Tag Archives: single-aisle

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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New entrants in the commercial aircraft business

In a previous post, I mentioned the new entrants in the large commercial aircraft business (Bombardier CSeries, Embraer, Russian MS-21, Sukhoi SuperJet, Comac C919, Mitsubishi…). Now that the latest market forecasts both from Airbus (Global Market Forecast) and Boeing (Current Market Outlook) are available, I wanted to briefly note how they are treating the segment that most of these entrants would enter: single aisle jet aircraft.

For example, Boeing in this year’s CMO already splits the single aisle between 90-175 passengers (where new entrants would fall into) and over 175 passengers (still the safe harbor?). In previous studies Boeing didn’t offer such sub-segmentation. On the other hand, Airbus hasn’t published yet such differentiation.

It is even more interesting to compare last year’s GMF and CMO with this year’s ones.

  • Airbus saw a demand for 16,977 single aisle aircraft in 2009 while in 2010 sees a demand for 17,870.
  • Boeing saw a demand for 19,460 single aisle aircraft in 2009 while in 2010 sees a demand for 21,150.

In other words Airbus has increased the single aisle market forecast in 893 aircraft, while Boeing has increased it in 1,690 aircraft… Both have made the forecasted pie bigger before it will have to be shared.

On average, they see ~1,300 more single aisle aircraft than what they saw last year… In the case that these extra aircraft was room made for new entrants, that would leave the new entrants a market share of 6.7% of the single aisle market… not much.

However, those entrants are not yet delivering in that segment and most of their deliveries would come at the second half of the 20-year period. By 2029, it could well be possible that their combined market share is around 10%… still not a big share, but already ~7bn$ yearly business (in 2010 dollars); a ~4.4bn$ after discounts, an amount the size of Embraer revenues (the 3rd company in commercial aviation, reason enough for them to enter the segment).

Boeing even concedes that of the 21,150 single aisle aircraft, 86% of them will be between 90-175 passengers, precisely the market sub-segment that will be ferociously fought.

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Boeing forecast for A380

The last two issues of Boeing’s Current Market Outlook, included a slide in which Boeing wanted to prove that their forecasts have been more accurate in the last 10 years. They compare actual aircraft demand versus both Airbus and Boeing forecasts in the year 2000.

Boeing Current Market Outlook, different views.

I find it interesting that all segments are described as such, segments: “Single-aisle”, “Twin-aisle”, “Large”… except for Airbus forecast in which Boeing introduces the model “A380”. As if wanting to point that Airbus was wrong in its A380 forecast… as if wanting to steer demand.

Let’s see the numbers:

  • Actual demand (2000-09): ~300 aircraft.
  • Boeing forecast (2000-19): ~700 aircraft, assuming equal split (among the 2 decades): ~350 a/c in 2000-09.
  • Airbus forecast (2000-19): ~1,300 aircraft, assuming equal split: ~650 a/c in 2000-09 (although A380 first flight took place only in April 2005).

As of today, Airbus has sold 234 A380s, including the latest 32 from Emirates. The prospects for the aircraft seem brighter as operators started operating it, on the other hand Boeing 747-8 orders have stalled since 2007.

A bit of history.

Yesterday, I was digging into back materials and I found two interesting pieces. Both from Boeing’s website in the year 1996 (using the way back machine). The first one is from a webpage about delivering value it could be read:

“In an industry defined by continual change, customers expect Boeing to help them prepare for the challenges ahead. That’s why we work closely with customers to understand their long-term requirements.

Customers have expressed interest in many potential airplanes, including:

  • An airplane smaller than the 737-600, seating 80 to 100 passengers.
  • An airplane larger than today’s 747-400.
  • A capable and cost-effective supersonic jetliner.
  • Derivatives of current models.”

Of those potential airplanes: we have seen the Embraer 190, the Airbus A380, derivatives and the only one that never came true was the supersonic jetliner

Artist image of Boeing Sonic Cruiser.

The other piece is from a news release on the occasion of the Farnborough air show of 1996 (2010 edition is taking place right now). There, Boeing stated:

Most major aerospace companies agree that airlines will require 500 to 700 airplanes capable of carrying more than 500 passengers. Boeing forecasts 500 airplanes will be needed by the year 2015.

Much of the demand for these very large airplanes will be generated by steady growth in air travel to and from Asia, and by capacity constraints at some of the world’s largest airports.

The 747-600X, with its ability to carry 548 passengers on routes up to 7,750 nautical miles (8,900 statute miles or 14,350 km), is designed to fill this market need. It will allow airlines to accommodate traffic growth without increasing the number of departures scheduled for busy airports.

During the next 20 years, airlines also will need approximately 600 airplanes capable of carrying between 400 and 500 passengers.

The Boeing 747-400 and 747-500X are designed to fill this market need.”

At this point it is useful to remember that in 1993 Boeing together with Airbus consortium companies started the feasibility study for the Very Large Commercial Transport (VLCT). Boeing left the joint study two years later. Nevertheless, still in 1996 it stated in its website that demand of aircraft carrying above 400 seats (747 and A380 of today) in the following 20 years would be between 1,100-1,300 planes, very close to Airbus forecast of the year 2000. The reasons behind that demand were the same Airbus argues nowadays: growth in Asia, constrains in largest hubs…

Later on, Boeing changed its forecast down to 700 aircraft.

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Aircraft discounts and new entrants

Boeing has recently unveiled its latest Current Market Outlook (CMO): a commercial aviation market forecast for the next 20 years. It calls for 30,900 new aircraft deliveries worth 3.6 trillion dollars. Today, I wanted to write about aircraft discounts and the possibility of having new entrants.

Boeing Current Market Outlook.

Both Boeing and Airbus give their market forecast and backlog figures in what they call as list prices. If you take figures from CMO, you will reach average list prices for regional jets (31M$), single-aisle (79M$), twin-aisle (230M$) and large aircraft (306M$). These figures are in accordance to the prices published in their website (dating from 2008).

However, if you take their published numbers of deliveries each year and use the same prices, you would come to much higher revenues figures than the ones they publish in the year-end results: this is because aircraft makers actually sell the planes at a much lower price. How much lower?

Discounts

I took the figures of revenues, orders and deliveries of the last three years and tried to reach what would be the corresponding discount Boeing’s customers manage to get on average.

I assumed that new orders come with a 3% down payment in the year of the booking, while the remaining cost I assumed that was paid on the year of delivery (for simplicity I didn’t consider more intermediate payments, the 3% figure was taken from the AIAA paper “A Hierarchical Aircraft Life Cycle Cost Analysis Model” by William J. Marx et al.). I also used estimated figures for Boeing Commercial Aviation Services ranging from 2.2bn$ to 3.3bn$.

With these assumptions, I concluded that the average discount that would best replicate revenues figures for Boeing Commercial Airplanes with a minimum error was: 38%! (being the errors in revenues of: 0.05% for 2009, 3.2% for 2008 and 0.5% for 2007).

Thus, when figuring out the value of those 30,900 aircraft we could rather estimate it at 2.2 trillion dollars (instead of 3.6 trn$).

New entrants?

Randy Tinseth, BCA’s VP Marketing, was quoted in Flight Global saying that he expected at least one more competitor in the single-aisle segment. If there are more competitors, competition is going to be tight.

Today Boeing Commercial Airplanes and Airbus Commercial yearly revenues together approximately account for 70bn$. If their revenues are to grow with Boeing’s forecasted world airplane fleet growth of 3.3%, along the next 20 years the revenues of both companies combined would amount to 1.94 trillion dollars.

Considering that the whole market, factoring in discounted prices, was going to be 2.2 trn$, this leaves the rest of competitors a share of the pie of about 250bn$ for the next 20 years (excluding regional jets), this is just 11.4% of the market.

If we look at it on a per year basis: 12.5bn$ a year for all new entrants (CSeries, Embraer, MS-21, SSJ, C919, Koreans, Japanese…) would mean about 250 aircraft a year (compared to the ~380-400 single-aisle that each Boeing and Airbus are delivering per year).

There is room for one commercial success comparable to the 737 or A320 family, but there is not room for two… maybe this is why Randy says “one or two of those guys into the mix” (despite of the many more new possible players).

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