities in the region are eager to expand their
aviation infrastructures and capitalize on increased trade and tourism.
Twenty-seven projects to upgrade and expand airports have been completed, begun
construction, or are being planned.
Airlines
bolster economic growth
Countries in Southeast Asia
continue to strengthen their economic relationships and encourage collaboration.
Air transportation plays a vital role in the region's above average (4.8
percent annually over 10 years) projected gross domestic product growth. For
example, the development of more affordable air travel options has spurred
growth throughout the region's services sector, including tourism and financial
services. The strength of the region's air cargo operations enables the
efficient shipment of manufactured goods. Overall, Southeast Asia's air
travel-to, from, and within the region-is projected to grow at an average
annual rate of 6.8 percent over the next 20 years. Intraregional traffic alone
is expected to grow at a rate of 7.4 percent per year. More than half of the
deliveries will be single-aisle airplanes, which will be needed to serve routes
within the region.
OCEANIA (AUSTRALASIA)
A thriving market
Although Oceania is a
region with fewer than 40 million people (0.5 percent of the world's
population), it accounts for 3.2 percent of global air traffic. Traffic is
forecasted to continue growing as the region establishes stronger connections
with other Asia Pacific nations and the world. Traffic is expected to grow at
an annual rate of 5.5 percent over the next 20 years. Most of this growth will
come from flights to and from Oceania, rather than from flights within the
region. Flights to Southeast Asia will increase as that region grows as an
intermediate point between Oceania and the rest of the world. In addition,
there will be more connecting flights to North America, the Middle East, and
especially China, as trade and tourism continue to rise. Companies in China are
looking to Australia for raw resources; therefore, traffic between those
nations is expected to grow at a rapid pace.
Airline
strategies continue to change
Over the past decade,
Oceania's commercial aviation market has changed dramatically as airlines have
redefined themselves amid economic uncertainty. Qantas, in response to the rise
of low-cost carriers (LCC), has successfully introduced its own LCC, Jetstar.
Virgin Blue sought to compete against Qantas by creating a spinoff airline (V
Australia), but has since changed its strategy and will rebrand all of its
airlines under the name Virgin Australia. Air New Zealand has continued to
innovate by introducing Boeing 777-300ERs with unique economy Skycouch seats.
In general, liberalization of markets is leading international carriers to
compete for passengers traveling to and from Oceania.
New airplanes
are needed
Increased traffic and
changing business strategies are creating a demand for new airplanes in the
region. Over the next 20 years, it is expected that approximately 970 new
airplanes will be delivered to airlines within Oceania, including 670
single-aisle airplanes to transport people within the region and to nearby
Southeast Asia. International traffic will require about 260 additional
twin-aisle airplanes and 30 large commercial airplanes. As the region becomes
more interconnected with the rest of the world, the economical new 787
Dreamliner will be in demand to serve longer, thinner routes.
NORTH AMERICA
Improvement continues despite short-term challenges
The North American
commercial aviation market in 2010 improved for the second consecutive year.
While air traffic grew at a modest 3 percent, strict capacity discipline (up 1
percent) kept passenger flights relatively full, with load factors averaging 83
percent. Low-cost carriers generated the majority of growth, with passenger
traffic increasing 6 percent and capacity up 3 percent. Load factors averaged
80 percent.
Cost and capacity
discipline led to improved financial results in 2010, with net profits of at
least US$4 billion. Due to continued fuel price volatility and economic
uncertainty, however, IATA is revising its 2011 regional forecast downward,
with net profits projected at around US$1 billion.
Industry
consolidates and strengthens alliances
The region's airline
industry continues to consolidate, highlighted by major mergers, including the
recent acquisition of AirTran by Southwest Airlines. Once the merged carriers
have been integrated, the top four US airlines (United, Delta, American, and
Southwest) will have a commanding market share, controlling 80 percent of
available capacity. Consolidations and increased market concentration are
expected to produce a period of stability over the long term.
Global airline alliances
continue to grow stronger, as evidenced by the recently implemented
trans-Pacific joint venture between Star Alliance members, ANA, and United
Airlines. Initially, coordination will include integrating the airlines'
networks and schedules, along with setting airfares.
In 2011, the oneworld alliance is strengthening
its ties through trans-Atlantic network enhancements. For example, American
Airlines and British Airways are jointly operating a high-frequency shuttle
between New York City and London.
Fleet outlook
for the next 20 years
The long-term outlook for
North American commercial aviation is favorable. Airlines are expected to
continue focusing on capacity discipline and improving financial performance.
Barring a prolonged economic downturn, the airline industry is poised for long-term,
moderate growth. As a result, we are increasing our demand forecast in the
single-aisle category by 330 airplanes.
Traffic demand within North
America is expected to grow at an annual rate of 2 percent, which is below
average; however, a majority of this increased growth in the single-aisle
category is related to traffic traveling to and from economically dynamic
regions in Central and South America.
Long-haul international
traffic will continue to grow at an average annual rate of approximately 4.5
percent. This growth is expected to result in demand for an additional 1,180
new fuel-efficient, twin-aisle airplanes, including the Boeing 787 Dreamliner.
EUROPE
Economic rebound
The European commercial
aviation market remained strong in 2010, despite losses from snow and volcanic
ash closing airports and canceling flights. The Association of European
Airlines reports that the total number of scheduled passengers carried by
member airlines was up 2.7 percent in 2010, compared to the previous year. Over
the same period, members of the European Low Fares Airline Association (ELFAA)
experienced a 6.1 percent increase in passengers. European airlines in 2010
acquired more than 270 new airplanes, of which 79 percent were single aisle.
European GDP rebounded in 2010, increasing by 2 percent over 2009.
Sustained growth is
expected to continue over the next 20 years, with European airlines forecasted
to acquire a total of 7,550 new airplanes valued at US$880 billion. A majority
of the incoming aircraft are expected to be single aisle, which will account
for approximately 75 percent of the total fleet.
Europe is an economically
diverse region, with both mature nations as well as newer, high-growth
economies. Despite areas of uncertainty, Europe's overall GDP is expected to
continue to grow at an average rate of 2 percent per year. The European Union's
efforts to pursue transport liberalization are contributing to this growth,
with negotiations taking place with Turkey, Brazil, India, Korea, and other
countries.
Leading
strategic change
Airline operations continue
to change as new ventures are launched and new business models are applied.
Additional mergers and acquisitions are expected over the next 20 years, along
with increased emphasis on collaboration with alliance partners around the
world.
There is a trend among
large network airlines to shift their focus away from short-haul routes that
are targeted by low-cost carriers and focus instead on longer haul routes. In
2010, network carriers announced new routes or increased service to cities such
as Buenos Aires, Quito, Guayaquil, Miami, San Juan, Haneda, Singapore, and Rio.
Meanwhile, low-cost carriers have continued to add service in the short-haul
markets, with ELFAA members in 2010 providing 30 percent of capacity on
intra-Europe flights.
Environment
European airlines are
continuing to reduce their environmental impact. In part, this is being done by
replacing older, less efficient airplanes with newer technology planes such as
the 787 Dreamliner. By the end of our 20-year forecast period, more than 94
percent of the jetliners acquired by European airlines will have been delivered
as new.
MIDDLE EAST
Middle East carriers gain long-haul market share
While air transport markets
in the rest of the world shrank during the global economic downturn of 2009,
international air travel continued to grow for Middle East carriers,
demonstrating the region's prominence in global air travel. International
traffic continued to grow during 2010, rising 17.8 percent for Middle Eastern
carriers-far exceeding the world average of 8.2 percent growth.
Strong
traffic growth
The civil unrest in Egypt,
Bahrain, Libya, Syria, Yemen, and Tunisia has dampened the outlook for 2011.
While the impact to global traffic has been relatively minor, some of the
region's most important destinations have been affected.
Despite the turmoil, the
region's economy is forecast to grow 6 percent in 2011, outpacing the world
average. The six nations of the Gulf Cooperation Council are forecast to
average 7.8 percent growth as energy production expands to cover the shortfall
from other oil-producing countries.
Rapid capacity
increase
Capacity at the three
carriers, Emirates, Qatar Airways, and Etihad, collectively has grown 23
percent annually over the past 10 years. Their growth is likely to continue as
the large backlog of new, efficient airplanes that the three carriers have on
order will provide a competitive advantage over European and Asian rivals.
Approximately half the 885 airplanes on order in the Middle East, including 72
percent of the widebodies, will go to these carriers.
Strategy
based on location
The market strategy of the
"Gulf 3" airlines is based on the so-called sixth freedom, which
allows an operator in one country to carry passengers or cargo from a second
country to a third country via a scheduled stop in the operator's home country.
Sixth freedom privileges have enabled Emirates, Qatar Airways, and Etihad to
take advantage of their central location to expand their share of traffic
between Europe and Asia. This huge air travel market does not depend on the
relatively small populations of the home countries. The three carriers have
also expanded into new markets, offering more than 100 weekly frequencies to
destinations in the Americas-including Chicago, Houston, Los Angeles, New York,
San Francisco, Washington, D.C., Toronto, and Sao Paulo. More than 70 weekly
flights are offered in the rapidly growing China market.
Newly emerged low-cost
carriers are stimulating demand for travel, targeting the young local
population and the large migrant workforce. Flying short- and medium-haul
routes within the region and to Africa, India, and Eastern Europe, the low-cost
carriers supply only 4 percent of the region's capacity, yet they account for
more than one-third of the region's backlog of single-aisle airplanes.
LATIN AMERICA
A bright future
The region's economy is projected to grow strongly over the next 20
years, spurring Latin American air traffic growth to exceed the world average.
Traffic within the region is expected to grow at a rapid pace, most quickly
within South America, where growth will average 7.0 percent per year. By 2030,
South America will have the sixth largest internal traffic flow among the
regions covered in the Current Market
Outlook. Total traffic carried by Latin American airlines will grow
6.9 percent annually.
Business
developments
Air travel is assuming an
increasingly important role in the region's commerce as travelers switch from
roads to air transportation. Rising prosperity is also creating demand for
international travel. More citizens can afford to travel outside the region and
more businesses seek wider economic bonds. In addition, the upcoming Olympic
Games and World Cup will require a growth in airline fleets and infrastructure
in South America. The region has a large number of new jets on order to meet
this escalating demand, with network carriers and low-cost carriers placing 187
orders in 2010.
Airlines have been
consolidating to expand their businesses across the region. During 2010,
Avianca and TACA completed their merger, and LAN and TAM announced their merger
into LATAM. Opportunities may exist for further consolidation in the region
over the next 20 years. These more competitive airlines will allow Latin
America to have a more substantial stake in the airline market. Today, Latin
American airlines account for 48 percent of the traffic to, from, or within
Latin America. By 2030, that number will grow to 61 percent.
Growing
fleet
Projected GDP growth of 4.2
percent per year over the next 20 years will help drive the commercial fleet to
grow 5.6 percent annually. By 2030, the fleet will consist of 3,390 airplanes.
Most of the fleet delivered over the next 20 years will be new single-aisle
airplanes for travel within the region. About 360 twin-aisle and larger airplanes
will be used for connections with the rest of the world as international
commerce increases. By increasing the size of the twin-aisle fleet and using
new, efficient airplanes such as the 787, airlines in Latin America will be
able to serve new city pairs and give passengers more convenient routes.
COMMONWEALTH OF INDEPENDENT STATES
Younger, more efficient fleet
The commercial aviation
market in the Commonwealth of Independent States (CIS) continues to grow as the
region's airlines add new airplanes to their fleets. We are forecasting that
the CIS will acquire 1,080 new airplanes, valued at US$110 billion, over the
next 20 years. Of that total, 32 percent of the airplanes are in current
backlog and expected to be delivered in the next five years.
The freighter market is
also growing, with 60 new airplanes-as well as 130 converted airplanes-needed
to meet demand in the region. More than 65 percent of the new freighters will
be in the large category.
Economy
recovering
The region's economies had
moderate growth in 2010. GDP was up 4.2 percent, compared to the substantial
decline of 4.1 percent in 2009. Overall, we expect the GDP to grow at an
average annual rate of 3.4 percent over the next 20 years. Russia continues to
be the largest driver of the economy, accounting for 70 percent of GDP in 2010,
followed by Ukraine and Kazakhstan.
Passenger traffic remains
strong-up 10.1 percent in the first quarter of 2011, according to Russia's
Federal Air Transport Agency. Domestic passengers account for nearly 60 percent
of this traffic. Over the next 20 years, air travel is expected to grow at an
annual rate of 4.2 percent.
Potential
for domestic growth
A projected 680 new
single-aisle airplanes will be needed over the next 20 years to support
anticipated domestic growth. Given the diverse geography of the region, airline
travel is expected to become more attractive as liberalization occurs and
personal incomes increase.
Market growth is being
supported by government programs to upgrade airports. In Russia, there are
plans to replace a runway at Moscow's Domodedovo airport in 2015. This will
help the airport to reach its planned capacity of 50 million passengers.
The budget travel market is
especially underserved in the CIS, because low-cost carriers serve only a small
percentage of the domestic market. Currently, low-cost carriers account for
less than 4 percent of domestic airline seats in the CIS, which is well below
market share in most regions. With only 5 percent of Russia's population using
air services, there are substantial opportunities for airlines to stimulate the
market and win new customers.
AFRICA
Rapid economic growth
The World Bank forecasts
that the economies of sub-Saharan Africa will grow 5.3 percent this year and
5.5 percent in 2012. North African and the Middle East economies will grow 4.3
percent this year and 4.4 percent in 2012. Commodity markets account for much
of this growth, as manufacturing countries, particularly China, seek to hedge
against volatility by negotiating long-term contracts with African producers of
raw materials. Direct foreign investment, growing urbanization, and rising
incomes will spur higher domestic demand for consumer goods and transportation.
The International Monetary Fund predicts that over the next 5 years, seven of
the world's 10 fastest growing economies will be in Africa.
Air transport
poised for expansion
Africans are turning
increasingly to air travel, as road and rail infrastructure remains
underdeveloped. The resulting boost in demand for airplanes has generated firm
orders for jet and turboprop airframes and created a favorable climate for
aircraft leasing companies. The average age of the African fleet has declined
as established airlines modernize for fuel efficiency and higher capacity. More
developed nations such as Nigeria and South Africa have undertaken ambitious
airport infrastructure projects to alleviate congestion and address safety
concerns. The Yamoussoukro Decision on the Liberalization of Air Transport
Markets in Africa, which set out in 1999 to create a single African sky by
2002, has languished in recent years, but is now receiving renewed attention.
Meeting
greater competition
Many state-run airlines in
Africa have given way to privately owned entities that are better able to
compete with the foreign operators currently predominant in intercontinental
routes. Competition has markedly increased in recent years as Middle Eastern
airlines have introduced larger capacity airplanes, higher frequencies, and
lower fares to markets traditionally dominated by European carriers.
African airlines have
responded by forming code-share agreements with foreign carriers, particularly
with Asian airlines. The entry of African carriers as full or associate members
into the three global airline alliances, Star Alliance, SkyTeam, and oneworld, signals even more
significant progress in African aviation. The additional market reach that
these alliances afford is expected to foster competition on intra-Africa routes
and create opportunities for emerging unaffiliated carriers.
Source: Boeing
FORECAST DATA: Boeing
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