Boeing’s 2012 Current Market Outlook

Randy Tinseth, VP Marketing for Boeing, outlined Boeing’s update for the Current Market Outlook for the 20 years from 2012-2031. Aircraft in the world fleet has nearly tripled from about 6,500 to more than 19,000 today.

(We will post more detail July 5.)

  • Fuel prices have forced some regional jets out of the market because they are no longer viable, Tinseth says.
  • There will be 13,000km in of high speed rail in China by the end of this year, more than the rest of the world combined.
  • By 2020, China will open 97 new airports.
  • 60%-80% of travel is tied to GDP and economic demand.
  • Passenger travel has historically grown at 5% per year.
  • Non-stop, point-to-point, more frequency growing and airplane size is shrinking.
  • Expect to see world fleet grow to nearly 40,000 airplanes by 2031. 40% of demand will be for retirements, 60% for growth.
  • Replacement market is very, very important for us. 500 retirements last year.
  • There will be demand for 940 production freighters.
  • China, Asia, Asia-Pacific will grow the fastest. 35% of demand will be here.
  • Cargo traffic has been much more volatile because more closely tied to economies. Growth has been steady but has slowed.
  • Over next 20 years see demand for 2800 freighters, 940 new, rest conversions. 940 airplanes valued at $250bn.

Q&A

  • About Airbus Mobile: I was a salesman and to be successful you have to do three things: it’s about the product and pricing; it’s about people; it’s about your relationship. Your customers are focusing on those things, not the address on your business card. What drives US and North American airlines, it’s about the business case. I don’t see how this drive the business case. You have to ask Airbus about efficiency. They are building airplanes in four different places.
  • About the $500bn increase in value over 20 years: We will see some modest up-gauging in single aisle market, from A319/737-700 size to address airport issues to A320/737-800 and will see it go to 737-9/A321. This is driving some of the change. The twin-aisle market sees the strength in the 777-300 size aircraft.
  • On the twin-aisle market: it’s split about 50-50 between small twins and large twins, a little heavier toward large twins. Long-term expect shifting up from 787-8 to -9 and -10.
  • On Very Large Aircraft: demand down about 1%. Big airplanes are operated by a handful of carriers in a handful of markets. We’ve probably been a little optimistic in this. A380 after 10 years has sold about where we expected (there are 258 sales–editor).

46 Comments on “Boeing’s 2012 Current Market Outlook

  1. If 60%-80% of (all) travel is tied to GDP and economic demand, how can we expect to double the size of the airliner fleet to 40,000 airplanes in the next 20 years? It seems to me we still have a few more ‘lean economic years’ ahead just for the airline industry alone.

  2. A twenty year outlook provides a large overview with a big paintbrush. It minimizes the normal ocillations that occur from time to time with some of these vibrations intruding on the predictions in a major way. It is impossible to predict the future with any accuracy . This report describes some trends and some information that can be the basis of comparison from year to year and reinforces the necessary optimism that growth is inevitable in the long term and orders will have to follow .

    Given the long lead period for new development and the delays and waiting list for delivery, many carriers have to put on their future glasses and try to react accordingly.

    • not sure what you’re getting at? Twenty year forecasts are industry standard. Airbus, Bombardier, Embraer, Boeing… all do 20 year forecasts.

      • He is telling you that all 20 year forecasts need to be taken with an optimistic grain of salt.

        They do not account for things like the pre Sept 11 american airline decline, the Sept 11 attacks, SARS outbreaks, asian stock market crashes, tsunamis, volcanos, earthquakes, american bank created economic recessions, EU crises and all the other negative influences that can occur over any 10 year period.

  3. •Non-stop, point-to-point, more frequency growing and airplane size is shrinking.
    Sounds like the new small airplane is the next logical step.

    • In fact, despite the long-standing Boeing mantra, average aircraft size is increasing – as can be seen from analysis of successive CMOs. Indeed, Tinseth acknowledged in his briefing Tuesday that aircraft size likely will increase 4-5% over 20 years.

    • I think that sentence should be translated to read –
      in our opinion 787 is the future, not the 380

  4. I believe that “point to point” they are referring in point to point on longer range transcontinental flights. The low cost carriers in Europe and NA already have challenged the hub and spoke system; Trans-Atlantic has already fragmented with the smaller twins handling that market. The area still largely undeveloped is transcon to Asia. Long range twins are the right planes to achieve this.

  5. So the fact that “they are building airplanes in four different places” makes Airbus inefficient?…I suppose multiple facilities makes Toyota, Hyundai, Honda, and BMW “inefficient”…hmmm…who knew?….

    • Depending on where they source their parts from… yes. Airbus sources from all the same factories in Europe, therefore when opening a FAL in China or in the US it will be less efficient than their current factories in Europe. It takes about a month to ship parts from Hamburg to Tianjin.

      The car companies source in the US by and large. This is in part why the stand alone FAL in Mobile makes little economic sense. Politically, sure. PR, sure. Economics… not so much.

      • Howard :
        Depending on where they source their parts from… yes. Airbus sources from all the same factories in Europe, therefore when opening a FAL in China or in the US it will be less efficient than their current factories in Europe.

        You ignore that Boeing already gets a significant amount of 787 parts – including structural parts – from all over the world and and Airbus gets plenty of parts from the US even today. (And let’s not even get into other industries where this kind of global supply and manufacturing chain is even more prevalent.)
        So I really don’t think that the US assembly line is going to be much less efficient (or actually at all less efficient) than the European ones.

      • @afromme “Airbus gets plenty of parts from the US”

        Doesn’t it depend upon what extent the large aircraft sections are integrated before being shipped to their final assembly line?

        Airbus A350 fuselage sections and even 787’s, as examples, are being stuffed as much as possible before shipment to their FAL. Photos of an A320 front cockpit and fuselage arriving in China show all the windows installed, the door, the wing tip fence, and even the pitot tubes are in place.

        http://news.enorth.com.cn/system/2008/07/25/003588934.shtml

        Can we reasonably assume Airbus won’t buy windows made in the US, install them in Hamburg then re-ship the whole thing to Mobile?

        Would Airbus contract with Goodrich for landing gears when European Messier-Dowty already has the contract?

        With some ownership share in the Airbus Tianjin factory the Chinese can get a certain amount of local content. The Mobile factory won’t have any leverage.

        On big expensive part that can be domestically sourced are the engines.

    • can we please stop comparing aviation to automobiles.
      the production run of the most successful a/c is about the same as a ferrari 360 spider (7,500), the cost per lb of an 1200 hp Bugatti Veyron Super Sport is ~650 $/lb – the cheapest LCA (per weight) – the A380 is ~2800 $/lb
      Not to mention the size difference and the small fact that only one of these catagories regularly flies over (and thus endangers) large urban centers – the other operates at it’s peak performance only in closed of circuits.

      Aircraft and Automobiles are dissimilar products, requiring different metrics and economics!

  6. Boeing keeps dismissing the VLA market. What else can they say? The market is there but -8i aint so popular?

    In reality a hand ful of carriers is nearly 20, new carriers introducing it every year, production is coming up to steam, passenger prefer it, airlines love the CASM and unique capacity. Pitty Randy. ANA, UA, DL, CX, CA replacing their VLA’s transpac in growth markets is a question of time and they are likely to follow their international competitors.

    Next operator will be BA, a Boeing airline that just didn’t need the A380, a few years ago.
    http://www.flightglobal.com/blogs/aircraft-pictures/Landing%20BA%20A380large.jpg

    • The VLA market is small, just accept that fact, it was small before the A380 and it will still be small with the A380. You make the misstake and think A380 is in the same market as the 747 once was, but back when 747 touched 1000 orders there was barely a large twin to pester the market. Back in 1969 VLA was the only way to travel far, today you have the same range in a small twin like A330 or 788.

      Point to point will be very popular as hubs are too crowded already, I hate going thorugh mega hubs, takes forever! This is where Boeing should aim with the NSA, a long and thin, point to point large NB. Killing 788 below 4000nm 🙂

      A380 is a dinasaur, mega beast for mega hubs, not my cup of tea! 🙂

      • Well, the air travel in the regions served by hubs will grow as well, and adding capacity at Heathrow, Charles de Gaulle, O’Hare, H-J, JFK, etc ain’t so easy… one (of few) options is to add larger a/c. Enter the VLA.

        And the, with B, so popular p2p scenario is not the likely only growth alternative either. Why? sayesth thou. Because, the travel that increases is also travel from one small(er) city to one bigger. I do not think Topeka to Tangier is a future hot city-pair, but more likely Topeka to Tokyo. Or Gothenburg to New York, or Bologna to Miami. With one city in the pair being a “mega-hub” capacity at that airport needs to be increased. Enter the VLA (not for those particular routes, but for those between the bigger city pairs, freeing up slots).

        Sure, there will be p2p routes that are between medium sized city pairs, like Cincinnati to Rome or Valencia, but my point is that it is not either the hub-and-spoke or p2p, there might well be a mix of those and also a third variant: the big2small. And 2 of 3 of these scanarios benefit from the capacity that VLAs free up.

        So I think that the VLA market might be bigger than you think once airports are slot limited (a number set to grow, and grow).

  7. afromme :
    You ignore that Boeing already gets a significant amount of 787 parts – including structural parts – from all over the world and and Airbus gets plenty of parts from the US even today. (And let’s not even get into other industries where this kind of global supply and manufacturing chain is even more prevalent.)
    So I really don’t think that the US assembly line is going to be much less efficient (or actually at all less efficient) than the European ones.

    We are discussing Airbus… NOT Boeing. Boeing is irrelevant to this discussion. It’s not a matter of worker efficiency, but rather LOGISTICAL. You are free to argue that it will cost zero for Airbus to ship it’s parts to Mobile, reality will speak otherwise.

    • Howard :
      We are discussing Airbus… NOT Boeing. Boeing is irrelevant to this discussion.

      As Boeing made the comment, it’s certainly fair game for critique and comparison. That said, I find their comment a little ironic given their decision to outsource and ship major structural components from overseas and build a new FAL on the other side of the country. Their motives may differ but the point remains.

      On another note…

      “it’s about the product and pricing; it’s about people; it’s about your relationship. Your customers are focusing on those things, not the address on your business card.”

      Well, it’s considerably easier to build and maintain such client relationships when the address on your business card happens to be in the same country.

      • Well, it’s considerably easier to build and maintain such client relationships when the address on your business card happens to be in the same country.

        We’d point out that Airbus has a sales team with an American address–they’re at Airbus Americas in Herndon, VA.

      • leehamnet :
        We’d point out that Airbus has a sales team with an American address–they’re at Airbus Americas in Herndon, VA.

        Sure, but I’d argue the bigger the footprint, the easier it is to build on existing relationships and establish new ones.

        That said, I didn’t know they were situated right by Dulles. Next time I visit my brother, I’ll have to stop by and see if I can harass them for some swag 😉

  8. A new oil crisis will make all these global supply chains a very costly way of putting things together. It might even disrupt the logistical stream for a while. We have built a fragile world the last 10 years..

    • I agree with you. Transportation costs (TC) can be just as important as manufacturing costs (MC). Aircraft manufacturing got away with it so far because the ratio TC/MC is still very low. But we can already see that for other kinds of goods there is a high degree of sensitivity to the the price of oil, which affects transportation costs directly.

  9. The states are a huge Airbus supplier all those parts (including the engines) will be send directly to Mobile

  10. MNEJA
    “So I think that the VLA market might be bigger than you think once air-
    ports are slot limited (a number set to grow, and grow).”
    I agree with you and the principle issue controlling this whole issue is:
    CONGESTION AT MAJOR HUBS, which is already at saturation point
    at many big airports worldwide, because of which the 787 was originally
    designed, to allow direct flights from one smaller city to another one like
    it on the other side of the world, relieving congestion at major hubs,
    allowing the passengers to avoid the drag of an un-nesasary transit stop
    AND all at a lower cost!
    At the same time, O & D traffic between the major hubs will also grow
    exponentially, requiring ever more VL aircraft like the A380(STR) and
    hopefully also 747-8I’s!

    • Hello,

      sure more p2p traffic would easen the congestion at the hubs (most of which are also very large cities). But my point was that it is not two scenarios that will be seen in the future (i.e. some mix of these two), but three: also one where one of the cities in a pair is a world metropolis (and as such very likely to have a slot limited airport – major hub).

      I think this third scenario is often overlooked beacuse it is always easier just to juggle two in your mind, and people tend to prefer the simpler explanation/scenario just because their mind fins it easier to grasp (the brain is quite a lazy organ).

      So, two (hub-and-spoke and big2small) scenarios from three will need more slots to grow (and grow they will), so more VLA’s needed (not only solution, but maybe the most obvious).

      As p2p grows this will help the situation at the hubs, but I doubt that will be enough.

      • In fact, although I don’t travel much, when I do it is almost always some mix of point-to-hub (Toulouse to anywhere) and hub-to-hub or hub-to-point (Paris/Amsterdam/London/Frankfurt to destination). The second leg of that is usually in the (V)LA category.

        I expect my situation is pretty much the norm for most people.

  11. For those that think the future is point to point I would like to mention how such routes hihgly touted by Boeing (Dallas/Houston? to ?) are being cut out and not increased. Hardly a good sign that hubs are disappearing. I think the problem is, that no matter how much we all want to fly point to point, there are too many smaller cities where not enough people fly to all of the other smaller cities. A midweek flight is totally useless and you can’t have them all on Mondays and Fridays.

    By the way, point to point is something that I would love to have as I do not live in a city with many direct destinations and must therefore change at least once, and often go through security a second time, for 90% of the destinations I would like to fly to.

    • Should have read your comment before posting my reply to Rudy… you add some very good insights…

      I live in a smaller city as well, and I’d love more p2p traffic, but we are not just that many to support it. They have been talking about a TATL to NYC once or twice a week, but that would be it am afraid.

      We have intra Europe flights and many of these are p2p, but not even here we can support all destinations that I would like to see (many flights to hubs like AMS, CDG, MUC…). Not that these flights would ever use a 787 or similar, but still, it still adds to the argument that smaller cities just cannot support the traffic. Not enough people that want to go to the same destination…

  12. One of the Randy comments is totally inaccurate .. . !

    “There will be 13,000km in of high speed rail in China by the end of this year, more than the rest of the world combined.”

    China is very very far to get this Railways huge net operating soon !
    Randy, you are totally false ! We are speaking … of a 5-10 years project at least !

    China Railways are struggling to open only some hundredth of miles now and keep them working correctly !

    http://www.guardian.co.uk/world/2011/jul/25/chinese-rail-crash-cover-up-claims

    http://traveldailynews.asia/news/article/49880/a-new-high-speed-train-opens

    May be be High speed notion , American (And Randy Timseth) way is just above 60 Mph ??

    • it is indeed on the web page too.

      http://www.boeing.com/commercial/cmo/high-speed_rail.html

      Maybe they meant decade iso yr. Anyway anyone writing, checking or repeating it isn’t good with numbers and estimations or probably overfocussed on aviation. I see some other numbers on the page too, ” In 2010, worldwide railways carried 45 percent less passenger traffic … than commercial aviation. ” I know several million people have a job at the Chinese and India railways, transporting staggering amounts of people on a daily basis, is Boeing creating a realistic perception here?

      • keesje :
        I see some other numbers on the page too, ” In 2010, worldwide railways carried 45 percent less passenger traffic … than commercial aviation. ” I know several million people have a job at the Chinese and India railways, transporting staggering amounts of people on a daily basis, is Boeing creating a realistic perception here?

        The old Mark Twain quote about lies, damned lies and statistics comes to mind here: you can almost always spin statistics to support whatever conclusion you want.

        In this case, Boeing is comparing total passenger-kilometres for rail and air, when rail is focused on short-hault traffic, and long-haul air traffic will skew up the totals for air.

        I expect that if you only compared rail traffic with narrow-body air traffic (a reasonable proxy for short-haul air traffic) the numbers would be far closer, and rail traffic might actually exceed air traffic.

    • Status Jan 2011 : 8,500km high speed rail >200kph
      The end of 2012 ( one year ahead of schedule )
      ~13,000 projection doesn’t seem so far off.

      guardians breathless “we will all die” reporting may
      not be the best information fount.
      Other nations had large rail accidents but nobody
      in his right mind would diss those nations as china
      is dissed.

  13. I am surprised that a Boeing executive doesn’t understand how Airbus in Mobile supports a business case.

    Let me help with that:

    1) Customers do care about business address especially the U.S. government.

    2) Building airplanes in a non-union environment like Alabama must be tremendously less expensive than Europe and this leads to a better price for airlines. In addition, there is more flexibility to reduce the size of the workforce in response to the business cycle (Boeing wrote the book on this one).

    3) Airbus has a mismatch between airplanes sold in dollars and a large portion of costs in Euros. Building airplanes in the U.S. reduces this.

    4) The U.S. government subsidizes financing of airplanes and Airbus airplanes assembled in the U.S. likely qualify.

    Look’s like Airbus has stolen the PR war at the airshow again.

    • 2. expensive workforce.

      the legal setup ( in Germany “Mitbestimmung” ) and formal interaction of participants ( employer, employees, workerepresentation and unions ) is extremely different to the US setup.

      EU productivity is good enough to produce competitive airframes under an overvalued Euro ( against the dollar ).

  14. I am not excited about forecasts from both the players ; it is a nice duopoly and both agree in general that commercial aviation will grow well with globalization and economic growth in that order ,apart from lifestyles driven by mobility.
    To some extent , both spin- on the product segments- which suit their strategies;A talking of capacity constrained hubs-while B talking of point to point -the first one requiring big jumbos (read 380) and the latter -medium long haul. That is why A went in for the big whale jet and B went in for 787.
    India – US , one of the fastest growing sectors is a classic case of point of point taking over; we now skip the legacy hubs-Bombay and Delhi, right to the cities in the south. Interestingly except for an occasional 747 from Lufthansa , all other planes are twins. 787/350 will just be what the doctor ordered for these routes from many US cities.
    In general , Boeing gets it better (till the recent 320 Neo) on product markets ; With Neo , A got back into a lead , pushing B on the defensive.The next big battle is long haul twin ,higher capacity.Let us see how it goes.

    • vaidya sethuraman :
      I am not excited about forecasts from both the players ; it is a nice duopoly and both agree in general that commercial aviation will grow well with globalization and economic growth in that order ,apart from lifestyles driven by mobility.
      To some extent , both spin- on the product segments- which suit their strategies;A talking of capacity constrained hubs-while B talking of point to point -the first one requiring big jumbos (read 380) and the latter -medium long haul. That is why A went in for the big whale jet and B went in for 787.
      India – US , one of the fastest growing sectors is a classic case of point of point taking over; we now skip the legacy hubs-Bombay and Delhi, right to the cities in the south. Interestingly except for an occasional 747 from Lufthansa , all other planes are twins. 787/350 will just be what the doctor ordered for these routes from many US cities.
      In general , Boeing gets it better (till the recent 320 Neo) on product markets ; With Neo , A got back into a lead , pushing B on the defensive.The next big battle is long haul twin ,higher capacity.Let us see how it goes.

      The problem is that there is not one solution to a problem.

      You travel from JFK, yes the 787/A350 direct to BLR could be an option sometime in the future (but today it is A340s between FRA and CDG at one end and BLR at the other end as one of the legs). Travel from Toronto and the 787 to BLR is probably not an option because there is just not enough traffic between theses cities.
      On the other hand there is EK and their DXB hub. For cities like Toronto to BLR, that is probably the way to go and you know what, the chance to be on a A380 on one of these legs is quite high.
      End the end it is all about execution of the model you choose, and today coming from Europe or North America, south India is best served by EK and their very well executed hub and spoke model. Maybe that changes when the point to point model gets executed better, but I don’t see that come anytime soon.

  15. Scott,

    Trying to go back to the original thread. The only meaningful part of a forecast is its accuracy. The only partial measure is, how did the previous forecast work out?

    My question is, what did B and A project 20 years ago, 10 years ago, 5 years ago? How accurate were those forecasts?

    • Tinseth actually addressed this. He said that to cross-check their data, they go back and look at their forecasts over the last 20 years. They’ve been within 2-3%.

      • Scott,
        Is this the same as saying that a review and comparison of all the Boeing forecasts have indicated that their predictive data fall within 2-3% accuracy

  16. leehamnet :
    Perhaps another way to say it is that the forecast has been 97%-98% accurate.

    any forecast that bracketed 911 or the GFC that “hit home” was significantly off.
    ( or the forecaster new about 911 or the GFC in advance.)

    • Actually Uwe, the sales record years of 2006-2010 for both OEMs significantly off set the lost sales oppurtunities after 9/11 (2002-2004).

  17. Actually Aboufulia looked at the impact of 911 and in the short term there was a huge drop, but after a few years it returned to normal and looking at the long haul it just looks like a blip – lots like the periodic stock market crashes. He also concludes in the same commentary that both A and B’s short term production rates don’t support the longer term growth and expects them to have to cut back production rates in the relatively near future.

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