July 16, 2022, © Leeham News: After years of market turmoil, Boeing and Airbus see brighter skies–and bigger order backlogs–ahead. Both companies maintained confidence that demand for aircraft would bounce back as the COVID-19 pandemic ebbed. Passenger traffic and aircraft utilization seem to back up their optimism. Traffic is bouncing back despite short-term economic concerns, a pandemic that is still smoldering and Russia’s invasion of Ukraine.
Boeing projects demand for 39,050 new commercial aircraft, excluding regional jets, over the next two decades, according to its Current Market Outlook, which it released Saturday. The company’s forecast is in line with Airbus’ forecast of demand for 39,500 aircraft. Single-aisle aircraft make up three-quarters of demand in both companies’ outlooks. Boeing is slightly more bullish on passenger widebody demand.
Sustainability is an increasingly important factor in Boeing’s market outlook. It is also a relatively new variable, and how much it will shape market demand and in what ways is not very clear.
Boeing projects demand for 41,170 commercial jet aircraft through 2041: 2,120 regional jets, 30,880 single-aisle, 7,230 widebody and 940 freighters. The company expects that demand to be largely evenly split among North America (23%), Europe (21%), Asia Pacific (21%) and China (21%). The rest is split among the Middle East (7%), Latin America (5%) and Africa (2%). Given the current war in Ukraine, Boeing’s outlook excludes the Russian market.
The U.S. aerospace giant sees slightly more than half the global demand coming after 2031. In the next 10 years, it forecasts global demand for 19,575 new aircraft: 1,170 regional jets, 14,620 single-aisle, 3,300 widebody and 485 freighters. The regional distribution is roughly the same as the overall outlook.
If Russia is included in the 10- and 20-year forecasts, the overall numbers are fairly close to 2019’s pre-pandemic outlook. The 10-year projection is nearly the same: 20,550 aircraft in 2019, 20,285 (19,575 plus 710 for the Russian market) in 2022.
There is more room between 2019’s 20-year outlook and the current year. Boeing projected 44,040 deliveries over 20 years in 2019. This year, it forecasts 42,710 deliveries, including the Russian market (41,170 plus 1,540). That is a 3% difference.
Boeing continues to expect domestic passenger traffic to return to 2019 levels by early 2023, followed by long-haul traffic in mid to late 2024, based on current trajectories, Boeing’s Vice President Commercial Marketing Darren Hulst said.
Airbus gives a wider range–between 2023 and 2025.
Single-aisle traffic is bouncing back strongly. Already, 98% of narrowbody aircraft flying before the pandemic are operating again. Widebodies continue to lag, with less than 80% back in operation, according to Boeing.
Airlines have been dusting off planes they parked during the pandemic, especially in Europe and Asia. Since June, 1,000 single-aisle aircraft have been taken out of storage, according to Cirium. Single-aisle aircraft utilization for domestic U.S. travel is 1% higher than it was in 2019. In Latin America, it is 9% higher than pre-COVID-19 levels.
To be sure, airlines face plenty of short-term economic challenges. Several are driving up costs–higher prices for fuel, labor and maintenance, among other expenses–which will likely mean higher ticket prices. At the same time, global GDP growth is slowing. And, the COVID-19 virus is no slouch. It continues to mutate, ready to throw a wrench in the works.
COVID-19 spurred ecommerce to new heights. Ecommerce is now a structural driver of economic growth through the next decade, Hulst said during a pre-Farnborough briefing. That shift in purchasing behavior is causing ripples throughout the global cargo and shipping industry.
“The speed and reliability of air cargo is an important aspect and a strategic value to the freight forwarders and shipping companies” far more today than it was three to five years ago, he said.
Capacity discipline and consolidation in the shipping industry should continue to increase the relative value of air cargo to ground and sea freight, Hulst said.
However, air cargo’s high yields compared to container shipping during the pandemic are “clearly phenomenon of extreme shortage of supply and extreme demand because of challenges in the supply chain related to shipping,” he said.
Currently, air cargo makes up about 1% of global freight. Even a tiny shift from container shipping to air cargo would greatly increase demand for freighters, he said.
Boeing projects demand for 940 new freighters–515 large widebodies and 425 medium widebodies, plus about 1,850 freighter conversions–555 widebody conversions and 1,300 narrowbody conversions. That makes a total demand of just under 2,800 freighter deliveries and conversions. Airbus projects 2,440 new-build or conversion freighters through 2041. As LNA has previously reported, with the Airbus A350F, Boeing faces its first credible competition in the widebody freighter market since it merged with McDonnell Douglas in 1997.
The drive to decarbonize aviation and other sustainability pushes are major variables that could significantly shape future demand for aircraft. In the near term, OEMs are focused on innovations such as sustainable aviation fuel. Longer term, though, new technologies could disrupt the large commercial aircraft industry.
Boeing accounts for sustainability in its market outlook as best as it is able to, Hulst said. “The more and more detail we have into how sustainability measures will truly impact the cost of aviation, that’s still largely unknown in specific markets.”
There are signs that it is affecting some ultra-short haul and short haul markets, he said.