Opportunities to be found in declining commercial airliner market

Citation

(2009), "Opportunities to be found in declining commercial airliner market", Aircraft Engineering and Aerospace Technology, Vol. 81 No. 6. https://doi.org/10.1108/aeat.2009.12781faf.002

Opportunities to be found in declining commercial airliner market

Article Type: Mini features From: Aircraft Engineering and Aerospace Technology: An International Journal, Volume 81, Issue 6

Forecast International's “The Market for Large Commercial Jet Transports” predicts that 9,879 large commercial jet transports will be produced from 2009 through 2018. The Connecticut-based market research firm estimates the value of this production, as calculated in constant 2009 US dollars, at some $1.16 trillion. The study indicates that yearly production of large jetliners will decline each year through 2012, but then rebound in 2013, kicking-off a new recovery in airliner production.

With the large airliner market essentially a duopoly, Airbus and Boeing are projected to account for nearly 99 per cent of the forecast production. The study also examines market prospects for aircraft from other players in the market, including current and emerging competitors within the Russian and Chinese industries.

According to Forecast International, large jetliner production by Boeing during the 2009-2018 timeframe will total 5,152 aircraft, worth $616 million. Airbus production during the same period is forecast to total 4,611 aircraft, valued at $539 million.

The large commercial jetliner market is currently being battered by such factors as general economic decline, near-frozen financial markets, falling air traffic, slumping order rates, and mounting order cancellations and deferrals.

“Airbus and Boeing have consequently made some adjustments to production rates, but these have tended to be on the conservative side,” said Raymond Jaworowski, Senior Aircraft Analyst and the report's author. “Clearly, the two manufacturers do not want to cut production so deeply that they would be left flatfooted should the market suddenly turn upward.”

Nevertheless, Forecast International believes that market conditions will force further cutbacks in production, particularly in narrowbody build rates.

As in previous downturns, the manufacturers will attempt to find market opportunities as they navigate their way through the chaos. Both Airbus and Boeing are introducing new widebody aircraft onto the market, namely the Airbus A350 XWB and the Boeing 787. Launched first and scheduled to enter service first, the 787 has had considerable early sales success, which forced Airbus to respond with the XWB. However, the XWB is more than simply a 787 competitor.

“Airbus has positioned the XWB to cover a broad spectrum of the widebody market,” said Jaworowski. “The XWB series competes not only with the 787, but also much of Boeing's 777 family.” In order to meet the challenge of the XWB, Boeing may have to revise its widebody line-up, possibly by launching a stretched version of the 787 or a new 777 model.

During the next ten years, both Airbus and Boeing can also be expected to launch development of new narrowbody airliners to replace the current A320 and 737 narrowbody families. With the latter still popular, neither manufacturer is any hurry to launch all-new replacement families, though calls are increasingly being heard for such aircraft from within the customer community. Also putting on some pressure is Bombardier's launch of its new CSeries family of 100-145 seat jetliners.

In the meantime, in order to cope with falling traffic and declining revenue, airlines are looking to cut costs and control capacity. Aircraft orders are being cancelled or deferred as many carriers are no longer in a position to take on additional capacity. Consolidation is changing the face of the airline industry, as some carriers disappear and other merge to form larger entities. Consolidation takes other forms as well.

“Much future consolidation activity in the airline industry will involve the expansion of marketing alliances and code-share agreements among carriers,” said Jaworowski. “In some cases, such arrangements may set the stage for a formal merger.”

Also, impacting the future airliner market will be new government regulations concerning aircraft emissions. The European Union (EU) is unilaterally incorporating airlines into its Emissions Trading Scheme starting in 2012. Eventually, other governments may follow suit and impose similar schemes on the airline industry. Emissions regulations will increase operating costs for airlines, and also serve as an impetus to airlines to look at their fleets and replace existing aircraft with new, more efficient models. Airbus and Boeing can be expected to increasingly take environmental factors into account when designing new airliners.

For more details, please contact: Forecast International, Tel:+1 203 426 0800.