Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
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Boeing sees long-term demand bouncing back after pandemic
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.
Projected demand almost at 2019 level
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.
Air cargo’s growing value is pushing freighter demand
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.
Sustainability is shaping the future…but how much?
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.
The very very strong recent rises US dollar in relation to most leading currencies will reduce profits for US companies operating overseas
– who sell in other countries currencies and repatriate profits
– sell in US dollars and see their prices rise for foreign buyers
Boeing is affected by both these circumstances.
Cant help leasing either if the payments are in dollars
This is correct.
However, the dollar index is currently so high because interest rates in the US are presently much higher than in other major economies; if and when that interest rate difference declines, then the dollar index will start to decline again — though it’s unclear to what level.
US corporations have already announced major expected declines in earnings due to these FX effects.
Another revealing SCMP article on the recent Airbus deal in China:
“Geopolitics far from the only reason for Boeing missing out”
“China was quick to ground the 737 MAX in 2019 after fatal back-to-back crashes by separate overseas carriers in Indonesia and Ethiopia. Boeing admitted after investigations that faulty software was to blame, shaking global confidence in the bestselling plane. But China’s firms have a more immediate reason for concern; the cause of the country’s worst aviation accident in a decade, the crash of an older-model China Eastern Boeing 737-800 in mountains in Guangxi in March, killing all 132 people on board, has still to be determined. The top priority in aviation is safety and it is understandable, given Boeing’s recent record, why Airbus should be turned to.”
“The strength of the US dollar and weaker Euro are also likely to have been factors in the latest deal.”
https://www.scmp.com/comment/opinion/article/3185548/geopolitics-far-only-reason-boeing-missing-out
Yea, seeing as how the -800 crash was a suicide and China does not want to have that public.
It does not take this long to fix and download even the worst damaged FDR and CVR.
Interesting that China trusted the US to do the recovery of data and voice.
Of course safety has a lot of aspect and to date no one has fully answered the suicide issue. Some precautions can be done and we have yet to hear what China dictates as to one pilot left in the cockpit (not that you can’t get around that as well)
If they’re so fearful of the737 NG….. then .they were also quick to reinstate services as well!!
Why would they resume flying it 3 weeks after the crash.??
Guess you ignored Scott’s own report , citing it was an intentional act…
Clearly stated that in recent article.!!
Having difficulty with the inline reply feature again?
Scott, at the time, didn’t “report” anything — he repeated a rumor that was going around.
There was a partial/temporary grounding of production numbers close to that of the downed frame, after deployment of the type resumed.
Would say it’s a little more substantial than a rumor..
Considering many other aviation sites cited the exact same thing..
Looking more like an intentional act…
We understand…, you become strangely silent, when quoting news from others sites..,if they have anything beneficial to say on Boeing’s behalf. !!!
And — once again — a lack of links to back up your assertions…
Here’s one for you, from 2 months ago. One would have thought that an explosive revelation like this would have garnered constant attention since then? Oh, but wait, the story was based on rumors…that might explain it.
https://www.theguardian.com/world/2022/may/17/china-air-crash-that-killed-132-may-have-been-deliberate-says-us-report
TC:
Its not on Boeing behalf, its factual he has issues with if its valid for Boeing but of course selectively ignores Airbus.
In any case, why are you whinging about this to me?
The SCMP link that I posted is on a Chinese news site, and it expresses the Chinese perspective. It appears that the Chinese are unhappy with BA’s safety record, and that’s that. If you’re not happy about that, why not write to the SCMP editor and ask him to explain himself? The Chinese are leading the investigation into the crash back in March — I’m sure they’ll be very impressed by the rumors that you’re referring to (NOT).
That’s a cleaver use of a thirty year old catch phrase.Byrce!!
NOT !!!!
That got old fast ,just like your unfathomable bias towards Airbus!!!
No bias at all toward Airbus: I like other OEMs such as Embraer, ATR and COMAC just as much.
But no time at all for aerospace OEMs who consistently produce disgracefully sub-standard products — and we know who’s world number 1 in that field, don’t we?
I wish Boeing everything that it deserves.
Now, have you got anything substantive to say? Or are you going to continue in “auto-whinge” mode?
Yea, COMIC that has no world recognized cross certifications process and indeed failed the ones they tried is right up there with integrity!
FAA tried with the ARJ21, China failed so badly they both agreed to quit, then China found they could not meet even FAA low standards on the C9191 at which time the FAA quit, then EASA took a look at the C919 and threw up their hands as hopelessly mucked up.
So he would rather fly a self certified aircraft than a certified one!
Hmm, isn’t that what he accuses Boeing of doing, aka self certifying?
The illogic chips is just screaming along though granted he hoists himself on his own Petard. Funny how logic works.
Thanks for this post on Boeing’s forecast.