Worldwide Fleet Forecast Presented to: Montreal June 6, 26 DAVID BECKERMAN Director, Consulting Services
Agenda State of the Industry Worldwide Fleet Regional Jets Narrowbody Jets Large Widebody Jets Freighter Market New Aircraft Programs
The industry continues to struggle for profitability The Good: Global passenger air traffic has grown at a 4.7% annual rate since 1999 with a positive outlook for growth over the next decade Asia, China, and emerging markets continue to create opportunities for expansion as the regulatory environment improves and more of the sky opens The global economy continues to remain strong driven by China and the United States LCCs continue to take hold around the globe, which helps stimulate demand for air service Air fare increases appear to be sticking The Bad: However, airlines are demanding greater fuel efficiency to combat rising fuel prices that have increased at a 15.5% annually since 2 North American bankruptcies have created a level of uncertainty as carriers restructure fleets and schedules inside of bankruptcy protection 1,5, 1,4, 1,3, 1,2, Source: IATA $9 $85 $8 $75 $7 $65 $6 $55 $5 $45 $4 $35 $3 $25 Source: ATA 1,257,754 Passenger Traffic (RPKs) 1,232,599 1,232,599 1,257,251 1,449,61 1999 2 21 22 23 24 25 $33.87 $3.3 RPK Crude Oil and Jet Fuel Prices ($/bbl) $32.64 $3.1 $25.92 $26.1 $35.67 $31.14 $48.14 $41.44 $69.57 $56.48 $88.29 $69.44 2 21 22 23 24 25 Q16 Q26 WTI Crude Oil ($/bbl) 4.7% 15.5% Jet Fuel ($/bbl) $88.8 $7.53
Worldwide fleet: Expected to grow at a 4.4% annually through 216 Regional Jet and Widebody aircraft fastest growing segments Number of Aircraft 3, 25, 2, 15, 1, 5, Global Aircraft Fleet Forecast 2,559 4,416 1,797 4,967 2,634 3,86 14,392 9,569 26 216 : 3.6% 5.3% 4.9% 4.2% Regional jet aircraft are expected to experience the fastest growth over the next 1 years as airlines take advantage of unit cost benefits of the new larger RJ equipment Demand for widebody aircraft is also expected to be strong as longhaul markets continue to model strong demand Freighters, mostly large widebody aircraft, will have positive growth over the next decade as global air freight volumes continue to expand driven by Chinese air freight volumes Narrowbody Widebody Regional Jet Freighters
Worldwide fleet: Emerging markets drive demand for capacity China, Russia, India, Asia, and Africa expected to grow rapidly Global Aircraft Fleet Forecast - Regional Breakdown 9, 8, 7, 6, 5, 4, 3, 2, 1, 3.1% 8,433 6,238 North America W. Europe 3.7% 4,15 2,842 4.6% 3,21 8.7% 6.2% 2,44 2,278 1,955 989 1,74 Asia Pacific China FSR 5.7% 5.9% 6.% 6.4% 1,122 7.4% 647 81 869 457 484 563 43 34 21 Latin America Africa Middle East E. Europe India 26 216 China s aviation industry is expected to grow rapidly over the next ten years and is likely to liberalize more aviation agreements while domestic demand will also expand Other emerging markets will demand additional capacity as traffic expands and economic regions such as Russia and India develop The two largest regions, North America and Western Europe, will experience growth, albeit at a slower pace
Regional Jets: Growth comes in larger seat categories Over 1 seat aircraft fastest growing segment Regional Jet Aircraft Fleet Forecast (.8%) 11.2% 1,75 1,5 1,25 1, 75 5 25 (.9%) 129 118 1,642 1,516 546 1,578 192 8.7% 444 19.8% 125 76 26 216 Demand for RJ aircraft with less than 6 seats is expected to be negligible as these aircraft struggle to find profitable markets to operate The 6-79 seat RJ aircraft is expected to account for 53% of all incremental RJ aircraft entering the worldwide fleet 2/39 4/59 6/79 8/99 1/119 Seat Category
Regional Jets: Mature markets drive capacity changes, while emerging markets fastest growing Russia, Middle East, and Latin America growing fast Regional Jet Aircraft Fleet Forecast - Regional Breakdown 2,5 2,25 2, 1,75 1,5 1,25 1, 75 5 25 2.9% 2,464 1,851 North America W. Europe 4.4% 26.% 8 13.8% 15.1% 519 24.2% 8.7% 334 7.8% 22.9% 4.5% 24 151 174 124 33 56 37 2 54 49 14 6 47 9 14 FSR Asia Pacific Africa Latin America E. Europe China Middle East India 26 216 Norht America s large RJ aircraft (1 to 119 seats) are forecast to grow by 29% annually as several U.S. airlines forge new pilot agreements and replace older, less efficient narrow body jets (DC9, MD8) The former Soviet Union is expected to purchase western 6-79 seat RJ aircraft as they replace older Russian-built aircraft in this market segment
Narrowbody: Growth expected to come from larger aircraft Nearly 9% of fleet will be 12+ seat aircraft Narrowbody Fleet Forecast 5.% 4.9% 6, 5,5 5, 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 (2.%) (3.1%) 159 17 165 12 1.% 1,2241,351 5,327 3,315 5,818 3,564 4.4% 1,759 1,142 26 216 Largest growth will be in the 14-169 seat category Airbus accounts for over 56% of confirmed orders and options in the category, 29% of which are A32 aircraft Boeing 737-7/8s account for 42% of the total orders and options 6/79 8/99 1/119 12/139 14/169 17 Plus Seat Category
Narrowbody: North America and China account for nearly half of the fleet additions Expected to account for 27% and 2% of new aircraft, respectively Narrowbody Aircraft Fleet Forecast - Regional Breakdown 5,5 5, 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 3,755 North America 3.1% 5,84 1,713 W. Europe 3.5% 2,46 759 China 8.7% 1,752 1,447 1,417 945 977 FSR 4.4% 3.8% Asia Pacific Latin America 4.% 88 546 319 Africa 4.2% 5.7% 481 396 31 291 227 15 178 E. Europe India 7.5% 5.% Middle East 26 216 Domestic U.S. traffic is forecast to continue to grow with GDP requiring significant narrowbody aircraft Intra-EU traffic is expected to grow steadily over the next ten years as low-cost carriers expand networks across Western Europe, driving demand for narrowbody aircraft in Western Europe Fastest growing markets such as China (majority Boeing aircraft on order) and India (mainly Airbus aircraft on order) will require narrowbody aircraft to satisfy domestic traffic demand growth
Widebody: Expected to grow 4.9% annually through 216 261-399 seat aircraft will account for nearly 5% of total widebody fleet Widebody Fleet Forecast 25 5.% 2,333 Move towards larger aircraft reflects need to reduce per seat costs 2 15 1 4.6% 1,347 855 1,437 5.% 1,264 774 26 216 New generation aircraft such as the 787, A35 will play an important role in this aircraft segment Despite buzz surrounding the A38, the overall fleet share of the largest jumbos will remain approximately the same in the future 5 19/26 261/399 4 Plus Boeing accounts for nearly 6% of firm orders and options for widebody aircraft Seat Category
Widebody: Asia will drive widebody growth over next ten years Asia/Pacific and Middle East account for nearly 6% of aircraft additions Widebody Aircraft Fleet Forecast - Regional Breakdown 1,5 1,25 1, 75 5 25 4.6% 1,572 1, 3.9% 3.4% 885 86 61 614 Asia Pacific W. Europe North America Middle East 5.9% 8.8% 529 422 5.8% 6.2% 298 5.6% 7.5% 6.5% 181 199 174 113 147 96 85 16 51 26 5 China Africa FSR Latin America India E. Europe 26 216 Widebody capacity demand in intra- Asia is driven partly by emerging markets such as China and India, which continue to develop as sources of passenger traffic Indian and Gulf carriers have placed firm orders or options for over 225 widebody aircraft
Freighters: Expected to grow 3.6% annually through 216 Asian freight growth drives predicted capacity growth 3.7% 874 9 75 65 6 45 3 Freighter Fleet Forecast 4.8% 4.5% 556 523 338 349 55 1.9% 67 25 216 Approximately 7% of all freighter additions will be passenger conversion aircraft Large widebody additions are expected to be converted 747-4 aircraft as well as new A38 and 747-8F Medium widebody freighter additions will likely be converted MD-11, 767, and A33 aircraft 15 Large Widebody Medium Narrowbody Seat Category Medium Widebody Small Narrow body Converted 737 and A32 aircraft will help fill the capacity requirement of the slower growing small narrowbody sector Asian, particularly Japan and China, air freight trade with North America and Western Europe drives capacity needs
New Aircraft Programs: Boeing dominating mid-sized segment Boeing 787 has proven to be market superior to Airbus A35 A34 (-3/-5/-6), 8% Medium Widebody Orders and Options (1,268 aircraft) A35 (-8/-9), 1% Boeing 787 (-3/-8/-9), 37% Boeing, driven by the 787 and 777, accounts for two-thirds of all orders or options for medium widebody aircraft 787 orders and options (461) have thus far outpaced those for the A35 (124) A33 (-2/-3), 16% Boeing 767 (-3ER/- 4ER/-3F), 4% Boeing 777 (-3ER/- 2ER/-2LR/-2/-3/- 2F, 25% ILFC and GECAS have both stated that a complete re-engineering of the A35 may be warranted to make it more competitive to the 787 Source: BACK Fleet inet
New Aircraft Programs: Airbus challenging Boeing dominance in large widebody segment Airbus A38 has early lead in orders and options 747-4F, 6.9% 747-8F, 8.7% Large Widebody Aircraft Orders and Options (275 aircraft) A35 (-8/-9), 1.% A38-8F, 17.1% Airbus has 215 orders and options for the A38-8/8F However, deliveries of the A38 have already been delayed by six months with first delivery scheduled for December 26 Boeing only recently announced their next generation large widebody, the 747-8, which has secured only 24 orders thus far (all in freighter configuration) 747-4ERF, 6.2% A38-8, 61.1% However, with large 747-4 customers installed in market place currently, the 747-8 makes a logical fleet renewal selection for many of the large widebody carriers Source: BACK Fleet inet
Conclusions and Implications The industry s drive to lower costs will drive the average seat size in each aircraft segment upwards Most pronounced in regional jet market North America will feel the greatest affects in this seat category Moreover, proliferation of regional jets in smaller markets means this segment affects more airports in North America than any other Large airports will want to focus on meeting the operational challenges of the shift back to larger widebodies Particularly important for airports seeking new or expanded Asia-Pacific service Airport operators will need to evaluate how this upward drift affects air carriers and passengers Changes in gate utilization by carriers Need for increased space per gate to accommodate larger loads Revenue effects
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