20 August 2004
20 August 2004
Boeing’s current market outlook models traffic growth and network development to describe the world airline system’s airplane requirements over the next 20 years.
The long-term forecast for air travel is healthy. Cycles, even severe ones such as occurred during the 2001–2003 period, do not change the fundamentals of economic growth, globalization, and the need for people to travel. The Current Market Outlook is a long-term forecast that assumes short-term cycles throughout the forecast period, but smooths these cycles to provide a 20-year trend outlook.
Economic growth is the major contributor to air travel demand. Gross domestic product (GDP) growth explains most of air travel growth. Globalization and international trade, declining fares, and network development such as increased frequencies and more direct service explain the other portion of air travel demand. During the next 20 years, annualized world GDP is forecast to grow at 3.0%, and air travel should increase at an average annual rate of 5.2%.
The pace of liberalization is accelerating. Around the world, governments continue to deregulate air travel markets to realize profound consumer, business, and tourism industry benefits. For example, in Asia, liberalization is rapidly occurring in the current period, facilitating robust network development and expansion. In addition to the direct airline system benefits, nations realize that open air systems among trading partners facilitate international trade.
Competition leads to more airline entrants, lower fares, and improved networks. Typically, when deregulation occurs, competition increases among airlines. History shows that competition leads to an increase in new nonstop markets and frequency growth, rather than an increase in average airplane size in seats. This trend is forecast to continue throughout the forecast horizon.
Airline business models and networks will remain diverse. The world’s airlines will continue to aggressively monitor their costs, both in reaction to the “low-cost” model and as a normal response to an increasingly competitive industry. A variety of business models including low-cost, hub and spoke, leisure, short-haul, and long-haul specialist will proliferate. Hub and spoke networks and different classes of service will continue to be relevant, especially in intercontinental markets.
Airlines will remain focused on improving efficiency and lowering costs. Manufacturers will provide a greater choice of airplane models with lower fuel and operating costs, and airlines will retire older airplanes. Passengers will benefit by a continuing long-term decline in real fares as airlines and networks become more efficient in response to competition.
Economic and traffic growth rates vary by region. Traffic within Asia-Pacific will grow 6.1% annually over the next 20 years, and the region’s share of world RPKs will increase by more than three percentage points to 18.4%. In contrast, Europe and North America are mature economies with lower growth rates, although these regions will continue to take the most airplane deliveries. The market share of flying within Latin America will increase from 2% to 4% of world RPKs, reflecting the relatively high 7.6% annual traffic growth rate.
Infrastructure develops alongside air travel demand. History shows that in specific markets, infrastructure supply and air travel demand are often not synchronized. Fortunately, the system adapts through a variety of mechanisms such as use of secondary airports, scheduling in non-peak hours, and improvements in Air Traffic Control. Many governments and airport authorities have concrete plans to expand existing airports and build new ones. Congestion will continue to be a cost to the airline system, but it is not a barrier to growth.
The world fleet will more than double over the next 20 years to almost 35,000 airplanes. Over the 20-year forecast period, 6,400 airplanes will be retired from active commercial service and will be replaced. An additional 18,600 airplanes will be needed to fill capacity demand. About 60% of the fleet operating today is projected to still be in operation 20 years from now.
Three-quarters of the fleet in 2023 will be single-aisle jets. The share of regional jets will increase from 14% to 17% of the world fleet. Airlines will use regional jets for hub feeding, taking traffic from hubs, hub bypass, point-to-point services, nonstop service on thin routes, turboprop replacement, and as a mainline jet complement, especially in off-peak hours. Single-aisle airplanes will continue to be the mainstay of the world fleet, representing the vast majority of world departures.
Regional differences influence airplane choices. Airlines need large numbers of single-aisle airplanes to fly the many domestic short-haul routes within North America and Europe. Within Asia-Pacific, a geographically wide region, a mix of single-aisle and twin-aisle airplanes is required. In the long-haul transoceanic markets, twin-aisle airplanes dominate the fleet.
Passengers will avoid itineraries that require multiple hub connections and segments to complete a journey. While the share of 747 and larger airplanes will fall from 6% to 4%, the percentage of twin-aisle airplanes will increase from 18% to 21%. Twin-aisle airplanes allow airlines to economically fly the increased frequencies, city pairs, and nonstop flights requested by passengers.