Boeing projects that commercial aircraft services will generate $8.8 trillion out of a $15 trillion market over the next 20 years, as balancing growth between advanced and emerging economies, innovation and productivity, and increasing aircraft replacement needs become even more pronounced in the coming years. According to the company’s 2018 Current Market Outlook, released Tuesday, the world economy will see an average 2.8 percent GDP growth while passenger numbers and cargo traffic measured in revenue ton kilometers each rise by 4.2 percent. Meanwhile, as load factors continue their upward climb—the measure of average aircraft loads rose from 76 percent to 81 percent over the past five years—passenger traffic measured in revenue passenger kilometers (RPKs) will increase by 4.7 percent.
Boeing expects another “very strong” passenger market again this year, following eight years of growth above average trends over the past four decades of some 5 percent. Based on data from the International Air Transport Association, BCA’s market analysis places RPK growth this year at 7 percent and cargo growth at 4 percent, while total profit reaches $34 billion. IATA expects airlines to carry 4.3 billion passengers this year while registering a record composite load factor of 82 percent.
Speaking with reporters at Boeing’s Seattle-area offices in late June, Boeing Commercial Airplanes managing director of market analysis Darren Hulst noted that the balance in growth between mature and emerging markets and an annual middle class population increase of 160 million have resulted in a “structural change.”
“The bar is shifting where the trend is moving from a 5 percent norm to closer to a 6- or 7 percent norm,” said Hulst. “The other piece that’s obviously helping us in 2018 is the fact that this will be just the second year in a row where we actually see a synchronized expansion globally from a GDP standpoint. Whereas some markets globally have been in recession, now we’re seeing that expansion across all the markets.”
Hulst noted that 10 years ago, advanced economies accounted for 70 percent of all capacity. They now account for 55 percent, reflecting the trend toward market balance Hulst sees as so indicative of the industry’s health.
Meanwhile, measures of industry productivity—stage lengths, load factor, and aircraft utilization—all continue to surge. Over the past 10 years, average stage lengths have risen 12 percent, from 1,030 nm to 1,150 nm; load factor has increased from 76 percent to 81 percent; and daily flight hours per aircraft has risen 13 percent, from 7.8 hours to 8.8 hours. A further measure of productivity—market stimulation—has generated 2,000 new city pairs in the past year alone. “Quite frankly, the number-one region for new market expansion in terms of city pairs served is actually not the emerging markets. It’s actually Europe,” said Hulst. “Almost 30 percent of all new city pairs in the last year are markets to, from or within Europe...A lot of it has to do with Ryanair...Wizz Air...the LCCs in the region.”
Finally, Boeing expects the need for replacement airplanes, both in the single-aisle and widebody markets, to double over the next five years. In the single-aisle category, roughly 200 airplanes a year reach 25 years of age; by 2023, that figure increases to 500 aircraft a year. Today, some 100 twin-aisle aircraft a year turn 25 years old; by the mid-2020s that figure doubles to 200, according to Boeing.
In terms of fleet breakdown, out of 42,700 deliveries over the next 20 years, 73 percent will involve single-aisle airplanes accounting for 55 percent of the $6.35 billion in delivery value, according to the CMO. Widebodies, estimated to account for 19 percent of deliveries, amount to 39 percent of all delivery value. Freighters, which would account for 2 percent of deliveries in terms of units, will represent 4 percent of the value, while regional jets, at 5 percent of unit deliveries, account for 2 percent of value.
In terms of geographic distribution, Asia will account for 40 percent of all deliveries, while North America and Europe take another 20 percent each. The Middle East and Latin America will each account for about 7 percent, while Russia/Central Asia and Africa each account for about 3 percent.
For the first time, the Boeing CMO includes value of commercial aviation services, the majority of which involve ground and cargo operations worth $4.665 trillion over 20 years. Next, maintenance and engineering account for $2.365 trillion, flight operations $1.115 trillion, marketing and planning $540 billion and corporate and external functions $145 billion.
Among possible exogenous influences on the forecast, Hulst said the imposition of tariffs globally won’t significantly affect passenger traffic but that a resulting disturbance to trade could change the cargo outlook. “It might change the mix between business and leisure travel, but we’re not seeing new barriers erected in terms of bilateral restrictions on flights,” he explained. “There might be a yield implication but I don’t think a traffic demand [effect].
“So far, the tariff scenarios are on the order of magnitude in the next year or two of less than two-tenths of a percent on GDP growth...but that’s really short term. You’d have to see a really sustained impact on the GDP side to really see that flow through to [passenger] traffic.”
