Monthly Archives: July 2014

July 30, 2014 · 10:00 pm

Mister India

I was reminded by the following tweet from a fellow Toastmaster from Finland of a funny anecdote from a few years ago.

In May 2011 Luca and I attended the annual shareholders’ meeting of Berkshire Hathaway (see here a post describing the experience). One of the activities for shareholders that we joined was to dine on Sunday evening at Piccolo’s, a steakhouse popularized by the taste of Warren Buffett, apparently a frequent customer (we indeed happen to have him dining together with Bill Gates two tables away).

The anecdote I wanted to share in this post stems from my rather strong Spanish accent when speaking English, together with the little vocalization effort that I put sometimes in my speech plus the use of the phonetic alphabet to spell words.

When I wanted to book a table at Piccolo’s to have that dinner, I was asked my surname, which is uncommon even in Spain, thus I spelled it: India, Romeo, Alfa, Sierra… Hours later, we arrived at the restaurant and informed the waiter that we had a reservation, at the name “Irastorza”. She went to check her registry. Swiftly and politely she said: “sure, come along with me”. I was close enough to her to see that in the book she had just noted: “India”.

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July 20, 2014 · 8:00 am

Aircraft market forecasts accuracy (update 2014)

About two years ago I wrote a post in which I analyzed the accuracy of commercial aircraft market forecasts. In particular, Boeing’s series of yearly Current Market Outlook (CMO). In that comparison, between the CMOs from 1997 and 2012, we could compare the predicted and the actual world fleets at 2011 year-end. Except for the twin-aisle segment and especially the large aircraft sector, the accuracy was remarkable, as the estimated global fleet only exceeded the actuals in 1%.

In this post, I just wanted to provide an update with the figures from the latest CMO (2014), released a few weeks ago, in comparison with 1999’s CMO. In that CMO from 1999 [PDF, 1.5MB], we find the following chart showing Boeing’s forecasted fleet size and distribution for 2003, 2008, 2013 and 2018 year-ends.

1999 Boeing CMO year-end fleet forecasts for 2003, 2008, 2013 & 2018.

1999 Boeing CMO year-end fleet forecasts for 2003, 2008, 2013 & 2018.

In 2014 CMO, Boeing offered figures of 2013 year-end fleet (1).

Fleet at year end 2013 - Boeing 2014 CMO.

Fleet at year-end 2013 – Boeing 2014 CMO.

And now, the comparison is immediate:

Comparison of aircraft fleet at year-end 2013: 1999 forecast vs. actual (sources: Boeing CMO 1999 and 2014).

Comparison of aircraft fleet at year-end 2013: 1999 forecast vs. actual (sources: Boeing CMO 1999 and 2014).

Some reflections:

  • The forecasts for all segment except for single-aisle (737-800) predicted higher numbers of aircraft in the fleet than the actuals have shown 15 years later (2).
  • The total fleet figure was missed by 11%, a larger deviation than the 1% from two years ago.
  • The 737 has been the model outselling the forecasts, offsetting partially the lower demand in all other segments. In particular, even if deviations per segment have been higher, the global forecasted figure for passenger aircraft has been missed by only 3%.
  • The forecast is especially off mark the twin-aisle, where there are over 1,700 less aircraft in the current fleet than forecasted (3).

For the next such comparison we will need to wait some years, as from the year 2000 Boeing provided CMOs in a different fashion, offering a view of the forecasted fleet only 20 years from the date in question, instead of a view every 5 years. Therefore, we will have to wait until 2017, when we will be able to compare the 20-year forecast from 1997 CMO with the actuals of 2016 to be provided in 2017 CMO.

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(1) In order to see the detailed split per segment differentiated between passenger and freighter aircraft, until the released of the full CMO, it is needed to use the exploring data tool offered in Boeing’s site.

(2) The differences in accuracy between the lower and higher end of the small-aisle segment should not be taken into account, as they are influenced by the different consideration of the cut off number of seats between a CMO and the other.

(3) Possibly a reason why Boeing plays down on the 747-8I and A380 segment.

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July 18, 2014 · 8:00 pm

“A bird in the hand is worth two in the bush” (speech)

Thanks to the drive of some individuals (Sarah, Eduardo, Dominique) a new Toastmasters corporate club (1) is being created within Airbus in Toulouse, where I work.

I joined Toastmasters in 2007 when I lived in Madrid and I have written often about Toastmasters in this blog, however I had become inactive in the last couple of years. This new initiative is very convenient and thanks to it I am engaging myself again in the association.

Today, I gave again a prepared speech in Toastmasters (2). In this post I just wanted to share it. Find it here, “A bird in the hand is worth two in the bush”, and below:

A bird in the hand is worth two in the bush

The topic of the speech is known for the reader of this blog: impact of delays in aircraft development projects seen as investment projects, the time value of money, discounting cash flows, break even, etc.

The feedback that I got: It was well received, especially the introduction, the interaction with the audience, the structure and how the topic was introduced and the main points called back in the end. However, I lost some individuals with the last slide, which needed some more explanation. I should have simplified the graphic. Some demanded more pauses and better vocalization.

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(1) Up to now it is a prospect Toastmasters club.

(2) Project #1 of the “Speeches by Management” advanced manual: “The briefing”.

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July 13, 2014 · 10:00 am

Wide-body mix in 16 years of Boeing CMOs

Last year I wrote a post showing the puzzling change in Boeing’s predicted mix of twin-aisle sales, between small and medium wide-bodies (“Wide-body mix in 15 years of Boeing CMOs”). A few days ago I wrote a post about the publishing by Boeing of its Current Market Outlook for 2014-2033. This year’s CMO is more consistent with last years figures, i.e., the larger share of the forecasted market corresponds to small wide-bodies (787s from Boeing perspective). Recall the numbers:

  • small wide-bodies: 4,270 a/c in CMO2014 (passenger aircraft only),
  • medium wide-bodies: 2,990 a/c in CMO2014.

However, the trend is changed again in this year’s CMO in comparison with last year’s one: small wide-bodies market decreases while the medium wide-bodies’ one increases again. Since I keep a collection of CMOs from years back, I will include again a comparison going 16 years back…

Twin-aisle mix distribution (Boeing CMO 1998-2014).

Twin-aisle mix distribution (Boeing CMO 1998-2014).

Seeing at the graphic (made using Boeing figures):

  • During the first 5 years (1998-2003) the trends are quite constant.,
  • From 2003 to 2007, the mix is reverted, possibly to favour the launch of the 787.
  • In 2008 the CMO did not provide the split.
  • From 2009 to 2014, you can see that both trends in the forecasts are erratic… why? Only Boeing knows.

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July 11, 2014 · 1:00 am

Review of Boeing Current Market Outlook 2014

Just ahead of Farnborough air show, Boeing Commercial has published its yearly update of the Current Market Outlook (CMO) for the next 20 years of commercial aircraft market (2014-2033).

I have just compared the figures for passenger aircraft of the last two years’ CMOs:

CMO 2014 vs 2013 comparison.

CMO 2014 vs 2013 comparison.

Some comments to it:

  • You can see that the total number of new aircraft delivered has slightly increased from 34,430 to 35,930, a 4%, which is consistent with the constant 5% traffic increase that Boeing predicts (1).
  • The volume (Bn$) increases by a larger percentage, 8% (360Bn$)… this is due mainly to the increase in:
    • single-aisle aircraft expected sales in volume (12%, +270Bn$) and aircraft (+1,010), and
    • medium wide-body segment with 180 more aircraft (+6%) and an increase in volume of 70Bn$ (+7%).
  • Last year I wrote about a sudden change between CMO 2013 and CMO 2012 of the mix in wide-bodies; CMO 2014 is more consistent with last year’s one even if the trend is reverted again.

This year study’s figures seem to push for the 737 and 777, which is backed by the presentation as well. It is curious how 777 market is increased whereas 787 is slightly decreased.

Find below the nice infographic [PDF, 0.1MB] that the guys from Boeing have put up together:

Boeing Commercial Aviation Market Forecast 2013-2032 infographic.

Boeing Commercial Aviation Market Forecast 2013-2032 infographic.

As always, I recommend going through the CMO, as you can learn a lot about the business: from global numbers, to growth, traffic figures, fleet distributions, forecasts, etc… You may find the presentation [PDF, 10.6 MB] and the file [XLS, 0.7 MB] with all the data.

For a comparison between this CMO and the respective Airbus’ GMF we will have to wait until after the summer, when Airbus publishes its update. Until then, find here the comparison based on 2013 market studies.

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(1) These two ratios, 4% fleet growth and 5% traffic growth, point to an implicit increase in the average size of the aircraft in fleet.

(2) Find the review I wrote comparing 2013 CMO with 2012 CMO.

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