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Review of Boeing Current Market Outlook 2018

Two weeks ago, on the second day of Farnborough air show, Boeing Commercial published its yearly update of the Current Market Outlook (CMO) for the next 20 years of commercial aircraft market (2018-2037).

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

CMO 2018 vs 2017 comparison

CMO 2018 vs. 2017 comparison.

Some comments to it:

  • You can see that the total number of new aircraft delivered has slightly increased from 40,110 to 41,750, a 4.1%, which is consistent with the 4.7% traffic increase (1) that Boeing predicts (2).
  • The volume (Bn$) increases by a higher percentage, 4.8% (280 Bn$) up to 6.07 Trn$. This is due to the increase in the single-aisle aircraft expected sales in volume (9%, +300 Bn$) and aircraft (6.2%, +1,830), as the other segments see both a forecast decrease in terms of volume and aircraft.
  • For years, Boeing has been dowplaying in its CMO the demand for the segment of the large aircraft (seen as mainly 747, A380 and some other high capacity aircraft, depending on the manufacturer). Last year, Boeing stopped to consider them a category by themselves and merged that category with the “intermediate twin-aisle” (i.e. 777, A350…). This year, Boeing has further reduced the detail provided in the wide-body category by merging large aircraft with the small wide-body (i.e. 787, A330…) segments and now provides a single forecast for wide-body.

This year presentation did not include slides showing the accuracy of Boeing’s CMO of 20 years ago in predicting today’s fleet. They used to include such a slide in previous years’ presentations. I will come back to that in a following post.

Find below a slide from the excutive summary [PDF, 263 kB] that provides a good snapshot of the forecast that the guys from Boeing have put up together:

BoeingCMOinfographic2018.png

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, 5.1 MB], a file [XLS, 0.6 MB] with all the data or the full CMO report [PDF, 11 MB].

(1) Traffic increased measured in RPKS (revenue passenger kilometers) in trillions.

(2) These two ratios, 4.1% fleet demand and 4.7% traffic growth, point to an implicit increase in the average size of the aircraft in fleet and / or a higher utilization of the aircraft (higher availability).

(3) Find the reviews I wrote comparing 2017 CMO with 2016 CMO2016 CMO with 2015 CMO2015 CMO with 2014 CMO2014 CMO with 2013 CMO and 2013 CMO with 2012 CMO.

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Airbus vs. Boeing, comparison of market forecasts (2017)

Two weeks ago, during Le Bourget air show in Paris, both Airbus and Boeing released their market forecasts for the following 20 years: Airbus’ Global Market Forecast (GMF, PDF 3.6 MB) and Boeing’s Current Market Outlook [PDF, 3.8 MB].

In previous years, I have published comparisons (1) of both Airbus’ and Boeing’s forecasts. You can find below the update of such comparison with the latest released figures from both companies.

Forecast2017

Comparison of Airbus GMF and Boeing CMO 2017-2036.

Some comments about the comparison:

  • The main comment for this year CMO is that after years of Boeing dowplaying the demand for the segment of the large aircraft (seen as mainly 747, A380 and some other high capacity aircraft, depending on the manufacturer), it has finally stopped to consider them a category by themselves and has merged that category with the “intermediate twin-aisle” (i.e. 777, A350…).
  • Excluding the large aircraft, both companies’ forecast for the twin aisle segment is nearly identical: ~8,175-8,210 aircraft (we may assume that about 100 of those 8,210 from Boeing’s CMO correspond to large aircraft, thus comparing apple to apples would be ~8,175-8,100). The mix between small and intermediate twins varies, ~400 units up and down.
  • On the other hand, Boeing forecasts about 4,700 single-aisle more than Airbus (the gap has widened in 100 units this year). Boeing doesn’t provide the split between more or less than 175 pax capacity airplanes since its 2015 CMO, nor does Airbus since 2016.
  • Alltogether, Boeing sees demand for 10% more passenger aircraft (excluding regional a/c and freighters) with a 9% more value. The gap is slightly lower than in 2016.
  • In relation to last year’s studies, Airbus has increased demand by ~1,700 aircraft (and ~ 190 Bn$) whereas Boeing has increased it by 1,400 (and ~ 130 Bn$).
  • In relation to traffic, measured in terms of RPKs (“revenue passenger kilometer”), that is, the number of paying passenger by the distance they are transported, they see a similar future: Airbus forecasts for 2036 16.5 RPKs (in trillion, 4.4% annual growth from today) while Boeing forecasts 17.8 RPKs (4.7% annual growth).

Some lines to retain from this type of forecasts:

  • Passenger world traffic (RPK) will continue to grow about 4.5% per year. This is, doubling every ~15 years.
  • Today there are about 18,890 passenger aircraft around the world (according to Airbus; 19,130 in Boeing’s CMO), this number is about 800 a/c more than the year before (5% increase) and will more than double over the next 20 years to 40,120 a/c in 2036 (41,320 as seen by Boeing, excluding regional jets).
  • Most deliveries will go to Asia-Pacific, 42% or ~17,000 passenger aircraft (according to Airbus).
  • Domestic travel in China will be the largest traffic flow in 2036 with over 2,000 bn RPK (according to Boeing, an annual growth of 6.1%), or 11.6% of the World’s traffic.
  • Nearly 13,000 aircraft will be retired to be replaced by more eco-efficient types.
Middle_Class

The doubling of the world’s middle class over the next 20 years will fuel air traffic growth and new airplanes demand.

As I do every year, I strongly recommend both documents (GMF and CMO) which provide a wealth of information of market dynamics.


(1) Find here the posts with similar comparisons I made with the forecasts of previous years: 201020112012, 2013, 2014, 20152016.

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Aircraft market forecasts accuracy (update 2017)

About three 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 1999 and 2014, we could compare the predicted and the actual world fleets at 2013 year-end.

In this post, I just wanted to provide an update with the figures from the latest CMO (2017), released a couple of weeks ago, in comparison with 1997’s CMO. In that CMO from 1997, we find the following chart showing Boeing’s forecasted fleet size and distribution for 2001, 2006, 2011 and 2016 year-ends.

Fleet at year end - forecast 1997

1997 Boeing CMO year-end fleet forecasts for 2001, 2006, 2011 & 2016.

In 2017’s CMO, Boeing offered figures of 2016 year-end fleet.

Fleet at year end 2016 - Boeing 2017 CMO

Fleet at year-end 2016 – Boeing 2017 CMO.

Along these years, Boeing has simplified the segmentation with which it provides the fleet and aircraft demand. Single aisle segment is not divided in up to 4 sub-segments. Twin aisle aircraft have gone from two categories (747 and the rest) to three (small and intermediate widebody and large aircraft) and back to two (small widebody and larger), but slightly different. Freighters come with less sub-segments, too.

Despite of the difference in the presentation of the fleet we can try to make a comparison:

Comparison Fleet at year end 2016

Comparison of aircraft fleet at year-end 2016: 1997 forecast vs. actual (sources: Boeing CMO 1997 and 2017).

Some reflections:

  • The overall size of the fleet was quite well predicted, with a difference of 1%.
  • The forecasts for small aircraft was too conservative: both single aisle and regional fleets are today larger than forecasted.
  • The forecasts for larger aircraft was too optimistic: both widebody and freighter fleets are today smaller than forecasted.

This year’s Boeing’s CMO presentation includes a couple of slides on the accuracy of 1997 CMO in relation to what would be the demand for new airplanes vs. what it has turned out to be 20 years later.

CMO_1997_2017

More aircraft have been delivered in relation to what had been forecasted. Retirement of aircraft also increased its pace with increases of oil price in the 2000s. See the chart below from Avolon’s paper “Aircraft retirement and storage trends” [PDF, 2 MB].

Retirement_vs_oil_Avolon.png

Now, having seen all this information, I can update this other graphic which I shared 5 years ago in a blog post titled “World commercial aircraft fleet: forecast vs. actual“:

Fleet evolution - forecast vs actual - 2017 CMO

World commercial aircraft fleet: past forecast vs. actual, and future demand (data source: Boeing CMOs up to 2017). Fleet (blue and red lines) in the left axis; market forecast (grey columns) in the right axis.

As you can see, actual fleets, forecasted fleets and forcasted fleet demand have all been increasing year by year . The compounded annual growth rate (CAGR) for each one has been:

  • Actual fleet growth: 3.65% from 1995 to 2016 (3.04% from 2000 to 2016).
  • Forecasted (15-20 years before) fleet growth: 3.52% from 2000 to 2036 (3.55% from 2000 to 2016).
  • 20-year market forecast: 4.82% from 1992 to 2017 (3.56% from 2001 to 2017).

The 20-year market forecasts have grown at a higher rate (4.82%) than fleets (3.65%), it is mainly because the first sets of data that I could retrieve come from the economic crisis of the beginning of the 1990’s, when Boeing trimmed down its forecasts. From the 2000’s the figures for market forecast have grown at a similar rate (3.56%) than those of fleets (3.04%). And so will be the growth of forecasted fleet from 2016 to 2036: 3.52%.


Notes:

  • 1990 CMO long-term market forecast is made for 15 years, not 20.
  • Forecast of fleet for the periods 2000-2003, 2005-2008 and 2010-2013 does not come from CMOs published 20 years before, but from 5, 10 and 15-year fleet forecasts included in the CMOs of 1996, 1997, 1998 and 1999.
  • Boeing does not publish 5, 10 and 15-year fleet forecasts anymore.
  • It would be interesting to have a per-segment graphic, however there is not consistent data to produce it for the same time span. Boeing has made different changes to the way it reports fleet and market segments.

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Review of Boeing Current Market Outlook 2017

Last week, on the first day of Le Bourget air show, Boeing Commercial published its yearly update of the Current Market Outlook (CMO) for the next 20 years of commercial aircraft market (2017-2036).

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

CMO 2017 vs 2016 comparison

CMO 2017 vs. 2016 comparison.

Some comments to it:

  • You can see that the total number of new aircraft delivered has slightly increased from 38,690 to 40,110, a 3.7%, which is consistent with the 4.7% traffic increase (1) that Boeing predicts (2).
  • The volume (Bn$) increases by a lower percentage, 2.3% (130 Bn$) up to 5.79 Trn$… this, as it was the case with CMO 2016, is due mainly to the increase in (3):
    • single-aisle aircraft expected sales in volume (6%, +180 Bn$) and aircraft (+1,390), and
    • small wide-body segment with 70 more aircraft (+7%) and an increase in volume of 70 Bn$ (+6%).
  • Four years ago, I wrote about a sudden change between CMO 2013 and CMO 2012 of the mix in wide-bodies; in this respect, CMO 2016 is consistent with last year’s one.
  • For years, Boeing has been dowplaying in its CMO the demand for the segment of the large aircraft (seen as mainly 747, A380 and some other high capacity aircraft, depending on the manufacturer). This year, Boeing has finally stopped to consider them a category by themselves and has merged that category with the “intermediate twin-aisle” (i.e. 777, A350…).
    • It is interesting to see that, if in CMO 2016 both segments had a combined market forecast of 3,450 aircraft (430 large and 3,020 intermediate twin-aisle), in CMO 2017 the combined figure has diminished to 3,160, a reduction of about 300 aircraft or 8.4%.
    • If the demand for intermadiate twin aircraft was about constant, that would mean that the large segment is seen to almost disappear, in Boeing’s eyes, with not many more than 100 airplanes in 20 years (down from 430 forecasted last year).

This year presentation includes a couple of slides on the accuracy of 1997 CMO in relation to what is the fleet they forecasted for the end of 2016 vs. what has been the reality 20 years later. I will come back to that in a following post, as I wrote some blog posts years ago making similar comparisons and in the last such one, commenting on CMO 2014, I mentioned

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.

See below a quick image about that forecast:

CMO_1997_2017

Find below the nice infographic [PDF, 539 KB] that the guys from Boeing have put up together:

BoeingCMOinfographic2017

Boeing Commercial Aviation Market Forecast 2017-2036 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, 3.8 MB], a file [XLS, 0.6 MB] with all the data or the full CMO report [PDF, 53.6 MB].

(1) Traffic increased measured in RPKS (revenue passenger kilometers) in billions.

(2) These two ratios, 3.7% fleet demand and 4.8% traffic growth, point to an implicit increase in the average size of the aircraft in fleet and / or a higher utilization of the aircraft (higher availability).

(3) These two segments (single-aisle and small wide-body) saw as well the largest increases in number of aircraft and volumes in the CMO of 2015 in relation to 2014.

(4) Find the reviews I wrote comparing 2016 CMO with 2015 CMO2015 CMO with 2014 CMO2014 CMO with 2013 CMO and 2013 CMO with 2012 CMO.

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World commercial aircraft fleet: forecast vs. actual

Some weeks ago I made a comparison about Airbus and Boeing aircraft market forecasts. Last week I published a couple of posts about the evolution in the forecasted aircraft average size and on the accuracy of these market forecasts. For this, I looked for old issues of Boeing Current Market Outlook from as back as 1990.

The next step then it was obvious, I compiled the following graphic showing with the data available information over a 40-year span on:

  • The evolution of world commercial aircraft fleet year by year (blue line) from 1995 to 2011,
  • The forecasted world aircraft fleets by Boeing CMO (red line) from 2000 to 2031 (with some gap years). For 2015 to 2031 the forecast was made 20 years ahead; for 2010-13 it was made 15 years ahead; for 2005-2008, 10 years ahead and for 2000-2003, 5 years ahead.
  • The published 20-year aircraft market forecast year by year.

World commercial aircraft fleet: forecast vs. actual (data source: Boeing CMO).

As you can fleets, forecasted fleets and market fleets have all been increasing year by year. The compounded annual growth rate (CAGR) for each one has been:

  • Actual fleet growth: 3.73% from 1995 to 2011 (2.88% from 2000 to 2011).
  • Forecasted fleet growth: 3.55% from 2000 to 2031 (3.69% from 2000 to 2011).
  • 20-year market forecast: 5.07% from 1992 to 2012 (3.43% from 2001 to 2012).

It is interesting to see that in those years when there is both figures for actuals and forecasted fleets the figures are close (-3.3% average deviation) and so is the trend, though forecasted fleet was lower at the beginning of that period (-7.2% in 2000) and grew at a higher rate until almost matching the numbers in 2011 (+1.2%).

Even though, the 20-year market forecasts have grown at a higher rate than fleets, it is mainly because the first data that I could retrieve come from the economic crisis of the beginning of the 1990’s, when Boeing trimmed down its forecasts. From the 2000’s the figures for market forecast have grown at a similar rate than those of fleets. And so will be the growth of forecasted fleet from 2011 to 2031: 3.5%.

****

Notes:

  • 1990 CMO long-term market forecast is made for 15 years, not 20.
  • Forecast of fleet for the periods 2000-2003, 2005-2008 and 2010-2013 does not come from CMOs published 20 years before, but from 5, 10 and 15-year fleet forecasts included in the CMOs of 1996, 1997, 1998 and 1999.
  • Boeing does not publish 5, 10 and 15-year fleet forecasts anymore.
  • It would be interesting to have a per-segment graphic, however there is not consistent data to produce it for the same time span. Boeing changed singe-aisle cut-off seat size from 1999-2000, in 1996-1997 and 2008 didn’t report the split within twin-aisle, in 2008 it also didn’t report the split within single-aisle.

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Airbus vs. Boeing, comparison of market forecasts (2011)

Some days ago, John Leahy, Airbus COO Customers, unveiled at a press conference in London the new figures of 2011-30 Airbus’ Global Market Forecast (GMF, PDF 28.8MB).

Last year, I already published a comparison of both Airbus’ and Boeing’s forecasts (Current Market Outlook, CMO, PDF 3.2MB). You can find below the update of such comparison with the latest released figures from both companies.

Comparison of Airbus GMF and Boeing CMO 2011-2030.

Some of last years’ comments still apply:

  • Boeing sees demand for 15% more aircraft with a 21% more value (excluding regional a/c).
  • Boeing continues to play down A380 niche potential (57% less a/c than Airbus’ GMF), though it has increased its Very Large market forecast by 40 a/c, or 7.5% (Did Emirates new order at ILA change their minds?)
  • On the other hand, Boeing forecasts about 600 twin-aisle and 4,000 single-aisle more than Airbus, clearly pointing to its point-to-point strategy.
  • In terms of RPKs (“revenue passenger kilometer”), that is, the number of paying passenger by the distance they are transported, they see a similar future: Airbus forecasts for 2030 12.3 RPKs while Boeing forecasts 13.3 (in trillion).

The main changes from last year’s forecasts are:

  • Both manufacturers have drastically increased their single-aisle forecast: +1,300 a/c in the case of Airbus and +2,200 in the case of Boeing.
  • In general all numbers have been increased: single-aisle (as mentioned above), twin-aisle (between 50-150 more), large aircraft (between 40-80 more), value of aircraft and RPKs… it seems that for commercial aircraft manufacturers not only the crisis is passed but they see a rosy future lying ahead.

Again, I strongly recommend both documents (GMF and CMO) which, differences apart, provide a wealth of information of market dynamics. I am especially happy to have encountered this year again full version of Airbus GMF, not only a short one [PDF, 4.7MB].

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A380, a game-changer

Probably you remember having seen in some magazines ads paid by airlines showing their luxury A380 cabins. Singapore Airlines was the first one in launching this kind of branding campaigns.

According to the definition by the Business Dictionary: Branding aims to establish a significant and differentiated presence in the market that attracts and retains loyal customers.”

Few days ago, I received an email with publicity from a company that operates the A380. As you can see, they go a step beyond: they now use the A380 not only for branding but for advertising a concrete product, a specific flight. In one of the destinations offered you may see a label indicating that the flight is served by an A380.

Ad: flight served by an A380.

From the Wikipedia: Advertising is a form of communication intended to persuade an audience to purchase or take some action upon products, ideas, or services.”

If they use it there must be a reason behind. I have heard from colleagues that, in fact, the companies already operating it in some of their routes are noticing that repeatedly the connections offered by an A380 show higher passenger load factor or occupancy rates than the same connections when offered by a different aircraft.

I have never seen anything like this before. It could have happened when the B-747 entered into service in the 70’s, but I was not here then; I didn’t witness it. It doesn’t happen now; not with the 747 nor with other aircraft. I certainly do not base my buying decisions, when I have to flight within Europe, on whether the airline operates a B-737 or an A320 (maybe I should!). But exactly this is happening in the case of the A380. And airlines are profiting from it.

In a previous post I wrote about the difference in current forecasts for the A380 that Airbus and Boeing report (Boeing has steeply reduced its reported forecast in the past decade). If the appeal of the aircraft continues to bring customers in, we could have a reason to believe that in end the orders figure of A380 maybe rather high. Only time and the market will let us know.

In its website, Airbus dubs the A380 as game-changer. One could expect this when a company is talking about one of its products, however when others are basing its branding and advertising on it, we seem to be really facing a game-changer.

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