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Airbusglobalmarketforecast 2009 - 2028


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Airbus global market forecast 2009 - 2028

Airbus global market forecast 2009 - 2028

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  • 1. 2009 - 2028Flying smart,thinking big
  • 2. True innovation can be difficult to see,but the identification and delivery of technologicalbreakthroughs are critical if the aviation industryis to develop a sustainable future for the spanof this GMF and beyond.This is particularly true in the field of alternativeenergy, so the cover of this years forecastis a graphical representation of oneof 200,000 species of algae availablefor research into aviation bio-fuels thatdo not raise conflicts, such as diverting resourcesfrom food production.The sheer number of possibilities for algaeand the challenges ahead to realise their potential,are useful reminders that resource and timeare arguably more important thanthe original idea when it comes to findingthe best result for all.True innovation can be difficult to see,but the identification and delivery of technologicalbreakthroughs are critical if the aviation industryis to develop a sustainable future for the spanof this GMF and beyond.This is particularly true in the field of alternativeenergy, so the cover of this years forecastis a graphical representation of oneof 200,000 species of algae availablefor research into aviation bio-fuels thatdo not raise conflicts, such as diverting resourcesfrom food production.The sheer number of possibilities for algaeand the challenges ahead to realise their potential,are useful reminders that resource and timeare arguably more important thanthe original idea when it comes to findingthe best result for all.
  • 3. 2009 - 2028
  • 4. 12 Demand for air travel30 Traffic forecast56 Demand for passenger aircraft142 Air cargo forecast154 Summary tables
  • 5. ExecutiveUnderlying demand strongOver time, a number of significant developments haveinfluenced passengers and airlines, affecting the shapeand direction of the aviation industry, as well as deter-mining the level of future demand for air transportationaround the world.The latest development has clearly been the recent eco-nomic downturn, which has given everyone in theindustry cause to reassess their business in light ofthe prevailing competitive and operational environment.These include such drivers as fuel price, finance availa-bility and even aircraft product offerings. What forecas-ters must decide is whether these changes significantlyimpact the long-term trends of the industry. The goodnews is that, despite bringing difficulties that can rangefrom falling demand, load factors, yields and profitability,such cycles are generally relatively short lived comparedto the timescales considered for aircraft investment andfleet turnovers. In addition, the industry can be subtlychanged for the better as a result of efficiency improve-ments introduced to beat the downturn. This meansthat when recovery comes, it is generally stronger andBackgroundStrong demand,benefiting people,innovationguaranteed
  • 6. Global Market Forecast 7Summarymore far reaching than the downturn.There is no doubt that the major reason the industryhas always recovered its upwards trend is the strongunderlying demand for the benefits that air transportbrings to the world, its economies and, most impor-tantly, to its people.Real benefits for real peopleWhile the cost of air travel in environmental terms is welldocumented, including the 2% contribution to manmade CO2 emissions, little is said on the benefit side ofthis equation. In monetary terms alone, aviation contri-butes more than some G20 countries to world GrossDomestic Product (GDP). These benefits are not merelyat a macro level; they permeate through the fabric of21st Century living, benefiting increasing numbers ofpeople from every corner of the globe. Aviation contri-butes to trade, by offering access to more lucrative andgeographically disparate markets; to investment, bynurturing internationalisation through greater access toskills and resources; to productivity, by stimulatingand encouraging competition, innovation and greaterefficiency; and to tourism, by facilitating a commercialexchange between travellers and regions where econo-mic growth could otherwise be limited.What is often crucial for all of these elements, is thatpeople come face to face, developing and reinforcingtrust and gaining the kind of knowledge and understan-ding of cultures, individuals, markets and places thatcan only be gained by physically being there.Innovation for passengers, airlines and theenvironmentBut underlying growth must be balanced with a sustai-nable future. The last 40 years have seen aircraft fuelburn and emissions reduced by 70% and noise by 75%,but this is not to say that Airbus, or indeed the rest of theindustry, will sit back for the next 40 years and donothing. Innovation remains the key and ambitious tar-gets have been set with an almost zealous desire toimprove fuel burn and resulting CO2 for our two biggestconcerns, our customers and our world.
  • 7. Despite the economic crisis, markets in the emergingeconomic nations are expected to continue to growover the next 20 years; their economies and demogra-phic developments both driven by and benefiting fromair travel. Continued global liberalisation is giving grea-ter market access to airlines and wider choice for pas-sengers. Low-cost carriers will also continue to growaround the world, but particularly in Asia, while the net-work airlines will benefit from demand on the importantinternational markets and a wave of new internationaltravel consumers from the emerging countries.Changing dynamics, particularly network evolution andthe role of mega-cities and congestion, are influencingthe future of aviation. All of these drivers were taken intoconsideration when developing this edition of the AirbusGlobal Market Forecast (GMF).The highlightsFreighterfleetPassengerfleetNew deliveries24,951Recycled3,134Retired8,453Converted2,58524,097 8547,147 1,306Passenger aircraft >100 seats24,951 new passenger andfreighter aircraftdemand overthe 2009-2028 periodThere is no doubt that the financial turmoil of 2008 andthe resulting downturn in the world economy, hasimpacted passenger demand and traffic growth in theshort term. However, over the 2009-2028 period cove-red by this forecast, the downturn represents a fairlyshort timeframe. Therefore, overall world passengertraffic is expected to increase by 4.7% per annum andthe number of frequencies offered on passenger routeswill more than double. Faced with increased competi-tion and fluctuating fuel costs, airlines have alreadyachieved considerable productivity gains. Today, veryfew seats are “wasted”, with very high load factorsacross most major markets and flows expected onceagain as the market recovers over the coming months.When downturns start to bite, as with fuel prices,congestion falls down the list of priority issues for manyin the industry. But unfortunately, this means a return todelays, waste and cost as markets recover. This is anissue for passengers, airlines and many of the world’smost important airports and cities. Any future growth oftraffic and frequencies will once again be an increasingchallenge to airport infrastructure and air traffic mana-gement. Using larger aircraft, with their reduced costsper seat both in terms of cash and CO2, is a commonsense solution to congestion. There are already signs ofthis today, with average aircraft sizes increasing acrossall categories, from smaller regional aircraft to very largeaircraft. This will result in the average aircraft size increa-sing by as much as 26% over the next 20 years.This GMF assumes that all necessary infrastructureimprovements, including those already planned, will beundertaken during the forecast period. However, giventhe substantial investments and time required to carryout such developments, there is the possibility that notall the changes necessary may be achieved. Combinedwith the need to reduce seat mile costs to cope withdeveloping competitive and environmental pressures,this could cause average aircraft size to increase evenmore than currently forecast. Therefore, airlines couldbe forced to acquire more, larger aircraft, across thewhole spectrum of those available, to meet demandefficiently and to fly smarter.The trafficAverage aircraftsize will needto growin the future
  • 8. Global Market Forecast 9The world’s fleet, which includes both passenger (from100 seats to very large aircraft) and freighter aircraft, willgrow from 15,750 beginning of 2009 to nearly 32,000 by2028. At the same time, some 14,442 aircraft from theexisting fleet will be replaced by more eco-efficientmodels. Of these, 3,134 will be recycled back intopassenger service, where they too will replace an oldergeneration model with another airline. It is also forecastthat 2,585 aircraft will be converted to freighters and theremaining 7,417 will be permanently retired or withdrawnfrom service, with increasing numbers decommissionedthrough environmentally sensitive programmes, such asthe Airbus PAMELA project. The Airbus forecast conti-nues to predict that the greatest demand for passengeraircraft will come from airlines in the United States, thePeople’s Republic of China and the United Kingdom, withits mix of global, low-cost and charter airlines. Europe willreceive 25% of the total, with North America and Asia-Pacific taking 23% and 31% respectively. In addition, theworld’s airlines will require more than 6,000 smaller air-craft, either jet or turbo-prop, (with 19 to 100 seats) toserve regional demand, especially in the US and Europe.While traffic demand will nearly triple, airlines will morethan double their fleets of passenger aircraft (with over100 seats) from 14,016 at the beginning of 2009 to28,111 in 2028.This will include deliveries of 24,097 new aircraft. Some17,000 of these will be single-aisles for domestic andintra-regional flows, which is more than in previous fore-casts due to the emergence of low-cost carriers andincreased liberalisation. A large number of aircraft,where new products must deliver even greater benefitsto passenger airlines and the environment, and a stepchange beyond those on offer today.The fleetAs many as 5,802 twin-aisle passenger aircraft willbe required to serve the existing, mainly internationalmarkets created largely by growth on existing city pairs,flows from and within emerging markets and the addi-tion of new routes. Around 1,318 very large passengeraircraft will be needed to link the 32 dynamic hub cities.It should be no surprise that more than 50% of theworld’s fleet of very large passenger aircraft will be ope-rated by the airlines in the Asia-Pacific region. With itshuge population increasingly concentrated in impres-sive and vibrant cities, more and more people have theeconomic ability as well as the desire to fly among thesedestinations.Freight traffic is expected to grow at 5.2% per annum.Combined with fleet renewal, this will create demand for3,439 freighter deliveries, 2,585 of which will come fromconversions and 854 of which will be new generationfactory-built freighters, mainly long-range or regionalfreighters.Overall, this means that by 2028 the world’s airlines willtake delivery of 24,951 new passenger and freighteraircraft, worth US$3.1 trillion at current list prices. Mostof this business will be generated from single-aisle deli-veries, while 1,729 large passenger and freighter aircraftwill account for 19% of total aircraft delivery value.Despite concerns about aircraft deliveries following theeconomic downturn, strong underlying demand willemerge with the recovery, which means airlines requirean average of 1,248 new, eco-efficient aircraft deliveriesper year over the next 20 years. Combined with thedecommissioning of older generation aircraft, this willgradually reduce the average fuel consumption of theworld’s fleet to less than three litres per 100 seat kilo-metres, already achieved by the A380 today.> 14,000aircraft to bereplacedby eco-efficienttypes
  • 9. The environmental impact of aviation will remain smallcompared to other modes of transport and othersources of man-made emissions, with the benefitsundeniably large. However, Airbus and the rest of theindustry is determined to minimise and even reduce theenvironmental impact of aviation at every opportunity,while maximising the contribution that it can make tothe quality of life, to better cultural understanding, togreater learning, and to fair and sustainable economicgrowth.And that contribution is considerable. In 20 years, airtransport will directly employ some 8.5 million peopleand contribute $1 trillion to world GDP. Measuringacross aviation, its supply chain, the spending ofemployees in these businesses and the contribution airtransport makes to tourism, this will grow to 50 millionjobs and US$3.6 trillion of GDP; even more when youconsider the impact of other industries dependent onaviation that are harder to measure.In the future...However, should growth in passenger and cargo trafficbe one percentage point lower than currently forecast,the contribution to GDP would be reduced by US$600billion and the number of jobs would be reduced by6 million, including around 2 million in Asia-Pacific, 1.5million each in Europe and North America, 400-500thousand each in Africa and Latin America and over200,000 in the Middle East.In this long-term industry, where demand and resultinggrowth will drive the need for more aircraft, and wherethe stakes are so high for the millions of people whodepend on it, aviation must continue to innovate. Itmust take the path with the most potential for custo-mers and the environment, even if it is not necessarilythe shortest, cheapest or easiest. Anything else wouldbe irresponsible.New aircraft demand willaverage 1,248 per yearPassenger and freighterdeliveries worthUS$3.1 trillion04,0008,00012,00010,0006,0002,00014,00016,00018,000Single-aisle& small jetfreightersSmalltwin-aisle& regionalfreightersIntermediatetwin-aisle &long-rangefreightersLargeaircraft &largefreighters% unit:1,7297%2,0088%4,23717%68%16,977*Passenger aircraft >100 seats + freightersNumber of new aircraft*04008001,2001,0006002001,400Single-aisle& small jetfreightersSmalltwin-aisle& regionalfreightersIntermediatetwin-aisle &long-rangefreightersLargeaircraft &largefreighters% value:57119%48215%81927%39%1,206US$ (billions)Air transportto employ millionsand contributebillions in next20 years
  • 10. Global Market Forecast 11Top ten countries (2009-2028)1 United States2 People’s Republic of China3 United Kingdom4 Germany5 India6 Russia7 Ireland8 Australia9 Japan10 BrazilPassenger aircraft demand5,0963,2721,2291,1751,0931,004615551548542United StatesPeople’s Republic of ChinaUnited KingdomIndiaGermanyJapanUAERussiaSingaporeAustraliaBy US$ value (billions)450.3439.5154.0141.5141.4114.298.289.979.374.2New and recycled passenger aircraft >100 seats (excluding freighters)Total new deliveries by region2019-20282,458% of worlddeliveries23%North America2009-20182,9932019-2028766% of worlddeliveries7%Latin America2009-20188922019-20283,949% of worlddeliveries31%Asia-Pacific2009-20183,7232019-2028455% of worlddeliveries4%Africa2009-20184742019-2028689% of worlddeliveries6%Middle East2009-20187302019-2028447% of worlddeliveries4%CIS2008-20184542019-20283,192% of worlddeliveries25%Europe2009-20182,876Passenger aircraft >100 seats (excluding freighters)
  • 11. Demand for air travel
  • 12. Aviation growth :more than justWhile much has been discussed about the environmen-tal impact of aviation, its 2% contribution to man-madeemissions and the fact that it will contribute up to 3%by 2050(1), little has been said about the socio-economicReal benefits for real peopleAviation plays an important role in today’s world,supporting social and economic development in bothemerging and established nations.While the impact of the aviation industry and its supplychain is considerable in itself, the indirect benefits areeven more significant, as air transport facilitates growthfor many other industries around the world; deliveringreal benefits for real people that can be measured ineconomic output, jobs, and the wealth and prosperity itbrings to communities and individuals.For example, by 2026 it is estimated that the air trans-port industry will directly contribute around 8.5 millionjobs and US$1 trillion to the world economy. Taking intoaccount the indirect and induced contributions, the airtransport industry is expected to contribute around 23million jobs and US$2.6 trillion. Adding the contributionof the air transport industry to tourism raises the contri-bution of the air transport sector to more than 50 millionjobs in 2026 and to around US$3.6 trillion of GDP.Beyond this there is a wide range of benefits that are justas tangible but are harder to quantify, which magnify theimmediate social and economic impact considerably.Broadly speaking, this can be seen in terms of:Trade: offering access to more lucrative and geographi-cally disparate markets;Investment: facilitating internationalisation and providingaccess to skills and resources,Productivity: stimulating and encouraging both competi-tion, innovation and greater efficiency,And tourism: facilitating a commercial exchange betweentravellers and regions where economic growth couldotherwise be limited, as well providing essential fundingand incentives for the protection of biodiversity.benefits the industry brings or the role it plays in preser-ving biodiversity through dependant activities, which canactually help reduce overall man-made CO2 emissions.(1) United Nations Inter-governmental Panel on Climate Change (UN IPCC).Balancing benefits and costs
  • 13. Global Market Forecast 15aircraftTrade is an important element of economic growth,which leads to better living standards, and 35% of worldtrade by value is transported by air.For many developing countries, air transport provides anessential link to wealthier markets. Research by theInternational Trade Centre (ITC) on the impact of banningair freighted organic produce to the UK in response toenvironmental concerns showed that some 79% of suchimports are from poorer countries of the world, includingKenya, Ghana and Zambia. And according to the UK’sDepartment for International Development (DFID)"Almost a million African farmers and their families relyon the fruit and vegetable trade with the UK...this is anexport trade success story … and it’s one of the reasonswhy African economies are growing around 5%”. In factthe UK trade alone injects over $200 million into ruralAfrican economies each year, while accounting for just0.2% of UK’s carbon emissions.As manufacturing in developing nations evolves and thevalue of the goods produced increases, so too does theuse of air transport. For example, 40% of high-techsales are dependent on air transport.Since World War II, the reduction of trade barriers has seenglobal trade increase more than 20-fold and world incomesmore than 6-fold. Aviation enables easier, more global tradeand highlights the need to reduce such barriers even fur-ther, with improvements in shipping times (both air and sea)adding value equivalent to reducing trade tariffs from 20%to 5.5% between 1950 and 1998. In addition, the speedof transportation, for which aviation cannot be surpassed,is an important determinant for entering an export marketand for the volume of trade that can be achieved. It hasbeen estimated that one-day saved in shipping timeglobally is worth more than US$100 billion and a 20-dayshipping time is equivilent to slapping a 16% tariff onimports; in this case, time quite literally is money, with avia-tion key to future timesaving.The express delivery industry provides fast, reliable,traceable door-to-door delivery of shipments. Aviation iscritical to express delivery as it allows the industry tooperate longer domestic or international routes anddeliver goods to places where alternative transport linksare not as good.Oxford Economics estimates show that in 2005 theexpress delivery industry supported 2.65 million jobsworldwide. However, the impact of the industry extendsbeyond this, through its effect on stimulating internationaltrade. The speed of express delivery enables internationaltransportation of perishable goods, e.g. pharmaceuticals,fruit, flowers etc. Reliability of delivery meanwhile encou-rages and facilitates international ties between customersand suppliers. Express delivery is crucial to ‘just-in-time’production and repair, allowing customers to get sub-components or spare parts quickly and at short notice,potentially sourcing them from overseas. On a macroeco-nomic level, the express industry stimulates internationaltrade by encouraging the specialisation of production indifferent countries.Surveys of companies around the world confirm theimportance of express delivery. A survey in Italy found thatwithout guaranteed international next-day delivery, about7% of Italian firms would possibly have to relocate someof their operations to another country. In a survey ofChinese companies three-quarters reported that custo-mers were demanding faster and more reliable delivery ofproducts. The express delivery industry is therefore crucialto Chinese exports. Likewise, 76% of businesses in theCity of London consider express parcel services critical orimportant to the smooth running of their operations.Demand for air travelThe express delivery industry:how a speedy high flyer delivers thegoodsBenefitingtrade
  • 14. Air transport is one of the key links between countriesand their major “hub” cities, helping to create and sus-tain international markets, investment and business.As a clear indication of this, when top companies wererecently asked to rank the cities that are the mostdesirable locations for doing business, the highestranked also ranked top for the quality of air transport.In another survey, of over 600 companies from 5 coun-tries carried out by IATA, 63% of firms stated that airtransport networks are “vital” or “very important” forinvestment decisions. If the network was constrained,30% said it would be highly likely they would invest less.Many companies search the world before decidingwhere to site new research and development activities.India, particularly Bangalore, is fast becoming recogni-sed in the IT world as a suitable venue, with companiessuch as Siemens, Samsung, Dell, GM, HP and IBM allestablishing themselves in the region. Not only wouldthis activity be difficult without air transport, but withoutit the search may never have reached Bangalore in thefirst place.This trend of investment in air transport subsequentlygenerating investment in a diverse range of other indus-tries is particularly visible at the new Dube Trade Portin South Africa (see panel opposite).Benefiting investmentGood business locationsneed good air transportlinksExternal transport links rankBusiness location rank350510152025303530 25 20 15 10 5 0Source: European cities monitor 2007,Cushman & Wakefield, AirbusStockholmBudapestAthensHelsinkiLondonParisFrankfurt
  • 15. Global Market Forecast 17Demand for air travelAs well as its direct impact on GDP, the DTP is designedto have catalytic benefits in terms of local economicempowerment, competitiveness and skills development.And, given the tourism ambitions of the project, relatedefforts to eradicate malaria from destination areas havedelivered significant health benefits to the local popula-tion.It is hoped that South Africa has almost reached the daywhen the country’s trade and tourism prospects willbe freed of the curse of malaria. South Africas naturalresources make it an ideal destination for many internatio-nal visitors. Its competitive tourism advantages are many:accessible wildlife, varied ecosystems, impressive sce-nery, unspoiled wilderness, diverse cultures, temperatesunny climate, and the absence of jet lag from Europe.In addition, the KwaZulu Natal region boasts uniquearchaeological sites and battlefields, the availability ofexcellent conference, exhibition and sporting facilities.To take advantage of such attractions, the building ofKing Shaka International Airport at DTP and the potentialit offers for direct flights from key markets, is a centralpart of the strategy to increase the flow of tourists to aregion. The FIFA World Cup in 2010 provides a majorincentive to have construction complete and the airportoperational.Thanks to the success of regional anti-malaria cam-paigns, the local KwaZulu Natal authorities now believethey have taken large strides to guarantee visitors immu-nity from the age-old disease that has long blightedthe continent of Africa.Airport development as an integral part of social and economic developmentinitiatives in South AfricaThe Dube TradePort (DTP) is a strategic and critical infra-structure investment, which aims to serve as a majorcatalyst for economic growth in KwaZulu-Natal andSouth Africa. The development demonstrates the cen-tral role that improved air services play in facilitating sus-tainable economic growth, widening the developmentoptions available and spreading prosperity. The creationof a new airport will be integral to improvements in pro-duction processes, trade stimulation, foreign directinvestment, natural habitat preservation and the deve-lopment of tourism.A new fully-integrated international passenger andfreight airport is to be constructed as part of the overallDTP development initiative. Included in the plans is atrade zone that will be linked to the airport’s freightfacility, providing scheduled space for the import andexport of high-value goods through KwaZulu-Natal. Byproviding state-of-the-art air freight handling facilities,comprising a cargo terminal and a perishables centre,the trade zone is seeking to attract industries such asmotor components, electronics, clothing and textiles,perishables and value-added logistics, which are criti-cally dependent on specialised and scheduled air cargothat guarantees timely delivery.The plans also include an integrated agricultural exportzone. This will include land and facilities for the cultivationand export of high-value farming products, providingopportunities for exporters of high-yield, time-sensitive, air-freighted horticultural produce and willinclude pre-harvest and post-harvest facilities required byon-site producers and growers from surrounding areas.
  • 16. Benefitingproductivity & efficiencyCork Airport Business Park: symbolof transition from agriculture to hi-techSince the early 1990s, the Irish economy has experiencedgrowth at an extremely accelerated pace. The 1980s hadseen many leave the island in search of employment, asan economy built on a strong agricultural sector stagna-ted. Much of the success of the Celtic Tiger economicboom around the turn of the century can be attributed tovarious policies implemented specifically to attract foreigncompanies. These policies included low corporation taxrates and an emphasis on high-quality education.These national policies have been complemented by localinitiatives that have made some regions of the countryparticularly attractive for foreign investors. The businesspark set up next to the city of Cork is one such example.The Cork Airport Business Park located just two minutesfrom Cork airport was set up in 1998. By 2005, the parkhad attracted many international companies employingaround 1,800 people. Building on this success, the Irishgovernment launched a new phase, which would nearlydouble the park’s office capacity and provide jobs foran extra 1,500 people. The business park hosts tenantssuch as Pfizer, Marriot, Motorola and Amazon.The Cork Airport Business Park has contributed to thelocal economy’s diversification away from declining agri-From the aforementioned IATA survey, 80% of busi-nesses also said that air transport was important toefficiency and 50% thought it was vital. More than twothirds believed that air transport enabled them to reachgreater economies of scale and improve efficiency, whileover half were convinced that it reduced costs for theirbusinesses.Opening markets to international competition alsodrives innovation, which typically leads to efficiencyimprovements. Over a quarter of companies believethat innovation and investment in research and develop-ment would probably be badly affected if air transportservices were constrained(2).Innovation has long been at the heart of the aviationindustry itself. In 2006, 39 aerospace and defence com-panies undertook US$19.9 billion of R&D expenditure.Successful innovations in aviation have a much widerimpact than just the industry itself. For example, thesocial return on aerospace R&D spend is estimated tobe 70%, compared with 50% for manufacturing as awhole(3). In other words, once it matures, a typical invest-ment of US$100 million in R&D by the aerospace sectoradds US$70 million to the level of GDP year-after-year.Two recent studies, by IATA and InterVistas, haveattempted to quantify the beneficial impact of air trans-port on productivity. Both found that an increase in avia-tion connectivity typically leads to a sizable improvementin labour productivity. To capitalise on such efficiencygains, some cities and regions have developed businessparks next to airports. These typically attract highlyproductive companies that benefit from the exchangeof ideas and skilled personnel, as well as the opportunityto do business together. One example of this is in Cork,in Ireland.(2) The Economic and Social Benefits of Air Transport 2008, ATAG(3) Assessing the Economic Impact of Aerospace Research & Development,Oxford Economics, May 2006
  • 17. With 40% of international visitors travelling by air, avia-tion is indispensable to the growth and sustainability oftourism. The industry contributes almost 10% of theworld’s GDP and employs nearly 80 million people, ran-ging from over 6% of total employment in Africa to over10% in the US. Because tourism is the primary sourceof economic growth for many areas, some governmentsplace it at the centre of their country’s growth strategies,which involves the development and promotion of flightconnections.In particular, areas with fragile ecosystems, which areoften home to endangered species and offer few alter-natives for locals who need to support their families,eco-tourism provides a growing source of funding,incentives and options. In Costa Rica for example, thepromotion of eco-tourism started in the 1980s. Sincethen, international tourism has increased six-fold toUS$2 billion, with nearly 1.9 million international visitors.In 2005 tourism contributed 7.9% of GDP, 13% of jobs,and 22.3% of foreign exchange earnings. But moreimportantly, it has also helped to pay for the preservationof the country’s national parks.In 2007, the spending of foreign visitors arriving by airdirectly supported more than eight million tourism jobs.Taking into account indirect and induced jobs, air tou-rism accounted for more than 18 million jobs.culture to the fast growing pharmaceutical and IT sectors,two sectors that rely heavily on air transport.Since 2000, growth of output in Cork has averaged 5.5%,outperforming the fast growth in the Irish economy overthat period by 0.5% per annum. Moreover output perhead is nearly 30% above the Irish average. In tandemwith this fast growth the proportion of the working-agepopulation that is economically active has risen fromapproximately 60% in the mid-1980s to 72% today. Thenumber of jobs has increased by 83% over the sameperiod, ensuring that the benefits of this growth have beenwidely spread throughout the community.Based on the key metrics of share of regional GDP,growth in value added and productivity, Cork ranks highlyin globally successful IT and Life Science locations.Among the key factors that have attracted these know-ledge-intensive industries to Cork are accessibility, R&Dinvestment, tertiary education and quality universities.Source: Cork Airport Business Park; Regional Forecasts (a division of OxfordEconomics); ‘Regions as Technology and Life Science Locations’, BAK BaselEconomics Forum 2006BenefitingtourismDemand for air travelGlobal Market Forecast 19
  • 18. Airborne tourists provide a path to jobs and development- Morocco’s Vision 2010The country’s location at the nexus between Africa andEurope has contributed to a rich brew of culturalinfluences, incorporating influences as diverse as thoseof the Phoenicians, the Berbers and the Spanish.Continuing this rich tradition of inclusiveness is theFestival of World Sacred Music (Festival des MusiquesSacrées du Monde). Each June sees performers fromevery corner of the Earth fly into Morocco for a week ofartistic performance in Fès, the country’s ancient holycity. The festival represents the spiritual heart of Islam –peaceful, pluralistic, generous and joyous, with the aimof honouring all the worlds spiritual traditions anddissolving musical boundaries.The Moroccan government has been keen to promotethe country’s rich cultural heritage and to encourage cul-tural exchange which will bring more visitors throughMorocco’s airports. The recent recording of part of U2’slatest CD in Fès has been a timely boost to these efforts.It is hoped that the attendant media interest in theband’s choice of recording venue will rekindle Morocco’sreputation as a favourite artistic retreat in the 1950s and60s, when artists such as the Rolling Stones were regu-lar visitors. The legendary rock group returned toMorocco in 1989 to record with the country’s mostpopular traditional artists, the Master Musicians ofJajouka, an all-male guild trained from childhood.Fès lies inland, 200km northeast of Casablanca. It is theoldest of Morocco’s imperial cities and commonly reco-gnised as the spiritual, cultural and intellectual capital ofMorocco. It is home to Fès El Bali, the largest medina inMorocco. Set within almost 3,000 acres, the ancient sitehas been declared a UN World Heritage Site, and hasbeen extensively renovated as part of the Vision 2010plan. The medina is a maze of mosques, food marketsand bazaars. Noted for its quality craftsmanship, Fès isfamous for metalwork, rugs and leather goods.Despite its status Fès El Bali had become run down andits tourist potential unexploited. Accordingly, the regio-nal plan calls for establishing Fès as a tourist destination.The plan aims to promote the city as a “Lively MillennialMuseum, based on its authenticity as the only remainingplace in the world where daily lives still reflect an ancientway of life and its associated culture and art.”The tourism development plans include:• the creation of additional accommodation in theMedina by converting houses with high historical valueand Fondouks into high-quality guest houses• the conversion of Fondouks into theme-based cafés orexhibition spaces• the creation of a religious arts museum• the rehabilitation of two pilot neighbourhoods, inclu-ding restoration of the original Medina walls• the opening of local handicraft industries to touristaccess, and the facilitation of electronic payment andoverseas shipping• the development of tourism in the hinterland of Fès, toallow these rural areas to benefit from the city’s role as atourist hub.Crucially for Fès, the realisation of the city’s tourist poten-tial and its successful entry into the European city-breakmarket depends on the introduction of point-to-pointflights from the major cities of Morocco’s key overseasmarkets. This will involve more flights on existing routesfrom France and the UK, and the introduction of newroutes, from untapped sources such as Barcelona,Madrid, Milan and Rome.To realise this ambition it is anticipated that investmentstotalling 3 billion dirhams (US$350 million) will be requiredover the ten years to 2015. In turn this is expected tocreate an additional 4,500 beds in tourist accommoda-tion, annual revenues of 1.26 dirhams (US$150 million)and an additional 13,500 jobs in and around Fès.Source:
  • 19. Global Market Forecast 21Demand for air travelToday, many of these benefits are so obvious and sointegrated into the social and economic fabric of oursociety that they are, in many ways, taken for granted.However, aviation has never been so closely scrutinisednor had its future growth so acutely threatened from somany sides.So consider this: should growth in passenger and cargotraffic be one percentage point lower than forecast pre-viously:Almost 1.5 million jobs would be lost within the air trans-port sector itself, some 3.8 million when including theindirect and induced effects, and over 6 million whenadding the impact on tourism. That would represent0.2% of world employment in 2026, including around2 million in Asia-Pacific, 1.5 million in each of Europeand North America, 400-500 thousand in each of Africaand Latin America and more than 200,000 in the MiddleEast.The direct, indirect and induced contribution of the airtransport sector to world GDP would be US$440 billionlower, with an additional US$164 billion lost throughlower tourism activity. Therefore, in total air transportwould contribute 0.6% less to world GDP in 2026 thanin the base case.That’s a lot to take for granted.But what if….
  • 20. The overall long-term effects of the 2008/2009 financialcrisis are expected to be more pronounced on networkevolution than on future passenger demand growth.In the coming years, the routes that passengers actuallyfly will depend not only on the route they want to take,but also on what the airlines can profitably offer in achallenging market environment.In the past, a significant part of growth allocation wasattributed to network development. The number of non-stop routes on the three main long-haul flows (trans-Atlantic, Europe-Asia and trans-Pacific) has doubledsince 1987 and now represents 70% of long-haul traffic.Strong air travel growth, globalisation of economies, airtravel deregulation and technology have allowed moreconnectivity between cities. New routes from hubs alsoplayed a major role in this development. In fact, hubshave been crucial, not only because few long-haul citypairs could survive without the connecting traffic, butalso because they are often the destinations peoplewant to fly to. Consequently, some 77% of long-hauldemand and 73% of long-haul routes involve at leastone of 32 global hub cities.Previous network development and the natural concen-tration of demand have created a more mature net-work, with few significant non-stop markets left to beopened on the three main long-haul flows.After 2001, traffic recovered relatively quickly whencompared to the recovery in the number of routes drop-ped in that period.In 2008, the number of airline routes has only increasedby 15 compared to 2007 on the three main long-haulflows, despite the new trans-Atlantic open skies agree-ment that came into effect that year.One such constraint today, and more so in the future,is the effect of airline alliance and consolidation, whichartificially influences some potential route openings,therefore, helping to limit the absolute number of non-stop routes.Even with such constraints, Airbus forecasts the needfor 400 net additional routes on the three main long-haul flows by 2028. However, their impact on the ove-rall network will have an ever-decreasing effect, as theirimportance in traffic terms also reduces, and as growthwill be increasingly concentrated on the existing routes,particularly on the hub-to-hub routes.IntroductionThe Future :a greater concentraand traffic
  • 21. Demand for air traveltion of demandGlobal Market Forecast 23Passengersfly furtherA long-haul network continuing to be dominatedby a few citiesSource: UN, Thomas Brinkhoff: City Population, Airbus5-10 million 10-15 million 15-20 million 20-25 million >25 millionUrban population:1985 201501977197919811983198519871989199119931995199719992001200320052007200920112013201520172019202120232025202740010001400Airline routes*202820080060018001200*Flows between (Europe/Africa/MiddleEast) - (Americas) - (Asia/PRC/Indian sub/Japan/Oceania). (70% of the world long haul RPKs).Airline route : Airport pair operated non stop by a specific airline.Source: Airbus GMF, OAG55119871,1582007 +388routesForecast1,5462028Long-haul route network maturation
  • 22. The trans-Atlantic flows will havethe most route openingsHistorically, the choice of aircraft for a given operationwas limited by the range capacity and of the productson offer. However, today there are aircraft with a widerange of capacities but with similar long-range capabi-lity, so it is possible to make fleet decisions basedpurely on demand and growth expectations.Growth allocation directly impacts generic aircraftdemand in terms of variables such as size and range.Airbus has developed a unique process that uses realand future passenger demand to determine the mostlikely airline operations on a route by route basis.The process starts with future growth being calculateddown to the origin and destination of passengers(O&D) and the basic principles are as follows:• Each O&D has a specific growth rate based on eitherthe size of the economy in a metropolitan area(known as the gross metropolitan product), if thisdata is available, or using a set of market typologiessuch as urban population growth, historical localtraffic growth, the presence of low costs airlines etc.• The routings of each O&D are then calculated tocreating the optimum “virtual network of routes”.• Matching the “virtual network” to the “actual net-work” indicates the values of many parametersinfluencing the passenger’s choice of routes.• New constraints are added/removed (technology,regulations, new business models, etc.)• New airline routes are incorporated to test their futurefeasibility and to identify from which existing routesthey could attract traffic. Dropped routes are alsoincorporated.• The future routings of all O&Ds are consolidated, withdifferentiation between those passengers connectingand travelling point-to-point.• The total traffic growth on each individual route isthen calculated, making it possible to estimate fleetrequirements.Translating growth into aircraft demand:Split of additional routes on the 3 main long-haul flowsEurope-USA 79Europe-PRC 38Europe-S. America 35Middle-USA 22PRC-USA 39Asia-USA 17Europe-lndian Sub 29Indian Sub-USA 15Asia-Europe 21Canada-Europe 19Other 74Trans-AtlanticEurope-AsiaTrans-PacificSource: Airbus
  • 23. Global Market Forecast 25Demand for air travelAll three of the main long-haul flows are expected to expe-rience solid and sustained future traffic growth. In particular,deregulation is expected to drive Latin American growth onthe trans-Atlantic flow; fast growing economies in Asia forthe Europe-Asia flow and the trans-Pacific flows; and newemerging sub-flows from/to the Middle East or Africa.The way traffic is allocated on each of these flows willdirectly impact demand and, more specifically, the aircraftcapabilities required by airlines, including the number ofseats.While different in many aspects, the three flows tend toshare the same basic long-haul principles:• Most of the 32 global hub cities are already intercon-nected with non-stop flights, the “big points”. Theseroutings are also very often those adding significantvalue to an airlines network.• Almost all routes are linked from, to or between these32 cities.• For historical, geographical and social reasons the moredistant two regions are, the more concentrated thedemand tends to be between connecting cities in eachregion.Regional network development• Frequencies are limited by time windows, passengerpreferences, airport congestion, noise curfews, over-night fees.• Largely due to the principles mentioned above, thelonger the route, the larger the aircraft tends to be.• Average route length is increasing as demand hasemerged from distant destinations. People are flyingfurther, simply because they want to visit places thatare further away.• The volume of organic growth (i.e. traffic added to anexisting route) is higher on hub-to-hub routes thanksto the dynamism of the 32 global hub cities and thegrowth of the connecting traffic.• The most common source of totally new city pairs isbetween hubs and secondary cities. These are typi-cally operated by only one airline, therefore, once thedaily flight is achieved, the airline can move to a largeraircraft to accommodate the additional organicgrowth.• Routes between secondary cities, or “transverse”routes are marginal. Many of these markets arecharter routes with no need for a daily flight.Trans-Atlantic network: % of passengersflying new airline routes in twenty years0%10%% of passengersEurope-USCanada-EuropeCentralAmerica-EuropeCanada-CentralEuropeCentralEurope-USCanada-NorthAfricaEurope-S.AmericaAfrica-USNorthAfrica-US20%30%40%50%60%70%80%90%S.Africa-S.AmericaMiddleeast-S.AmericaCanada-MiddleeastMiddleeast-USS.Africa-US68%of the trafficSource: AirbusThe longerthe routes,the largerthe aircraft
  • 24. In the year to September 2008, 113 scheduled routesof all sizes, (in terms of seats offered), were openedacross the overall transatlantic network, whichincludes non-EU states, Africa and the Middle Eastto/from Canada and Latin America. However, 106 ofall routes have been dropped.It has been forecast that that there will be nearly 200additional trans-Atlantic airline routes, 60% of whichwill be between the North America and WesternEurope, in the next 20 years. However, most of thegrowth will be allocated to existing routes, which areexpected to carry some 93% of the forecast traffic.Dynamic growth in Latin America will create someadditional network opportunities, but will remain limiteddue to the historical concentration of demand inEurope and continuing consolidation among airlines.As a result, 23 routes will carry more than 1,000 dailypassengers one way by 2028, compared to only tworoutes today; making this a clear market for largeaircraft.The trans-AtlanticDuring recent years, smaller trans-Atlantic traffic flowshave quickly emerged. In 2000, only three regularnon-stop routes existed from the Middle East to theAmericas, but by 2008 there were 19 in operation. In2028, more than 70% of the passengers flying from theMiddle East to the Americas will fly on routes not yet inoperation. This market will be ideal for large twin-aisleaircraft such as the A350XWB and very large aircraftlike the A380.Today 45% of trans-Atlantic passengers fly on 42 citypairs with traffic exceeding 1,000 daily departing pas-sengers. This number has steadily increased during thepast 30 years, despite the opening of many new non-stop routes. As fewer new route opportunities remain onthe main flows, airlines consolidate and emerging flowslargely having demand concentrated in a few cities, alarger proportion of the growth will be allocated to theexisting routes. Therefore, the number of “1,000 pas-senger” routes will rise to 130 in 2028. Traffic on theseroutes will be accommodated by an increase in bothaircraft frequencies and seat capacity.Trans-atlantic: number of citypairs with more than 1,000 dailydeparting passengersNumber of city pairs1977 1987191997 2007402017 2028132140120100806040200Source: Airbus
  • 25. The long-haul market between Europe and Asia-Pacific,which includes the Indian Subcontinent, China andJapan, is the 2nd largest in terms of traffic (RPKs(4)). Halfof the volume of passengers added in the last threeyears were to China and India. High growth from Chinaand India will continue to create new network opportu-nities, of which the majority will be new city pairs.In China, there are currently very few non-stop routesfrom and to secondary cities, but more are expected toemerge by the end of the next decade as wealthspreads and the country’s aviation network develops.The high organic growth of these routes will result in ahigh density of routes.However, India’s network is more mature, with shorterdistances from Europe and traffic in new markets 30%less dense than in China. This is consistent with averagelong-haul trends, where the longer the route, the largernon-stop markets.Between Asia and Europe :recent developmentsSignificant growth to and from Europe has also beenobserved in some South Eastern Asian countries likeVietnam, the Philippines and Malaysia. New directnon-stop routes are expected from South East Asiancountries to the largest markets in Europe, although theMiddle Eastern hubs will capture a significant part ofthe local traffic.The market share of Middle Eastern hubs on theEurope to Asia flow has continued to increase toaround 14%, depending on the season. Many of thesepassengers are travelling from Europe to India andother South East Asian countries, while China, Koreaand Japan remain relatively untapped. As the MiddleEastern hub network expands to encompass moredirect routes to North East Asia, they will capture someadditional traffic.(4) RPK: Revenue Passenger KilometresEurope-Asia: share of passengers transiting throughMiddle East hubs by final Asian destination40%20%0% 100%NepalMaldivesSri LankaPakistanBangladeshPhilippinesAustraliaThailandMalaysiaIndiaNew ZealandIndonesiaSingaporeVietnamChinaHong KongRepublic of KoreaJapan60% 80%% of passengersTop Asian markets from EuropeSource: Airbus, GMF; IATA PaxisDemand for air travelGlobal Market Forecast 27
  • 26. Most of the growth is on hub-to-hub routesTrans-Pacific network development will remain largelydominated by the trunk routes linking major cities onboth sides of the ocean. This flow is characterised bythe high concentration of the demand to and from a fewAsian and American cities.The share of routes linking global hub cities on both sidesof the Pacific (hub-to-hub routes) will remain at 70% of thetraffic by 2020. This is because three quarters of thegrowth on existing routes will be on the current hub-to-hub routes. Among the 28 new non-stop city pairs to beopened by 2020, half will be driven by high growth in Indiaand China. The other half is mostly long-range routes toSouth East Asia, which will be extremely sensitive to theoil price.Non-stop routes to and from secondary cities in Chinaare expected to mainly develop after 2020, but will notrepresent more than 1% of trans-Pacific traffic by 2028and will also be extremely dependent on oil price.The Asian to Latin American flow is a fast developing mar-ket with a few non-stop city pairs expected to be opened,but most of the demand will continue to connect throughother regions due to range and costs.One conundrum today is: “how can a passenger travelfrom one side of the Pacific to the other without crossingthe Pacific?” The answer is to fly through Europe and theMiddle East. In Europe new connecting Asia-Americasgates (e.g. Brussels) are being established by major car-riers . In the Middle East, hubs have more direct servicesto the Americas. For example, Dubai and its Asia-Americas connecting traffic is expected to increase14-fold by the year 2020. Although a staggering growth,only specific parts in Asia will be impacted, with 90% of theoverall trans-Pacific demand still expected to fly on “actual”trans-Pacific routes, rather than via connections.Today’s trans-Pacific routes are dominated by interme-diate twin-aisle and large widebody aircraft (90% ofthe trans-Pacific RPKs). As almost three quarters ofthe growth will be allocated to existing routes, that domi-nation will continue, with an even greater emphasison this class of aircraft.The trans-Pacific18%55%12%15%% of traffic added 2007-2020 on the trans-Pacific flowsOther routesHub-to-hub routesGrowth on existing city pairsNew city pairsSource: Airbus
  • 27. Higher fuel prices, stronger hubsGlobal Market Forecast 29Demand for air travelThe long-term effects of crisis are expected to be morepronounced on network evolution than on overall pas-senger demand growth. Long-haul network develop-ment is also particularly sensitive to the increases in fuelprice. Therefore, it is important to consider alternativescenarios linked to these variables. For example, analy-sis shows that on the trans-Pacific the total number ofnon-stop city pairs in 2020 would be similar to today’slevels with an oil price of US$150 per barrel (real terms),while the traffic would still grow (with an average growthrate still exceeding 4% per year). However, very long thinroutes would be expensive to operate, with the costsand risks associated with opening new city pairs higher.The acceleration of airline consolidation would also havea major effect on the forecast for network evolution.Airbus anticipates that this trend will continue withinsome major regions and across regions, as say restric-tions on foreign ownership is reduced. Large airline hubswill benefit from this consolidation, even when airlinesadopt a multi-hub structure. However, while big routeswould remain non-stop, routes from absorbed airlines tosecondary destinations are more likely to be operatedfrom the main airline hub.The combined effects of higher than expected energyprices and airline consolidation, will be less new non-stop city pairs, resulting in more demand which will stillcontinue to connect. For example, with oil costingUS$100 per barrel in 2020, 45% of traffic from Europeto Asia would still connect even with new non-stoproutes. With an oil price of US$150, the overall flow traf-fic would be down 12%, but the share of connectingtraffic would increase to 52% (+7pt) making the routeswith a higher proportion of connecting traffic more resi-lient to higher oil price.
  • 28. Traffic forecast
  • 29. People want andWorld air traffic growth is closely correlatedto economic growth0%1%0%2%3%4%5%6%7%-5%10%5%20%30%Air traffic growth (%) Real GDP growth (%)1972197425%15%-10%19761978198019821984198619881990199219941996199820002002200420062008EAir TrafficGDPSource: Global Insight, ICAO, AirbusEconomic developments can be measured by severalmacro economic variables including Gross DomesticProduct (GDP), exports, imports, unemployment rate,inflation, private consumption and disposable personalincome. For each edition of the GMF and each trafficflow, the final permutation of independent variables thatare selected follows the testing and statistical evalua-tion of numerous possible combinations. Most often fordeveloping and matured markets, the statistical modelthat best fits the historical traffic provides the bestexplanation of future trends and is, therefore, the oneselected for use in Airbus’ aircraft demand model.While the current downturn has highlighted the impor-tance of GDP as an explanatory variable in traffic fore-casting, in some market segments, classic econometricmodelling is not sufficient to adequately forecast trafficgrowth and the use of hybrid models is required. Forexample, in Asia, the development of Low-Cost Carriers(LCCs) is driven by the pace and timing of deregulationwithin each country and of liberalisation between others.In Mexico for example, a portion of air traffic growthdepends on the number of people switching from thepopular bus network to air transport, which is a conse-quence of lower airfares and improved journey times.In the maturing LCC markets of North America andWestern Europe, the LCC growth will ultimately dependon the number and size of new routes still to be opened,on an economic and sustainable basis. The growth inIndia is a good example of this, because althoughundoubtedly influenced by economic, trade and popula-tion growth, it has also benefited from increased accessto air transportation, either through new destinations orsimply through greater affordability as a result of deregu-lation and competition. In some cases these develop-ments are the result of actions taken by regulators andgovernments keen to take advantage of the benefits ofair transportation.Airbus is often asked how variations in underlyingfactors, such as the oil price, a recession or acceleratedmarket liberalisation, can affect traffic growth anddemand for air travel. To understand the impact suchvariations could have, the forecast uses econometric orhybrid models to conduct sensitivity analysis around ourbaseline traffic forecast in a more systematic way.Key drivers of traffic growth
  • 30. Global Market Forecast 33Traffic forecastneed to flyThe Airbus traffic forecast process is based on fourmajor building blocks: detailed market research, suitablemarket segmentation, targeted use of econometrics anddetailed network development analysis. The latter beingparticularly important, as it provides a systematic viewof how the route structure of the world’s air transportsystem will evolve, based on true passenger originsand destinations. The full benefits of this approach areparticularly clear when the aviation market movesthrough its now characteristic cyclical variations, such asthe drop in passenger demand resulting from the mostrecent economic downturn.The 2009 GMF analyses a total of 156 distinct domes-tic, regional and intercontinental passenger sub-mar-kets, segmented according to their degree of maturityand specific characteristics over time. Airbus marketresearch examines the fundamental drivers of transpor-tation including future consumer behaviour and expecta-tions, the pace of liberalisation, modal competition,the growing importance of emerging markets andconstraints, such as the influence of airport congestion.The market is segmented by airline business model,region and traffic flow, which enables the precisecircumstances and drivers prevailing on each segmentto be fully considered. Econometric data is then used toquantify future air travel demand based on economic,operational and structural variables.Airbus traffic forecast:from research to network development• Deregulation/liberalisation• Emerging markets• Modal competition• Low-cost penetration• Consumer/travel surveys• Regional/low-cost/charter• Start-up/network• Integrators• Traffic flows• Domestic/international• Economics• Tourism• Fuel price• Yields• Trade/value of goods• Aircraft economics• Airline operation economics• Origin-destination demand• Demographics• GeopoliticsMarketresearchMarketsegmentationEconometrics NetworkdevelopmentForecast methodology
  • 31. Cyclical downturns have almost always been linked toeconomic cycles, but at times this has also been exa-cerbated by other factors, most notably in the last tenyears with 9/11 and SARS.This time, both the global economy and consumerconfidence have been severely affected by the events inthe world’s banking community and stock markets,including the knock-on effects of the restriction offinance – the so called “credit crunch”. This createsproblems for consumers, airlines and aircraft manufac-turers alike. However, although these periods invariablylead to extremely difficult trading conditions - includinga number of airline bankruptcies, poor financial resultsfor some and some very difficult decisions for most -historically the industry has managed these periodsproactively, becoming more efficient and recoveringto enjoy the benefits when the market rebounds.Air travel has proved to be resilient to external shocksLong-term fundamentals01968 1973 1978 19881983 1993 2003 200819980. annual traffic(RPKs - trillions)5.0Source: ICAO, AirbusOil Crisis Oil Crisis Gulf CrisisAsianCrisisWTCAttack SARSFinancialCrisis+38%It is not yet clear how severe the current cycle will be orwhat shape it will take, however, previous cycles showthat the deeper the recession, the stronger the subse-quent recovery. During the last two cycles, the drop offin traffic and passenger demand was steep, creatingthe only two periods of negative traffic growth everwitnessed. The steep recovery after the last cycle sawalmost 14% growth in one year.
  • 32. Global Market Forecast 35Traffic forecastWhile the current cycle is clearly difficult for everyone inthe industry, it has the global economic slowdown at itsheart and has not been aggravated by any other “exo-genous events”. In this cycle, perception has played asignificant role, as businesses and passengers put tra-vel plans on hold awaiting a clearer picture of where theturning point of this cycle would come. As the serious-ness of this cycle became apparent, however, theworld’s major economic powers were very quick to res-pond, with unprecedented economic stimulus plans,totalling thousands of billions of dollars. While 2009 isexpected to be the worst in terms of world GDP growthfor many decades, economies are widely expected togradually begin to recover late in the year, with moremeaningful improvement in 2010 and 2011 forecast.These developments are expected to form the basis ofrecovery in passenger and freight traffic.As seen in the past, this typical response of the marketto such events is possible only due the enormousunderlying demand, the fact that people want and needto fly.remain strongThe deeper the downturnthe stronger the recoveryPotential for upsidefrom meaningful rescueand economic stimulusplansRescue Plan EconomicStimulus Plan$700 billion$320 billionN/A$650 billion$656 billion$468 billion$787 billion$150 billion$586 billion$109 billion$52 billion$39 billion-4%0%-2%4%2%8%6%10%14%12%Air traffic growth (%)Year 1 Year 2 Year 3 Year 4 Year 5Source: ICAO, Airbus Market Research and Forecast00 - 01 - 02 - 03 - 0490 - 91 - 92 - 93 - 9479 - 80 - 81 - 82 - 83USJapanChinaGermanyUKFranceSource: Airbus
  • 33. Although inversely linked to traffic growth, airline yieldshave traditionally been one of the main drivers for airtransportation growth, largely driven by fares. In otherwords, higher yields generally reduce passengerdemand and for obvious reasons are also closely linkedto the profitability of airlines. Analysis has shown that a1% increase in airfares will result in a 0.5 to 1% decreasein air travel demand, with this variation largely linked toregional markets and passenger class. Conversely, a 1%increase in GDP results in a 1% to 2.5% increase in airtravel demand.Like any industry, airlines seek to manage downturns bybalancing supply and demand. However, many opera-tors initially reduce capacity because, as explainedabove, using pricing alone to stimulate demand has pro-ven to be financially damaging in the past. In fact, duringthe early stages of the current cycle a significant portionof airlines particularly in the US chose to reduce capacityeven before demand started to turn significantly down-wards. A move designed in part to protect yields andrevenues and reduce costs, but also later havingthe effect of more closely matching capacity to demandand protecting load factors.Seats, yields and costs continueto influence trafficAir traffic demand is also correlated to air fares-10%19711973197519771979198119831985198919871991199319951997199920012003200520075%15%US domestic Air traffic growth (%) US domestic Air fare growth (%)20%0%-5%10%Air trafficAir Fare*Source: ATA, Airbus* Airline unit revenue expressed in average passenger revenue per kilometer flown (airline yield) as a proxy of air fares-10%-5%-0%5%10%15%20%25%30%35%-15%
  • 34. Global Market Forecast 37Traffic forecastAlthough all downturns have a number of similarities,there is invariably always something that makes eachone a little different. This time one difference was the factthat airline costs had been strained by exceptionally highprice of oil. But ironically the same financial crisis thatweakened demand for air traffic also reduced demandfor oil, thereby bringing fuel prices to more manageablelevels. In May 2008, world economic growth for 2009was expected to be around 3.3%, with oil costs aroundUS$140 per barrel at that time. Early in 2009, economicforecasts for the year show expected negative worldgrowth, with oil prices ranging around US$50 per barrelat that time. It is assumed that as economies anddemand recover, then so too will the price of oil andother commodities. Forecasts suggest that this will notbe to the levels witnessed in 2008, but enough will be tomake the need for the most fuel and eco-efficient aircrafttypes, once again self-evident.Elasticity for air travel demand1% increase in air fares0.5 to 1% decrease in airtravel demand(elasticity for air fares is -0.5 to -1)-0.5 Domestic ChinaChina - JapanDomestic USUS-W. EuropeDomestic Europe-11% increase in GDP1.0 to 2.5% increasein air travel demand(elasticity for GDP is +1.0 to +2.5)+2.5 Domestic ChinaChina - JapanDomestic USUS-W. EuropeDomestic Europe+1
  • 35. The 2.8 billion people living in Brazil, Russia, India andChina (BRIC nations) represented 36% of world GDPgrowth and 10% of all consumer spending in 2008.Over the next 20 years these nations will grow to repre-sent 22% of world GDP and 19% of consumer spen-ding, making them increasingly important in terms of airtransport.Today, the BRIC nations’ economies and industries arestill closely entwined with more developed countries.Therefore, the slow down in demand from the US andEurope has had a negative effect on these emergingeconomies and on the short-term development of theirair transport industry. However, there is little doubt thatstrong performance in recent years, coupled with largetrade surpluses and foreign exchange reserves, meantthese emerging economies were in a better positionthan many to boost spending, encourage consumerdemand and withstand the worst effects of the currentdownturn.In future, it is also likely that the resilience of BRICnations will further increase with each successive eco-nomic cycle. The national savings rate in China is around50% of GDP, up from 38% in 2000, and there is clearlyhuge potential for consumer spending growth as China’seconomy and population develop. This offers real poten-tial as a counter balance to difficulties such as the recentcuts in consumer confidence and spending in moremature economies. In China, consumer spending isexpected to increase by 8.4% annually over next 20years to 43% of GDP, while Indian consumer spendingis expected to grow by 6.9% per year to 60% over thesame period, all helping to strengthen their economiesand offset the effects of future economic downturns.Cyclical downturns no matchfor underlying demandGrowing importance of consumption in BRIC countries30%19811983198519871989199119931995199719992001200320052007200920112013201520172019202120232025202740%50%60%Private consumption as a share of GDP (%)70%History ForecastWestern EconomiesWorldBRIC countriesSource: Global Insight (Jan 2008), Airbus
  • 36. Global Market Forecast 39Traffic forecastThe Chinese and Indian governments both aim to stimu-late their economies using multi-million dollar infrastruc-ture projects, which also include airport developments.China’s massive US$586 billion package is designed toboost investment and consumption.Packages unveiled by the Indian government in late 2008and early 2009 have made more funds directly availablefor projects that will help the country’s airport infrastruc-ture, which has struggled to keep pace with rapid growthand the resulting increase in air traffic, increasing by anaverage of 20% per year since 2002. The governmentLarge potential to increase propensity to travelhas also relaxed regulations to make it easier for thoseinvolved in infrastructure projects to gain access to foreignfunds.These actions also address concerns raised in a reportpublished by Forbes, which indicates that three of the fiveairports with the most significant delayed arrival times in2008 were in India, and another by Goldman Sachs,which highlights the need for infrastructure development,including airports, in their top ten recommendations toensure India realises its economic potential by growingforty-fold by 2050.0.0010 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,0000.010.11Trips* per capita - 20082008 Real GDP per Capita10 SeychellesBarbados MaltaPassenger originating from a particular countryNote: GDP in 2005 US$Source: IATA PaxIS, Global Insight, AirbusCyprusBahrainBahamasNew ZealandSingaporeMacao UAE IrelandSwitzerlandDenmarkNetherlandsSwedenUSAQatarUKBelgiumFinlandJapanCanadaSt LuciaFijiCape verdeSamoaJordanMalaysiaMauritiusCzech rep.EstoniaCroatieLatviaPanamaSaudi ArabiaBosniaBelarusAngolaNigeriaBangladeshLesothoAfghanistanIraqChadNigerBotswanaSlovakiaMaldivesItalyBruneiSloveniaSouth KoreaPuerto RicoTrinidadTaiwanIsraelPortugalSpain Hong KongAustraliaGreeceGermanyFranceKuwaitHungaryMexicoPolandSurinameBrazilChinaIndiaWorld averageRussiaEquatorial Guinea
  • 37. In 2008, the number of foreign tourist arriving in India wasup 5.7% on 2007 to 5.5 million, despite the problemsthat beset the Indian market in the second half of theyear, including fuel prices, terrorism and the economiccrisis. However, there is clearly also a lot of additionalpotential, when you consider that some 47 million foreigntourists visit China each year and there are 528 milliondomestic Indian tourists that can be targeted with airtravel, at the right price.In recent years, the populations of emerging countrieslike China and India have clearly demonstrated anincreased propensity to fly. Even with the significantgrowth in air transportation witnessed in recent years,huge potential exists for further growth as these nationsand their people become better able, economically, totake advantage of the benefits aviation undoubtedlyoffers. Wider access to such opportunities helps ensurethat GDP and wealth are increasingly spread amongstthe world’s nations. By 2017, it is forecast that 70%of the world’s population will be responsible for 18% ofworld GDP: double the 1997 level of just 9%.GDP increasingly spread over the worldAlthough China and India are the largest emergingmarkets, the United Nations has identified another 27emerging or potentially emerging countries. With a com-bined population of almost three billion people, theserepresent smaller, but never-the-less significant markets,in terms of their economies and air transportation.Many of these governments recognise the benefitsaviation can offer their economies and their people, soactively support and promote air transport within andfrom their nations. This support comes in many forms,but can include tax relief on aircraft purchases and fuel,airport and infrastructure projects, and creatingor extending existing bilateral arrangements, therebycreating greater deregulation and greater access andchoice for passengers. Vietnam for example has imple-mented many of these policies, including extending abilateral agreement with the US in 2008, and is todayseen as one of the fastest developing markets in Asiaand indeed, the world.0%0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%20%10%40%30%60%50%70%90%100%80%World Population (%)World GDP (%)Source: Gobal Insight, Airbus201720071997Future air travel capture
  • 38. 3.0Spain-United KingdomGermany-SpainRepublic Of Ireland-ItalyGermany-United KingdomGermany-ItalyFrance-United KingdomItaly-United KingdomItaly-SpainFrance-GermanyFrance-SpainFrance-ItalyNetherlands-United KingdomAustria-GermanyGermany-SwiterlandGermany-GreeceSwiterland-United KingdomPoland-United KingdomPortugal-United KingdomNetherlands-SpainFrance-SwitzerlandSpain-SwitzerlandGermany-SwedenGermany-PolandDenmark-NorwayGermany-NetherlandsFrance-NetherlandsItaly-NetherlandsPortugal-SpainBelgium-ItalyDenmark-GermanySweden-United KingdomGermany-PortugalBelgium-SpainDenmark-United KingdomNorway-United KingdomRepublic of Ireland-SpainFrance-PortugalDenmark-SwedenLCC AirlinesOther scheduled airlinesSource: Airbus, OAG, Scheduled seats (millions), September 2008Millions sheduled seats (Sept 2008)Global Market Forecast 41Traffic forecastEuropeLow Cost Carriers (LCC) now carry over a third of thescheduled traffic in Europe and will continue to act as astimulus for air traffic growth into the future. Despite beingheavily affected by a higher oil price, the LCC model inEurope has not lost ground and many airlines haveactually strengthened their positions. Even the economicdownturn provides some opportunities, with businesspassengers in particular increasingly flying LCCs as travelbudgets are tightened. Longer term, opportunities formergers and acquisitions among LCC airlines will lead tothe possibility for fewer but larger groups, enabling themto reinforce their networks and access more markets,potentially even on long-haul routes.LCCs exceed 50% market share on some large intra-European flowsLCC’s continue to growand influence traffic growthThe European LCC market is well established andbeginning to mature. As well as seeking new routes, forwhich the number of opportunities will steadilydecrease, operators will look to consolidate and growexisting markets and routes, inevitably leading to theneed for larger aircraft. Three quarters of the LCC capa-city is today on intra-European markets, where LCCsoften already exceed 50% market share on large non-adjacent markets.LCC’s exceed50% on someEuropeanmarkets
  • 39. Domestic European LCC operations primarily focusedon a small number of key countries todayThere is still significant potential for LCCs in the largestdomestic markets, such as in Spain or Italy, althoughcompetition with other modes of transport, such asthe high-speed train, is more pronounced on shorterdistances. In addition, many domestic markets arelimited to regional jet operations, an aircraft segmentin which LCCs have traditionally not operated. 3.0Domestic SpainDomestic ItalyDomestic GermanyDomestic FranceDomestic United KingdomDomestic NorwayDomestic SwedenDomestic GreeceDomestic FinlandDomestic PortugalDomestic DenmarkDomestic Ireland RepublicDomestic SwitzerlandDomestic PolandDomestic AustriaDomestic RomaniaDomestic CroatiaDomestic IsraelDomestic IcelandDomestic GreenlandDomestic BulgariaDomestic Czech RepublicDomestic SlovakiaDomestic CyprusDomestic LatviaDomestic NetherlandsDomestic EstoniaDomestic Bosnia And HerzegovinaDomestic Macedonia FormerDomestic Lithuania4.0 5.0LCC AirlinesOther scheduled airlinesLCC Market share: 22%Source: Airbus, OAG, Sheduled seats (millions), September 2008Despite a challenging year for air transport in 2008,LCCs in Europe offered 10% more seats than in 2007.This strong performance largely benefited the twomajor LCC carriers in Europe, which account for over40% of the LCC market and saw capacity increaseby 21% between 2007 and 2008.
  • 40. Global Market Forecast 43Traffic forecastThe US and European LCC markets are similar in size.However, while 95% of the US LCC traffic is carried bythe top four airlines, the European market is still largelyfragmented, with 30 carriers splitting 60% of the trafficand increasing capacity by 3.6% between 2007 and 2008.Though very few bankruptcies occurred in 2008, the last18 months have seen the European LCC market slowlybegin to consolidate, helped by the absence of newLCC start-ups and a more difficult environment wherenumerous survival plans involve mergers between LCCairlines or network carriers reabsorbing LCC affiliates.Two strong performersin a difficult environmentdominating a fragmentedbut now consolidating LCCmarket in EuropeEven with this consolidation, the European LCC marketwill remain more fragmented than its US counterpartbecause of the greater diversity of markets, travellersand airline business models. The difficulties facing somesecondary network carriers in Europe will continue toallow better placed LCCs to increase their share of keymarkets, while the trend towards greater Europeancultural and political integration will continue to providegrowth and new network opportunities. LCCs will conti-nue to play a key role in the mobility of Europeans,particularly to and from the more disparate destinationsin the European Community, with their weightedaverage route length having increased 20% to 1,050kmin the last five years.LCCs are flying longerroutes participatingin the unification of Europe010015050200250300350400450500Daily seats (Thousands)Ryanair & Easyjet+21%+3.6%> 30 other LCC carriersSource: Airbus, OAG, Scheduled seats (millions), September 20082008 total growth2007 seat capacity6008001,0001,200Average distance (km)2000 2004 2008Source: Airbus, OAG, LCC routes average great circle distances.Weighted by the scheduled seats, September 2008791 km924 km1,050 km
  • 41. Organic growth, or growth of existing markets, is stillmodest, but is key to forecasting future LCC trafficgrowth as additional new network opportunities dimi-nish. For one major European LCC, 30% of the growthAsian market split. LCCs have captured the largest share(62%) in domestic ASEAN(1)marketsMore larger aircraft will be needed for theLCCs to operate higher density markets050100150200250300350400Number of airline routes2000 2004 2008 2012 2016 2020 2024 2028Source: Airbus, OAG. Number of LCC routes* > 500 daily seats*Airport pairs operated by a specific airlineLCC Routes* > 500 daily seatsHistory Estimates19%of the LCCcapacity41%of the LCCcapacityTotal: 2.5 million daily seats65%11%11%4%9%010203040506070% of seats offered by LCCsLCC share11%2%8%37%62%Domestic markets excl.ASEAN marketsDomestic ASEAN marketsIntl. Markets between ASEAN Nations(1) Association of South East Asian Nations (ASEAN) : Brunei, Darussalam, Cambodia,Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and VietnamIntl. Markets not linked to ASEANIntl. Markets from ASEANSource: Airbusin 2008 was organic. By the year 2028, it is estimatedthat 40% of the LCC traffic will be on routes with morethan 500 daily seats, so many will require larger aircraftthan the 737s and A319s typically used today.
  • 42. Traffic forecastAsiaLCC growth in Asia-Pacific has remained high. Over 30operators generated 19% more traffic in 2008 than in2007, with the top five carriers accounting for 68% ofthat growth. In addition, there are still opportunities forLCC markets to become more widespread, with poten-tial for new operations and even some new operators inparts of Asia where LCCs are not well established.However, the overall number of LCC operators in theregion should remain stable.In a very short time LCCs in Asia have captured 14% ofa regional market that is the same size as the domesticDomestic Asia markets: 14% market share for LCC’s5004003002001000 600 700Domestic ChinaDomestic JapanDomestic AustraliaDomestic IndonesiaDomestic IndiaDomestic Republic Of KoreaDomestic MalaysiaDomestic ThailandDomestic PhilippinesDomestic New ZealandLCC AirlinesOther scheduled airlinesDaily seats (Thousands)Daily seats (Thousands)58% of Asia-Pacific domestic trafficLCC share: 3%Half of the top 10 markets with aLCC market share > 40%Top 10 markets (95% of total domestic traffic)Source: Airbusmarkets in North American or Europe. However, whilesimilar in size, the Asian market differ with these moremature markets significantly. For example, in half of thetop ten domestic Asian markets, LCCs have over 40%market share, more than some western markets areexperiencing. However, LCCs are basically non-existenton the two largest domestic markets, Japan and China.Asian LCCs will continue to grow in their domesticmarkets by both increasing their market share and bybenefiting from impressive regional economic growth.However, they are also increasingly considering thepotential of international markets.Global Market Forecast 45
  • 43. Intra-Asia: LCC’s have taken just an 8% market share,but increasing rapidly2520151050 30 35 40 45China-Hong Kong-ChinaChina-JapanChina-Republic Of KoreaHong Kong-ChinaJapan-Republic Of KoreaAustralia-New ZealandJapan-Chinese TaipeiSingapore-IndonesiaSingapore-AustraliaMalaysia-IndonesiaHong Kong-JapanHong Kong-ThailandChina-SingaporeSingapore-ThailandJapan-ThailandMalaysia-SingaporeMalaysia-ThailandHong Kong-SingaporeHong Kong-PhilippinesHong Kong-AustraliaMacao (Sar) China-Chinese TapeiJapan-SingaporeChina-ThailandHong Kong-KoreaRepublic Of Korea-ThailandThailand-AustraliaChina-MalaysiaPhilippines-Republic Of KoreaChinese Taipei-ThailandIndia-ThailandJapan-PhilippinesThailand-VietnamSingapore-VietnamIndia-SingaporeLCC AirlinesOther scheduled airlinesSource: Airbus, OAG, Scheduled seats (millions), September 2008Daily seats (Thousands)Top Asian markets(74% of total international traffic)LCC capacity between Asian markets grew by a stun-ning 37% in 2008. This was helped by more markets,like the Singapore-Kuala Lumpur route, being opened toLCC airlines, but in the third quarter 2008, operationslike this between markets in other ASEAN countries onlyrepresented 8% market share.
  • 44. Global Market Forecast 47Traffic forecastIntra-ASEAN countries:LCC now represent morethan a quarter of the trafficTraffic from the ASEAN countries to other countrieswithin the region has increased by 67%, fuelled by agreater liberalisation that has mainly been achievedthrough bilateral agreements. Today, 60% of that marketis on routes with ranges below 2,000nm (3,700km),where LCC airlines traditionally operate. However, anumber of LCCs are operating at ranges above thatand are mainly using larger aircraft, particularly wide-body types.Today, 20% of all international Asia-Pacific traffic is over2,000nm (3,700km). Within the next 20 years, it isforecast that nearly 250 additional routes (includingadditional carriers on existing city pairs) will be added, aquarter of which will be over 2,000nm (3,700km), withmost requiring wide-body aircraft. LCCs are likely tograb a significant share of this traffic, while also develo-ping operations to further destinations, in particular toNorth East Asia, where LCCs are emerging, notablyfrom South Korea. For example, LCC traffic amongASEAN countries and between ASEAN countries andSouth Korea are expected to grow by an average of10% per year over the next 20 years. Should the mar-kets of Japan and China become more accessible toLCC operations, the growth rates would be muchhigher. The growth of these LCCs will continue to offer% of seats offeredbetween ASEAN countriesLCCsOtherScheduledservice27%73%• Market share > 25% (2008)• Passenger growth > 25% (2008 vs 2007)Source: Airbus40% of the demand from ASEAN countrieswith in Asia is on distances over 2,000nm0%20%10%30%40%50%60%100%% of total cumulative demand from ASEAN countries to the regionRange (nm-Great circle)90%80%70%0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000LCCsmarket share: 2%LCCsmarket share: 11%people in the Asia-Pacific region an opportunity to reapthe benefits of air transport through new routes andmore affordable travel, as well as helping to drive worldtraffic growth to its projected highs.
  • 45. As well as economic and LCC growth, continued dere-gulation, particularly in the developing markets in Asia, isexpected to drive future traffic growth. Recent examplesinclude the expanded trans-Atlantic agreement betweenthe US and Europe. However, developments on oneimportant Asian flow, in particular, China to Taiwan, hasalso taken significant steps forward in recent months.Chinese Cross Straits traffic remains one of the mostregulated markets in the world, but is still one of thelargest intra-Asian traffic flows with almost five milliontravellers using all modes of transport each year. Themarket has experienced solid growth during the pastdecade with an average annual growth rate of 8.1%.Deregulation drives growth ininevitable growthChinese Cross Straits: as deregulationprogresses, more direct flights and a surgein air traffic demand are expectedCSXPEKTSNDLCTAONKGHGHPVGHGHWUHCGOFOCXIYKMGCTUCKGHAKCANKHHXMNSZXSource: Airbus• One of the most regulated markets in the world with fewscheduled direct flights.• Strong visitor growth: 8.1% per year on average duringthe last 10 years.• Has the potential to become the number one networkwithin Asia.January 2009 : direct non stop scheduled flights to mainland ChinaIn January 2009, following additional deregulation,over the Chinese New Year, 108 weekly scheduledflights were allowed to operate between mainland Chinaand Chinese Taipei. Thirteen carriers operated these fre-quencies and new routes.In the medium term, providing the trend continues andthere is full deregulation over time, the direct routesbetween Taiwan and mainland China could becomethe number one intra-Asian network in terms ofair traffic.
  • 46. Global Market Forecast 49Traffic forecastemerging markets :from Cross Straits travelArrivals in mainland Chinafrom Taiwan by modeof transportationToday, most air traffic between these points goesthrough Hong-Kong or Macau, where scheduled directair links are allowed from Taiwan. Passengers thenconnect by air or other modes of transport to reach theirfinal destinations in mainland China. Others points ofentry to mainland China also involve non-aerial trans-ports. Overall, 60% of the visitors still complete theirjourney to their final destinations by using non-air modesof transport.Just five mainland Chinese destinations are responsiblefor half of the demand. These are cities mainly located inthe south easten parts of the country where social, his-torical and economic ties with Taiwan are the strongest.However, as more deregulation occurs, with as a conse-quence a surge in mainland Chinese nationals travellingto Taiwan, demand is expected to spread from manymore cities in mainland China, thereby increasing theaverage trip length and therefore aircraft utilisation.Chinese cross straits forecast:the number one intra-Asian network60%40%Source: Airbus, OAG,National Tourist Administration (September 2008)Other modesAirOn directflights andcontinuationfromHong-kong& MacauMosltythroughHong-kong& MacauPEKTSNTNADLCTAONKGHGHHGHWUHCGOFOCXIYKMGCTUCKGHAKCANNMGKHHKWLSZXYNTSource: Airbus• Air Traffic to almost triple within the next decade.(Includes traffic to Hong-Kong and Macau).• > 8 million air travellers per year on the direct routesto Mainland China only.• More routes, average distance to increase.• Single-aisle up to very large aircraft needed to operatethe different markets.Direct non-stop scheduled routes with regular flights to mainland China within the next decade
  • 47. Many of the passengers expected to fly the new directair links between Taiwan and mainland China will bediverted from the current Hong-Kong and Macau routesto Taiwan, as two thirds of the traffic on these routesconsists of passengers connecting to mainland China.Overall 20% of Hong-Kong regional traffic has thepotential to be affected by the new direct air services.However, in the short term only 35% of this demand isexpected to effectively translate into lost traffic, asHong-Kong Airport will remain an attractive gatewayfor nearby mainland destinations, in Guangdong pro-vince, and will continue to offer more destinations andflights to mainland Chinese cities. While the connectingtraffic will continue to erode, direct traffic between Hong-Kong and Taipei will continue to increase at an averagerate estimated at 5.2% per year (2008-2020), morethan offsetting the decline of the connecting traffic tomainland China beyond the next 5 years. Therefore, by2020, the HKG-TPE route will increasingly become aroute serving origin and destination demand betweenthese points directly, with 72% of traffic being thosepeople only wanting to travel between the citiesof Hong Kong and Taipei.As well as being an example of the pro-active deregula-tion of an important market allowing significant growth,it is also an example of the strength of the resultingunleashed demand.The magnitude of the effects of the deregulation andwhen they will occur is uncertain, but recent eventsshow developments happen sooner rather than later.Frequencies will increase significantly in 2009, if weassume frequencies trebling to around 350 a week withthe additional new routes, this implies that 75% of thecurrent visitors will be able to fly to their desired destina-tions directly. There would also be enough flights tocapture all the demand on the routes served in January2009 with a mix of single-aisle and wide-body aircraft.Assuming progressive, total deregulation and with aconservative scenario, more than eight million air travel-lers will fly annually one way on the direct air routesbetween mainland China and Taiwan within the nextdecade. That is similar to Japan-PRC. Total trafficbetween Taiwan and China, including Hong-Kong andMacau, could almost triple within the same timeframe.This as deregulation, particularly for passengers frommainland China, will boost demand and some existingdemand switching to air travel. As traffic levels grow,average distance flown increases and top destinationswill continue to attract most of the demand, a largenumber of aircraft, ranging from single-aisles to verylarge aircraft will be necessary to fly Cross Straits.
  • 48. Global Market Forecast 51Traffic forecastAir travel will doublein the next 15 yearsAir travel remains a growthmarket0199019801970 2000 2010 2020 2030246810World annual traffic - RPKs trillionAir trafficwill doublein the next15 yearsAir traffichas doubledevery 15 years+ 10.5% per yearSource: ICAO, AirbusAirbusGMF 2009ICAOtotal trafficAs a result of drivers such as these, worldwide RevenuePassenger Kilometres (RPKs) will grow at an average of4.7% per annum over the next 20 years. Among thelargest submarkets, annual RPK growth on domesticIndian and PRC flows are expected to average 10% and7.9% respectively. This reflects optimistic long-term pro-jections for economic growth in these countries, as wellas a growing tendency for their populations to travel byair, reaping the benefits of vastly reduced journey timesfor largely similar prices. Growth will also be driven byincreased wealth and improved access to air transportgenerally. Some other markets linked to the IndianSubcontinent are expected to grow strongly, with an ave-rage annual RPK growth of 5.8% for the IndianSubcontinent-Western European market and 5.8% forthe Middle East-Indian Subcontinent market for example.For other, more mature markets, such as the domesticUS and the intra/domestic European market, Airbusforecasts average annual RPK growth of 2% and 3.3%respectively. Although these seem to be relatively smallnumbers, they are still significant due to the already highlevels of traffic in these regions. The pace of growth onIndian and Chinese domestic flows is set to increaseseven-fold and five-fold respectively over the next 20years. However, by 2028 the total volume of traffic,including growth, will still be larger in the US andWestern Europe.
  • 49. History and forecast of world top ten traffic flow by RPK1. Domestic US2. Intra - Western Europe3. US - Western Europe4. Domestic PR China5. Asia - Western Europe6. South America - Western Europe7. Japan - US8. Domestic Western Europe9. PR China - Western Europe10. Central Europe - Western Europe1. Domestic US2. Intra - Western Europe3. US - Western Europe4. Japan - US5. Asia - Western Europe6. Domestic PR China7. Domestic Western Europe8. South America - Western Europe9. Domestic Japan10. Asia - US1. Domestic US2. Intra - Western Europe3. US - Western Europe4. Japan - US5. Asia - Western Europe6. Asia - US7. Domestic PR China8. Domestic Japan9. Domestic Western Europe10. South America - Western Europe1998 2003 2008Largest 20 traffic flows in 20284.3%4.4%4.6%3.0%5.8%6.8%5.4%5.5%5.6%4.2%10.0%6.7%7.1%4.6%5.7%7.0%4.0%3.3%7.9%2.0%1,0008006004002000 1,200 1,400 1,600RPKs (Billions) 20-yeargrowth1.3%1.3%1.3%1.3%1.5%1.5%1.5%1.8%1.8%1.8%2.2%2.3%2.3%2.5%2.5%2.6%6.8%8.4%8.7%12.2%% of 2028World RPKs2008 traffic 2009-2028 growthDomestic USDomestic PR ChinaIntra West. EuropePR China - West. EuropeUS - West. EuropeSouth America - West. EuropeAsia - West. EuropeAsia - PR ChinaCentral Europe - West. EuropeDomestic IndiaJapan - USAsia - USMiddle East - West. EuropeIntra-AsiaPR China - USIndia Sub - West. EuropeDomestic West. EuropeDomestic AsiaNorth Africa - West. EuropeCanada - West. EuropeSource: Airbus20-year worldannual trafficgrowth 4.7%
  • 50. Traffic forecast1. Domestic US2. Domestic PR China3. Intra - Western Europe4. US - Western Europe5. PR China - Western Europe6. South America - Western Europe7. Asia - Western Europe8. Asia - PR China9. Central Europe - Western Europe10. Domestic India1. Domestic US2. Intra - Western Europe3. Domestic PR China4. US - Western Europe5. Asia - Western Europe6. South America - Western Europe7. PR China - Western Europe8. Central Europe - Western Europe9. Japan - US10. Asia - PR China1. Domestic US2. Intra - Western Europe3. US - Western Europe4. Domestic PR China5. Asia - Western Europe6. South America - Western Europe7. Japan - US8. Central Europe - Western Europe9. PR China - Western Europe10. Asia - PR China2013 2018 2028India and China the fastest growing,but US remains the largest marketx1 x3 x5 x7x2 x4Traffic volume in 2028RPKs(billions)Domestic USDomesticJapanRatio to 2008 traffic2004006008001,0001,2001,4001,600Domestic PR ChinaDomestic IndiaWestern Europe - USWestern Europe - Asia PRC - USWestern Europe (Dom + Intra)Indian Subcontinent - PRCSource: AirbusGlobal Market Forecast 53
  • 51. World traffic growth by regional flow - 2028 versus 2008In addition, the combined Middle Eastern traffic flowsare expected to expand rapidly, with 6.9% annualgrowth to 2028. Flows from and within theCommonwealth of Independent States (CIS) will gene-rate 5.9% average annual growth, while Africa and LatinAmerica are expected to increase by 5.2% and 5.8%respectively.The progress made by Chinese flows is equally clear.The country’s domestic flow moved up from seventhplace in 1998 to fourth in 2008 and is expected to bethe third largest by the end of 2028, with flows linked toAsia in general representing five of the top ten largestflows in terms of traffic. As a consequence, airlinesbased in Asia are expected to develop their traffic morerapidly than those based in other regions, growing byan average of 6.0%. This is fuelled by the aspirations ofairlines and in some cases the countries themselves,as well as by access to burgeoning markets driven byliberalisation and a growing propensity to travel.The airlines of Latin America, the CIS and Africa are alsoexpected to register growth higher than the global ave-rage during this period, as air transportation and itsbenefits continue to be more evenly distributed aroundthe world. As a result, traffic will be much more evenlyshared across the world, with Asian airlines forecast totriple operations to represent 33% of all traffic by 2028.The fastest regional traffic growth will be in the MiddleEast, where the ambitions of countries and airlines willdrive annual growth of 6.9%. Over the next 20 years thiswill result in the region increasing its world share to 8% ofthe total.Looking at traffic evolution from a different point of view,this time segmenting airlines at a very broad level (or thehighest possible granularity), the network airlines areexpected to remain dominant with 75% of the totalworldwide traffic, whether they are global, major, suchas a large national flag carrier with a large fleet, or small.The 42 global network airlines, which grow more slowly,will still represent 55% of total worldwide traffic in 2028.Todays LCCs are expected to grow 1.2% per annumfaster than the global network airlines (the 84 included inthis GMF represent 98% of global LCC traffic).0%30%50%100%RPKs (billions)World 2008World 2028DomesticPRC790Otherflows3,009Domestic&Intra-W.Europe536DomesticUS462W.Europe-US426W.Europe-PRC227Domestic&IntraAsia225DomesticIndia222Asia-PRC202W.Europe-SouthAmerica195W.Europe-C.Europe193W.Europe-Asia171Asia-USA141W.Europe-MiddleEast1384,66511,602Source: Airbus
  • 52. Global Market Forecast 55Airline segmentation - world traffic evolutionPassenger traffic growth by airline domicileAsia to lead in world traffic by 20282019-20282.9%20-yeargrowth2.4%North America2009-20181.9%2019-20285.6%20-yeargrowth5.8%Latin America2009-20185.9%2019-20285.1%20-yeargrowth5.2%Africa2009-20185.4%2019-20284.7%20-yeargrowth4.3%Europe2009-20184.0%2019-20285.6%20-yeargrowth5.9%CIS2009-20186.2s%2019-20284.8%20-yeargrowth4.7%World2009-20184.6%2019-20285.5%20-yeargrowth6.0%Asia-Pacific2009-20186.6%2019-20286.3%20-yeargrowth6.9%Middle East2009-20187.6%2,5002,0001,5001,0005000 3,000 3,500RPKs (billions)Traffic by airline domicileAsiaEuropeNorth AmericaLatin AmericaMiddle EastCISAfrica6.0%20-yeargrowth4.3%2.4%6.9%5.8%5.9%5.2%33%% of 2028World RPKs26%20%8%6%4%3%2009-2029 growth2008 traffic4%14%57%13%6%6%Traffic at end 20084.7 trillion RPKsTraffic at end 202811.7 trillion RPKsGlobal NetworkMajor NetworkCharterSmall networkLCCRegional& Affiliates16%4%16%4%5%55%Source: AirbusTraffic forecast
  • 53. Demandfor passenger aircraft
  • 54. Demand for aircraftWhen in very difficult periods for the industry, it issometimes easy to forget the importance ofaviation and the growth expected over the comingyears. Over the next 20 years, the world’s airlines willrequire 24,097 new passenger aircraft with more than100 seats, worth US$2.9 trillion, to meet the demand forair travel. In terms of units, single-aisle aircraft, such asthe A320 will account for more than two thirds of thisdemand and twin-aisles, such as the A350 XWB, willaccount for 24%.In terms of value, the single-aisles and twin-aisles willrepresent 44% and 31% of the total demand respecti-vely. Some 1,318 very large passenger aircraft (VLA), likethe A380, will be required, accounting for 5% in termsof units and worth an important share of total businessat 15% of total value. Each of these seat segmentsis driven by market conditions, the opportunities andconstraints prevailing on each traffic or regional seg-ment, as well as airline strategies and manufacturerproduct offerings.New passenger aircraft demand willaverage 1,205 per year2,0004,0008,0006,00012,00014,00010,00018,00016,0000Single-aisle Smalltwin-aisleIntermediatetwin-aisleVery largeaircraft16,9774,0971,705 1,318Passenger aircraft > 100 seats (excluding freighters)Number of new aircraft% unit: 71% 17% 7% 5%% value: 44% 27% 14% 15%
  • 55. Demand for passenger aircraft20 year demand for 24,097 passengeraircraft worth US$ 2.9 trillion5,00010,00020,00015,00030,00025,0000Beginning 2009 2028Passenger aircraft > 100 seats (excluding freighters)Fleet size+ 3.5 % per annum28,11114,016GrowthReplacedStay in service14,09510,0023,13488024,097 new aircraftUS$ 2.9 trillionRecycledAircraft replacement 2009-2028Replacement(Passengerand combi aircraftreleased byan airline)13,136Recycled(resumingpassenger servicewithanother airline)3,134Converted(into freighter)2,585Retired(withdrawnfrom use)7,417Replaced(leavingpassenger orcombi services)10,002Global Market Forecast 59
  • 56. As the different world regions are stimulated by differenteconomic timing, demographic, geographic, regulatoryand air transportation structural forces, demand withineach region will also differ.Although air travel growth in the larger, more maturedomestic markets of North America and Europe willslow over the forecast period, demand for aircraft willcontinue to be strong, due in part to replacement acti-vity. In these regions, efficient wide-body aircraft willform a larger share of the total requirement, as interna-tional long-haul demand will be fuelled by the need toincrease travel, to and from the emerging and dynamicmarkets of Asia.In the Americas, single-aisles will represent 84% of theirtotal demand for aircraft with more than 100 seats, whileEuropean and African demand will be more evenlyspread across market segments. The Middle East, andAsia in particular, will represent a larger share of demandfor twin-aisles and VLAs. This is due to the fast growingmega-cities on both side of Asia’s international flows,demographics, the need to use such aircraft on trunkdomestic and intra-regional routes, geographical consi-derations, the effectiveness of these aircraft in alleviatingcongestion and the desire to reduce costs.However, it is interesting to note that Asia will also takean equal share of the single-aisle market with NorthAmerica and Europe, with 27% of single-aisle deliveries,as deregulation and increased inter-regional flyingdevelop further across Asian markets.By segmenting airlines using a set of pre-definedcharacteristics to a relatively high level of granularity(or scope), it is clear that 69% of the aircraft deliverieswill be taken by the network airlines.The global network airlines, with their large combinedsingle-aisle and widebody fleets, and wide-ranging ope-rations will need 11,326 aircraft of more than 100 seats.Major (medium size network airlines with internationalreach) and small operators (network or national carrierswith a smaller country base) will require just over 5,300aircraft. The current Low-Cost Carriers (LCCs) willrequire 5,542 aircraft, or 23%. Since publication of thelast GMF, long-haul LCC operations have successfullystarted. Airbus estimates that current LCCs, particularlyin Asia, will require nearly 400 widebody aircraft over thenext 20 years. Regional airlines will also require about700 single-aisle aircraft with more than 100 seats. Inaddition to the greater demand for aircraft with morethan 100 seats, there will be a need for 6,078 regionalaircraft with more than 30 seats (either jets or turbo-props which have seen a resurgence of interest followingthe high fuel prices in 2008). Some 60% of these aircraftwill be delivered to regional airlines, however, the globaland major network airlines, especially in Europe and Asiawill need 1,823 of them. Scope clause evolution in theUS, fuel prices and the declining competitiveness overtime of the current crop of smaller regional jets, willgreatly influence the requirement for large regional andsmaller single-aisle aircraft in both regional and networkairlines fleet. The Asia-Pacific region, with its growingemerging markets, is expected to take the largest shareof deliveries. Although Asia’s fleet is currently around20% of the world fleet, Airbus expects demand for7,672 new aircraft in Asia-Pacific, continuing to repre-sent up to 31% of the total world demand over the next20 years for aircraft over a hundred seats. The moremature, yet still significant, markets of North Americaand Europe are expected to take 25% and 23% of totaldeliveries respectively. The rest of the world will take theremaining 21%, including 7% for Latin America, a slightincrease on the GMF view expressed last year.Airlines will acquire aircraft not only to accommodategrowth, but also to replace older equipment with moreeco-efficient, more comfortable and lower cost models.Increased productivity and larger aircraft, will see thetraffic demand grow by 4.7% per year and the aircraftfleet by 3.5% per year to satisfy demand for air travel.
  • 57. Demand for passenger aircraftGlobal Market Forecast 61A simple realityIn the last ten years average aircraft size has increasedfrom 157 seats to 162, adding almost an extra row.Like the majority of aircraft demand forecasters, Airbuspredicts the average size of aircraft with over 90 seatswill grow to 186 seats.This is important because, to a certain extent, size andfrequency dictate the number of aircraft required, withthe balance between them influencing the type of air-craft that will be required to meet market needs over thenext 20 years. The growth in aircraft size is largely drivenby network evolution. However, both cost reduction andenvironmental obligations will become increasinglyinfluential as airlines seek to capitalise on the operatingbenefits larger aircraft can bring, particularly in thecontext of upgrades within a single-aircraft family thatalso minimises training and maintenance costs.Aircraft size increased by morethan 3% in less than 10 years1561999 2000 2001 2002 2003 2004 2005 2006 2007 2008Source: Airbus, OAG, January 2009Average aircraft capacity (number of seats) per flightAircraft >90 seats only157158159160161162163
  • 58. The move to larger aircraft has been a global trend andmost regions have shown double-digit growth sincethe 1970s, even with the introduction of the numeroussingle-aisle types from the eighties and efficient twin andquad engine types through the nineties. However, someregions have demonstrated a need for even greaterincreases in size because of particular characteristicssuch as location, cities, demographics and airlines. Forexample, average aircraft size has grown by more than40% in the Middle East and 34% in Asia.Aircraft size increased in all regionsover the last 35 years1401501901101972 2008Source: Airbus, OAG, January 2009Average aicraft capacity (number of seats) per flightAircraft >90 seats only120130160170180200+41%+34%+31%+28%+21%+16%AfricaAsia-PacificEurope & CISLatin AmericaMiddle EastNorth AmericaThat trend is sure to continue; not only because ofthe increasing numbers of very large and efficientA380s already operating around the world, but also withupcoming aircraft like the 787 and the A350XWB (extrawide body), which will replace smaller aircraft like theA300/A310, 777 and 767, and eventually with the nextgeneration of single-aisles, which will bring a stepchange in economic and environmental performance.
  • 59. Demand for passenger aircraftRegional aircraft getting biggerThere is also a clear trend towards larger aircraft onregional operations, including jet and turbo-prop, withthe average aircraft size increasing from 27 to 50 seatssince the early 1980s.Just 15 years ago, one could watch banks of small30 or 40 seat turbo-props buzzing in and out of the mainUS hub airports. Today, most have been replaced withregional jets, with an increasing proportion of fleetsmade up of new, larger variants as more of these aircraftare delivered.This growing demand is illustrated by the developmentof several 70 and 90 seat regional jet programmes,some of which are being produced by new entrantsto the international regional market. As they come intoservice, these will further boost the numbers of largerregional aircraft and continue the upward trend.By contrast there has been a steady decline in 50 seataircraft in recent years. This is partly because ofincreases in fuel prices and, therefore, operating costs,but also because as regional routes continue to matureorganically, they need more capacity rather than morefrequency to meet growth needs.Global Market Forecast 63
  • 60. Less 50 seater aircraft in service0%1985 2008Source: Airbus, Ascend, January 2009Share of aircraft in service per category20%40%60%80%100%Western Passengers only50 70 8587%7%6%78%16%6%Regional aircraft getting bigger201983 1988 1993 1998 2003 2008Source: OAG, January 2009Average aicraft capacity (number of seats) per flight25303540455055
  • 61. Demand for passenger aircraftGlobal Market Forecast 65Bigger single-aisle aircraftSeveral factors have pushed up the average aircraft sizeof single-aisle aircraft. Firstly, organic growth on coredomestic and inter-regional routes is a key driver.Secondly, LCCs are already operating an increasingnumber of aircraft with relatively high-density configura-tions. However, to support future growth not only willthey gradually adopt new routes, but they will alsoincreasingly consider the use of larger single-aisles. Andthirdly, there has been a surge in the number single-aisleSingle-aisles getting bigger0%1985 2008Source: Airbus, Ascend, January 2009Share of aircraft in service per category20%30%10%40%50%60%70%80%90%100%Western Passengers only100 125 150 175 21045%5%48%29%12%46%13%2%deliveries to Asia to support the growth of domestic andregional operations, particularly in light of demand fromemerging markets. Historically, the number of largersingle-aisles with 150 seats or more delivered to Asiahas not been significantly different from deliveries ofsmaller aircraft. However, in the last four years, therehave been more than four times as many of the largeraircraft entering Asian fleets, which has boosted theaverage for single-aisle seating.
  • 62. Larger single-aisles needed over time1001973 1978 1983 1988 1993 1998 2003 2008Source: Airbus, OAG, January 2009Average aicraft capacity (number of seats) per flight110105115120125130135140145150Airbus forecasts that due to the evolution of the world’snetworks and the desire to further extract the economicand environmental benefits on a seat-mile basis, theaverage size of single-aisles will grow from 148 to 154over the next 20 years.Single-aisle aircraft size deliveredinto Asia has increased01992 1994 1996 1998 2000 2002 2004 2006 2008Source: Airbus, Ascend, February 2009Deliveries per year50100150200250150-21050-125
  • 63. Demand for passenger aircraftTwin-aisles continue to growThe twin-aisle market has been very much at thecentre of many airlines’ fleet decisions in recent years,particularly the extremely efficient A350WXB Family,which ranges from 270 to 350 seats, and the largervariants of the 787 that are being considered for thissegment. It should be no surprise, therefore, that evenbefore these aircraft enter service in 2013 and 2010respectively, the average size of twin-aisle aircraft iscontinuing the upward trend seen in the single-aisleand regional markets.Twin-aisles getting bigger2702001 2002 2003 2004 2005 2006 2007 2008Source: Airbus, OAG, January 2009Average aicraft capacity (number of seats) per flight275280285290295300Global Market Forecast 67
  • 64. As mentioned, the desire to reduce costs is already akey factor and will increasingly drive demand for largeraircraft in the future. Taking the middle market as anexample, it is simple to demonstrate the benefits; parti-cularly in a market where recent experience has shownhow volatile fuel prices can be.Typically airlines have used financial hedges to helpremove some of the uncertainty, but as recent expe-rience has shown, price fluctuations and timing can endLarger aircraft have lower fuel costper seat; an advantage with higher oil prices152 2.5 3 3.5 4 4.5 517192123252729313335Fuel price ($ per US Gallon)up making these tactics very costly. A more reliableoption is to use larger aircraft, with a similar technologystandard, as a sort of operational hedge. Not onlyis the cost per seat benefit guaranteed simply becauseof the extra seats, but that benefit actually grows asthe price of fuel increases. Clearly, load factors needto be sufficient for this trade between aircraft size andfrequency; however, this simple reality is likely to furtherencourage growth in average seating.Cost per seat advantage between same generation 260-seater and 230-seater
  • 65. Demand for passenger aircraftGlobal Market Forecast 69If further evidence was needed,very large aircraft have arrived!With 16 A380’s already operating – a number which isset to increase still further by the end of this year - everincreasing numbers of very large aircraft will make theirpresence felt on the market. The combination of sizeand new technology give operators enormous flexibilityin terms of how they use the space on board.Airlines are already demonstrating this flexibility. Somehave opted for unprecedented comfort and serviceacross first, business and economy classes. Othersprefer to take advantage of unbeatable seat mile costsand profitability by opting to carry over 800 passengersa single class configuration, but with 21st centurypassenger amenities and comfort.The VLA network is growing fastNew YorkLondonParisTorontoDubaiSingaporeBangkokTokyoSeoulMelbourneLos AngelesAucklandSydney16 A380s in service> 4,000 revenue flightsOver 1,500,000 passengers*Data at July 2009As well as providing complete cabin flexibility, the aircrafthas demonstrated incredible operational flexibility - meetingairline requirements for capacity and low operating costs,while providing unrivalled environmental pedigree for everytype of operator be they mainline network, low-cost,domestic, medium or long-haul carrier.By 2009, A380s were already operating out of many ofthe world most important airports and as deliveriesincrease so too will the destinations, making the world’sbiggest aircraft, a familiar sight at all of the biggestairports.
  • 66. Big hubs more resilient to crisis32 of the world’s biggest hubs are moreresilient to crisis1102007 2008Source: OAG, AirbusMonthly ASK (Billions)115120125130135140145150155Between big hubs Rest of the world-1.9%-3.8%It is interesting to note, that as airlines adjusted capacitythroughout 2008, initially to reduce costs because ofhigh fuel prices and then to maintain load factors withthe onset of the economic crisis, smaller airports werehit twice as badly as the larger hub airports by capacityreductions. The resilience of these large hubs furtheremphasises their importance in the world’s aviationnetwork.
  • 67. Global Market Forecast 71Demand for air travel will worsencongestionEvery year, an ever-growing population needs andwants to fly; put simply, air travel and access to itssignificant benefits, is now possible for more of theworld’s population than at any point in history.This demand has caused air traffic to increase 10-foldin the last 30 years - a rate of growth so rapid, that attimes the industry’s infrastructure and in particular air-port capacity, has not been able to keep pace. Despitethe current industry woes, traffic is expected to doubleagain in the next 15 years, so sufficient airport capacityis likely to remain an issue for politicians, airlines andpassengers.One factor helping to fuel these congestion concernsis the growth in the world’s major cities, which gene-rates most of the increase in air transport. As the worldbecomes inexorably urbanised, mega cities continueto draw more and more people, with their greaterprospects for wealth and security. It is unsurprising,therefore, that at as these large centres of populationgrow and people become more economically mobile,the need for travel between them increases as theirinhabitants do business, take holidays or visit friendsand relatives. All putting pressure, on what is in somecases, already limited airport capacity.Capacity-constrained airports are more likely to facedelays and service breakdown than other airports,as their facilities remain under constant pressure.More passengers without adequate capacity invariablyimply more people in waiting lines to check-in, forsecurity screening and to collect bags. Likewise, moreaircraft have to share the same air space, gates,runway capacity and even parking, creating increasedcongestion.Demand for passenger aircraft
  • 68. Congestion: costly for passengers,airlines, airports, economiesand the environmentThat wasted fuel was worth US$1.6 billion in 2007 andconsiderably more in 2008, given the very high fuelprices up to October and is equivalent to 7.1 milliontonnes of pointless CO2.The Air Transport Association in the US estimated thecost of delays to US airlines over a rolling year, toSeptember 2008. The fuel portion of these delay relatedcosts increased a staggering 41% compared to theyear before.More widely, delays cost passengers up to US$12 billionon US domestic flights alone, mostly as opportunitycosts such as lost productivity and missed opportunitiesfor business travellers, lost leisure activities and missedholiday time for tourist travellers, and missed connec-tions and disrupted ground travel plans for passengersin general. Consequently, these costs cascade throughthe rest of the economy. The US Travel IndustryAssociation estimated the loss to US tourism in 2007at more than US$9 billion.Congestion occurs when the available infrastructure isclose to its designed capacity. The congestion may bethe result of a capacity problem at an individual airport,but the resulting delays can have knock-on effectsacross an entire network. For example, New YorkMetropolitan airports represent approximately 7% of USdelays: the greatest delays in the country. Unfortunately,these airports are also one of the country’s most impor-tant gateways, connecting numerous international anddomestic flights, which means that any congestion hasa massive knock-on effect, with three quarters of thecountry’s flight delays cascading from them.In addition to being simply time-consuming, coping withdelays is costly for passengers, air carriers, the eco-nomy and the environment. In 2007, taking the US as anexample as the data is more easily available, airlineseffectively wasted up to 740 million gallons of fuelin delays, equivalent to 32,000 Paris-New York trips,or three years of air traffic between these two cities.
  • 69. Demand for passenger aircraft0%% of used design capacity (2007)20%40%60%80%100%120%140%160%180%200%Bubble size proportional to airport size(in passengers per year)London LHRFrankfurtTorontoLos AngelesSao Paulo GRUAmsterdamSydneySeoul ICNSingaporeHong KongJohannesburgBeijingMumbaiDubaiAirport designcapacity limitHigh growth and no capacity – congestion pathSpare capacity and growth potential – the perfect pathSource: AirbusCapacity vs. traffic balance is tough for some airports0London HeathrowLos AngelesParis Charles-de-GaulleFrankfurtBeijingMadridAmsterdamHong KongTorontoDubaiShangai PudongMumbaiShangai HongqiaoJohannesburg20 40 60 80 100 120 1402007 passengersProjected 2015 passengersCurrent capacityProjected 2015 capacitySource: ACI, AirbusMost of these airports current expansion plans are already below2015 forecasted traffic.Passengers (millions)Global Market Forecast 73Expansion is a major need for most airports
  • 70. Although the current downturn has slowed demand atmany major airports worldwide, with some even tryingto combat this by adjusting their pricing, as traffic reco-vers, congestion issues will once again become evi-dent. Airlines will need to find alternative solutions tosatisfy their short-term capacity needs, as many air-ports will find themselves approaching the limitations oftheir capacity and having to deal with sudden marketchanges, such as with the extra traffic created by rapidliberalisation in the Indian market.Extra terminals and runways can all facilitate growth,but these are neither quick nor simple solutions dueto space constraints, financing, environmental andpolitical concerns, particularly in Europe and the US,where there can often be opposition from residentialcommunities situated close to airports.For example, spare runway capacity is scarce in theGreater London area, especially at Heathrow. Itsrunways have already been close to capacity for manyyears: 25% of London’s flights were delayed in 2005and 30% in 2007. With the possibility of a much-nee-ded third runway under considerable pressure, bothfrom environmental groups and on the political front,the problems in growing key global hub airports are evi-dent. Competition from hub airports in other countrieswith spare capacity can alleviate some demandconstraints. However, this does not support develop-ment and competitiveness at airports where expansionis hindered by, for example, noise or land use concerns.In these areas expansion projects will become increa-singly difficult to achieve. So traffic will grow, but capa-city and facilities will not keep pace, which will increasedelays even further:Similarly in Asia, airports at Hong-Kong and Beijing areimproving facilities to accommodate traffic that is set togrow at an impressive seven to eight percent per year.However, the new facilities are already expected tobe operating at or beyond capacity when they open,effectively postponing, rather, than solving the area’scongestion issues.However, congestion doesn’t always mean that anairport has reached full capacity. Airport activityfluctuates throughout the day, with most airport facilitiesheavily used only during peak hours and under utilisedfor the rest of the day. Traffic is concentrated on strate-gic hours of the day, such as mornings and evenings,when most people start and end their working day. Theproblem is that these periods are concentrated in a fewshort time ranges. For example, New York JFK airporthandles half of its daily departing traffic (about 580 perday) within just six of the 21 hours it operates each day.With higher volumes and reduced margins at peaktimes during the day, this type scheduling can leadto the problems associated with congestion.Moreover, airports are not the only facilities that needto be upgraded to cope with more traffic. In somecongested regions, such as US East Coast or Europeanareas like Greater London, air traffic management some-times have difficulties managing the increasing flows ofaircraft. For example, the US National Aviation System isreported to have caused over half of 2007 departuredelays at New York Kennedy airport.Fortunately, there are plans to modernise both Europeanand American air traffic control systems. EuropeanSESAR and US NexGen programmes aim to introducecutting-edge satellite-based navigation technologies,offering more precise flight tracking, enabling more air-craft flying in the same airspace and optimised flightpaths. With air traffic controllers able to manage moreaircraft at the same time, even in bad weather, thesenew generation air traffic control systems will offer quic-ker flights, less fuel burn and emissions, shorter routesand less congestion.This technology will complement growth in airport infra-structure to increase the system’s overall capacity.However, they won’t replace 50-year old ground radartechnologies on the busiest route, so it is unlikely trafficdemand requirements will be met before 2012.JFK: HalfDepartures/dayin just 6 hours
  • 71. Demand for passenger aircraftGlobal Market Forecast 75US National Aviation System responsible for overa half of New York JFK airport delays in 2007Source: US Department of Transportation, AirbusDelays by cause0.2%55%3.7%24.3%16.8%Air carrier delayWeather delayAircraft arriving lateNational Aviation System delaySecurity delayEuropean traffic control capacity maynot catch up with traffic demand until 2012ATC CapacityForecast capacityTrafficForecaste traffic20,0002003 2004 2005 2006 2007 2008 2009 2010 2011 2012Source: Eurocontrol, AirbusFlights per day25,00030,00035,00040,000
  • 72. Larger aircraft = LargerTraditionally, traffic growth has been accommodatedacross the network by a combination of new route,greater frequencies and improved aircraft productivity,including aircraft size growth. That ‘mix’ is dictated bya number of factors, competition, availability and capa-bility of aircraft, the required level of service, deregulationand, crucially, airport capacity. Should airport capacitybe insufficient and development opportunities limited,then it is really only through an incremental increasein aircraft size that demand can be met - or lost to acompeting airline or airport.Just prior to the current downturn, 114 airports hadbeen identified as ‘capacity constrained’; these airportsare congested and no capacity expansion is achievablein the near future. Significantly 72% of world trafficpasses through these airports.114 capacity constrained airports*Source : IATA, OAG, Airbus * level 3 airports with over 30 daily scheduled movements in Sept. 2007Constrained airports represent 72% of worldwide traffic
  • 73. Demand for passenger aircraftairport capacityIn the past few years, smaller regional aircraft replaceda number of larger aircraft in many US major airports,despite the seat mile cost benefits of larger aircraft,which has also served to increased congestion. Eventhough traffic congestion at New York JFK airport, 35percent of aircraft departing during 4pm-8pm peaktimes are regional aircraft with less than 100 seats.The use of larger aircraft would allow more passengers,limit the number of movements and potentially reducethe CO2 emissions per passenger. It could also poten-tially postpone the need for additional runways at air-ports and air traffic control centres. For some airports,congestion has become such a major issue that toughpolitical decisions have had to be made to help combatcongestion. New York Kennedy Airport’s movementswere capped to 82 movements per hour at peak timesto make airlines shift their flights to times of the daywhere there was unused capacity.However, actions such as these will not be sufficient tosolve congestion. Demand elasticity for travelling at peaktimes is very low, which means that most passengerswill want to fly at these particular peak times, even withhigher fares. Larger aircraft make it possible to carrymore passengers per slot, therefore, relieving pressureon infrastructure on peak times for an increased numberof passengers.Today, the spectre of soaring fuel costs is less of aconcern, but as the world economy recovers so too willthe price of commodities like oil, which will widen the gapbetween smaller and larger aircraft costs per passenger.Therefore, using smaller aircraft to provide increasedservice, through high frequency on busy routes, may nolonger be sustainable for many air carriers. Indeed themovement from today’s 50-seat aircraft to largertypes and at least one regional jet Original EquipmentManufacturer to consider entering the large aircraftmarket, is an indication of some of the existing and futurepressure to move aircraft size higher.Global Market Forecast 77
  • 74. Bigger is cheaper?Airports previously based the landing fees chargedto airlines on the weight of the aircraft. Now, the USDepartment of Transportation has allowed Americanairports to calculate charges based on arrival time,which means peak-hour slots will become more expen-sive. So, as well as being more efficient to use largeraircraft per slot, it will also be more profitable for airlinesseeking to operate at peak times.The Japanese government is studying a similar systemfor its busiest airports such as Tokyo Haneda and Narita,while other governments are studying alternative landingcharge schemes to encourage the use of cleaner, quie-ter and more eco-efficient aircraft.In fact the trend to larger aircraft has already started. Thelack of capacity at some of the worlds largest airports ishelping to drive aircraft size upwards, with an increasedaverage aircraft size at three quarters of the worlds topten airports in the last few years. The pressures and costaccrued as a result of congestion are likely to mean thatthe others will have to follow that example.3/4 of the worlds ten biggest airports have used biggeraircraft for international flights since 2003* On international flights onlySource: OAG, AirbusTop ten airports by number of seats (2007)Airports Average seats per aircraft* Growth2003 20071. Atlanta Hartsfield-Jackson 163 165 +1.5%2. London Heathrow 201 208 +3.5%3. Chicago O’Hare 172 175 +1.9%4. Paris Charles-de-Gaulle 155 164 +5.9%5. Los Angeles International 230 217 -5.6%6. Frankfurt Airport 169 175 +3.8%7. Beijing Airport 251 258 +2.7%8. Madrid Barajas 147 158 +7.5%9. Dallas Fort Worth 152 137 -9.8%10. New York JFK 244 228 -6.8%
  • 75. Demand for passenger aircraftGood for businessGood for the environmentGood for travellersThe task facing aircraft manufacturers is clear but chal-lenging: lower costs for operators, less impact on theenvironment and practical, affordable connectivity fortravellers and freight companies. This is particularlyimportant, as many forecasts, including the Airbus GMF,continue to predict the sound growth of air travel overthe coming decades. While the 20-year timeframe of theforecast is long, the corresponding years, as well as pro-viding challenges, will provide further opportunities tofind solutions to some of the key issues we face today.Airlines recently faced fuel bills that represented up to40% of their operating costs and continue to face oilprice fluctuations that can impact profitability and pri-cing, as well as noise restrictions that limit the servicesthey can offer from some of the world’s busiest airports.In the last 40 years the aviation industry has created air-craft that are 70% more fuel-efficient and 75% quieter,which means that they also produce 70% less C02emissions and are less restricted by airport curfews.So, it’s clear that what’s good for business is also goodfor the environment and good for travellers. But maintai-ning or, even better, increasing the pace of improvementrequires massive investment and co-operation, not justacross the aviation industry but also across the widertransport and energy sectors, to ensure that we makethe best use of each new technology or alternative fuelas they become available.Airbus has over 400 R&T initiatives in progress and 80%of the company’s R&T, worth up to €500 million per year,offers environmental benefits for current and futureaircraft. All such projects are in line with the Vision 2020research targets of the Advisory Council for AeronauticsResearch in Europe (ACARE), which aim for 50% lessCO2, 80% less NOx and 50% less noise than compara-ble aircraft designed in 2000.Airbus innovation at work• More than 1,200 researchers• Over 400 initiatives in progress• R&T delivering environmental benefits• 637 patents applications filed by Airbus (2007)Global Market Forecast 79
  • 76. Evolution or revolution?Until now, progress in aircraft performance has been amatter of evolution rather than revolution. For example,the entry into service of the A310 back in 1983 markedthe introduction of composites on secondary structures,before applying them to primary structures two yearslater and then gradually increasing their use up to 25%on the A380 and to over 50% on the A350XWB.But that may be about to change.A new aircraft programme is launched when sufficientbenefits are available to airlines, through the advance-ment of the broad range of mature technologies neces-sary to create a step change in performance and effi-ciency compared to anything already available on themarket and when there is both sufficient market demandto build a sound business case. Airbus continues toresearch and identify technologies that may enable astep-change to become a reality and has launchedcorresponding research for an aircraft to enter servicearound the end of the next decade. The market expectsmore than an evolution, it demands a revolution in:• airline economics• environmental performance• simplicity for operations, maintenance and passengerscenarios.Technical and engineering teams at Airbus are identi-fying and fostering the most promising technologies(to develop a range of scenarios), which can be evalua-ted to ensure we move forward with a game-changerthat meets market expectations. However, while indivi-dual technologies can offer a significant step change ina specific aspect of aircraft performance, the real break-through will come from evaluating them as an integra-ted solution. For example, a new piece of technologymay offer a dramatic reduction in fuel burn, but couldhave a negative impact on weight, drag or noise; agame changing aircraft design comes from achievingthe optimum combination of all these elements.The following are examples of scenarii that havesimply been designed to illustrate that while improvingon all criteria, there comes a point when there mustbe a decision on priorities. They have been drawnqualitatively.Innovation is keyThe A300, the world’s firsttwin-engine widebodyjet is launchedat the Paris Airshow.The A310, seating218 passengers, is launchedoffering a smaller long rangealternative.> 1981A300 performs first flightwith a two-man crewFFCC (forward facingcrew cockpit).> 1978> 1969
  • 77. Demand for passenger aircraftGlobal Market Forecast 81Example 1: This concept concentrates on fuel burnand passenger experienceCost of OperationSimple to Manufacture Airline ProductivityPassengerexperienceSimple OperationsRecyclingFuel burn& EmissionsNoiseExample 2: This concept emphasises noiseand simple operationsCost of OperationSimple to Manufacture Airline ProductivityPassengerexperienceSimple OperationsRecyclingFuel burn& EmissionsNoiseA320 becomesthe first passenger aircraftto fly with full digitalcomputer-driven fly-by-wire controls and sidestick controller.The A380 was launched,the world’s first doubledeck passenger aircraftever built.The A350 is launchedincorporating groundbreaking metallic andcomposite structure, cabinand cockpit. The next stepinto the future.> 1987 > 2000 > 2006
  • 78. As time progresses, new technology becomes matureand can be used to expand aircraft capabilitiesin the desired directionCost of OperationSimple to Manufacture Airline ProductivityPassengerexperienceSimple OperationsRecyclingFuel burn& EmissionsNoiseDeveloping alternative energy sourcesfor aviation – Fuelling InnovationWhile fuel burn is a key factor in developing scenarii forfutur aircraft, it is just as big an issue for aircraft opera-ting today. The need to find alternative sources of fuelwas dramatically reinforced by the spiralling cost of fuelin 2008, which more than doubled due to increaseddemand, particularly from the emerging markets.Not only did this highlight that environmental ambitionand commercial reality are inextricably linked in the avia-tion industry, but it also made the search for sustainable,energy sources compatible with existing technology andinfrastructure an industry priority.Alternative fuels – Growing InnovationThe development of such ‘drop-in’ alternative fuelsremains a fledgling industry, with, as yet, little standardi-sation, which means that they will not be produced insignificant quantities within the next 10 years or so. Eventhen, they are unlikely to become available in quantitiesto meet the needs of all the forms of transport and all theindustries seeking to use them, which will lead to consi-derable competition.To help lead the industry, Airbus has defined a globalroadmap on alternative fuels, integrating research, part-nerships, test flights and co-operation with fuel standardcertification authorities. Airbus remains open mindedThe future...?
  • 79. Demand for passenger aircraftGlobal Market Forecast 83about all possible alternatives, but when it comes to bio-fuels, the focus is on second-generation and beyond,such as algae and micro-organisms, which includesbacteria, yeast and micro-algae. However, in all casessuch research will stay clear of anything that could com-pete with food resources, fresh water supplies or landuse (See algae example).Assuming that sufficient quantities are made availablefor aviation, Airbus believes that biofuels could provideup to 30% of all commercial jet fuel by 2030. In supportof this, it has teamed up with Honeywell Aerospace,UOP (a Honeywell Company), International Aero engines(IAE) and JetBlue Airways to pursue development of asustainable second-generation biofuel for use in com-mercial aircraft.Exploring the potential for Fuel cellsEmpowering InnovationAs well as looking at fuel burn to power flight, Airbus islooking at all aspects of energy consumption on aircraft,including for ground and auxiliary operations.Fuel cells transform the energy contained in hydrogeninto electricity by combining the hydrogen with oxygenin a “cold” combustion. Fuel cells could eventuallyreplace aircraft functions that currently require theAuxiliary Power Unit (APU), such as main engine startand air conditioning, paving the way towards emissions-free ground operations. What’s more, the only by-product from fuel cells is water, which could be used forthe aircraft’s water and waste system, saving weightand, therefore, reducing fuel consumption.In February 2008, Airbus, with the German aerospacecentre (DLR) and Michelin, successfully performed thefirst test flight on a civil aircraft (an A320) where a fuelcell system provided the power for the aircraft’s electri-cal and hydraulic back-up systems. During the test,the fuel cell system produced up to 20 kilowatts ofelectrical power. It powered the electric motor pump forthe aircraft’s back-up hydraulic circuit and controlledthe spoilers, ailerons and elevator actuator. Fuel cellsystems for commercial aviation are still in their infancyand it is unlikely that they would be used for commer-cial aircraft propulsion, which requires a thousand timesthe electric energy that was produced on the test flight.To use fuel cells more extensively on-board commercialaircraft, further improvements need to be made in termsof the amount of energy they produce versus theirweight (ratio kilo watt per kilogramme).
  • 80. Just 80 years ago, most people would not have evenconsidered the idea that flight would eventually becomea common method of future mass transportation. Today,the same can be said of using algae or other microorga-nisms, even yeast, as a source fuel for aircraft. However,the potential benefits of this innovative, eco-efficientsolution to the long-term availability and affordability offuel, mean that it is fast becoming a very real and viableoption. In this context, Airbus has been actively suppor-ting the development and possible application of gene-ric alternative fuels (including bio-jet fuel) and theirapproval for commercial aviation via agreed industryprotocols.However, Airbus believes that the innovation rich routeto bio fuels should not only reduce the carbon footprintof aviation, but also meet agreed sustainability criteria,such as avoiding a “food versus fuel dilemma”.Second-generation bio-fuels typically refer to fuels notadversely impacting the food chain, fresh water supplyor deforestation.There are a number of terrestrial plants that couldpotentially be candidates to meet these criteria. Algae,particularly micro-algae, are probably one of the morepromising options and have been a main focus forthose studying the potential opportunities for sustainablebio-fuels.Converting pints to gallonsFuel from micro-organisms,
  • 81. Global Market Forecast 85Demand for passenger aircraftthe future?Mainly because they have no roots or stems, micro-algae show significantly higher growth rates, whichcould result in higher volumes of bio-jet fuels, after theappropriate refining process (e.g. Fischer-Tropsch,hydrotreatment). Generally speaking, algae have thepotential to produce more than 5,000 litres per hectareof fatty acids in a year, several times more than their ter-restrial counterparts at the origin of first generation bio-fuels, such as rape seed or palm.Another advantage is that there are over 200,000 spe-cies of algae, which represents a huge field of investiga-tion to identify the strains with the best potential tomanufacture bio-jet fuels. Selection of the most suitablestrains will ultimately be based on the specific conditionsthat will be encountered during the industrial productionprocess and a compromise between growth speed,lipid content, photosynthetic efficiency and resistanceto contamination or diseases.However, even though the basic principles for producingalgae are understood, there are still many technicalissues that need to be resolved before the production of(micro) algae can be scaled up to make it a commerciallyviable alternative fuel for civil aviation. For example, onearea requiring further investigation is the means ofharvesting the cells, which can vary in size from a fewnanometres to a few microns.Today, with production at pre-industrial scale, the priceof a gallon of algae derived fuel is not on the same scaleas a gallon of kerosene (around US$1.85 in the lastweek of July 2009). Algae culture costs are likely torepresent the biggest part of the bio-jet fuel user price.As time passes and work in this area progresses, it issure that the price will tumble thanks to full industrialisa-tion of the production process. This will allow the startof large-scale commercial production within the 20-yeartimeframe encompassed by the GMF.And this is not the end of the story. Among the othermicroorganisms being considered for their potentialbenefits are yeasts, which offer two main advantages.Firstly they are known to provide a very high accumula-tion yield (up to 70% weight) and secondly, industrialprocesses (fermentation plants) already exist for foodapplications. Airbus has been partnering with academicand industrial bodies to investigate yeasts since 2005,obtaining promising results by working with CNRS-INRA(1)and by participating in the French CALIN(2)andthe pan-European ALFA-BIRD(3)and SWAFEA(4)projects.So why has this subject inspired the cover of this yearGMF? It is expected that by 2030 some 30% of aviationfuels will come from these and other alternative sustai-nable sources. However, this assumes that aviation willbe given fair access to sufficient supplies. This iscrucial because unlike other forms of transport andindustries that may find other ways to reduce theircarbon footprint, aviation will have to rely on fuels asits main energy for a long time to come – low carbonlifecycle fuels are therefore an even more essential partof aviation roadmap to drastically reducing its carbonemissions, helping to ensure that the benefits of avia-tion can be increasingly enjoyed into the future, whilst atthe same time minimising its environmental impact.(1)CNRS-INRA: Centre National de la Research Scientific L’Institut National dela Recherche Agronomique(2)CALIN: Carburants ALternatifs et systèmes dINjection innovants(3)ALFA-BIRD: Alternative Fuels and Bio-fuels for Aircraft Development(4)SWAFEA: Sustainable Way for Alternative Fuel and Energy in Aviation
  • 82. Storage and aircraftretirements balanceDuring down cycles, it is usual for airlines to withdrawpassenger aircraft and place them into some form ofstorage, in order to help adjust their fleet capacity require-ments; this to maintain load factors and ultimately yields.This cycle was slightly unusual early in its development, ascapacity reductions were driven, particularly in the US, bythe need to reduce costs as a result of the high fuel priceswitnessed in 2008. At the end of the first quarter 2009,the proportion of the fleet in storage, 12%, was still lessthan that in 2001, the last major cycle, which reached15% of the fleet.In 2001, the steep rise in aircraft storage was strikingfor the influx of old generation aircraft that ultimatelywould not be returned to service. In fact, 64% ofthe aircraft in storage at that time could be classifiedas old. Today, the situation is slightly different, whilethe proportion of new types in storage is roughlythe same, the proportion of mid generation typeshas risen dramatically, with more than 860 in storageat the end of the first quarter 2009. This possiblyas a precursor to the ultimate retirement of thoseless efficient models.2505007501,0001,2501,5001,750Number of aircraft storedOld Mid New Share fleet in serviceShare (%)2,00020002001200220032004200520062007Q1 Q2 Q3 J F M A M J0 %5 %10 %15 %20 %Q4020092008* Western-built passenger aircraft >100seatsSource: AirbusStorage increases as cycle develops, not to 2001 levels
  • 83. Global Market Forecast 87Demand for passenger aircraftand shape demandAnother way of looking at the likely return from storageof particular aircraft is simply their age. Examining theprofile of aircraft returning from storage, it can be seenthat over time the older the aircraft the less likely that itwill return to service. For example, between 1990 and2000 more than 85% of the aircraft returned to servicefrom storage were less than 25 years old. From 2000,just over 90% were under 25 years on their return.Today, there are nearly 600 aircraft over 25 years oldcurrently in storage.Little chance of return for stored aircraft morethan 25 years old0%10 15 20 25020%10%40%30%60%70%80%90%100%50%Cumulated % of de-storage events5 30 35 40Source: Airbus, Ascend December 2008 Western jets Pax only1970-1980 1980-1990 1990-2000 2000-2008
  • 84. Replacements are a key part of any forecast, as thetime at which aircraft leave passenger service to retireor be converted for other uses has an impact on boththe level of demand and timing of new aircraft delive-ries. When aircraft enter this phase of their lifecycle isdependant on many factors: airline finances, financingavailability, new aircraft availability both in terms ofdelivery positions and capability e.g. operating costs,and not least business cycles, due to their fluctuationsin passenger demand. However, making an extremelyprecise evaluation of what, when and how many, ismade more difficult by the fact that this is essentially anairline management decision.At a top level, it can be expected that aircraft retire-ments, as opposed to replacement, will increase asaircraft delivered in periods of historically high delive-ries, hit an age when typically aircraft retire in greaternumbers. Some simple analysis, assuming a retire-ment age of 25 years, shows these peaks and troughsclearly, with the industry entering a period of increasedretirements over the next six to seven years. However,given the factors described above, the decision toretire or replace aircraft could be taken sooner ratherthan later.As mentioned, the relative operating cost of new versusolder aircraft types can be a stimulus to take the deci-sion to replace or retire a particular aircraft type from afleet. This became particularly apparent with the highfuel prices witnessed in 2007 and 2008. With fuel pricesat around US$2 per gallon airlines can save aroundUS$700,000 per aircraft per year by operating a newgeneration types, like the 737NG and A320, versus atypical mid-generation single-aisle aircraft; at US$4 mil-lion this increases to US$1.4 million. For larger long-range types, the delta is even more significant. At US$2per gallon the comparison shows a US$2.3 millionbenefit from new generation aircraft like the A330, atUS$4 million per gallon this rises to US$4.5 million peraircraft per year. As fuel prices are expected to recoverwith the economy over the short to medium term, andat the same time environmental factors will continue toincrease importance, this fact will play a greater rolein airlines fleet planning considerations. By broadlysegmenting the current fleet by generation, there is aclear potential to replace more than 5,000 old or midgeneration aircraft well before the end of the forecastperiod of this GMF.Retirements: 3 waves, first peak in 201602009201020112012201320142015201620172018201920202021202220232024202520262027202820292030203120322033100200300400500600700800900Number of aircraft to be retired1,000Source: Ascend (Dec 2008), Airbus, assuming retirement at 25 yearsTwin-aisleSingle-aislePassenger aircraft >100seats (western & Russian aircraft)
  • 85. Global Market Forecast 89Demand for passenger aircraftOil price gives incentive to replace older generationaircraft soonerLarge replacementopportunity for passengeraircraft driving demand0.02 2.5 3 4 53.5 4.5 5.50.5Yearly fuel cost savings ($ million)Single-aisle: new vs. older Twin-aisle: new vs. olderFuel price ($ per US Gallon) 4$/US gallon a new generation aircraft saves $1.4M per aircraftper year in fuel vs. an older generation aircraft02 2.5 3 4 53.5 4.5 5.5Yearly fuel cost savings ($ million)Fuel price ($ per US Gallon)2135467At 4$/US gallon a new generation aircraft saves $4.5M per aircraftper year in fuel vs. an older generation aircraft500nm trip, 2,000 annual trips 1,500nm trip, same number of seats offered per yearThe Airbus replacement forecast is primarily basedeither on the actual fleet replacement plans of each air-line, or a default replacement age, (which is determinedthrough detailed analysis of the airline’s previous aircraftreplacements and the region in which it is based). In theGMF, any passenger aircraft removed from an airline’sfleet, either through lease termination, second-handsale, cargo conversion, storage or decommissioningand recycling, provides an opportunity to place a newmore eco-efficient aircraft. A number of the aircraftreplaced in the forecast will go back into service withother airlines, thereby competing with new aircraft tomeet airline needs. These are the ‘recycled’ aircraftreferred to in the GMF. Others become available forcargo conversions and compete with factory-built cargoaircraft; these trends will be discussed in more detail inthe Freight section of the forecast.2008 fleet13,785*Today, more than5000 old/midgeneration aircraftto be replaced bymore eco-efficientmodelAverageage : 25Averageage : 15Averageage : 5**Old: DC8, DC9, DC10, L1011, 707,727, 737-100/200,747-100/200 & A300BMid: F100, MD80, MD90, MD11, 737-300/400/500,757, 767, 747-300, A300-600 & A310New: ERJ190, 717, 737NG, 747-400, 777, A320Fam,A330 & A340*Passenger (>100seats) fleet in service at end 2008Old**(821 aircraft6%)Mid**(4,440 aircraft32%)New**(8,524 aircraft62%)
  • 86. Over the next 20 years, combined productivity parame-ters such as higher utilisation, speed and load factorswill deliver a 0.7% annual increase in RPK per seat.Consequently, to accommodate the forecast averagetraffic growth of 4.7% per year, the world’s airlines will beaiming to increase the number of seats they operate atan average of 4.0% per year. These additional seats willbe provided partly by an increase in frequency and partlyby an increase in the number of seats per aircraft.Productivity improvements derived2468204060Total daily flights (all airlines combined)200 400 600 800 2,000 4,000 6,000 8,000 10,00011,000Satisfactoryregionalservice levels(Europe-Asiashown)Maximumservicelevels10Capacity/frequency splitFrequencygrowth onlyCapacitygrowth onlyFrequencyshareCapacityshareDistance (km)Source: AirbusLarge potential to increase propensity to travel
  • 87. Global Market Forecast 91Demand for passenger aircraftfrom innovation and smart flyingFrequency or capacity are distributed depending on thespecific characteristics of each individual city pair, withinevery one of the 156 traffic flows forecast. When servicestarts on a particular route, airlines typically offer oneflight per day as soon as possible and then increasefrequencies to capture market share and to stimulatedemand. However, as mentioned earlier, the benefits ofconvenient schedules reach a point beyond which thereare diminishing returns and no further generation oftravel demand. That is why mature markets have justa handful of domestic city pairs with 60 daily flights,equivalent to one every 18 minutes.As traffic grows on any particular route, the extent towhich it will be accommodated by an increase in aircraftseat capacity, as opposed to an increase in frequency,will depend on where it is situated between the twothresholds. This analysis for each airport pair shows thatby 2028, assuming the infrastructure can cope with thegreater volume of flights, airlines worldwide will increasethe number of departures they offer, by an average of3.2% per year. This is significantly higher than the 2.5%per annum increase achieved since 1980 and willpresent a major challenge to the world’s airports and airtraffic control systems. Meanwhile, the number of seatsper aircraft (including regional aircraft) will increase by1.2% per year, from an average of 137 in 2008 to 173by 2028, in comparison to a 0.5% yearly increase since1980.Capacity growthaccommodated by biggerand more numerousaircraftTravel demand growthaccommodatedby productivityand capacity3 2 1 0 1 2 3 4 5 6Europe 3.70.6 3.1NorthAmerica 2.31.1CIS 3.3Africa 3.0Asia-Pacific America 4.7 3.22.8World capacity 4%1.2Middle East 6.10.9 5.2Average aircraftsizeNumber of aircraftin serviceAverage annual growth (%)Source: Airbus3 2 1 0 1 2 3 4 5 6 7Europe 4.40.6 3.7North America2.50.6 1.93.4CIS 5.92.5Africa 4.5Asia-Pacific - PRC America 5.8 4.84.0World traffic 4.70.7Middle East 6.90.7 6.1RPK per seat Capacity (seats in service)Average annual growth (%)Source: Airbus
  • 88. More will be seen in AsiaBy 2028 the world’s major airlines will need 19,724 newand ‘recycled’ single-aisle passenger aircraft to accommo-date traffic growth and renew their fleets.Of these, 2,747 aircraft will be replaced by their currentoperator and recycled back into the fleet to continue ser-vice with another airline. Therefore, there will be demandfor deliveries of some 16,977 new, more efficient aircraft.The demand for single-aisle aircraft will be evenly spreadbetween the three major regions of Asia, Europe andNorth America, with 81% of all single-aisle demand splitevenly at 27% each. Whilst the latter two regions havebeen traditional markets for this class of aircraft, delive-ries to Asia-Pacific are expected to increase with thegrowing low-cost presence and demand from emergingmarkets stimulated by progressive deregulation. LatinAmerica, the Middle East and Africa will take a significant15% of deliveries between them. By 2028, the active fleetof 20,478 single-aisles will be operating out of 1,815airports, linking 12,619 airport pairs. Unsurprisingly ope-rations will be largely focused on domestic US routes.Flights from the top 25 airports, led by Atlanta andChicago O’Hare, will absorb 20% of the fleet’s productivecapacity.Single-aisle aircraft will be overwhelmingly flown on shortflights and by 2028, 70% of them will be used on flightsof 1,850 kilometres/1,000 nautical miles or less, which isthe equivalent of Madrid to Berlin or Shanghai to Manila.Over the next 20 years, existing LCCs will require a totalof 5,141, or 30%, of the world’s new single-aisle aircraft.Asia-Pacific LCCs are expected to develop their single-aisle fleets quickly from a relatively low base of 340today, to more than 1,470 by 2028. With the shift tolarger regional aircraft, a significant portion of deliveriesis expected to be in the bigger categories, particularlythe 70 to 85-seat category. Today, there are a conside-rable number of in production and development turbo-fan aircraft in this segment. Overlap between mainlinejets and regional jets with around 100 seats is expectedto continue. However, the spread of demand, eitherupward or downward, for a particular airline, and thedesire for commonality and cost benefits, will both helpdefine aircraft demand in this sector.Demand above 100 seats, remains centered aroundthe 150-seat segment, which is currently characterisedby the extremely successful A320 Family. Meanwhile, ofthose airlines’ with single-aisle demand, 64% havedemand both above and below 150 seats, representingmore than 90% of deliveries. This makes commonalityacross the whole range of seat categories an importantelement for current and future single aisle programs,particularly for airlines intent on reducing the number ofaircraft types in their fleets in order to improve operationalefficiency.Single-aisle aircraft demandSingle-aisle fleet will grow to morethan 20,000 aircraft5,00010,00020,00015,0000Beginning 2009 2028Excluding freightersFleet size+ 3.2 % per annum20,47810,807GrowthReplacedStay in service9,6717,3062,74775416,977 new aircraftUS$ 1.2 trillionRecycled
  • 89. Global Market Forecast 93Demand for passenger aircraft2019-20282,021% of worlddeliveries27%North America2009-20182,5432019-2028594% of worlddeliveries8%Latin America2009-20187462019-20282,383% of worlddeliveries27%Europe2009-20182,1982019-2028371% of worlddeliveries4%CIS2009-20183622019-20282,226% of worlddeliveries27%Asia-Pacific2009-20182,3322019-2028254% of worlddeliveries3%Middle East2009-20183072019-2028299% of worlddeliveries4%Africa2009-2018341Asia becoming a large single-aisle market2009-2028 new regional aircraftand single-aisle demand050 70/85 100 125 150 175 210Excluding freightersNumber of new aircraft2,0003,0001,0004,0005,0006,0007,000Seat category2,4683,6102,2433,3435,3773,4572,557
  • 90. A broad market,with broad requirementsUnsurprisingly, just over two-thirds of the demand fortwin-aisles will come from airlines that operate largeglobal networks and will, therefore, make use of the sizeand range capability of these aircraft, mainly on routesfrom major hubs to secondary airports. Most of theseairlines will require aircraft in all sizes, with varying rangerequirements. Airbus’ current products in this categorycontinue to prove their popularity with customers,Twin-aisle demand2009-2028 new twin-aisle demand: 5,802 aircraft0250 300 350 400Excluding freightersNumber of new aircraft1,5005002,0001,0002,500Seat category2,1841,9131,057648the A330/A340 Family achieving net orders of 138 in2008 and selling the 1,000th A330 in the same year. Onentry into service in 2013, the A350 XWB Family will alsoaddress demand from the 250-seat segment all the wayto the 400-seat segment, operating on routes withranges up to 15,400kms, while retaining commonalitywith other Airbus family of aircraft, which today rangefrom 105 to 525 seats.
  • 91. Global Market Forecast 95Connecting the worldThere will be 4,454 aircraft in service in the 250 and300-seat category by 2028. Demand for 273 of thoseaircraft will be met by aircraft being recycled back intothe fleet as the original operators take delivery of one ofthe 4,097 new aircraft that will be required between2009 and 2028. Unlike for single-aisles, the NorthAmerican market represents only 15% of worldwidedemand in this category. European and Asia-PacificSmall twin-aisle demandSmall twin-aisle fleet will grow to more than 4,000 aircraft1,0005002,0001,5004,0003,5003,0002,5004,5000Beginning 2009 2028Excluding freightersFleet size+ 3.5 %per annum4,4542,261GrowthReplacedStay in service4,097 new aircraftUS$ 797 billionRecycled2,1931,90484273Demand for passenger aircraftairlines will take 59% of all deliveries in this class, repre-senting some 2,428 aircraft. By 2028, 4,454 small twin-aisle aircraft will be operating at 632 airports, linking atotal of almost 3,117 airport pairs. Flights from the top50 airports led by London Heathrow and Dubai will usethe productive capacity of half the total demand. Asmuch as 70% of the small twin-aisle demand is concen-trated with just 49 airlines.
  • 92. For growing marketsThe world’s major airlines will operate a total of 1,861passenger aircraft in the 350 and 400-seat category by2028; a market segment covered by the A340-600today as well as the A350-1000XWB in the future. Ofthese, 1,705 aircraft will be new, which will replace 768of the existing fleet and provide 937 for growth. Thetypes of operations and distances involved in Asia-Pacific mean that it will need the bulk of all deliveries inthis category, with 785 aircraft, or 46%. Europe will take396 aircraft, or 23%, and the growing Middle Easternmarket will take 193 aircraft, or 11%. Twenty years fromnow, 1,861 intermediate twin-aisles will be operating at337 airports, linking a total of about 1,260 airport pairs.Intermediatetwin-aisle demandIntermediate twin-aisle fleet will growto almost 1,900 aircraft6008004002001,2001,0002,0001,8001,6001,4000Beginning 2009 2028Excluding freightersFleet size+ 3.6 % per annum1,861924GrowthReplacedStay in service1,705 new aircraftUS$ 419 billionRecycled93776842114Of the top ten airports served, seven will be in the Asia-Pacific region, including three in China, two will be inEurope, the remaining one will be in the Middle-East.Compared with the world fleet as a whole, the operationof intermediate twin-aisles will be relatively concentra-ted, led by London Heathrow, Shanghai and Beijing air-ports. Half of these aircraft will be used on flights fromthe top 19 airports. In addition, half of intermediate twin-aisles will be used on flights of no more than 5,925 kilo-metres/3,200 nautical miles, which is roughly the equi-valent of Frankfurt to Boston, while the other half will beused on flights less than 12,965km/7,000nm, which isroughly the equivalent of Hong Kong to New York.
  • 93. Global Market Forecast 97Demand for passenger aircraftNew twin-aisle (small and intermediate)demand concentrated in Asia-Pacific and Europe7JFK1LHR5CDG8FRA6DXB9BKKRankAirport10SIA2PEK3PVG4NRT10ICNTwin-aisle operations in 2028 will be concentratedlargely on Asia-Pacific and Europe2019-2028381% of worlddeliveries14%North America2009-20184422019-2028160% of worlddeliveries5%Latin America2009-20181392019-2028633% of worlddeliveries21%Europe2009-20185732019-202872% of worlddeliveries3%CIS2009-2018822019-20281,278% of worlddeliveries41%Asia-Pacific2009-20181,1252019-2028333% of worlddeliveries12%Middle East2009-20183352019-2028128% of worlddeliveries4%Africa2009-2018121
  • 94. Delivering large benefitsTo maximise the profit potential of operations in an eracharacterised by fluctuating fuel prices, pressure onyield mix, increasing competition, a need to differentiateairline product offering through comfort, as well asincreasingly stringent infrastructure and environmentalconstraints, airlines will operate 1,318 very large aircraft(VLA) such as the A380, by 2028. Regional demand forVLA, will be centred on the Asia-Pacific region, with 711aircraft, or 55%, of world demand. Europe’s airlines willneed 281 aircraft, or 21%, to meet growing demandto the Asia-Pacific region, while North America andthe Middle East will take 253 aircraft, or 19%, betweenthem.By 2028, these VLA will be serving 198 airports, linking491 airport-pairs and operating in a diverse set of mar-kets. Airbus anticipates that flights from just these top20 airports will use the productive capacity of 881 air-craft, or 67% of the 2028 VLA fleet. London, HongKong, Beijing and Dubai will require nearly 304 VLA.Although Los Angeles is the only North American citywithin the top 15, together with San Francisco and NewYork, they will use the productive capacity of nearlyVery large aircraft80 VLA, as already confirmed with the routes announ-ced by current A380 customers. The VLA will be usedon the complete range of domestic, intra-regional andintercontinental routes, in single and multi-class configu-rations.With many of the top routes being centred in Asia-Pacific, it is understandable that most of the VLA delive-ries will be made to the region. However, with thestrength of traffic between Europe and Asia and demandon some trans-Pacific routes, other regions’ airlines,notably the Middle East, will take a significant share ofVLA deliveries over the next 20 years. Unsurprisingly, theglobal network airlines will use as much as 82% of theworld’s large aircraft to meet their requirements onroutes between the mega hub cities like London, Beijing,Tokyo, New York and Dubai. Very large eco-efficientaircraft, like the A380, are able to move people at lowerseat mile costs than any other aircraft in airline revenueservice today. This class of aircraft is also expected to beof interest to LCCs and charter airlines that may findthemselves in competition on certain long-haul routesin the future.1,318 new VLA passenger aircraftwill be needed4002008006001,2001,0001,4000Beginning 2009 2028Excluding freightersFleet size1,31824GrowthReplaced1,294241,318 new aircraftUS$ 446 billion
  • 95. Global Market Forecast 99Demand for passenger aircraft2019-202856% of worlddeliveries5%North America2009-201882019-202812% of worlddeliveries1%Latin America2009-201872019-2028176% of worlddeliveries21%Europe2009-20181052019-20284% of worlddeliveries1%CIS2009-2018102019-2028445% of worlddeliveries55%Asia-Pacific2009-20182662019-2028101% of worlddeliveries14%Middle East2009-2018882019-202828% of worlddeliveries3%Africa2009-201812VLA new deliveries concentrated in Asia-Pacificand EuropeExcluding freighters14LAX20SFO19JFK2LHR8CDG9FRA4DXB17JNB15ICN5NRT3PEK1HKG18HND10DEL12BOM 7BKK6SIN13SYD11PVG16TPERankAirportBy 2028, 12 of the top 20 large aircraft airportswill be in Asia-Pacific
  • 96. AsiaTiger, tiger, burning brightAlready known as the “world’s producer”, the Asia-Pacific region will become the “world’s largestconsumer” as a huge middle class emerges among the3.5 billion living in the region. Countries such asSingapore or South Korea, which rely heavily on worldtrade, have been particularly impacted by the globaleconomic crisis. This having been said, two-thirds ofAsia-Pacific nations are still expected to experiencepositive economic growth in 2009. In the medium tolong term, the crisis may well accelerate Asia-Pacificeconomic integration, making the countries moredependent on regional trade and enabling them tobenefit more from the growth of their giant neighbours,China and India, as well as from other smaller but fastgrowing economies, such as Vietnam.In terms of air travel, the emergence of a huge middleclass, increasing regional co-operation and progressiveair deregulation are making Asia-Pacific one of the fas-test growing regions in terms of traffic. It is also one inwhich the airlines’ operational environment is changingthe most, making it impossible to determine which jour-neys passengers will make, which carrier they will useand even which mode of transport they will select,based solely on analysis of passed trends alone.Intra-Asian marketsAlthough traffic amongst Asia-Pacific countries repre-sents only 25% of the passengers carried in the region,it accounts for almost half of the Available SeatsKilometers (ASKs). For years, bilateral regulations haveprevented the full expansion of air transport betweenmany countries in the region. The economies of thesecountries were largely focused on the US, Europe orJapan, limiting the potential for more regional economicintegration.Today, there are more structures to deal effectively withtrans-national issues within the region. The ASEAN(1)countries are at the forefront, having formed their ownfree trade area between South-East Asian countries.The result of all this is stronger economic ties and a morederegulated environment, which has allowed Low CostCarriers (LCCs) to emerge successfully, opening theregion up to more travellers and boosting the tourismindustry.The emergence of a the middle-class also means thatleisure oriented travel between Asian countries lookspromising, although greater deregulation will be neededto allow the region to realise the region’s full potential. Asthese barriers ease, with the notable example of the pro-gressive deregulation of flights between mainland Chinaand Chinese Taipei, airlines will need to adapt theirstrategies: high growth and starting from constrainedmarkets generates more rapid change than any otherregion.(1) Association of Southeast Asian Nations: Brunei Darussalam, Cambodia,Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand andVietnam
  • 97. Global Market Forecast 101Demand for passenger aircraftHalf of the intra-Asian demandwill be to China & India30%40%20%10%60%50%100%90%80%70%020081988 2028*Other Asia : primarily Japan, South Korea, Australia & New ZealandSource: Airbus% of intra-Asian passengers demandASEAN from/to China+IndiaASEAN from/to Other Asia*Other Asia* from/to China+IndiaBetween ASEAN countriesBetween Other Asia* countriesBetween China - India28%20%19%18%14%1%17%18%27%21%16%1%14%16%32%17%20%1%More signs of regional economic integration can befound in new international trade links emerging betweenAsia-Pacific countries: direct non stop traffic betweenChina and India multiplied by 3.5 in one year. However,with air traffic to India accounting for only 5% of intra-Asia-Pacific traffic in 2008, it is in its infancy, rankedbehind smaller countries like Vietnam, though new co-operation agreements with other countries are allowingrapid development. In North East Asia, traffic to Japanand Korea will be stimulated by the emergence ofmedium and long-haul LCC routes from South East-Asia and the high Chinese growth. Long-haul LCCroutes will also continue to boost traffic to Australia andNew Zealand, as well as more direct routes linking thePacific to China and India.
  • 98. Japan, KoreaASEANIndianSubcontinentP.R.CAustralia / New ZealandLinks with traffic more than doubledthe last 10 yearsAsia-Pacific integration boosting linksbetween blocksThe majority of these fast-developing markets involvelong routes, with ranges exceeding 2,160nm/4,000km.Traffic on such routes has more than doubled in the lastten years and most flows can be considered emergent.Widebody aircraft such as the A330 almost exclusivelyoperate this type of route. Larger aircraft will also conti-nue to be used on shorter distances where demandis high enough and where there is a high concentrationof demand in the region, with almost half of the intra-Asian demand wanting to fly between just 11 cities.0Routes < 4,000km Routes > 4,000kmSource: Airbus, OAGSeats 2009 v.s. 19991.500.502.001.002.503.00x1.7x2.4Intra-Asian growth benefittingthe longest routes the mostThough the traffic to major cities will continue to inten-sify, secondary destinations will develop as the econo-mies grow and deregulation takes effect. This isparticularly true for mainland China, with more direct airservices being allowed, such as between the country’ssouthern cities and Thailand. The rapidly developingintra-Asian tourism market is also playing a key rolein developing secondary cities, which will mainly beserved by single-aisle aircraft.Travellers between Asiancountries :> 46% want to travelbetween these cities only.> 91% want to travelfrom or to these cities.TokyoOsakaSeoulBeijingShanghaiTaipeiHong KongBangkokKuala LumpurSingaporeJakartaSource: Iata Paxis, Airbus - full year 2008Big cities, big demand ;intra-Asia demandconcentratedAsiaHalfof intra-asiandemandbetween just11 cities.
  • 99. High concentration of demandBeijing, Shanghai and Hong KongFastest growing citiesAirport pairs expected to grow aboveaverage domestic traffic growthPEKHKGPVGJGNHEKYNZTSNNDGTGOCIFPEKUYNSYKJJNYIWLZHXNNNKGXUZTYNCIHLYACGDCKGWEFLXABSDLJGLZOXICSource: Airbus45%of the domestictraffic from/tothese 3 citiesGlobal Market Forecast 103Demand for passenger aircraftChinaChinese domestic scheduled air traffic has trebledduring the last ten years, helped by deregulation,modernisation and strong economic growth. Most ofthis growth was on the existing network and today thereare 18 high density airport pairs with more than 1,000daily passengers, compared to only three a decadebefore. However, just three cities - Shanghai, Beijing andHong Kong - account for 45% of China’s domestic traf-fic. This high concentration of demand, combined withstrong economic growth, will continue to generate moreDomestic marketshigh density routes where aircraft ranging from single-aisles to very large aircraft will be used to ease congestionand address environmental issues.Meanwhile, the country’s secondary cities are experien-cing significant growth and the “transversal” marketslinking them are exceeding average growth rates. On thewhole, this will be addressed by more frequencies withsingle-aisle aircraft, which also offer the capacity andflexibility to link these secondary cities with frequencyconstrained top destinations.Domestic China: high concentrationand fastest growing cities (air traffic)During the past ten years domestic traffic in India,Indonesia, the Philippines and Vietnam has also morethan doubled. While some of this is the result of econo-mic growth, it has been largely fuelled by the emer-gence of LCCs, which have now captured more than60% of the domestic ASEAN traffic and are increasinglylooking towards international traffic.Competition from other modes of transport, particularlyhigh-speed trains, is also having a major impact on twodomestic markets: The Republic of Korea and ChineseTaipei. The opening of a high speed ground transportbetween the two main Taiwanese cities last year causeddomestic traffic to drop more than 40%. Taiwanesedomestic air traffic has decreased almost 80% in tenyears. However, it should be noted that both casesinvolve cities less than 200nm/370 kms apart, whereas98% of the available seats kilometre (ASKs) within Asia-Pacific are on routes with ranges exceeding that.
  • 100. Significant growth maintained in Asia-PacificCISAsia-Pacific8.1%Europe5.2%Africa8.6%Latin America5.9%North America5.5%Middle East6.1%2019-20285.5%20-yeargrowth5.9%Asia-Pacific2009-20186.4%2019-20284.8%20-yeargrowth4.7%World2009-20184.6%7.2%RPKs growth: annual average 2009-2018Asia-Pacific air transport demand summaryTotal passenger trafficDomestic & intra-regional trafficInternational trafficTotal freight trafficAsia-PacificTraffic (yearly growth)2009-20186.4%7.2%5.6%7.1%2009-20286.1%6.3%5.5%6.3%Asia-PacificDeliveries2009-2028Passenger (< 100 seats)Passenger (> 100 seats)Total1,0547,6728,726Asia-Pacific passenger fleet evolutionIncludes regional aircraftFleet at start 2009 Fleet at end 202815%56%14%7%1%8%6%Global NetworkMajor NetworkCharterRegional& AffiliatesSmall NetworkLCC53%15%6%19%Asia
  • 101. Global Market Forecast 105Demand for passenger aircraftOver the next ten years, air traffic growth within Asia-Pacific is expected to surpass all other regions, with anaverage 6.4% per year. This impressive growth will bestimulated by the continued expansion of the region’sLCCs, its established ‘tiger’ economies and its emer-ging markets. This will subsequently act as a catalystfor growth in more mature parts of the region, such asJapan.Traffic growth to all other regions of the world is fore-cast to far exceed the world average of 4.7% per year,with significant growth in inter-regional and domesticmarkets likely to be around 6.4% for the next 20 yearsNew passenger aircraft deliveries to the region areexpected to be dominated by aircraft over 100 seats,nearly 90%. From these, over 40% or some 3,100aircraft, will be twin-aisle types and VLA. This is due tothe huge population centres and significant distancesbetween them and to other parts of the world. Theglobal passenger network airlines will continue todominate the Asia-Pacific over the next 20 years,expanding their presence both internationally and inter-regionally, and operating more than 50% of the region’sfleet. However, the current LCCs will also be evolvingand growing their share over time.Benefits of aviation to the Asia-Pacific regionA recent report by Oxford Economics estimated thatthe air transport industry directly employs more than1.2 million people in the region and contributes morethan US$60 billion to GDP. The industry is more thanseven times as productive as the economy as a whole.Combining the direct, indirect and induced contribu-tions, the air transport sector supports more than threemillion jobs in Asia-Pacific and contributes US$170billion to GDP.Asia-Pacific is expected to be the fastest growing regionin the world for air transport over the next 20 years.It has been estimated that close to the end of periodcovered by this forecast, air transport will contributeUS$540 billion in GDP, providing and supporting jobs foraround five million people. It will also support an additio-nal 13.5 million jobs in the tourism sector, generatinga further US$780 billion in GDP.Over that period, every percentage point lower growthin passenger and freight traffic would reduce the numberof jobs supported by air transport by around two millionand the level of GDP contribution by around US$130billion.GDP (US$bn)Jobs (’000s)244.2169.2135.461.8 1,177 2,552 3,190 11,670 +Direct+ indirect+ induced+ tourism+ other catalytic+Source: Oxford EconomicsContribution of air transport to the Asia-Pacific economy
  • 102. North AmericaWhere the importanceof flight is never forgottenThe US economy officially entered recession inDecember 2007, marking the end to an economicexpansion that began six years earlier. In addition – onthe back of extremely volatile crude oil prices, jet fuelprices fluctuated wildly throughout 2008, reaching apeak of US$4.33 per gallon in early July and a trough ofUS$1.28 per gallon in late December. These factors willbe remembered as the key drivers in the latest cyclicaldownturn, which as in most similar periods has seenthe US airline industry, having to respond to resultingpressures as the worlds leading aviation market.One benefit of the economic woes witnessed in the USwas a billion dollars set aside for airport related projectsas part of the multi-billion dollar stimulus package. Whilea large part of this money will be used to enhance secu-rity at a number of airports, the funding will also createsome 3,000 jobs and potentially free up capital for otherprojects.Congestion issues and other problems are often forgot-ten in downturns, but over the long term, infrastructurein the region could be further enhanced should privatelyfunded airports take off. Today, all 552 airports in the USreceive some kind of federal money and are owned bypublic entities, municipalities, transportation districts orairport authorities. However, if these airports are to growin number from the very few projects that exist todayfinding private equity post “credit crunch” will be thechallenge.The region’s airline industry has been proactive in itsresponse to the twin difficulties of managing the impactsof a global economic recession and highly volatile jet fuelprices. The most significant responses to the recessionand falling passenger demand have been both a signifi-cant reduction in the production of flights and AvailableSeat Miles (ASMs) offered, together with efforts toenhance passenger revenues, through the introductionof ancillary fees. However, both efforts started as aresponse to spiralling fuel prices and the need toimprove revenues.Current global economic woes are likely to have a lessadverse impact on the North American airline industry,due in large part to cost cutting efforts that had alreadybeen put into place since the 9/11 and SARS crises.Whether this means that the industry makes an opera-ting profit in 2009 remains to be seen at time of writing,as fewer travellers are flying and in turn are generatinglower yields.One group of airlines that has benefited from adjust-ments in capacity by the US majors on their domesticnetworks are the Low Cost Carriers. Domestically, theiroverall presence is up by three percentage points, in justover two years, to 27%. Recently, these airlines have fur-ther strengthened their position by expanding theirdomestic operations with new routings, when othershave been consolidating around core international feedoperations, through the reduction of routes. In the longterm, the GMF forecasts that the share of the entireNorth American fleet operated by LCCs will increasefrom 15% to 22% of the fleet in service.Lessonslearnedfrom pastdownturns
  • 103. Global Market Forecast 107Demand for passenger aircraftAirlines adjust capacity to respond to high fuel pricethen the downturn788290Sep-05 Mar-06 Oct-06 Apr-07 Nov-07 Jun-08 Dec-08 Jul-09748684807688Source: Airbus, ATADomestic load factor sustained by capacity adjustment-10%-5%10%01/0802/0803/0804/0805/0806/0807/0808/0809/0810/0811/0812/0801/0902/0903/0904/0905/09-15%06/0907/090%5%-7.6-8.6-10.5-9.3 -9.6-12.4-8.4 -8.3 -8.5-7.3-6,8-0.5-1.2 -1.0-0.3 -0.1- US value for: WN, DL, NW, UA, AA, US, CO, FL, F9, NK, B6, VX, AS. Source: Airbus, OAG Schedules.
  • 104. Liberalisation will still have a major part to play in thecoming years for the region. Even the significant flowbetween the US and Europe had the opportunity forthe scope of its air service agreement to be expandedsignificantly in 2008. There is still the potential for evengreater liberalisation between markets. For example,the pact between Europe and Canada signed in May2008 goes further. As well as allowing direct flightswithout restriction, it has also increased the possiblelevel of foreign direct ownership from 25% to 49%. In2007, nine million people travelled between Europeand Canada. Despite the slump in air travel as a resultof the economic downturn, the European Commissionhas estimated that the agreement could increase thatnumber by half a million during the first year, generating€72 million, or roughly US$95 million, in additionalbusiness and adding 1,000 jobs, as flights are addedbetween the regions.Over the next 20 years, the region’s fleet is forecast togrow from 7,075 to 8,817 passenger aircraft, as a resultof increased passenger traffic and the need for replace-ment aircraft, particularly in the single-aisle market seg-ment. The average US fleet remains at 12 years old, ayear older than the world average. As many as 46% ofthese aircraft can be considered old or mid generationaircraft. Given the expected rise in fuel price as econo-mies recover and growing environmental pressures,these aircraft are not as efficient, either economicallyor ecologically, as new generation aircraft like the A320Family. The airlines concerned are expected to addressthis in the coming years to reduce costs, while minimi-sing the impact on the environment. The structure ofthe North American fleet will remain fairly stable, in termsof operator segmentation. Global network airlines willcontinue to operate most of the aircraft in the region;7,225 aircraft in 2028. The regionals and their affiliateswill operate 30% of the fleet, mainly aircraft with lessthan 100 seats (jet and turbo-props).NorthAmericaA380 at Oshkosh 2009
  • 105. Global Market Forecast 109Demand for passenger aircraftNorth America passenger fleet evolutionIncludes regional aircraftFleet at start 2009 Fleet at end 20281%48%34%15%2%Global NetworkMajor NetworkRegional& AffiliatesCharterLCC44%1%30%22%3%North America is the largest and most mature ofthe regional markets. This is reflected in the fact that20 year average annual growth is forecast to be belowthe world average, at 3.4%. However, the US domesticmarket will remain the largest in size throughoutthe next 20 years, whilst growing at just 1.5% per year.External flows will grow at a much faster pace as deve-loping markets and regions rapidly develop links withthe North American market. These include flows toAsia-Pacific with 5.5% growth, the Commonwealthof Independent States (CIS) with 7.1% and the MiddleEast with 8.2%. Growth will be driven internationallyby the major US carriers continuing to seek new oppor-tunities outside of the US domestic market, but alsoby carriers domiciled in growth regions, benefiting fromcontinuing opportunities in the growth in mutual tradeand tourism these regions will deliver in the comingyears.
  • 106. New markets, new international growthCIS7.1% Europe3.6%Africa6.7%Latin America3.6%Asia-Pacific5.5%Middle East8.2%2019-20283.9%20-yeargrowth3.4%North America2009-20183.0%2019-20284.8%20-yeargrowth4.7%World2009-20184.6%1.6%NORTH AMERICARPK growth: annual average 2009-2018North America air transport demand summaryTotal passenger trafficDomestic & intra-regional trafficInternational trafficTotal freight trafficNorth AmericanTraffic (yearly growth)2009-20183.0%1.6%4.5%4.2%2009-20283.4%2.1%4.7%5.1%North AmericanDeliveries2009-2028Passenger (< 100 seats)Passenger (> 100 seats)Total2,2245,4517,675NorthAmerica
  • 107. Global Market Forecast 111Demand for passenger aircraftContributions of air transport to the North American economyIt has been estimated that the air transport industrydirectly employs approximately 2.3 million people in NorthAmerica and contributes more than US$200 billion toGDP. Combining the direct, indirect and induced contri-butions, the air transport sector supports over 6 millionjobs and contributes US$550 billion to GDP.GDP (US$bn)Jobs (’000s)614.3550.3440.2211.5 2,333 4,813 6,016 6,900 +Direct+ indirect+ induced+ tourism+ other catalytic+Source: Oxford EconomicsIn particular, air transport supports regional tourism. Thetourism industry is an important source of jobs, skills andincomes throughout North America. With an estimated0.9 million jobs in tourism supported by air transport,contributing around US$64 billion to the continent’sGDP.More than 8 million jobs will be supported by NorthAmerica’s air transport sector in the next 20 yearsWith the expected growth in the North American marketover the next twenty years, it has been estimated in arecent report by Oxford Economics that this will supportjobs for more than 8 million people towards the end ofthis forecast. An additional 1.3 million jobs are expectedto be supported in the tourism sector. Every one percen-tage point lower growth in passenger and freight trafficwould reduce the number of jobs supported by air trans-port in the next 20 years by close to 1.5 million and thelevel of GDP contribution by around US dollar 210 billion.
  • 108. EuropeMore liberalisation + more integrationAs in other regions, European economic growth wasseverely impacted by the global economic slow-down and financial crisis in late 2008. For example,Eurozone countries, which form a significant part ofEuropean GDP, plunged 2.5% quarter-on-quarter and4.6% year-on-year in the first three months of 2009. It isalso projected to contract 4.5% in 2009, which wouldbe the first decline since it was formed in 1999.However, according to Global Insight, recovery is projec-ted to develop gradually through 2010 as monetary andfiscal stimuli take effect, credit conditions ease and theglobal economic activity picks up. Longer term, theregion is forecast to achieve around 2% annual growthaverage between 2011 and 2020.The economy of Central Europe, which forms the otherpart of the GMF’s European region, is forecast to fairbetter. A 3.7% contraction is forecast for 2009, with amodest recovery in 2010, followed by growth rates of asmuch as 4% to 2012. These countries, particularly Croatia,Turkey, Bosnia and Macedonia, will also fuel further EUgrowth and opportunities in the medium term, a develop-ment providing more opportunity for the regions airlines.As has been discussed at various points in the GMF, grea-ter liberalisation of aviation markets is often a driver foraviation growth. In addition, greater competition and pas-senger choice and the opening of new marketsstimulate greater efficiencies across the system as awhole.Last year the first part of the EU-US Open Sky Treatycame into force, replacing more than 20 other European‘open skies’ and bi-lateral agreements. The new agree-ment allows EU airlines to fly from any European nation toany US city and allows American airlines to fly withinEurope. It also avoids restrictions on international routesbetween the two continents (3rd and 4th freedom rights)and on routes beyond them (5th freedom rights). In 2007,Heathrow accounted for a fifth of all trans-Atlantic seats.This 2008 ‘Open Skies’ agreement opens theairport to any EU or US carrier and 12 new routes havealready been added, half of which are new city pairs ope-rating to the main hubs of US airlines.The current agreement brings opportunities for enhancedco-operation in areas such as safety, environment, compe-tition and state aid, with a second stage already envisa-ged, which would bring further liberalisation of traffic rightsand the possibility of foreign investment. However, itremains to be seen whether the impact of the economicdownturn will make this next step easier or harder toachieve.Increased competition can also generate increasedco-operation, which, in turn, encourages consolidation asairlines seek to capitalise on the advantages it brings.There has already been consolidation among large trans-Atlantic operators in 2008, including mergers, attemptedmergers and wide-ranging alliance discussions. Shouldregulations relax even further, particularly in terms of foreignownership restrictions, it is probably just a matter of timebefore a major trans-Atlantic merger is sealed. So, overall,the consolidation effects on airlines and networks areexpected to exceed the fragmentation effects.Beyond the London market, the latest trans-Atlantic“Open Sky” treaty is not expected to trigger major changesin terms of route development, as 57% of the traffic bet-ween Europe and the US was already covered by previousbilateral agreements. Most of the remaining traffic wasbetween the US and UK, with more than 40 non-stoproutes already serving over 80% of the demand for travelbetween the two countries.
  • 109. Global Market Forecast 113Demand for passenger aircraft= more traffic10019851986198719881989199019951993199219911994199619981997130150200Number of carriers*Number of carriersdown 23% in 10 years1701601801401101202000199920022001200420032006200520082007210220190* Airline groups operatingin Domestic & Intra-EuropeOnly carriers > 100 daily seatsPassenger traffic in the region is expected to grow fasterin the second ten years of the forecast from 2018, partlyas a result of the financial crisis and subsequent down-turn. However, traffic growth is still expected to average4.4% per year. Compared to other regions, this growthwill be reasonably well distributed among major interna-tional flows, although growth between Europe and theMiddle East, CIS and Asia-Pacific will be the most signi-ficant at 5.7%, 5.3% and 5.2% over the next ten years.At 4.7% per year for the next 20 years, growth on inter-national routes from Europe is expected to slightlyexceed that of domestic and intra-region routes, whichwill be around 4.5%.The number of airlines in Europe has now reached thelevels they where in the late 1980’s, with the absolutenumber of airlines declining 23% in ten years suggestingsome level of consolidation, even if some is through air-lines joining larger airline groupings. This change doesnot appear to have constrained demand with traffic gro-wing 49% since 2000. The number of airlines in Europefell significantly following the downturn of 2001, recove-ring somewhat in the early years of the new century withthe emergence of more low cost ventures. It remains tobe seen what effects the current downturn will have. Attime of writing in the middle of 2009, there is little sign ofa similar negative effect, however the evolution of fuelprices through the cycle could play a greater role thistime as compared to post 2001, when pricing levels wererelatively low and stable.70% of European fleetless than 15 years oldAircraft >100 seatsSource: Airbus, Ascend May 20090%50%70%20%100%80%90%30%40%60%10%Africa Asia LatinAmericaand CaribbeanMiddleeastNorthAmericaEurope0-56-1011-1516-2021-25>25Number of carriersat the level of the 80’s
  • 110. North AmericaEUROPE3.6%CIS5.3%Middle east5.7%Africa4.2%Latin America4.6%Asia-Pacific5.2%2019-20284.8%20-yeargrowth4.4%Europe2009-20184.1%2019-20284.8%20-yeargrowth4.7%World2009-20184.6%3.4%RPK growth: annual average 2009-2018EuropeEuropeThe European fleet of aircraft with over 100 seats is rela-tively young and eco-efficient compared to other regions;more than 70% have been in service for 15 years or lessand over 50% for a decade or less, which is better thanany region except for Asia. However, that still means that30% of the fleet is over 15 years old and will need to bereplaced well before the end of this 20-year forecast. Asnew generation aircraft can be up to 40% more fuel-efficient than their older versions of the same model,fluctuating fuel prices will also play a role in the way thisdevelops.The majority of aircraft, 75%, delivered to the region willbe single-aisle types, although nearly 1500 aircraft will beneeded by the region’s airlines to meet demand for largertwin-aisle and VLA aicraft. The LCC’s are expected toincrease their presence and will account for 26% of theregion’s fleet by 2028, driven by growth on existingroutes and the need for greater connectivity as theEuropean Union develops further. However, networkairlines, particularly those with global operations, willcontinue to dominate, accounting for 54% of theEuropean fleet by 2028.European air transport demand summaryTotal passenger trafficDomestic & intra-regional trafficInternational trafficTotal freight trafficEuropeTraffic(yearly growth)2009-20184.1%3.4%4.5%3.6%2009-20284.4%3.9%4.7%4.5%Passenger (< 100 seats)Passenger (> 100 seats)TotalEuropeDeliveries2009-20281,5176,0687,585
  • 111. Global Market Forecast 115Demand for passenger aircraftEuropean passenger fleet evolutionIncludes regional aircraftFleet at start 2009 Fleet at end 2028Global NetworkMajor NetworkSmall NetworkRegional& AffiliatesCharterLCC11%9%11%4% 4%26%16%17%36% 33%15%18%Contributions of air transport to the European economyIt has been estimated that the air transport industrydirectly employs more than 1.6 million people in Europeand contributes more than US$134 billion to GDP,making it some 50% more productive than the economyas a whole. Combining the direct, indirect and inducedcontributions, the air transport sector supports over 4.5million jobs and contributes US$380 billion to GDP.In addition, air transport supports European tourismgenerating an estimated 3.3 million jobs (around 5% oftotal European employment) and contributing aroundUS$200 billion to the region’s GDP. This is a key indus-try for the region with five EU countries among the topseven destinations in the world, including the UK, whichis currently ranked sixth and relies on air transport tobring 70% of tourists into the country.Close to 12 million jobs could be supported by Europe’s airtransport sector in the next 20 yearsWith the expected rise in air travel within the region it hasbeen estimated that towards the end period covered inthis forecast, air transport will provide and support jobsfor more than seven million people, while contributingsome US$870 billion to GDP. An additional five millionjobs will be supported in the tourism sector, generatingGDP (US$bn)Jobs (’000s)575.6376.6301.3134.1 1,617 3,566 4,458 7,764 +Direct+ indirect+ induced+ tourism+ other catalytic+Source: Oxford Economicsa further US$470 billion of GDP. For every percentagepoint lower growth in passenger and freight traffic,the number of jobs supported by air transport in the next20 years would be reduced by around 1.5 million andthe level of GDP contribution by around US$225 billion.Contribution of air transport to the European economy
  • 112. Latin America &New opportunitiesin the new worldLatin America has not been immune to the impact ofthe latest downturn, particularly because somecountries in the region have close economic links to theUS and because of the importance of commodities,whose prices fell in line with demand.However, according to the International Monetary Fund(IMF), considering the very challenging external environ-ment, most countries in the region are weathering theeconomic storm well compared to previous downturns,thanks to “improvements in policy frameworks andbalance sheet positions.” Global Insight, recently statedthat the long-term prospects for the Latin Americaneconomies remain positive, with few exceptions.Consumerspendingto growby 4.1%
  • 113. Global Market Forecast 117Demand for passenger aircraftthe CaribbeanEven allowing for the current economic issues, LatinAmerica is clearly well placed among other emergentregions in terms of some of the key drivers for aviationgrowth. For example, the region’s GDP is expectedto grow on average at 3.6% per year until 2012 andconsumer spending is expected to grow at around 4.1%per year over the same period. This growth exceeds thatof more developed regions and is closer to those ofthe Middle East, Russia and India.Several leading economies stand out in the region, parti-cularly Brazil, which is one of the BRIC(1)nations, Chileand Peru, which have impressive economies and corres-ponding growth, and Mexico, which benefits from itsproximity to the US, helping to drive their economy andair travel when times are good.(1) BRIC nations: the world’s key emerging nations: Brazil, Russia, India& ChinaPeru, Uruguay, Chile and Brazil will lead LatinAmerica economic recovery0%2% 3% 4% 5%0%2%1%4%3%6%5%GDP growth 2008-2013Real consumer spending growth 2008-20131% 6%ColombiaBrazilChile UruguayEcuadorArgentinaVenezuelaPeruMexicoBubble size proportional to real GDP at PPP (Purchasing Power Parity) in US$billions in 2013Source: Global Insight, Airbus
  • 114. Over the period between 2000-2008, which includesthe effects of the previous economic downturn, LatinAmerican capacity increased 20% internationally,domestically and between member states. Growth tothe emerging markets was impressive over this period.For example, there was an increase of 145% to the CISand 40% to Europe, where cultural and business tiesremain strong. Capacity to North America grew just 1%over this period, perhaps driving the calls at the end of2008 by US representatives for more expansive openskies agreements between the region’s countries andNew markets, new international growthCISLATIN AMERICA+145%Europe+40%Africa+27%Pacific+93%North America+1%Latin America Intra+Domestic: +21%Latin America international: +20%Latin America Total: +20%+21%AsiaNo direct traffic in 2000 Middle EastNo direct traffic in 20002000-2008 capacity growth in ASKsthe US. The US even suggested they might offer towaive nationality clauses present in existing agreements,to further stimulate interest across the region.While international traffic has grown impressively in the last20 years, the share of these markets operated byairlines from the region has fallen steadily to around 25%of capacity. The fact that the market has grown over thistime is a clear sign of its strength and future potential; afact clearly not lost on the world’s other major internationaloperators, who have gradually increased their presence.LatinAmerica&theCaribbeanLatin Americancapacityup 20%
  • 115. Global Market Forecast 119Demand for passenger aircraftStrong growth of Latin America int’l traffic but LatinAmerican carriers share down to 25% in 200801980198219841986198819901992199419961998197810,00020,00035,000Monthly traffic from/to LatinAmerica (million ASKs)Share of Latin Americancarriers on Int’l markets25,000 50%60%70%40%30%20%10%30,00015,0005,00020002002200420062008Europe North America Others*Source: September ASK traffic from OAG, Airbus * Includes Asia-Pacific, Africa, Middle East & CISTourism to the region has been an important elementof aviation growth in recent years, with an average annualincrease of 3.6% since 1992 and the resulting touristreceipts up 6.8%. While the early effects of the downturnhave seen tourism affected globally, both Central andSouth America posted positive results (3-5%) in the firstfew months of 2009, according to preliminary figure fromthe UNWTO(2), giving confidence that as the worldrecovers economically, so too will growth in the regionstourism market.(2) UNWTO: United Nations World Tourism Organisation
  • 116. “Cross Straits” Caribbean StyleThe Caribbean, which is included in the LatinAmerican region for the purposes of the GMF, maybe about to have its own version of the “CrossStraights” deregulation that fuelled growth betweenChina and Chinese Taipei (see page 50 & 51).In March, the US eased travel restrictions to Cuba,allowing Cuban-Americans to make the journey asoften as they want and to stay as long as they want.Air travel increased almost over night. At just oneof eight agencies booking trips to Cuba, the dailybooking capacity was up from 369 in March 2009 to900 in June 2009; growth of over 140% in just threemonths. They also estimated that up to 18,000 peo-ple would travel to Cuba with them in May 2009.With the government now considering furtherrelaxation of rules to allow any US citizen to travel toCuba, that figure is likely to increase substantially: it’sworth noting that in 2008, Cuba reported 2.3 milliontourists, mostly Canadian or Europeans, comparedto 3.4 million in the nearby Dominican Republic.In addition, many major US brands are now registe-ring their trademarks in Cuba, hopeful that theeasing of travel restrictions will set a precedentfor trade restrictions, which could also have asignificant impact on air transport between the twocountries.The number of visitors will grow significantly shouldthis positive progress be maintained, adding tothe growth of air travel from and to the region asa whole. Already at least one US airline CEO haspublicly stated his interest in operating scheduledflights to the country, given the political will to liftrestrictions.Fast growing tourism demand to Latin America01992199319941995199619971998199920002001200220032004200520062007104050607080Million tourists Billion US$20301992199319941995199619971998199920002001200220032004200520062007010304050602070Tourism int’l arrivalsAAGR*1992-2007+3.6%AAGR*1992-2007+3.6%Tourism receipts* Average Annual Growth RateSource: World Tourism OrganizationLatinAmerica&theCaribbean
  • 117. Global Market Forecast 121Demand for passenger aircraftIn the meantime, the regions airlines as a whole havecontinued to build their fleets and networks. Tangibleevidence of the region’s growing strength can be seenin the average age of the fleet, which is now around12 years - more than three years younger than it wasa decade ago. This has been achieved through the intro-duction of numerous new single and twin-aisle aircraftby an increasing number of trendsetting airlines; with asignificant number new eco-efficient Airbus types. In factsince 1980 the Airbus share of the Latin American fleethas grown from nearly nothing to more than one third.At 4.9% per annum, traffic growth in Latin Americaduring the next 20 years is forecast to exceed the worldaverage. Traffic to new and emerging markets in Africaand the Commonwealth of Independent States (CIS) areexpected to exhibit the strongest growth, with 7.3% and6.7% respectively. However, the growth between LatinAmerica and the Middle East is the highest at 7.9%.Traffic within the region is also expected to grow stron-gly, at an average of 5.6% per year. However, dependingon the pace of economic policies, social development,innovation and consolidation of its industries, the regioncould experience even higher levels. There is still a lotmore potential in reserve for Latin American air travel.As a result of the forecast traffic growth and deliveriesfor both new and used aircraft, Airbus predicts thatthe fleet of passenger aircraft with over 100 seats inLatin America will more than double. Global and majornetwork carriers are expected to increase their share ofthe Latin American fleet. The LCC model will alsoincrease its presence, with 14% of the fleet, although notto the levels witnessed in North America and Europe.Airbus fleet now represents 34%of Latin American in service total fleet019801982198419861988199019921994199619984006001,2001%34%Number of aircraft in serviceAirbus aircraft share8001,00020020002002200420062008Source: Ascend (data as of end December for each year), AirbusPassenger aircraft >100 seats and freighter aircraft
  • 118. Latin America air transport demand summaryTotal passenger trafficDomestic & intra-regional trafficInternational trafficTotal freight trafficLatin AmericaTraffic (yearly growth)2009-20184.7%5.6%4.3%4.1%2009-20284.9%5.6%4.6%4.7%Latin AmericaDeliveries2009-2028Passenger (< 100 seats)Passenger (> 100 seats)Total4321,6582,090Latin AmericaCISLATIN AMERICA7.3%Europe4.6%Middle-East7.9%Africa6.7%Pacific5.5%North America3.6%5.6%2019-20285.1%20-yeargrowth4.9%North America2009-20184.7%2019-20284.8%20-yeargrowth4.7%World2009-20184.6%RPK growth: annual average 2009-2018LatinAmerica&theCaribbean
  • 119. Demand for passenger aircraftLatin America and the CaribbeanA recent report by Oxford Economics found that the airtransport industry directly employed more than 225,000people in Latin America and the Caribbean, contributingaround US$8 billion to GDP. The industry is almost threetimes as productive as the economy as a whole.Combining the direct, indirect and induced contribu-tions, the air transport sector supported close to600,000 jobs in the region and contributed US$22 billionto GDP. In particular, air transport supports regionaltourism, which is particularly important source of jobs,skills and income throughout Latin America and theCaribbean. It was estimated that nearly 1.8 million jobsin tourism are supported by air transport, contributingaround US$23 billion to the region’s GDP.With the expected rise in air travel in the region it hasbeen estimated that towards the end period covered inthis forecast, air transport will provide and support jobsfor more than one million people, while contributingsome US$55 million to GDP. An additional 3 million jobswill be supported in the tourism sector, generating afurther US$57 billion of GDP.However, for every percentage point lower growth inpassenger and freight traffic, the number of jobs suppor-GDP (US$bn)Jobs (’000s)44.821.817.58.1 226 493 616 2,370 +Direct+ indirect+ induced+ tourism+ other catalytic+Source: Oxford Economicsted by air transport in the next 20 years would be redu-ced by around 430,000 and the level of GDP contribu-tion by around US$18 billion.Contribution of air transport to the Latin Americanand the Caribbean economyLatin America fleet evolutionIncludes regional aircraftFleet at end 2028Global NetworkMajor NetworkRegional& AffiliatesLCCSmall NetworkCharter23%Fleet at start 200914%19%35%22%27%23%13%8%1%14%1%Global Market Forecast 123
  • 120. The Middle EastAt the heart of air transportDuring the last three decades, significant parts ofthe Middle East region have been transformed,thanks to a strategic foresight that has sought toconvert the region’s geographic and raw materialbounty into a number of major locations for tourism andbusiness, creating an air traffic crossroads of globalimportance.Vast iconic developments - from palm islands to theworld’s tallest building, the Burj Dubai - have helpedmake this vision a reality. As the share of local invest-ment is constantly increasing, there is enormouspotential for the region to develop itself further in allareas: tourist attractions as well as transport or busi-ness infrastructure. According to the World Travel& Tourism Council, the United Arab Emirates is cur-rently leading Middle Eastern nations with air transport,road and port hubs now ranked 7th, 12th and 9th inthe world respectably.Even in the downturn, which took hold of the industry in2008, the Middle Eastern carriers have showed thestrength of their ambitious business models, being lessimpacted than many others. In terms of internationaltraffic’ as reported by IATA, the region was the only oneto record positive growth in the first quarter of 2009.Major airlines in the region have confirmed significantdelivery commitments as a sign of their determinationto expand, while others have eyed or implementedcapacity reductions.1976 2006 Close-up
  • 121. 02001 2002 2003 2004199910.521.533.52.5Monthly passengers (Millions)44.52000 2005 2006 2007 2008Source: ITA, Airbus+334% in less than 10 yearsDubai and Abu DhabiGlobal Market Forecast 125Demand for passenger aircraftThe Middle East hasa geographical advantageInternational MarketNumber of people within various great circle distances of the Middle East4,500nm2,500nm86% world population63% world GDP8,000nm36% world population16% world GDPThe Middle East, as well as beinguniquely situated geographicallyon the earth’s surface, is uniquelysituated between the worldsmajor regions, North America,Europe and Asia, in terms ofwealth and population. It is loca-ted less than 4,500nm (8,340km)from 63% of the world’s totalGDP and within 86% of theworld’s total population. Theseshares are expected to increaseover the 20 year period of thisforecast.This unique location on the globe makes it the idealplace to position a truly sixth freedom world hub. Infact, a look at the evolution of the traffic betweenEurope and Asia-Pacific clearly illustrates that anincreasing amount of traffic is routed through MiddleEast airports instead of using direct routes.The region offers transiting visitors tremendous hotels,shopping malls and other attractions. For exampleAbu Dhabi is investing massively in arts. It has plansto build the Saadiyat Island Complex by 2012, offeringnew “Louvre” and “Guggenheim” museums. Thesedevelopments and those like them will no doubt drive atrend for connecting passengers in the region to spendsome time between flights, enjoying the sights andsounds on offer.As a result of all these factors the main hubs situatedwithin Middle East are growing at a very fast pace. Inless than ten years the number of passengers hasincreased by more than 300%, when consideringthe combined passenger traffic at Dubai and AbuDhabi’s airports.Hubs in the region continuetheir impressive growth
  • 122. Several indicators in the region show that the domesticmarket is about to boom. One of the top priorities for theMiddle Eastern air transport industry is to sustain theliberalisation momentum achieved since the open-skiesinitiatives signed in 2004. Even if a full open-skiesagreement is reached quickly, bilateral agreements willfacilitate the continued expansion of the domesticmarket, potential identified by LCC carriers with severalnewcomers emerging in the region, all sharing ambitiousexpansion plans.These developemts are no doubt driven by the expecta-tion that as the region’s youthful population matures,they will increasingly seek to benefit from opportunitiesthe region can offer, both economically and in terms ofleisure activities and will increasingly utilise domesticand intra-regional air travel in order to facilate this.Today, about 60% of the regions population is less thanThe domestic market- more short range flying to come30 years old, compared to 35% in Europe. The SaudiArabian population, the largest in the Gulf region, will nodoubt help to shape this, with similar estimates for thespread of age in its population over time, and is itselflooking to the future.As well as looking to increase domestic tourism withinthe country, Saudi Arabia is considering optionsto attract up to 8.8 million international and religioustravellers by 2020 interested in the country’s history,effectively doubling current levels. Today, SaudiArabian’s spend more than US$10 billion on internatio-nal travel. In order to help overhaul existing air travelinfrastructure in the country, to meet future needs and tohelp drive economic development through the additionalcreation of adjacent development zones, reports sug-gest the country will invest more than 46 billion Saudiriyals (US$12.3 billion) through to 2020 and is setting upa new company to manage its 27 airports.TheMiddleEastMiddle east will sustain very strong traffic growthNorth AmericaMiddle East8.2%CIS6.0%Europe5.7%Africa8.7%Latin America7.9%Asia-Pacific6.1%5.2%RPK growth: annual average 2009-20182019-20285.4%20-yeargrowth5.9%Middle East2009-20186.4%2019-20284.8%World2009-20184.8%20-yeargrowth4.7%
  • 123. Global Market Forecast 127Demand for passenger aircraftA wave of new air travellers on the horizon0-910-1920-2940-4930-3950-5970-7960-6980+25 20 15 1510 105 50Source: Airbus, UN Population Division, The EconomistEuropeArab worldAge%of populationSaudi Arabiaseekingto attract8.8 milliontravellers
  • 124. During the next ten years, the region’s ideal geographi-cal location near to growing markets like thoseof India, the CIS and Eastern Europe will also serveto provide opportunities for more traditional and low-cost carriers. Traffic is forecast to grow at 6.6%, fasterthan any region, including Asia. Whilst domestic andintra-regional markets in the region will continue to growat an impressive rate as networks develop and LCCsenter the market, the intercontinental network will growmore quickly, as new routes are added by the regionsairlines and their operations expand. Therefore morevery long range and very large aircraft will join the fleets ofthe leading airlines of the region. The total passenger fleetof airlines domiciled in the Middle East will grow to 1,790by the end of 2028. In addition, the rapid development ofcargo operations at the region’s major hubs means thatthe freighter fleet will grow to 99 large freighters by 2028.The region’s global airlines, of which there are few today,are expected to continue their current domination ofgrowth markets over the next 20 years taking morethan 50% of total aircraft deliveries in the region, but morethan 70% of the regions twin-aisle and very large aircraft.TheMiddleEastMiddle East fleet will almost treble by end-2028Total passenger trafficDomestic & intra-regional trafficInternational trafficTotal freight trafficMiddle EastTraffic (yearly growth)2009-20186.4%5.2%6.6%3.6%2009-20285.9%5.0%6.0%4.1%Passenger (> 100 seats)Middle EastFleet in service2009-20281,418
  • 125. Air travel supporting the Middle East’s strategic goalsA recent report by Oxford Economics suggests that theair transport industry directly employs close to 150,000people in the Middle East and contributes more thanUS$6 billion to GDP. Combining the direct, indirect andinduced contributions, the air transport sector supportsclose to 400,000 jobs in the region and contributesUS$17 billion to GDP.In addition, air transport supports regional tourism, animportant source of jobs, skills and incomes throughoutthe Middle East. Over 600 thousand jobs in tourism aresupported by air transport, contributing around US$12billion to the region’s GDP.Towards the end of the GMFs forecast period, air trans-port will provide and support jobs for close to 750,000people making a GDP contribution of US$50 billion toGDP. An additional 1.2 million jobs will be supported inthe tourism sector bringing a further US$35 billion toGDP.However, each percentage point lower growth in pas-senger and freight traffic world reduce the number ofjobs supported by air transport in the next 20 years byclose to 240,000 and GDP by around US$14 billion.GDP (US$bn)Jobs (’000s)28.916.913.5143 304 379 1,012 +6.2Direct+ indirect++ induced+ tourism+ other catalyticGlobal Market Forecast 129Demand for passenger aircraft
  • 126. The CommonwealthNew aircraft, new marketsWhilst steadily increasing fuel prices, peaking in July2008, were causing problems for airlines in theregion, the economies of countries such as Russia,Kazakhstan and Ukraine, all benefited from record-highworld-market prices for their commodity exports. As wellas oil, this included metals and other key commodities,accounting for very large shares of their total exports.According to Global Insight, economic growth in theCommonwealth of Independent States (CIS) will notrepeat the impressive performance in 2007 at 8.5%, upfrom an already strong 8.4% in 2006. A reduction of thegrowth rate of the aggregate CIS economy is estimated at5.5% for 2008, led by a moderation in Russian growth asthird-quarter expansion slowed and the economic down-turn took a greater toll in the fourth. Russias GDP hadgrown at a startling 8.1% in 2007, dominating the region.Growth in the medium term is expected to hover in therange of 3.5-4.5% per year after a moderately pacedrecovery in 2010. The pace and strength of recovery willbe firmly linked to the value of exports which in turnappear firmly linked to commodity prices like oil. As theworld economy gradually recovers so too will commodityprices, economic growth and demand for air transport inthe region.The fact that the number of aircraft in the CIS fleet waslower in 2008 than in the early 1990s could be seen asa cause for concern. However, it is a sign that the mar-ket has become more efficient through the introductionof newer, latest generation eco-efficient aircraft, whichcan operate at significantly higher utilisation levels thanthe aircraft they have replaced. One clear indication ofthis is the fact that the number of western built aircraftdelivered into the market (new build, second hand andleased) has increased from just 1% in 1992 to 56% ofthe fleet in 2008. However, there remains a real oppor-tunity to further increase the efficiency of the region’soperations as an analysis of the fleet in service showsthat 80% can be classified as old or mid generation, with44% in the oldest technology category. In reality this is avast improvement of the situation compared to just eightyears ago, when 90% of the fleet could be classified asold generation, and illustrates the pace of change in thismarket.Increasing oil prices will trigger medium termeconomic growth in the CIS0199819992000200120022003200420052006200720082009201020112012201302004006008001,0001,200US$ per barrelOil priceUS$ billionsCIS exports20408060100120Source: EIA, Global Insight (April 2009), AirbusHistory Forecast
  • 127. Global Market Forecast 131Demand for passenger aircraftof Independent States4006008009001,000700500200200100199201993199419951996199719981999200020012002200320072006200520042008Source: Airbus, Ascend (passenger aircraft in service >100 seats, data as of December for each year)Number of aircraft in serviceWestern-built aicraftRussian-built aircraft1%15%56%Western-built aircraft share… but old generation aircraft stillaccounts for 44% of CIS fleet in service01992199319951994199619971998200019992001200320022004200520062007200844%500700800Number of aircraft in service*1,000Source: Ascend, AirbusNew generationMid generation600900300100400200Old generation36%20%Western-built aircraft now representsmore than half of CIS fleet in service…
  • 128. The CIS nations continue to spread their wings, withimpressive growth in the number of large internationalroutings. In 1992 there were 36 routings with over 4,000monthly seats. In 2008 there were 126, with the web ofroutes spreading across Europe and into North Americaand Asia.North America7.1%Africa6.3%Middle East6.0%Europe5.3%Latin America7.3%Asia-Pacific8.1%2019-20285.6%20-yeargrowth5.7%CIS2009-20185.8%2019-20284.8%20-yeargrowth4.7%World2009-20184.6%CIS5.2%RPKs growth: annual average 2009-2018CIS air traffic will grow faster than world averageAs a result, the traffic growth forecast by the GMF willexceed world average levels at 5.7% per annum overthe next 20 years, with impressive growth to keymarkets in Asia and North America, 8.1% and 7.1% res-pectively. This means the fleet in the region is expectedto more than double to 1,500 by 2028.TheCommonwealthofIndependentStatesRegion’sfleetto morethan double
  • 129. Global Market Forecast 133Demand for passenger aircraftCIS air transport demand summaryTotal passenger trafficDomestic & intra-regional trafficInternational trafficTotal freight trafficCIS Traffic(yearly growth)2009-20185.8%5.2%6.4%5.0%2009-20285.7%5.3%6.1%6.1%Passenger (> 100 seats)CISDeliveries2009-2028901CIS nations spread their wings199236 int’l city pairs> 4,000 monthly seats200056 int’l city pairs> 4,000 monthly seats2008126 int’l city pairs> 4,000 monthly seatsSource: OAG, Airbus
  • 130. AfricaRegional flying set to take offWith a population of 950 million people across morethan 50 countries in 2008, Africa is the secondmost-populous continent after Asia. In addition, as its30 million km2covers 20% of the world’s total landsurface, it is the third largest continent after Asia andAmerica. The huge scale of this continent and the resul-ting geographic challenges mean that neither roadnor rail travel are practical options, which makes airtransport expansion the only realistic solution for theinterconnectivity necessary to support future economicgrowth.From 2003 to 2008, African economic performance hasbeen impressive with average growth of 5.6% per year.This momentum has been achieved through (1) highexport revenues and the resulting fiscal expansion, (2)rapid growth in foreign direct investment inflows,particularly in the energy sector, (3) expansion in theconstruction sector, (4) improved performance in agri-culture and (5) increased tourism activities.The continent was relatively shielded from the initialeffects of the current economic downturn, thanks to thevery low direct exposure of the region’s banks to thefinancial crisis. However, a subsequent decrease inforeign direct investment and falling commodity pricesare now taking a toll on short-term growth prospects. Asa result, the African economy is expected to expand byonly 1% in 2009. Over the medium term, commodityprices are expected to pick up once again, meaningAfrica will be in the top four economic performers interms of growth, together with China, India and MiddleEast. Africa is, therefore, expected to enjoy an averageof 3.8% real GDP growth per year, over the next fiveyears, compared with 1.9% average annual growth forthe world as a whole.China, India, Africa and Middle Eastwill lead world economic recovery-2%-2% 0% 2% 7% 6% 8% 10%GDP growth 2008-20130%2%6%4%8%10%Real consumer spendinggrowth 2008-2013Bubble size proportional to real GDP at PPP(Purchasing Power Parity) in US$billions in 2013USJapanAustraliaWesternEuropeEasternEuropeRussiaLatinAmericaMiddleEastIndiaChinaAfricaSource: Global Insight (April 2009), Airbus
  • 131. Global Market Forecast 135Demand for passenger aircraftSince the end of colonial era, political instability hasalways been a major constraint on the region’s develop-ment prospects. But recently, peace settlements havebeen negotiated in some of the region’s war-torn coun-tries, through increased networking among AfricanStates and organisations such as the African Union, anddebt relief has been secured for a significant number ofAfrican countries. Both are important factors for futurestability and, therefore, growth.As a result of these developments, contacts betweenAfrica and other world regions have surged over the lastfew years leading to considerable growth in both tou-rism and trade activities.Booming tourism and trade activities with Africa0199319941995199619971998199920002001200220032004200520062007200810203035404550Million tourists51525199319941995199619971998199920002001200220032004200520062007200802004006007008009001000100300500African inbound tourismAAGR*1993-2008+6.2%AAGR*1993-2008+6.5%Billion US$African trade* Average Annual Growth RateSource: Global Insight, World Tourism Organization, Airbus
  • 132. African trade has been boosted by the double-digitgrowth rates of import demands from resource-intensiveeconomies such as China, India and other more indus-trialised nations. As an example, Sino-African tradereached a “historic” level of US$106.8 billion in 2008,up from US$10 billion back in 2000. It is estimatedthat today there are around one million Chinese workersin Africa.Africa is also keen to attract lucrative business from tou-rism, which now represents 5.1% of world tourism interms of arrivals, up from 3.3% back in 1990. Touristsflying into Africa support nearly three million jobs andUS$22billion and, according to the World TourismOrganization (WTO), it was, together with Latin America,the only region to enjoy growth of tourism in the firstquarter of 2009.A number of countries like Kenya, Tanzania, Namibiaand South Africa are capitalising on growing demand foreco tourism. In addition, tourism infrastructure conti-nues to develop all over Africa and especially in NorthAfrica where low cost carriers are stimulating an alreadywell-established air travel market. The massive mediacoverage that will accompany the 2010 football WorldCup will also accelerate international recognition ofsub-Saharan Africa as a major tourist destination.Changes in the policy framework regulating air transportservices in Africa began in the 1960’s, when efforts weremade to transform national regulation into a regionalagreement. The result was the declaration on a newAfrican Air Transport Policy in 1988. The Heads ofAfrican States endorsed the resulting policy framework,the Yamoussoukro Decision in 2000, for broad imple-mentation across the continent. The objectives were toliberalise the air transport market in Africa, by focusingon the gradual elimination of all non-physical barriersto air transport services, and to lift restrictions linkedto fifth freedom traffic rights, air carrier capacity, andfrequency of passenger and cargo flight operations.However, progress has been patchy, with African pro-gress considered slower than other regions.Not withstanding the progress of deregulation, theAfrican international market gained 94% more AvailableSeat Kilometres (ASKs) from 1998 to 2008. This impres-sive growth has been achieved through bigger routes(average size of individual city pairs has increased by46%) in parallel with international network development(162 additional city pairs). However, African airlines’share of the international market is down to 40%; aconcern for indigenous airlines no doubt, but also a signof the increasing importance of this market at an inter-national air transport level.Strong growth of Africa int’l trafficbut African carriers share down to 40% in 200810,00015,00020,00025,0005,00019780 0%10%20%30%40%50%198019821984198619881990199219941996199820002002200420062008Middle EastEurope*Americas**Asia-Pacific* includes CIS / ** includes North America and Latin America /Source: September ASK traffic from OAG, AirbusMonthly traffic from/to Africa (million ASKs) Share of African carriers on Int’l marketsAfrica
  • 133. Global Market Forecast 137Demand for passenger aircraftAfrican’s international network has more than doubled in 30 years019731978198319881993199820032008200400600700Number of city pairs10030050019731978198319881993199820032008African international network developmentNumber of city pairsAfrica intra-regional* network development* Intra-regional includes domesticSource: OAG, Airbus04008001,2001,4002006001,000Nearly 100 (or 17%) old generation passengeraircraft still in service in Africa01980198219841986198819901992199419961998200020042006300400500Number of aircraft in service6002008Source: Ascend, Airbus200100Passenger aircraft >100seatsNew generationMid generationOld generation17%33%50%
  • 134. Intra-regional demand in Africa has remained largelyuntapped over the last 20 years. Indeed, from 1988 to2008, it grew at a low average rate of 4% per year,below the 6.1% achieved by the African internationalmarket. Contrary to the international market, the intra-regional market has not yet been stimulated by networkdevelopment, so the number of city pairs being opera-ted has dropped from 1,260 in 1988 to 1,050 in 2008.This is largely due to delays in implementing furtherregional deregulation.Should greater air traffic freedoms be achieved, theywould provide new opportunities for growth at a regio-nal level and leave African carriers better positioned tocounter some of the competitive issues from outside ofthe region. With the introduction of newer, more efficientaircraft, this will allow African carriers to improve theircompetitive strength. At the end of 2008 there were stillnearly than 100 old-generation passenger aircraft in ser-vice in Africa. This represented 17% of the region’s fleet,which contrasts with an 8% share for old generationtypes at a worldwide level. Today, 45% of the Africanfleet is over 15 years old.Therefore, with fuel prices expected to pick up again inthe foreseeable future, improving competitivenessthrough fleet renewal will be a significant considerationfor African airlines.With a regional economy expected to rebound in paral-lel with commodity prices, it is expected that flourishingtrade and tourism, greater liberalisation and the emer-gence of a low cost sector will drive a strong growth inAfrica’s passenger traffic. Therefore, Airbus forecaststhat Revenue Passenger Kilometres (RPKs) will growwell above the world average, at 5.6% per annum overthe next 20 years, with more significant growth of 5.8%over the next 10 years. If Africa achieves full liberalisa-tion, intra-regional traffic has the potential to grow at animpressive yearly rate of 6.7%. Likewise, internationalmarkets are expected to grow strongly. Traffic to Northand Latin America are both expected to grow by 6.7%and traffic to Asia-Pacific will increase by an impressive9.0% per year over the next 10 years.Over the next 20 years, strong passenger demand andaircraft replacements needs, particularly in the single-aisle market segment, mean the African passengeraircraft fleet, like that in the CIS, is expected to morethan double to about 1,200 aircraft.African traffic to grow much faster than world averageNorth America6.7%CIS6.3%Middle East+8.7%Europe4.2%Latin America6.7%Asia-Pacific9.0%2019-20285.4%20-yeargrowth5.6%Africa2009-20185.8%2019-20284.8%20-yeargrowth4.7%World2009-20184.6%AFRICA6.7%RPKs growth: annual average 2009-2018Africa
  • 135. Global Market Forecast 139Demand for passenger aircraftAfricaIt has been estimated that the air transport industrydirectly employs more than 150,000 people in Africa andcontributes US$3.5 billion to GDP. The industry is aboutfour times as productive as the economy as a wholeCombining the direct, indirect and induced contribu-tions, the air transport sector supports close to 450,000jobs and US$10 billion GDP.Air transport also supports regional tourism, which is animportant source of jobs, skills and incomes throughoutAfrica. It has been estimated that three million tourismrelated jobs in the region are supported by air transport,contributing around US$22 billion to the continent’s GDP.Oxford Economics estimates that towards the end ofour forecast period, air transport will provide and sup-port jobs for almost 700,000 people in Africa, making aGDP contribution of US$25 billion, plus an additionalfour million jobs and US$77 billion of GDP supported inthe tourism sector.Every one percentage point lower growth in passengerand freight traffic will reduce the number of jobs suppor-ted by air transport in the next 20 years by around500,000 and GDP by approximately US$13 billion.GDP (US$bn)Jobs (’000s) 158 357 446 3,431 +Direct+ indirect+ induced+ tourism+ other catalytic+Source: Oxford EconomicsContribution of air transport to the African economyAfrica air transport demand summaryTotal passenger trafficDomestic & intra-regional trafficInternational trafficTotal freight trafficAfrica Traffic(yearly growth)2009-20185.8%6.7%5.6%4.9%2009-20285.6%6.2%5.5%4.5%Passenger (< 100 seats)Passenger (> 100 seats)TotalAfricaDeliveries2009-20283419291,270Intra-regionalflying will helpto drive fleetgrowth
  • 136. Middle East• Central to world population & wealth• 5 billion people next door• Global ambition and vision• High growth40%47%13%1,418 aircraft demandUS$243 billionMiddle East20-year new passenger aircraft demand > 100 seats (excluding freighters)929 aircraft demandUS$107 billion• Home of the next India• Economic promise to reality• Sustaining the momentum• Intra-regional market untapped4%69%27%Africa4%Latin America• Stability and new confidence• Economies to grow further• Aviation resistant to downturn• Many emerging markets1,658 aircraft demandUS$159 billionLatin AmericaLatin America18%81%1%Latin America, Middle East& Africa to represent 16%of 20-year new passengeraircraft demand
  • 137. Asia-Pacific: largestand most diverse marketEurope & CIS6,969 aircraft demandUS$763 billion• Sustained growth• Still untapped Central European markets• Strong long haul international market• Asia’s largest international market76%4%20%20-year new passenger aircraft demand > 100 seats (excluding freighters)North America5,451 aircraft demandUS$495 billion• Large replacement market• Mature domestic market• Still developing international market• Largest freight base83%2%15%Asia-Pacific7,672 aircraft demandUS$1.1 trillion• High growth• Large developing markets• Large cities• Fast developing LCCs60%9%31%Global Market Forecast 141Demand for passenger aircraft
  • 138. Air cargo forecast
  • 139. Freighter fleetdevelopmentThe 2008 freighter fleet was composed of 1,731aircraft, including 53 ‘combi’ aircraft, (i.e. aircraftcombining passengers and freight on their main-deck)and 59 quick-change aircraft (i.e. aircraft that can beconverted between passenger and freight operationsthrough the removal of palletised seats, in just a fewhours). In the past these aircraft facilitated postalservices in some countries. Those combi aircraft remai-ning in the fleet continue to be gradually converted intofull freighter and with no new combis being delivered bymanufacturers, we can expect that in a few years theywill have disappeared from the market completely.A total of 190 operators are flying the current freighterfleet, but the majority have a very limited number of air-craft. The major freight integrators operate the largestshare, which represent 50% of the global fleet.The largest of these, by some margin, is operated fromNorth America, where 40 operators are using more than57% of the world fleet. This is because most of themajor integrators are based in the US. Europe and theCIS have the next largest fleets of freighter aircraft, clo-sely followed by the dynamic Asia-Pacific region. For thetime being there are relatively few dedicated freighters inthe Middle East, but this region is evolving rapidly.The GMF assumes that freighter aircraft on average areoperated until they reach the age of 35, whether being
  • 140. Global Market Forecast 145Air cargo forecast2008 freighter operators and fleetnew or converted. Small freighters are typically retiredafter 37 years of operation, while combis and otheraircraft converted to freighters are converted at around20 years of age meaning that they are operated asfreighters for about 15 years. Whether a particular typeis converted or not is heavily dependent on severalfactors including: availability, residual value, operationalsuitability (range, cargo capability etc.) and, not least,one or more suitable conversion programmes. Over thenext 20 years, 72% of today’s freighter fleet will leaveFleet982North AmericaOperators40Fleet81Latin AmericaOperators21Fleet61AfricaOperators34Fleet41Middle EastOperators12 Fleet277Asia-PacificOperators46Fleet289Europe and CISOperators37Fleet1,731WorldOperators190service, meaning that 1,306 aircraft will be retired. Some94% of the smaller freighters currently flying will reachthe end of their lives by 2028 and the vast majority ofregional freighters will also be retired; 563 aircraft areforecast to become too old to sustain profitable opera-tions. On the other hand, the fact that large cargoaircraft, are as a whole significantly younger today thanother classes of freighter, means that just a half of themwill leave service in the next 20 years, resulting in loweroverall demand in this segment.72% of today’sfreighters willretire by 2028
  • 141. The price of fuel is a very important parameter in aircargo economics, even more so than for passengertransport, as in this case, all passenger-related costs areirrelevant. Between 2005 and mid-2008, fuel pricesincreased dramatically, leading to major changes inthe global fleet, with many older types coming underpressure due to their inefficiency. High fuel prices alsodrove some airlines to apply fuel surcharges to helpcover higher operational costs, with the resulting higherprices driving freight from the air to other modes oftransport.From the time the crisis began to bite and demand forair freight began to be negatively affected, the numberof these older types entering storage increased in ever-greater numbers. The best of these stored aircraft mayreturn to service when demand resumes, but a vastmajority of the oldest, less fuel efficient aircraft won’tfly again, which will effectively increase the pace ofretirement.We can be confident that, as economies and marketsrecover over the coming months and years, demand forairfreight will also recover, particularly in emerging coun-tries, which as in the passenger market, are expectedto have higher rates of growth.Market trendsAfter years of steady growth from 2003, air cargo traffichas faced a severe downturn, linked to the global econo-mic conditions and a slump in consumer and thereforemanufacturing demand. However, most in the forecastingcommunity remain convinced that the market will recover,as economic fundamentals are expected to once againcreate a real demand for the transportation of goods, par-ticularly by air.Air freight offers the advantage of speed compared toother means of transport, particularly advantageous forsome products like high technology or perishable goods.It offers additional value by freeing up capital more quickly,as the value of goods transported by ship for example, islocked in over longer journey times. As borrowing is moredifficult today and liquidity key, this benefit of air transpor-tation is now even more valued by customers and freightforwarders. Finally this is often taken for granted, butsending goods by air has the additional benefit of beingprobably the most secure method of transport for highvalue goods. This is an important factor when trans-porting goods in regions of the world where securitythreats, such as piracy, have increasingly become aserious consideration.Freight trafficto triple in 20 years0199820002002200420062008201020122014201620182020202220241996100200300400FTKs* (billions)2503501505020262028450500550AAGR 1999-2008:3.8%AAGR 2009-2028:5.2%85%World FTKs86%World FTKsInternational DomesticHistory Forecast
  • 142. Global Market Forecast 147Air cargo forecastRegional overviewAsia-PacificAsia-Pacific has been by far the most dynamic regionover recent years and should remain the leading regionin terms of growth over the next 20 years. Economicgrowth is higher than in western countries and a subs-tantial population is becoming increasingly consumerist,which is expected to drive their economies furtherthrough increased spending. Moreover the geography ofthe region, in terms of distances, terrain and large cen-tres of population, makes surface transportation difficultand substantial an opportunity for airfreight.However, sea transport is a strong competitor to air inthe region particularly for local shipments. Due to lowlabour costs in some cases and a focus on world classmanufacturing of consumer and industrial goods inmany others, Asian countries have become key loca-tions for the production of a wide range of goods fromtextiles to computers or household equipment. Part ofthis production goes to local markets, but most of it isexported to developed countries outside of the region,mainly North America and Europe. Air cargo has playeda crucial role in the trend to lean and just-in-time typemanufacturing processes. Companies and individualsexpect to have their goods in very short timeframes,enabling significant inventory and cost reductions, whichcan be passed on the final consumer or shareholders.Focus on North America020060010004008001,2002002 2009MD-11, 747A300, A310DC-8DC-9, 727DC-10, 767, 757Small jetfreightersLong-rangefreightersLargefreightersRegionalfreightersNorth AmericaNorth America, and the US in particular, is by far themost important point in terms of world freight traffic. In20 years this region as a whole will be responsible forover 40% of freight tonnes every year. Today, the USdomestic market is the single most important marketworldwide as measured by the amount of freight traffic.However, while this market will grow at 1.5% per annum,other flows including that between China and the US,and the domestic Chinese market will develop at a fas-ter pace, to replace it in the overall world ranking offreight traffic flows. Today, 57% of the freighter fleet islocated in the region mostly in the US. However, as theworld’s dedicated cargo fleet grows and trade and eco-nomies develop in other parts of the world, like Asia, thisshare is expected to decline to 40% by 2028, with Asia’sfleet reaching a similar size with 1,147 aircraft or 37%of the world fleet. Nevertheless, the North Americanfleet as a whole, will grow by 58% to 1,550 aircraft,despite the clear issues faced by the industry in 2009.Integrators like FedEx and UPS have built impressiveexpress freight businesses in the region, based on theneed for the timely delivery of all manner of small parcelsand packages door to door, primarily using or integratingroad and air transportation. This business has historicallydriven the need for small freighters like the 727 and DC9.These aircraft have declined in use in recent years as theyare retired due to age and in a significant number of caseshave been replaced by ground transportation, primarilylong-haul trucks. However, speed, distance and costconsiderations will mean continued demand for a numberof this class of aircraft, the vast majority, if not all, conver-sions of existing passenger types like the A320.
  • 143. Middle EastWith its unbeatable geographical location, the MiddleEast has a clear advantage over other regions to reachEurope, Asia or Africa easily. This region has experien-ced huge growth over the last decade, thanks to theexceptional economic growth linked to oil, but alsothrough other industrial developments. Infrastructure inthe region has improved over the last decade, allowingfor more capacity without some of the constraints thatairports in Europe and North America have to face.Dubai International Airport is one of the busiest in theworld for cargo activity, helped by a focus on multimodalfreight activity, with steady growth since the mid-90s.The Middle-East now has freight traffic links to all partsof the world, with North America and the Indian subcontinent being the largest flows. In the next 20 years,North America will remain a key partner for the region,but China will become more important as its economygrows.Latin AmericaAlthough this region represents just 7.5% of the globalFTKs today, it has the potential to grow thanks to adynamic population and improved economic condi-tions. Flows to and from Latin America are now equalto 11.5 billion FTKs and by 2028 are expected to reach28.3 billion, therefore driving the need for significantlymore capacity than today. The largest increase will bebetween the PRC and South America, as China seeksto further extend trade ties with the region. The stronglinks between South, Central and North America willremain important, with South and Central Americamajor suppliers of perishable produce for NorthAmerican markets, as well as for Europe, although ona smaller scale.People’s Republic of ChinaPeople’s Republic of China (PRC) markets dominatefreight traffic. During the last decade, huge economicgrowth has occurred in China, leading to a dramaticrise in air cargo, mainly from and to a lesser extent,returning to China. Over the next 20 years, traffic flowslinking China with other countries are expected tocontinue their growth. For example, the flow betweenChina and the US will be the largest, representing morethan 15% of total FTKs in 2028. This can be explainedby the continuous development of Chinese industry,exporting manufactured goods to western countries aswell as to other Asian markets. Domestic China will bethe second largest market in terms of the number ofFTKs, with 8.2% of the total by 2028. This growth islinked to the level of goods needed to be exchangedwithin the country during its continued industrialdevelopment.The Eastern and South-Eastern regions of China arevery industrialised, whilst at the same time other partsof the country like the West and South-West are muchmore rural. Today, the Chinese government is trying tostimulate growth in these regions, with improved trans-portation links and air cargo likely to play a major rolein this effort. For instance the western province ofSichuan is developing Chengdu airport to help compa-nies settle in the region, particularly those in hightechnology businesses. As a result, a number of air-lines have launched regular cargo activities betweenSichuan and Hong-Kong and the east of the country.The use of belly hold capacity in passenger aircraftused to be sufficient from Chengdu, but is now supple-mented with pure cargo aircraft, which often prove tobe the most efficient solution in light of growingdemand. Internationally, links between China andAfrica are developing very rapidly, as trade and theresulting goods increasingly pass between these tworegions. Today, Chinese companies are investing mas-sively in Africa, resulting in the opening of air cargoroutes, like that between mainland China and Nigeria,largely based on the oil industry and large infrastruc-ture projects.
  • 144. Global Market Forecast 149Air cargo forecastAfricaAfrica is as diverse in its economic development as thecontinent’s flora and fauna, with many countries exhibi-ting signs of strong growth potential. Goods exportedfrom Africa have been primary raw materials, as well asfresh produces like flowers, fresh fruits and vegetables.Interestingly, the countries emerging today, are sho-wing interest in African markets and capabilities, withplaces like China, keen to safeguard supplies of oil andother raw materials. However, this interest is not justlimited to natural resources. For example, Indian manu-facturer TATA Motors has targeted Africa for vehicleproduction. In 2008, the company announced that itwould build a bus manufacturing plant in Mombasa,PRC markets dominate international traffic50403020100 60 70 80FTKs (billions)PRC-North AmericaPRC-EuropeEurope-PRCAsia-North AmericaEurope-North AmericaNorth America-PRCNorth America-EuropeAsia-EuropeEurope-AsiaNorth America-AsiaSouth America-EuropeAsia-PRCIndian Subcontinent-North AmericaAfrica-EuropeJapan-EuropeEurope-Indian SubcontinentJapan-North AmericaEurope-Africa2009-20282009-20188.7%7.4%7.6%4.0%2.1%7.8%1.2%2.4%2.2%2.9%4.6%8.6%3.2%3.8%2.2%6.3%1.0%2.7%8.9%8.2%7.5%4.6%3.8%8.5%4.7%3.9%4.7%4.3%5.0%9.0%4.3%4.2%4.2%6.8%3.7%4.0%8.8%7.8%7.6%4.3%3.0%8.2%3.0%3,2%3.4%3.6%4.8%8.8%3.7%4.0%3.2%6.6%2.3%3.3%15.4%7.7%4.0%4.0%3.7%3.5%3.2%2.6%2.5%2.0%1.4%1.2%1.1%1.1%1.1%1.1%1.0%1.0%% of 2028World FTKs20 yeargrowth2008 traffic 2009-2028 growthKenya. The plant, which will produce between 10 and60 buses per month, will boost sales, as they will notattract import duty and therefore cost 25% less whenlocally manufactured. This will also allow TATA to sup-ply vehicules to the neighbouring markets of Tanzania,Rwanda, Uganda, Ethiopia, Zambia and Malawi. TATAconsider Africa a key emerging market for its products.With growth in this sort of inward investment, beyondmining or farming for example, economies will benefitand grow, leading to an increased need for air freight.Today, the highest number of FTKs goes to Europe andNorth America, but in the coming years other emergingmarkets including China will represent a bigger part ofthe trade from this continent.US-PRC flowwill be world’slargest at 15%of FTKs
  • 145. 0FTKs (billions) FTKs (billions)1.50.5122.5India domestic express freightHistory Forecast010152530205India international freightHistory Forecast+ 5.4% per yearA huge development of domestic air freight in India to satisfy a growing middle-class population+ 16.5% per year200520001995 2010 2015 2020 2025 200520001995 2010 2015 2020 2025India freight traffic to grow almost four-fold over the next20 yearsIndiaThe Indian subcontinent is developing quickly thanks tothe size of the country and the pace of its economicdevelopment, both domestically and internationally. Witha current fleet limited to only 12 aircraft, there is very highpotential for traffic and fleet development, with Airbusforecasting that 164 cargo aircraft will fly within andfrom India by 2028. Part of this development will belinked to the expansion of an express market, as com-panies and individuals will increasingly need to shipurgent goods and documents. International freight willgrow slightly faster than the world average, buttremendous growth will come from the rapid expansionof those domestic express freight operations, whichshould increase on average 16.5% per annum overthe next two decades. The freighter fleet startedto increase regularly from the year 2000, firstly with alimited number of single-aisle aircraft, but since 2005regional wide-body aircraft like the A310 have joinedthe fleet.Indianfleet to grow13.5 times
  • 146. Global Market Forecast 151Fleet evolutionSmall jet freightersToday, these predominanty single-aisle derived aircraftare mainly flown by North American operators and arerelatively aged. Most of the current fleet is expected tobe phased-out in the next 20 years, as they reach theend of their economic lives. Only converted aircraft, likethe A320, will replace them, with little expectation of anynew build freighter offerings over this period. The growthin the number of aircraft flying in this segment will be limi-ted, mainly because the US domestic market is nowmature. Most of these converted aircraft will fly in theAsia-Pacific region, with China and India seeing a dra-matic increase in their general cargo and express opera-tions.Small jet freighters02004006008001,0002009 202878681250826+2.4%p.a.Retainedin serviceConversionsRegional and long-range freightersThis dynamic market segment will experience 4.6%growth over the next 20 years, for two main reasons.Firstly, the long-range segment has been underserved,with a clear need for such aircraft for such operations.With manufacturers now offering aircraft increasinglysuited to airlines needs such as the 767 and the A330,operators have been encouraged to increase their fleets.Secondly, there will be development of integrator activityin China and India over the next two decades. Theseairlines and operations will need aircraft offering greaterpayload and range capabilities to serve their customersin a very limited time frame.Regional and long-rangefreighters04008001,2001,6002006001,0001,4001,8002,0002009 20281,2853401,816754191+4.6%p.a.Retainedin serviceNewfreightersConversionsAir cargo forecast
  • 147. The cargo aircraft fleet will increase globally from justover 1,700 aircraft in 2008 to 3,864 in 2028, with bothnew and converted freighters. This means that thededicated freighter fleet will grow 2.2 times from today’slevel. North America’s mature market, where the expec-ted growth rate is limited to 1.5% over the next 20years, will mainly be a replacement market with littlegrowth. Younger converted aircraft will replace the rela-tively old single-aisle aircraft and a few new freighterswill supplement the need for larger aircraft among theNorth American airlines. Globally, 3,439 aircraft will jointhe freighter fleet, 75% of them being conversions.Large freightersThis segment of the market differs from others as thefleet flying today is relatively young, which means a lowerproportion of large freighters will cease operations in thenext 20 years. It is forecast that some 44% of the aircraftflying today will remain in service until 2028, with agrowth of the segment of 5%. This represents a fleetincrease of more than 750 aircraft, which can be explai-ned by high growth rates expected on routeslinking China with distant markets like South andCentral America. From North America to the PRC thegrowth rate will be more than 8% per year over the nexttwo decades. This means that airlines operating on thisflow will have a strong requirement for large freightercapability. Half of these will be conversions of large pas-senger aircraft like 777s or 747s, while the other half willbe factory built freighters. Large freighters are typicallyoperated on long distances, with a much higher dailyutilisation than smaller freighters, meaning that effi-ciency and reliability are a key benefit, factors that helpto justify the investment in expensive new equipment.Asia-Pacific will be the most important region in termsof large freighters in 2028, due to the need to ship high-tech products to North America and Europe.Large freightersWorld fleetdevelopment04008001,2002006001,0001,4002009 20285145141,236469208+5%p.a.Retainedin serviceNewfreightersConversionsLarge aircraft will represent 60% of new deliveries, withthe vast majority of these flown by operators from theAsia-Pacific region. The value of the new freighters deli-vered during the next two decades will be aroundUS$210 billion at current list prices. Latin America willsee an 86% increase of its freighter fleet, with essen-tially small, converted aircraft flying regionally. The big-gest increase will be in the Asia-Pacific region, whichwill start with a modest fleet of 277 aircraft but is fore-cast to reach 1,447 units in 2028, thanks to the deve-lopment of long-haul routes to North America andEurope as well as to destinations within Asia.Large freighterfleet to morethan double
  • 148. Global Market Forecast 15320281,55040%North America200998257%20281494%Latin America2009805%2028722%Africa2009613%2028993%Middle East2009412%20281,44737%Asia-Pacific200927716%202854714%Europe and CIS200929017%20283,864100%World20091,731100%Asia-Pacific freighter fleet to increase five-fold2009-2028 freighter fleetAir cargo forecast2009-2028 freighter demand…04008001,2001,0006002001,4001,6001,800Small jets Regional& Long-rangeLargeNew freightersConversions1,2857863405145140Total new aircraft 8542009-20282,5853,439Total convertedTotal aircraftSource: Airbus Market Research and Forecasts...with new deliveriesworth > $200 (billion)0501001501257525175Small jetfreightersRegional& Long-rangeLargefreighters058151US$ (billions)Source: Airbus Market Research and ForecastsSmall jet freightersRegional & long-range freightersLarge freighters727, 737, A320P2F, Bae 146, DC-9, Tu-204707, 757, 767, A300, A310, A321P2F, A330, DC-8, DC-10747, 777, A350*, MD-11, A380** Future freighter programmes
  • 149. Summary tables
  • 150. Africa Sub-Sahara - Asia 5.0%Africa Sub-Sahara - Australia/New Zealand 5.9%Africa Sub-Sahara - Indian Subcontinent 7.1%Africa Sub-Sahara - Middle East 7.5%Africa Sub-Sahara - North Africa 9.0%Africa Sub-Sahara - P.R. China 9.3%Africa Sub-Sahara - Russia 2.4%Africa Sub-Sahara - South Africa 7.4%Africa Sub-Sahara - South America 4.3%Africa Sub-Sahara - US 4.8%Africa Sub-Sahara - Western Europe 4.2%Asia - Australia/New Zealand 4.8%Asia - Canada 4.7%Asia - Central Europe 7.5%Asia - CIS 6.3%Asia - Indian Subcontinent 7.1%Asia - Japan 3.5%Asia - Middle East 4.4%Asia - North Africa 4.4%Asia - P.R. China 7.1%Asia - Pacific 2.8%Asia - Russia 6.2%Asia - South Africa 6.6%Asia - South America 6.4%Asia - US 5.6%Asia - Western Europe 4.6%Australia/New Zealand - Canada 5.3%Australia/New Zealand - Indian Subcontinent 5.0%Australia/New Zealand - Japan 3.3%Australia/New Zealand - Middle East 7.3%Australia/New Zealand - P.R. China 6.6%Australia/New Zealand - Pacific 5.9%Australia/New Zealand - South Africa 5.7%Australia/New Zealand - South America 6.8%Australia/New Zealand - US 5.3%Australia/New Zealand - Western Europe 3.5%Canada - Caribbean 3.3%Canada - Central America 7.8%Canada - Central Europe 5.8%Canada - CIS 6.0%Canada - Indian Subcontinent 8.0%Canada - Japan 4.1%Canada - Middle East 6.9%Canada - North Africa 6.2%Canada - P.R. China 6.9%Passenger traffic forecastSub marketAAGR*2009-2028Canada - Pacific 3.9%Canada - Russia 5.2%Canada - South America 5.1%Canada - US 4.3%Canada - Western Europe 4.3%Caribbean - Central America 6.2%Caribbean - Russia 6.4%Caribbean - South America 4.7%Caribbean - US 2.2%Caribbean - Western Europe 5.0%Central America - Japan 4.0%Central America - South America 7.1%Central America - US 4.8%Central America - Western Europe 3.3%Central Europe - CIS 6.5%Central Europe - Indian Subcontinent 7.3%Central Europe - Middle East 1.9%Central Europe - North Africa 5.5%Central Europe - P.R. China 6.9%Central Europe - Russia 5.8%Central Europe - US 3.9%Central Europe - Western Europe 6.7%CIS - Indian Subcontinent 6.0%CIS - Japan 4.7%CIS - Middle East 5.2%CIS - North Africa 2.9%CIS - P.R. China 9.4%CIS - Russia 6.5%CIS - US 6.4%CIS - Western Europe 6.0%Domestic Africa Sub-Sahara 5.3%Domestic Asia 4.6%Domestic Australia/New Zealand 4.9%Domestic Brazil 5.8%Domestic Canada 2.9%Domestic Caribbean 2.3%Domestic Central America 4.5%Domestic CIS 5.3%Domestic Central Europe 4.1%Domestic Western Europe 3.0%Domestic India 10.0%Domestic Indian Subcontinent 5.8%Domestic Japan 2.2%Domestic Mexico 5.5%Domestic Middle East 4.2%Sub marketAAGR*2009-2028* AAGR: Average Annual Growth Rate
  • 151. Global Market Forecast 157 Summary tablesDomestic North Africa 5.1%Domestic Pacific 2.8%Domestic P.R. China 7.9%Domestic Russia 4.9%Domestic South Africa 5.7%Domestic South America 4.2%Domestic Turkey 10.1%Domestic US 2.0%Domestic Africa Sub-Sahara 5.4%Indian Subcontinent - Japan 4.7%Indian Subcontinent - Middle East 5.8%Indian Subcontinent - P.R. China 8.4%Indian Subcontinent - Russia 6.0%Indian Subcontinent - South Africa 7.7%Indian Subcontinent - US 8.2%Indian Subcontinent - Western Europe 5.8%Intra-Africa Sub-Sahara 4.9%Intra-Asia 5.4%Intra-Australia/New Zealand 3.8%Intra-Caribbean 1.3%Intra-Central America 6.4%Intra-Central Europe 6.2%Intra-CIS 4.0%Intra-Indian Subcontinent 4.9%Intra-Middle East 6.0%Intra-North Africa 4.9%Intra-Pacific 3.2%Intra-South America 5.7%Intra-Western Europe 3.3%Japan - Middle East 6.8%Japan - North Africa 4.9%Japan - P.R. China 6.1%Japan - Pacific 2.6%Japan - Russia 3.3%Japan - South America 1.9%Japan - US 4.2%Japan - Western Europe 3.5%Mexico - US 3.1%Middle East - North Africa 7.1%Middle East - P.R. China 7.4%Middle East - Russia 5.2%Middle East - South Africa 9.1%Middle East - South America 6.8%Middle East - US 7.1%Middle East - Western Europe 5.5%Sub marketAAGR*2009-2028North Africa - P.R. China 9.4%North Africa - Russia 6.0%North Africa - South Africa 8.6%North Africa - US 7.0%North Africa - Western Europe 4,4%P.R. China - Pacific 6.7%P.R. China - Russia 8.5%P.R. China - South Africa 8.7%P.R. China - South America 6.9%P.R. China - US 6.8%P.R. China - Western Europe 7.0%Pacific - South America 1.9%Pacific - US 4.1%Pacific - Western Europe 4.1%Russia - US 7.3%Russia - Western Europe 4.9%South Africa - South America 6.5%South Africa - US 5.8%South Africa - Western Europe 5.2%South America - US 4.5%South America - Western Europe 5.7%US - Western Europe 4.0%World 4.7%Sub marketAAGR*2009-2028
  • 152. Freight traffic forecastAfrica - Africa 4.3%Africa - Asia 3.2%Africa - Central America 5.5%Africa - CIS 2.5%Africa - Europe 4.0%Africa - Indian Subcontinent 3.8%Africa - Japan 0.9%Africa - Middle East 4.7%Africa - North America 3.6%Africa - Pacific 3.7%Africa - P.R. China 7.6%Africa - South America 5.1%Asia - Africa 3.9%Asia - Asia 4.0%Asia - Central America 5.8%Asia - CIS 4.4%Asia - Europe 3.2%Asia - Indian Subcontinent 5.1%Asia - Japan 3.2%Asia - Middle East 3.1%Asia - North America 4.3%Asia - Pacific 4.0%Asia - Africa 8.8%Asia - South America 4.9%Central America - Africa 5.5%Central America - Asia 2.3%Central America - Central America 2.4%Central America - CIS 4.1%Central America - Europe 3.3%Central America - Indian Subcontinent 6.2%Central America - Japan 3.1%Central America - Middle East 3.5%Central America - North America 2.6%Central America - Pacific 4.7%Central America - P.R. China 6.9%Central America - South America 5.0%CIS - Africa 1.3%CIS - Asia 2.7%CIS - Central America 3.7%CIS - Europe 2.0%CIS - Indian Subcontinent 2.2%CIS - Japan 1.5%CIS - Middle East 2.3%CIS - North America 2.2%CIS - Pacific 1.8%CIS - P.R. China 6.2%CIS - South America 2.2%Domestic India 16.5%Domestic P.R. China 11.9%Domestic US 1.5%Europe - Africa 3.3%Europe - Asia 3.6%Europe - Central America 4.4%Europe - CIS 3.8%Europe - Europe 3.2%Europe - Indian Subcontinent 6.6%Europe - Japan 1.8%Europe - Middle East 3.4%Europe - North America 3.0%Europe - Pacific 3.0%Europe - P.R. China 7.6%Europe - South America 2.8%Indian Subcontinent - Africa 5.5%Indian Subcontinent - Asia 4.2%Indian Subcontinent - Central America 6.9%Indian Subcontinent - CIS 2.1%Indian Subcontinent - Europe 4.8%Indian Subcontinent - Indian Subcontinent 4.4%Indian Subcontinent - Japan 3.9%Indian Subcontinent - Middle East 5.0%Indian Subcontinent - North America 3.7%Indian Subcontinent - Pacific 3.9%Indian Subcontinent - P.R. China 7.6%Indian Subcontinent - South America 6.1%Japan - Africa 4.4%Japan - Asia 3.5%Japan - Central America 3.3%Japan - CIS 3.2%Japan - Europe 3.2%Japan - Indian Subcontinent 4.0%Japan - Middle East 3.9%Japan - North America 2.3%Japan - Pacific 4.3%Japan - P.R. China 9.0%Japan - South America 2.6%Middle East - Africa 4.5%Middle East - Asia 3.2%Middle East - Central America 5.7%Middle East - CIS 2.7%Middle East - Europe 2.3%Sub marketAAGR*2009-2028 Sub marketAAGR*2009-2028* AAGR: Average Annual Growth Rate
  • 153. Global Market Forecast 159 Summary tablesMiddle East - Indian Subcontinent 4.8%Middle East - Japan 1.7%Middle East - Middle East 3.3%Middle East - North America 3.2%Middle East - Pacific 3.4%Middle East - P.R. China 7.7%Middle East - South America 3.6%North America - Africa 4.8%North America - Asia 3.4%North America - Central America 2.8%North America - CIS 4.3%North America - Europe 3.0%North America - Indian Subcontinent 7.1%North America - Japan 2.5%North America - Middle East 3.9%North America - North America 1.7%North America - Pacific 2.3%North America - P.R. China 8.2%North America - South America 4.4%Pacific - Africa 4.1%Pacific - Asia 2.7%Pacific - Central America 4.0%Pacific - CIS 3.0%Pacific - Europe 2.6%Pacific - Indian Subcontinent 3.8%Pacific - Japan 3.0%Pacific - Middle East 4.6%Pacific - North America 1.0%Pacific - Pacific 2.3%Pacific - P.R. China 4.9%Pacific - South America 7.6%P.R. China - Africa 8.4%P.R. China - Asia 8.3%P.R. China - Central America 8.5%P.R. China - CIS 7.5%P.R. China - Europe 7.8%P.R. China - Indian Subcontinent 8.4%P.R. China - Japan 4.2%P.R. China - Middle East 8.3%P.R. China - North America 8.8%P.R. China - Pacific 8.4%P.R. China - South America 9.3%South America - Africa 5.6%South America - Asia 4.6%South America - Central America 6.1%South America - CIS 4.1%South America - Europe 4.8%South America - Indian Subcontinent 6.6%South America - Japan 4.3%South America - Middle East 3.0%South America - North America 2.4%South America - Pacific 5.2%South America - P.R. China 8.9%South America - South America 6.0%World 5.2%Sub marketAAGR*2009-2028 Sub marketAAGR*2009-2028
  • 154. Aircraft segmentation and in service seating profile5004003002001000 600 700AircraftTypeCategoryAircraft capacityCRJ200Dash 8An-28Y-12ERJ-135737BBJSU-80ATR 42An-140ERJ-145Y-7TU-134ATR 72CRJ700IL-114ERJ-170ERJ-175A319CJAN-148CRJ900RRJARJ-21A318-100717ERJ-190CRJ1000ERJ-195737-600A319-100737-700YAK-42A320-200737-800Tu-154757-200A321-200737-900Tu-204757-300A340-500767-400ER767-200ER767-300ERA330-200787-8IL-96777-200LRA350-800A340-300A330-300777-200ER787-3787-9A350-900777-200777-300ERA340-600A350-1000747-400777-300747-8A380-800800507085100125150175210250300350400450500Source of seating data Ascend
  • 155. Global Market Forecast 161 Summary tables50-seat70/85-seat100-seat125/210-seatSmall twin aisleIntermediate twin-aisleVLATotalFleet 20085,4441,3051,5539,2542,2619242420,7658691,8811,4077,4222,15066749614,8921,5991,7298367,3121,9471,03882215,2832,4683,6102,24314,7344,0971,7051,31830,1751,613274702,67727311405,02158169118636844201,1074,1394,0532,43118,0474,4541,8611,31836,303New aircraftdeliveries2009-2018New aircraftdeliveries2019-2028New aircraftdeliveries2009-2028With sameoperatorRecycledRemaining in serviceFleet 202850-seat70/85-seat100-seat125/210-seatSmall twin-aisleIntermediate twin-aisleVLATotalAfrica13920216547520247401,2704026523204,2381,6187857118,72613729413659712430141,3325729456433,9388103962817,5852631692291,11124554192,0901960754864751931891,4979361,2886753,889623200647,6752,4683,6102,24314,7344,0971,7051,31830,175Asia-Pacific CIS EuropeLatinAmerica& CaribbeanMiddle East TotalNorthAmericaNew passenger aircraft deliveries by regionPassenger fleet development