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.
2009 - 2028
Demand for air travel 12 30 Traffic forecast56 Demand for passenger aircraft 142 Air cargo forecast 154 Summary tables
ExecutiveBackgroundUnderlying 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 and Strong demand, benefiting people, innovation guaranteed
Summary more far reaching than the downturn. exchange between travellers and regions where econo- There is no doubt that the major reason the industry mic growth could otherwise be limited. has always recovered its upwards trend is the strong What is often crucial for all of these elements, is that underlying demand for the benefits that air transport people come face to face, developing and reinforcing brings to the world, its economies and, most impor- trust and gaining the kind of knowledge and understan- tantly, to its people. ding of cultures, individuals, markets and places that can only be gained by physically being there. Real benefits for real people While the cost of air travel in environmental terms is well Innovation for passengers, airlines and the documented, including the 2% contribution to man environment made CO2 emissions, little is said on the benefit side of But underlying growth must be balanced with a sustai- this equation. In monetary terms alone, aviation contri- nable future. The last 40 years have seen aircraft fuel butes more than some G20 countries to world Gross burn and emissions reduced by 70% and noise by 75%, Domestic Product (GDP). These benefits are not merely but this is not to say that Airbus, or indeed the rest of the at a macro level; they permeate through the fabric of industry, will sit back for the next 40 years and do 21st Century living, benefiting increasing numbers of nothing. Innovation remains the key and ambitious tar- people from every corner of the globe. Aviation contri- gets have been set with an almost zealous desire to butes to trade, by offering access to more lucrative and improve fuel burn and resulting CO2 for our two biggest geographically disparate markets; to investment, by concerns, our customers and our world. nurturing internationalisation through greater access to skills and resources; to productivity, by stimulating and encouraging competition, innovation and greater efficiency; and to tourism, by facilitating a commercial Global Market Forecast 7
The highlights The traffic Despite the economic crisis, markets in the emerging There is no doubt that the financial turmoil of 2008 and economic nations are expected to continue to grow the resulting downturn in the world economy, has over the next 20 years; their economies and demogra- impacted passenger demand and traffic growth in the phic developments both driven by and benefiting from short term. However, over the 2009-2028 period cove- air travel. Continued global liberalisation is giving grea- red by this forecast, the downturn represents a fairly ter market access to airlines and wider choice for pas- short timeframe. Therefore, overall world passenger sengers. Low-cost carriers will also continue to grow traffic is expected to increase by 4.7% per annum and around the world, but particularly in Asia, while the net- the number of frequencies offered on passenger routes work airlines will benefit from demand on the important will more than double. Faced with increased competi- international markets and a wave of new international tion and fluctuating fuel costs, airlines have already travel consumers from the emerging countries. achieved considerable productivity gains. Today, very Changing dynamics, particularly network evolution and few seats are “wasted”, with very high load factors the role of mega-cities and congestion, are influencing across most major markets and flows expected once the future of aviation. All of these drivers were taken into again as the market recovers over the coming months. consideration when developing this edition of the Airbus Global Market Forecast (GMF). When downturns start to bite, as with fuel prices, congestion falls down the list of priority issues for many in the industry. But unfortunately, this means a return to 24,951 new passenger and delays, waste and cost as markets recover. This is an freighter aircraft issue for passengers, airlines and many of the world’s demand over most important airports and cities. Any future growth of traffic and frequencies will once again be an increasing the 2009-2028 period challenge to airport infrastructure and air traffic mana- gement. Using larger aircraft, with their reduced costs 24,097 New deliveries 854 24,951 per seat both in terms of cash and CO2, is a common sense solution to congestion. There are already signs of this today, with average aircraft sizes increasing across all categories, from smaller regional aircraft to very largeRecycled Passenger Freighter aircraft. This will result in the average aircraft size increa- 3,134 fleet Converted fleet 2,585 sing by as much as 26% over the next 20 years. This GMF assumes that all necessary infrastructure 7,147 Retired 1,306 improvements, including those already planned, will be 8,453 undertaken during the forecast period. However, givenPassenger aircraft >100 seats the substantial investments and time required to carry out such developments, there is the possibility that not all the changes necessary may be achieved. Combined with the need to reduce seat mile costs to cope with developing competitive and environmental pressures, this could cause average aircraft size to increase even more than currently forecast. Therefore, airlines could Average aircraft be forced to acquire more, larger aircraft, across the size will need whole spectrum of those available, to meet demand efficiently and to fly smarter. to grow in the future
The fleetThe world’s fleet, which includes both passenger (from As many as 5,802 twin-aisle passenger aircraft will100 seats to very large aircraft) and freighter aircraft, will be required to serve the existing, mainly internationalgrow from 15,750 beginning of 2009 to nearly 32,000 by markets created largely by growth on existing city pairs,2028. At the same time, some 14,442 aircraft from the flows from and within emerging markets and the addi-existing fleet will be replaced by more eco-efficient tion of new routes. Around 1,318 very large passengermodels. Of these, 3,134 will be recycled back into aircraft will be needed to link the 32 dynamic hub cities.passenger service, where they too will replace an older It should be no surprise that more than 50% of thegeneration model with another airline. It is also forecast world’s fleet of very large passenger aircraft will be ope-that 2,585 aircraft will be converted to freighters and the rated by the airlines in the Asia-Pacific region. With itsremaining 7,417 will be permanently retired or withdrawn huge population increasingly concentrated in impres-from service, with increasing numbers decommissioned sive and vibrant cities, more and more people have thethrough environmentally sensitive programmes, such as economic ability as well as the desire to fly among thesethe Airbus PAMELA project. The Airbus forecast conti- destinations.nues to predict that the greatest demand for passengeraircraft will come from airlines in the United States, the Freight traffic is expected to grow at 5.2% per annum.People’s Republic of China and the United Kingdom, with Combined with fleet renewal, this will create demand forits mix of global, low-cost and charter airlines. Europe will 3,439 freighter deliveries, 2,585 of which will come fromreceive 25% of the total, with North America and Asia- conversions and 854 of which will be new generationPacific taking 23% and 31% respectively. In addition, the factory-built freighters, mainly long-range or regionalworld’s airlines will require more than 6,000 smaller air- freighters.craft, either jet or turbo-prop, (with 19 to 100 seats) toserve regional demand, especially in the US and Europe. Overall, this means that by 2028 the world’s airlines will take delivery of 24,951 new passenger and freighterWhile traffic demand will nearly triple, airlines will more aircraft, worth US$3.1 trillion at current list prices. Mostthan double their fleets of passenger aircraft (with over of this business will be generated from single-aisle deli-100 seats) from 14,016 at the beginning of 2009 to veries, while 1,729 large passenger and freighter aircraft28,111 in 2028. will account for 19% of total aircraft delivery value. Despite concerns about aircraft deliveries following theThis will include deliveries of 24,097 new aircraft. Some economic downturn, strong underlying demand will17,000 of these will be single-aisles for domestic and emerge with the recovery, which means airlines requireintra-regional flows, which is more than in previous fore- an average of 1,248 new, eco-efficient aircraft deliveriescasts due to the emergence of low-cost carriers and per year over the next 20 years. Combined with theincreased liberalisation. A large number of aircraft, decommissioning of older generation aircraft, this willwhere new products must deliver even greater benefits gradually reduce the average fuel consumption of theto passenger airlines and the environment, and a step world’s fleet to less than three litres per 100 seat kilo-change beyond those on offer today. metres, already achieved by the A380 today. > 14,000 aircraft to be replaced by eco-efficient types Global Market Forecast 9
Air transport to employ millions and contribute billions in next 20 years In the future... The environmental impact of aviation will remain small However, should growth in passenger and cargo traffic compared to other modes of transport and other be one percentage point lower than currently forecast, sources of man-made emissions, with the benefits the contribution to GDP would be reduced by US$600 undeniably large. However, Airbus and the rest of the billion and the number of jobs would be reduced by industry is determined to minimise and even reduce the 6 million, including around 2 million in Asia-Pacific, 1.5 environmental impact of aviation at every opportunity, million each in Europe and North America, 400-500 while maximising the contribution that it can make to thousand each in Africa and Latin America and over the quality of life, to better cultural understanding, to 200,000 in the Middle East. greater learning, and to fair and sustainable economic growth. In this long-term industry, where demand and resulting growth will drive the need for more aircraft, and where And that contribution is considerable. In 20 years, air the stakes are so high for the millions of people who transport will directly employ some 8.5 million people depend on it, aviation must continue to innovate. It and contribute $1 trillion to world GDP. Measuring must take the path with the most potential for custo- across aviation, its supply chain, the spending of mers and the environment, even if it is not necessarily employees in these businesses and the contribution air the shortest, cheapest or easiest. Anything else would transport makes to tourism, this will grow to 50 million be irresponsible. jobs and US$3.6 trillion of GDP; even more when you consider the impact of other industries dependent on aviation that are harder to measure. Passenger and freighter New aircraft demand will deliveries worth average 1,248 per year US$3.1 trillionNumber of new aircraft* US$ (billions)18,000 16,977 1,40016,000 1,206 1,20014,000 1,00012,000 81910,000 800 8,000 600 571 482 6,000 400 4,237 4,000 2,008 1,729 200 2,000 0 0 Single-aisle Small Intermediate Large Single-aisle Small Intermediate Large & small jet twin-aisle twin-aisle & aircraft & & small jet twin-aisle twin-aisle & aircraft & freighters & regional long-range large freighters & regional long-range large freighters freighters freighters freighters freighters freighters % unit: 68% 17% 8% 7% % value: 39% 27% 15% 19%*Passenger aircraft >100 seats + freighters
Total new deliveries by region Europe CIS % of world % of world 2009-2018 2019-2028 deliveries 2008-2018 2019-2028 deliveries 2,876 3,192 25% 454 447 4% North America % of world Middle East 2009-2018 2019-2028 deliveries % of world 2,993 2,458 23% 2009-2018 2019-2028 deliveries 730 689 6% Africa Latin America % of world 2009-2018 2019-2028 deliveries % of world Asia-Pacific 2009-2018 2019-2028 deliveries 474 455 4% % of world 2009-2018 2019-2028 deliveries 892 766 7% 3,723 3,949 31% Passenger aircraft >100 seats (excluding freighters) Top ten countries (2009-2028) Passenger aircraft demand By US$ value (billions) 1 United States 5,096 United States 450.3 2 People’s Republic of China 3,272 People’s Republic of China 439.5 3 United Kingdom 1,229 United Kingdom 154.0 4 Germany 1,175 India 141.5 5 India 1,093 Germany 141.4 6 Russia 1,004 Japan 114.2 7 Ireland 615 UAE 98.2 8 Australia 551 Russia 89.9 9 Japan 548 Singapore 79.3 10 Brazil 542 Australia 74.2 New and recycled passenger aircraft >100 seats (excluding freighters) Global Market Forecast 11
Demand for air travel
Aviation growth : more than justBalancing benefits and costsWhile much has been discussed about the environmen- benefits the industry brings or the role it plays in preser-tal impact of aviation, its 2% contribution to man-made ving biodiversity through dependant activities, which canemissions and the fact that it will contribute up to 3% actually help reduce overall man-made CO2 emissions.by 2050(1), little has been said about the socio-economic (1) United Nations Inter-governmental Panel on Climate Change (UN IPCC).Real benefits for real peopleAviation plays an important role in today’s world, of the air transport industry to tourism raises the contri-supporting social and economic development in both bution of the air transport sector to more than 50 millionemerging and established nations. jobs in 2026 and to around US$3.6 trillion of GDP. Beyond this there is a wide range of benefits that are justWhile the impact of the aviation industry and its supply as tangible but are harder to quantify, which magnify thechain is considerable in itself, the indirect benefits are immediate social and economic impact considerably.even more significant, as air transport facilitates growth Broadly speaking, this can be seen in terms of:for many other industries around the world; deliveringreal benefits for real people that can be measured in Trade: offering access to more lucrative and geographi-economic output, jobs, and the wealth and prosperity it cally disparate markets;brings to communities and individuals. Investment: facilitating internationalisation and providing access to skills and resources,For example, by 2026 it is estimated that the air trans- Productivity: stimulating and encouraging both competi-port industry will directly contribute around 8.5 million tion, innovation and greater efficiency,jobs and US$1 trillion to the world economy. Taking into And tourism: facilitating a commercial exchange betweenaccount the indirect and induced contributions, the air travellers and regions where economic growth couldtransport industry is expected to contribute around 23 otherwise be limited, as well providing essential fundingmillion jobs and US$2.6 trillion. Adding the contribution and incentives for the protection of biodiversity.
Demand for air travelaircraft The express delivery industry: how a speedy high flyer delivers the goods Benefiting The express delivery industry provides fast, reliable, traceable door-to-door delivery of shipments. Aviation is trade critical to express delivery as it allows the industry to operate longer domestic or international routes and deliver goods to places where alternative transport links are not as good. Trade is an important element of economic growth, which leads to better living standards, and 35% of world Oxford Economics estimates show that in 2005 the trade by value is transported by air. express delivery industry supported 2.65 million jobs For many developing countries, air transport provides an worldwide. However, the impact of the industry extends essential link to wealthier markets. Research by the beyond this, through its effect on stimulating international International Trade Centre (ITC) on the impact of banning trade. The speed of express delivery enables international air freighted organic produce to the UK in response to transportation of perishable goods, e.g. pharmaceuticals, environmental concerns showed that some 79% of such fruit, flowers etc. Reliability of delivery meanwhile encou- imports are from poorer countries of the world, including rages and facilitates international ties between customers Kenya, Ghana and Zambia. And according to the UK’s and suppliers. Express delivery is crucial to ‘just-in-time’ Department for International Development (DFID) production and repair, allowing customers to get sub- "Almost a million African farmers and their families rely components or spare parts quickly and at short notice, on the fruit and vegetable trade with the UK...this is an potentially sourcing them from overseas. On a macroeco- export trade success story … and it’s one of the reasons nomic level, the express industry stimulates international why African economies are growing around 5%”. In fact trade by encouraging the specialisation of production in the UK trade alone injects over $200 million into rural different countries. African economies each year, while accounting for just 0.2% of UK’s carbon emissions. Surveys of companies around the world confirm the As manufacturing in developing nations evolves and the importance of express delivery. A survey in Italy found that value of the goods produced increases, so too does the without guaranteed international next-day delivery, about use of air transport. For example, 40% of high-tech 7% of Italian firms would possibly have to relocate some sales are dependent on air transport. of their operations to another country. In a survey of Chinese companies three-quarters reported that custo- Since World War II, the reduction of trade barriers has seen mers were demanding faster and more reliable delivery of global trade increase more than 20-fold and world incomes products. The express delivery industry is therefore crucial more than 6-fold. Aviation enables easier, more global trade to Chinese exports. Likewise, 76% of businesses in the and highlights the need to reduce such barriers even fur- City of London consider express parcel services critical or ther, with improvements in shipping times (both air and sea) important to the smooth running of their operations. adding value equivalent to reducing trade tariffs from 20% to 5.5% between 1950 and 1998. In addition, the speed of transportation, for which aviation cannot be surpassed, is an important determinant for entering an export market and for the volume of trade that can be achieved. It has been estimated that one-day saved in shipping time globally is worth more than US$100 billion and a 20-day shipping time is equivilent to slapping a 16% tariff on imports; in this case, time quite literally is money, with avia- tion key to future timesaving. Global Market Forecast 15
Benefiting investmentAir transport is one of the key links between countries In another survey, of over 600 companies from 5 coun-and their major “hub” cities, helping to create and sus- tries carried out by IATA, 63% of firms stated that airtain international markets, investment and business. transport networks are “vital” or “very important” forAs a clear indication of this, when top companies were investment decisions. If the network was constrained,recently asked to rank the cities that are the most 30% said it would be highly likely they would invest less.desirable locations for doing business, the highestranked also ranked top for the quality of air transport. Many companies search the world before deciding where to site new research and development activities. India, particularly Bangalore, is fast becoming recogni-Good business locations sed in the IT world as a suitable venue, with companiesneed good air transport such as Siemens, Samsung, Dell, GM, HP and IBM alllinks establishing themselves in the region. Not only would this activity be difficult without air transport, but without External transport links rank it the search may never have reached Bangalore in the35 30 25 20 15 10 5 0 0 first place. Frankfurt 5 This trend of investment in air transport subsequently 10 generating investment in a diverse range of other indus- Paris 15 tries is particularly visible at the new Dube Trade Port Stockholm London 20 in South Africa (see panel opposite). Budapest 25 30 Helsinki Athens 35 Business location rank Source: European cities monitor 2007, Cushman & Wakefield, Airbus
Demand for air travelAirport development as an integral part of social and economic developmentinitiatives in South AfricaThe Dube TradePort (DTP) is a strategic and critical infra- As well as its direct impact on GDP, the DTP is designedstructure investment, which aims to serve as a major to have catalytic benefits in terms of local economiccatalyst for economic growth in KwaZulu-Natal and empowerment, competitiveness and skills development.South Africa. The development demonstrates the cen- And, given the tourism ambitions of the project, relatedtral role that improved air services play in facilitating sus- efforts to eradicate malaria from destination areas havetainable economic growth, widening the development delivered significant health benefits to the local popula-options available and spreading prosperity. The creation tion.of a new airport will be integral to improvements in pro-duction processes, trade stimulation, foreign direct It is hoped that South Africa has almost reached the dayinvestment, natural habitat preservation and the deve- when the country’s trade and tourism prospects willlopment of tourism. be freed of the curse of malaria. South Africas natural resources make it an ideal destination for many internatio-A new fully-integrated international passenger and nal visitors. Its competitive tourism advantages are many:freight airport is to be constructed as part of the overall accessible wildlife, varied ecosystems, impressive sce-DTP development initiative. Included in the plans is a nery, unspoiled wilderness, diverse cultures, temperatetrade zone that will be linked to the airport’s freight sunny climate, and the absence of jet lag from Europe.facility, providing scheduled space for the import and In addition, the KwaZulu Natal region boasts uniqueexport of high-value goods through KwaZulu-Natal. By archaeological sites and battlefields, the availability ofproviding state-of-the-art air freight handling facilities, excellent conference, exhibition and sporting facilities.comprising a cargo terminal and a perishables centre,the trade zone is seeking to attract industries such as To take advantage of such attractions, the building ofmotor components, electronics, clothing and textiles, King Shaka International Airport at DTP and the potentialperishables and value-added logistics, which are criti- it offers for direct flights from key markets, is a centralcally dependent on specialised and scheduled air cargo part of the strategy to increase the flow of tourists to athat guarantees timely delivery. region. The FIFA World Cup in 2010 provides a major incentive to have construction complete and the airportThe plans also include an integrated agricultural export operational.zone. This will include land and facilities for the cultivationand export of high-value farming products, providing Thanks to the success of regional anti-malaria cam-opportunities for exporters of high-yield, time- paigns, the local KwaZulu Natal authorities now believesensitive, air-freighted horticultural produce and will they have taken large strides to guarantee visitors immu-include pre-harvest and post-harvest facilities required by nity from the age-old disease that has long blightedon-site producers and growers from surrounding areas. the continent of Africa. Global Market Forecast 17
Benefiting productivity & efficiencyFrom the aforementioned IATA survey, 80% of busi-nesses also said that air transport was important to Cork Airport Business Park: symbolefficiency and 50% thought it was vital. More than twothirds believed that air transport enabled them to reach of transition from agriculture to hi-techgreater economies of scale and improve efficiency, whileover half were convinced that it reduced costs for their Since the early 1990s, the Irish economy has experiencedbusinesses. growth at an extremely accelerated pace. The 1980s had seen many leave the island in search of employment, asOpening markets to international competition also an economy built on a strong agricultural sector stagna-drives innovation, which typically leads to efficiency ted. Much of the success of the Celtic Tiger economicimprovements. Over a quarter of companies believe boom around the turn of the century can be attributed tothat innovation and investment in research and develop- various policies implemented specifically to attract foreignment would probably be badly affected if air transport companies. These policies included low corporation taxservices were constrained(2). rates and an emphasis on high-quality education.Innovation has long been at the heart of the aviation These national policies have been complemented by localindustry itself. In 2006, 39 aerospace and defence com- initiatives that have made some regions of the countrypanies undertook US$19.9 billion of R&D expenditure. particularly attractive for foreign investors. The businessSuccessful innovations in aviation have a much wider park set up next to the city of Cork is one such example.impact than just the industry itself. For example, the The Cork Airport Business Park located just two minutessocial return on aerospace R&D spend is estimated to from Cork airport was set up in 1998. By 2005, the parkbe 70%, compared with 50% for manufacturing as a had attracted many international companies employingwhole(3). In other words, once it matures, a typical invest- around 1,800 people. Building on this success, the Irishment of US$100 million in R&D by the aerospace sector government launched a new phase, which would nearlyadds US$70 million to the level of GDP year-after-year. double the park’s office capacity and provide jobs for an extra 1,500 people. The business park hosts tenantsTwo recent studies, by IATA and InterVistas, have such as Pfizer, Marriot, Motorola and Amazon.attempted to quantify the beneficial impact of air trans-port on productivity. Both found that an increase in avia- The Cork Airport Business Park has contributed to thetion connectivity typically leads to a sizable improvement local economy’s diversification away from declining agri-in 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
Demand for air travel Benefiting tourism With 40% of international visitors travelling by air, avia- tion is indispensable to the growth and sustainability of tourism. The industry contributes almost 10% of the world’s GDP and employs nearly 80 million people, ran- ging from over 6% of total employment in Africa to over 10% in the US. Because tourism is the primary sourceculture to the fast growing pharmaceutical and IT sectors, of economic growth for many areas, some governmentstwo sectors that rely heavily on air transport. place it at the centre of their country’s growth strategies, which involves the development and promotion of flightSince 2000, growth of output in Cork has averaged 5.5%, connections.outperforming the fast growth in the Irish economy over In particular, areas with fragile ecosystems, which arethat period by 0.5% per annum. Moreover output per often home to endangered species and offer few alter-head is nearly 30% above the Irish average. In tandem natives for locals who need to support their families,with this fast growth the proportion of the working-age eco-tourism provides a growing source of funding,population that is economically active has risen from incentives and options. In Costa Rica for example, theapproximately 60% in the mid-1980s to 72% today. The promotion of eco-tourism started in the 1980s. Sincenumber of jobs has increased by 83% over the same then, international tourism has increased six-fold toperiod, ensuring that the benefits of this growth have been US$2 billion, with nearly 1.9 million international visitors.widely spread throughout the community. In 2005 tourism contributed 7.9% of GDP, 13% of jobs, and 22.3% of foreign exchange earnings. But moreBased on the key metrics of share of regional GDP, importantly, it has also helped to pay for the preservationgrowth in value added and productivity, Cork ranks highly of the country’s national parks.in globally successful IT and Life Science locations. In 2007, the spending of foreign visitors arriving by airAmong the key factors that have attracted these know- directly supported more than eight million tourism jobs.ledge-intensive industries to Cork are accessibility, R&D Taking into account indirect and induced jobs, air tou-investment, tertiary education and quality universities. rism accounted for more than 18 million jobs.Source: Cork Airport Business Park; Regional Forecasts (a division of OxfordEconomics); ‘Regions as Technology and Life Science Locations’, BAK BaselEconomics Forum 2006 Global Market Forecast 19
Airborne tourists provide a path to jobs and development- Morocco’s Vision 2010The country’s location at the nexus between Africa and Fès lies inland, 200km northeast of Casablanca. It is theEurope has contributed to a rich brew of cultural oldest of Morocco’s imperial cities and commonly reco-influences, incorporating influences as diverse as those gnised as the spiritual, cultural and intellectual capital ofof the Phoenicians, the Berbers and the Spanish. Morocco. It is home to Fès El Bali, the largest medina in Morocco. Set within almost 3,000 acres, the ancient siteContinuing this rich tradition of inclusiveness is the has been declared a UN World Heritage Site, and hasFestival of World Sacred Music (Festival des Musiques been extensively renovated as part of the Vision 2010Sacrées du Monde). Each June sees performers from plan. The medina is a maze of mosques, food marketsevery corner of the Earth fly into Morocco for a week of and bazaars. Noted for its quality craftsmanship, Fès isartistic performance in Fès, the country’s ancient holy famous for metalwork, rugs and leather goods.city. The festival represents the spiritual heart of Islam – Despite its status Fès El Bali had become run down andpeaceful, pluralistic, generous and joyous, with the aim its tourist potential unexploited. Accordingly, the regio-of honouring all the worlds spiritual traditions and nal plan calls for establishing Fès as a tourist destination.dissolving musical boundaries. The plan aims to promote the city as a “Lively MillennialThe Moroccan government has been keen to promote Museum, based on its authenticity as the only remainingthe country’s rich cultural heritage and to encourage cul- place in the world where daily lives still reflect an ancienttural exchange which will bring more visitors through way of life and its associated culture and art.”Morocco’s airports. The recent recording of part of U2’s The tourism development plans include:latest CD in Fès has been a timely boost to these efforts. • the creation of additional accommodation in theIt is hoped that the attendant media interest in the Medina by converting houses with high historical valueband’s choice of recording venue will rekindle Morocco’s and Fondouks into high-quality guest housesreputation as a favourite artistic retreat in the 1950s and • the conversion of Fondouks into theme-based cafés or60s, when artists such as the Rolling Stones were regu- exhibition spaceslar visitors. The legendary rock group returned to • the creation of a religious arts museumMorocco in 1989 to record with the country’s most • the rehabilitation of two pilot neighbourhoods, inclu-popular traditional artists, the Master Musicians of ding restoration of the original Medina wallsJajouka, an all-male guild trained from childhood. • the opening of local handicraft industries to tourist access, and the facilitation of electronic payment and overseas shipping • the development of tourism in the hinterland of Fès, to allow these rural areas to benefit from the city’s role as a tourist hub. Crucially for Fès, the realisation of the city’s tourist poten- tial and its successful entry into the European city-break market depends on the introduction of point-to-point flights from the major cities of Morocco’s key overseas markets. This will involve more flights on existing routes from France and the UK, and the introduction of new routes, from untapped sources such as Barcelona, Madrid, Milan and Rome. To realise this ambition it is anticipated that investments totalling 3 billion dirhams (US$350 million) will be required over the ten years to 2015. In turn this is expected to create 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: http://www.tourisme.gov.ma/docspdf/PDRT/PDRT%20F%C3%A8s/Brochure- An.pdf
Demand for air travelBut what if….Today, 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. Global Market Forecast 21
The Future : a greater concentra and trafficIntroductionThe overall long-term effects of the 2008/2009 financial Previous network development and the natural concen-crisis are expected to be more pronounced on network tration of demand have created a more mature net-evolution than on future passenger demand growth. work, with few significant non-stop markets left to beIn the coming years, the routes that passengers actually opened on the three main long-haul flows.fly will depend not only on the route they want to take,but also on what the airlines can profitably offer in a After 2001, traffic recovered relatively quickly whenchallenging market environment. compared to the recovery in the number of routes drop- ped in that period.In the past, a significant part of growth allocation wasattributed to network development. The number of non- In 2008, the number of airline routes has only increasedstop routes on the three main long-haul flows (trans- by 15 compared to 2007 on the three main long-haulAtlantic, Europe-Asia and trans-Pacific) has doubled flows, despite the new trans-Atlantic open skies agree-since 1987 and now represents 70% of long-haul traffic. ment that came into effect that year. One such constraint today, and more so in the future,Strong air travel growth, globalisation of economies, air is the effect of airline alliance and consolidation, whichtravel deregulation and technology have allowed more artificially influences some potential route openings,connectivity between cities. New routes from hubs also therefore, helping to limit the absolute number of non-played a major role in this development. In fact, hubs stop routes.have been crucial, not only because few long-haul citypairs could survive without the connecting traffic, but Even with such constraints, Airbus forecasts the needalso because they are often the destinations people for 400 net additional routes on the three main long-want to fly to. Consequently, some 77% of long-haul haul flows by 2028. However, their impact on the ove-demand and 73% of long-haul routes involve at least rall network will have an ever-decreasing effect, as theirone of 32 global hub cities. importance in traffic terms also reduces, and as growth will be increasingly concentrated on the existing routes, particularly on the hub-to-hub routes.
Demand for air traveltion of demand Passengers fly further A long-haul network continuing to be dominated by a few cities 1985 2015 Urban population: 5-10 million 10-15 million 15-20 million 20-25 million >25 million Source: UN, Thomas Brinkhoff: City Population, Airbus Long-haul route network maturation 1,546 2028 Airline routes* 1800 1,158 1400 2007 +388 routes 1200 Forecast 1000 551 800 1987 600 400 200 0 2003 2005 2009 2023 2025 2028 2007 2027 1983 1985 1989 1993 1995 1999 2001 2013 2015 2019 2021 1979 1987 1997 2017 1977 1981 1991 2011 *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, OAG Global Market Forecast 23
Translating growth into aircraft demand:Historically, the choice of aircraft for a given operation such as urban population growth, historical localwas limited by the range capacity and of the products traffic growth, the presence of low costs airlines etc.on offer. However, today there are aircraft with a wide • The routings of each O&D are then calculated torange of capacities but with similar long-range capabi- creating the optimum “virtual network of routes”.lity, so it is possible to make fleet decisions based • Matching the “virtual network” to the “actual net-purely on demand and growth expectations. work” indicates the values of many parameters influencing the passenger’s choice of routes.Growth allocation directly impacts generic aircraft • New constraints are added/removed (technology,demand in terms of variables such as size and range. regulations, new business models, etc.)Airbus has developed a unique process that uses real • New airline routes are incorporated to test their futureand future passenger demand to determine the most feasibility and to identify from which existing routeslikely airline operations on a route by route basis. they could attract traffic. Dropped routes are also incorporated.The process starts with future growth being calculated • The future routings of all O&Ds are consolidated, withdown to the origin and destination of passengers differentiation between those passengers connecting(O&D) and the basic principles are as follows: and travelling point-to-point.• Each O&D has a specific growth rate based on either • The total traffic growth on each individual route is the size of the economy in a metropolitan area then calculated, making it possible to estimate fleet (known as the gross metropolitan product), if this requirements. data is available, or using a set of market typologiesThe trans-Atlantic flows will havethe most route openings Split of additional routes on the 3 main long-haul flows Europe-USA 79 Other 74 Canada-Europe 19 Europe-PRC 38 Trans-Atlantic Asia-Europe 21 Trans-Pacific Indian Sub-USA 15 Europe-Asia Europe-S. America 35 Europe-lndian Sub 29 Middle-USA 22 Asia-USA 17 PRC-USA 39Source: Airbus
Demand for air travelRegional network developmentAll three of the main long-haul flows are expected to expe- • Frequencies are limited by time windows, passengerrience solid and sustained future traffic growth. In particular, preferences, airport congestion, noise curfews, over-deregulation is expected to drive Latin American growth on night fees.the trans-Atlantic flow; fast growing economies in Asia for • Largely due to the principles mentioned above, thethe Europe-Asia flow and the trans-Pacific flows; and new longer the route, the larger the aircraft tends to be.emerging sub-flows from/to the Middle East or Africa. • Average route length is increasing as demand hasThe way traffic is allocated on each of these flows will emerged from distant destinations. People are flyingdirectly impact demand and, more specifically, the aircraft further, simply because they want to visit places thatcapabilities required by airlines, including the number of are further away.seats. • The volume of organic growth (i.e. traffic added to an existing route) is higher on hub-to-hub routes thanksWhile different in many aspects, the three flows tend to to the dynamism of the 32 global hub cities and theshare the same basic long-haul principles: growth of the connecting traffic.• Most of the 32 global hub cities are already intercon- • The most common source of totally new city pairs is nected with non-stop flights, the “big points”. These between hubs and secondary cities. These are typi- routings are also very often those adding significant cally operated by only one airline, therefore, once the value to an airlines network. daily flight is achieved, the airline can move to a larger• Almost all routes are linked from, to or between these aircraft to accommodate the additional organic 32 cities. growth.• For historical, geographical and social reasons the more • Routes between secondary cities, or “transverse” distant two regions are, the more concentrated the routes are marginal. Many of these markets are demand tends to be between connecting cities in each charter routes with no need for a daily flight. region.Trans-Atlantic network: % of passengersflying new airline routes in twenty years % of passengers 90% 80% 70% 60% The longer 50% the routes, 40% the larger 68% 30% the aircraft of the traffic 20% 10% 0% Europe - US Canada - Europe Central America - Europe Canada - Central Europe Central Europe - US Canada - North Africa S. Africa - S. America Middle east - S. America Canada - Middle east Middle east - US S. Africa -US Europe - S. America Africa - US North Africa - US Source: Airbus Global Market Forecast 25
The trans-AtlanticIn the year to September 2008, 113 scheduled routes During recent years, smaller trans-Atlantic traffic flowsof all sizes, (in terms of seats offered), were opened have quickly emerged. In 2000, only three regularacross the overall transatlantic network, which non-stop routes existed from the Middle East to theincludes non-EU states, Africa and the Middle East Americas, but by 2008 there were 19 in operation. Into/from Canada and Latin America. However, 106 of 2028, more than 70% of the passengers flying from theall routes have been dropped. Middle East to the Americas will fly on routes not yet in operation. This market will be ideal for large twin-aisleIt has been forecast that that there will be nearly 200 aircraft such as the A350XWB and very large aircraftadditional trans-Atlantic airline routes, 60% of which like the A380.will be between the North America and WesternEurope, in the next 20 years. However, most of the Today 45% of trans-Atlantic passengers fly on 42 citygrowth will be allocated to existing routes, which are pairs with traffic exceeding 1,000 daily departing pas-expected to carry some 93% of the forecast traffic. sengers. This number has steadily increased during the past 30 years, despite the opening of many new non-Dynamic growth in Latin America will create some stop routes. As fewer new route opportunities remain onadditional network opportunities, but will remain limited the main flows, airlines consolidate and emerging flowsdue to the historical concentration of demand in largely having demand concentrated in a few cities, aEurope and continuing consolidation among airlines. larger proportion of the growth will be allocated to theAs a result, 23 routes will carry more than 1,000 daily existing routes. Therefore, the number of “1,000 pas-passengers one way by 2028, compared to only two senger” routes will rise to 130 in 2028. Traffic on theseroutes today; making this a clear market for large routes will be accommodated by an increase in bothaircraft. aircraft frequencies and seat capacity.Trans-atlantic: number of citypairs with more than 1,000 dailydeparting passengersNumber of city pairs140 132120100 80 60 40 40 19 20 0 1977 1987 1997 2007 2017 2028 Source: Airbus
Demand for air travelBetween Asia and Europe :recent developmentsThe long-haul market between Europe and Asia-Pacific, Significant growth to and from Europe has also beenwhich includes the Indian Subcontinent, China and observed in some South Eastern Asian countries likeJapan, is the 2nd largest in terms of traffic (RPKs(4)). Half Vietnam, the Philippines and Malaysia. New directof the volume of passengers added in the last three non-stop routes are expected from South East Asianyears were to China and India. High growth from China countries to the largest markets in Europe, although theand India will continue to create new network opportu- Middle Eastern hubs will capture a significant part ofnities, of which the majority will be new city pairs. the local traffic.In China, there are currently very few non-stop routes The market share of Middle Eastern hubs on thefrom and to secondary cities, but more are expected to Europe to Asia flow has continued to increase toemerge by the end of the next decade as wealth around 14%, depending on the season. Many of thesespreads and the country’s aviation network develops. passengers are travelling from Europe to India andThe high organic growth of these routes will result in a other South East Asian countries, while China, Koreahigh density of routes. and Japan remain relatively untapped. As the Middle Eastern hub network expands to encompass moreHowever, India’s network is more mature, with shorter direct routes to North East Asia, they will capture somedistances from Europe and traffic in new markets 30% additional traffic.less dense than in China. This is consistent with averagelong-haul trends, where the longer the route, the larger (4) RPK: Revenue Passenger Kilometresnon-stop markets.Europe-Asia: share of passengers transiting throughMiddle East hubs by final Asian destination Top Asian markets from Europe % of passengers 0% 20% 40% 60% 80% 100% Nepal Maldives Sri Lanka Bangladesh Pakistan Philippines Australia Thailand Malaysia India New Zealand Indonesia Vietnam Singapore China Hong Kong Republic of Korea Japan Source: Airbus, GMF; IATA Paxis Global Market Forecast 27
The trans-PacificTrans-Pacific network development will remain largely but most of the demand will continue to connect throughdominated by the trunk routes linking major cities on other regions due to range and costs.both sides of the ocean. This flow is characterised bythe high concentration of the demand to and from a few One conundrum today is: “how can a passenger travelAsian and American cities. from one side of the Pacific to the other without crossing the Pacific?” The answer is to fly through Europe and theThe share of routes linking global hub cities on both sides Middle East. In Europe new connecting Asia-Americasof the Pacific (hub-to-hub routes) will remain at 70% of the gates (e.g. Brussels) are being established by major car-traffic by 2020. This is because three quarters of the riers . In the Middle East, hubs have more direct servicesgrowth on existing routes will be on the current hub-to- to the Americas. For example, Dubai and its Asia-hub routes. Among the 28 new non-stop city pairs to be Americas connecting traffic is expected to increaseopened by 2020, half will be driven by high growth in India 14-fold by the year 2020. Although a staggering growth,and China. The other half is mostly long-range routes to only specific parts in Asia will be impacted, with 90% of theSouth East Asia, which will be extremely sensitive to the overall trans-Pacific demand still expected to fly on “actual”oil price. trans-Pacific routes, rather than via connections.Non-stop routes to and from secondary cities in China Today’s trans-Pacific routes are dominated by interme-are expected to mainly develop after 2020, but will not diate twin-aisle and large widebody aircraft (90% ofrepresent more than 1% of trans-Pacific traffic by 2028 the trans-Pacific RPKs). As almost three quarters ofand will also be extremely dependent on oil price. the growth will be allocated to existing routes, that domi- nation will continue, with an even greater emphasisThe Asian to Latin American flow is a fast developing mar- on this class of aircraft.ket with a few non-stop city pairs expected to be opened,Most of the growth is on hub-to-hub routes % of traffic added 2007-2020 on the trans-Pacific flows 18% Other routes 15% 12% 55% Hub-to-hub routes Growth on existing city pairs New city pairs Source: Airbus
Demand for air travelHigher fuel prices, stronger hubsThe long-term effects of crisis are expected to be more tions on foreign ownership is reduced. Large airline hubspronounced on network evolution than on overall pas- will benefit from this consolidation, even when airlinessenger demand growth. Long-haul network develop- adopt a multi-hub structure. However, while big routesment is also particularly sensitive to the increases in fuel would remain non-stop, routes from absorbed airlines toprice. Therefore, it is important to consider alternative secondary destinations are more likely to be operatedscenarios linked to these variables. For example, analy- from the main airline hub.sis shows that on the trans-Pacific the total number ofnon-stop city pairs in 2020 would be similar to today’s The combined effects of higher than expected energylevels with an oil price of US$150 per barrel (real terms), prices and airline consolidation, will be less new non-while the traffic would still grow (with an average growth stop city pairs, resulting in more demand which will stillrate still exceeding 4% per year). However, very long thin continue to connect. For example, with oil costingroutes would be expensive to operate, with the costs US$100 per barrel in 2020, 45% of traffic from Europeand risks associated with opening new city pairs higher. to Asia would still connect even with new non-stop routes. With an oil price of US$150, the overall flow traf-The acceleration of airline consolidation would also have fic would be down 12%, but the share of connectinga major effect on the forecast for network evolution. traffic would increase to 52% (+7pt) making the routesAirbus anticipates that this trend will continue within with a higher proportion of connecting traffic more resi-some major regions and across regions, as say restric- lient to higher oil price. Global Market Forecast 29
People want andKey drivers of traffic growth conomic developments can be measured by several popular bus network to air transport, which is a conse-E macro economic variables including Gross DomesticProduct (GDP), exports, imports, unemployment rate, quence of lower airfares and improved journey times. In the maturing LCC markets of North America andinflation, private consumption and disposable personal Western Europe, the LCC growth will ultimately dependincome. For each edition of the GMF and each traffic on the number and size of new routes still to be opened,flow, the final permutation of independent variables that on an economic and sustainable basis. The growth inare selected follows the testing and statistical evalua- India is a good example of this, because althoughtion of numerous possible combinations. Most often for undoubtedly influenced by economic, trade and popula-developing and matured markets, the statistical model tion growth, it has also benefited from increased accessthat best fits the historical traffic provides the best to air transportation, either through new destinations orexplanation of future trends and is, therefore, the one simply through greater affordability as a result of deregu-selected for use in Airbus’ aircraft demand model. lation and competition. In some cases these develop- ments are the result of actions taken by regulators andWhile the current downturn has highlighted the impor- governments keen to take advantage of the benefits oftance of GDP as an explanatory variable in traffic fore- air transportation.casting, in some market segments, classic econometricmodelling is not sufficient to adequately forecast traffic Airbus is often asked how variations in underlyinggrowth and the use of hybrid models is required. For factors, such as the oil price, a recession or acceleratedexample, in Asia, the development of Low-Cost Carriers market liberalisation, can affect traffic growth and(LCCs) is driven by the pace and timing of deregulation demand for air travel. To understand the impact suchwithin each country and of liberalisation between others. variations could have, the forecast uses econometric orIn Mexico for example, a portion of air traffic growth hybrid models to conduct sensitivity analysis around ourdepends on the number of people switching from the baseline traffic forecast in a more systematic way.World air traffic growth is closely correlatedto economic growthAir traffic growth (%) Real GDP growth (%)30% 7% Air Traffic25% 6%20% 5% GDP 15% 4% 10% 3% 5% 2% 0% -5% 1%-10% 0% 2008E 2000 2002 2004 2006 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 1972 1974 1976 1978Source: Global Insight, ICAO, Airbus
Traffic forecastneed to fly Forecast methodology The Airbus traffic forecast process is based on four The 2009 GMF analyses a total of 156 distinct domes- major building blocks: detailed market research, suitable tic, regional and intercontinental passenger sub-mar- market segmentation, targeted use of econometrics and kets, segmented according to their degree of maturity detailed network development analysis. The latter being and specific characteristics over time. Airbus market particularly important, as it provides a systematic view research examines the fundamental drivers of transpor- of how the route structure of the world’s air transport tation including future consumer behaviour and expecta- system will evolve, based on true passenger origins tions, the pace of liberalisation, modal competition, and destinations. The full benefits of this approach are the growing importance of emerging markets and particularly clear when the aviation market moves constraints, such as the influence of airport congestion. through its now characteristic cyclical variations, such as The market is segmented by airline business model, the drop in passenger demand resulting from the most region and traffic flow, which enables the precise recent economic downturn. circumstances and drivers prevailing on each segment to be fully considered. Econometric data is then used to quantify future air travel demand based on economic, operational and structural variables. Airbus traffic forecast: from research to network development Market Market Econometrics Network research segmentation development • Deregulation/liberalisation • Regional/low-cost/charter • Economics • Aircraft economics • Emerging markets • Start-up/network • Tourism • Airline operation economics • Modal competition • Integrators • Fuel price • Origin-destination demand • Low-cost penetration • Traffic flows • Yields • Demographics • Consumer/travel surveys • Domestic/international • Trade/value of goods • Geopolitics Global Market Forecast 33
Long-term fundamentalsCyclical downturns have almost always been linked to It is not yet clear how severe the current cycle will be oreconomic cycles, but at times this has also been exa- what shape it will take, however, previous cycles showcerbated by other factors, most notably in the last ten that the deeper the recession, the stronger the subse-years with 9/11 and SARS. quent recovery. During the last two cycles, the drop off in traffic and passenger demand was steep, creatingThis time, both the global economy and consumer the only two periods of negative traffic growth everconfidence have been severely affected by the events in witnessed. The steep recovery after the last cycle sawthe world’s banking community and stock markets, almost 14% growth in one year.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 shocks World annual traffic (RPKs - trillions) Asian WTC Financial Oil Crisis Oil Crisis Gulf Crisis Crisis Attack SARS Crisis 5.0 4.5 4.0 +38% 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 1968 1973 1978 1983 1988 1993 1998 2003 2008 Source: ICAO, Airbus
Traffic forecastremain strong While the current cycle is clearly difficult for everyone in the industry, it has the global economic slowdown at its heart and has not been aggravated by any other “exo- genous events”. In this cycle, perception has played a significant role, as businesses and passengers put tra- vel plans on hold awaiting a clearer picture of where the Potential for upside turning point of this cycle would come. As the serious- from meaningful rescue ness of this cycle became apparent, however, the world’s major economic powers were very quick to res- and economic stimulus pond, with unprecedented economic stimulus plans, plans totalling thousands of billions of dollars. While 2009 is expected to be the worst in terms of world GDP growth Rescue Plan Economic for many decades, economies are widely expected to Stimulus Plan gradually begin to recover late in the year, with more meaningful improvement in 2010 and 2011 forecast. US $700 billion $787 billion These developments are expected to form the basis of Japan $320 billion $150 billion recovery in passenger and freight traffic. China N/A $586 billion Germany $650 billion $109 billion As seen in the past, this typical response of the market UK $656 billion $52 billion to such events is possible only due the enormous France $468 billion $39 billion underlying demand, the fact that people want and need to fly. Source: Airbus The deeper the downturn the stronger the recovery Air traffic growth (%) 14% 00 - 01 - 02 - 03 - 04 12% 90 - 91 - 92 - 93 - 94 10% 79 - 80 - 81 - 82 - 83 8% 6% 4% 2% 0% -2% -4% Year 1 Year 2 Year 3 Year 4 Year 5 Source: ICAO, Airbus Market Research and Forecast Global Market Forecast 35
Seats, yields and costs continueto influence trafficAir traffic demand is also correlated to air faresUS domestic Air traffic growth (%) US domestic Air fare growth (%)20% 35% 30% 15% 25% Air traffic 20% 10% 15% 5% 10% 5% 0% -0% Air Fare* -5%-5% -10%-10% -15% 2003 2005 2007 1983 1985 1989 1993 1995 1999 2001 1973 1975 1979 1987 1997 1977 1981 1991 1971Source: ATA, Airbus* Airline unit revenue expressed in average passenger revenue per kilometer flown (airline yield) as a proxy of air faresAlthough inversely linked to traffic growth, airline yields Like any industry, airlines seek to manage downturns byhave traditionally been one of the main drivers for air balancing supply and demand. However, many opera-transportation growth, largely driven by fares. In other tors initially reduce capacity because, as explainedwords, higher yields generally reduce passenger above, using pricing alone to stimulate demand has pro-demand and for obvious reasons are also closely linked ven to be financially damaging in the past. In fact, duringto the profitability of airlines. Analysis has shown that a the early stages of the current cycle a significant portion1% increase in airfares will result in a 0.5 to 1% decrease of airlines particularly in the US chose to reduce capacityin air travel demand, with this variation largely linked to even before demand started to turn significantly down-regional markets and passenger class. Conversely, a 1% wards. A move designed in part to protect yields andincrease in GDP results in a 1% to 2.5% increase in air revenues and reduce costs, but also later havingtravel demand. the effect of more closely matching capacity to demand and protecting load factors.
Traffic forecastElasticity for air travel demand -0.5 Domestic China China - Japan 0.5 to 1% decrease in air 1% increase in air fares travel demand US-W. Europe (elasticity for air fares is -0.5 to -1) -1 Domestic Europe Domestic US +2.5 Domestic China China - Japan 1.0 to 2.5% increase 1% increase in GDP in air travel demand US-W. Europe (elasticity for GDP is +1.0 to +2.5) +1 Domestic Europe Domestic USAlthough 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. Global Market Forecast 37
Cyclical downturns no matchfor underlying demandThe 2.8 billion people living in Brazil, Russia, India and In future, it is also likely that the resilience of BRICChina (BRIC nations) represented 36% of world GDP nations will further increase with each successive eco-growth and 10% of all consumer spending in 2008. nomic cycle. The national savings rate in China is aroundOver the next 20 years these nations will grow to repre- 50% of GDP, up from 38% in 2000, and there is clearlysent 22% of world GDP and 19% of consumer spen- huge potential for consumer spending growth as China’sding, making them increasingly important in terms of air economy and population develop. This offers real poten-transport. tial as a counter balance to difficulties such as the recent cuts in consumer confidence and spending in moreToday, the BRIC nations’ economies and industries are mature economies. In China, consumer spending isstill closely entwined with more developed countries. expected to increase by 8.4% annually over next 20Therefore, the slow down in demand from the US and years to 43% of GDP, while Indian consumer spendingEurope has had a negative effect on these emerging is expected to grow by 6.9% per year to 60% over theeconomies and on the short-term development of their same period, all helping to strengthen their economiesair transport industry. However, there is little doubt that and offset the effects of future economic downturns.strong 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.Growing importance of consumption in BRIC countries Private consumption as a share of GDP (%) 70% History Forecast 60% 50% 40% Western Economies World BRIC countries 30% 2003 2005 2009 2023 2025 2007 2027 1983 1985 1989 1993 1995 1999 2001 2013 2015 2019 2021 1987 1997 2017 1981 1991 2011Source: Global Insight (Jan 2008), Airbus
Traffic forecastThe Chinese and Indian governments both aim to stimu- has also relaxed regulations to make it easier for thoselate their economies using multi-million dollar infrastruc- involved in infrastructure projects to gain access to foreignture projects, which also include airport developments. funds.China’s massive US$586 billion package is designed toboost investment and consumption. These actions also address concerns raised in a report published by Forbes, which indicates that three of the fivePackages unveiled by the Indian government in late 2008 airports with the most significant delayed arrival times inand early 2009 have made more funds directly available 2008 were in India, and another by Goldman Sachs,for projects that will help the country’s airport infrastruc- which highlights the need for infrastructure development,ture, which has struggled to keep pace with rapid growth including airports, in their top ten recommendations toand the resulting increase in air traffic, increasing by an ensure India realises its economic potential by growingaverage of 20% per year since 2002. The government forty-fold by 2050.Large potential to increase propensity to travel Trips* per capita - 2008 10 Seychelles Bahamas Malta Cyprus Macao UAE Ireland Maldives Barbados New Zealand Singapore Bahrain Australia St Lucia Spain Hong Kong Canada Qatar USA Fiji Trinidad Puerto Rico Greece Kuwait France UK Finland Sweden Denmark Switzerland Mauritius 1 Cape verde Malaysia Saudi Arabia Portugal Latvia Brunei Italy GermanyJapan Belgium Samoa Panama Taiwan Netherlands Suriname Croatie Estonia Israel South Korea Jordan Mexico Czech rep. Hungary Slovakia Slovenia Russia Poland Brazil Equatorial Guinea China Botswana 0.1 Bosnia India Belarus World average Angola Nigeria Bangladesh Lesotho Afghanistan 0.01 Iraq Chad Niger0.001 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000Passenger originating from a particular country 2008 Real GDP per CapitaNote: GDP in 2005 US$Source: IATA PaxIS, Global Insight, Airbus Global Market Forecast 39
In 2008, the number of foreign tourist arriving in India was Although China and India are the largest emergingup 5.7% on 2007 to 5.5 million, despite the problems markets, the United Nations has identified another 27that beset the Indian market in the second half of the emerging or potentially emerging countries. With a com-year, including fuel prices, terrorism and the economic bined population of almost three billion people, thesecrisis. However, there is clearly also a lot of additional represent smaller, but never-the-less significant markets,potential, when you consider that some 47 million foreign in terms of their economies and air transportation.tourists visit China each year and there are 528 milliondomestic Indian tourists that can be targeted with air Many of these governments recognise the benefitstravel, at the right price. aviation can offer their economies and their people, so actively support and promote air transport within andIn recent years, the populations of emerging countries from their nations. This support comes in many forms,like China and India have clearly demonstrated an but can include tax relief on aircraft purchases and fuel,increased propensity to fly. Even with the significant airport and infrastructure projects, and creatinggrowth in air transportation witnessed in recent years, or extending existing bilateral arrangements, therebyhuge potential exists for further growth as these nations creating greater deregulation and greater access andand their people become better able, economically, to choice for passengers. Vietnam for example has imple-take advantage of the benefits aviation undoubtedly mented many of these policies, including extending aoffers. Wider access to such opportunities helps ensure bilateral agreement with the US in 2008, and is todaythat GDP and wealth are increasingly spread amongst seen as one of the fastest developing markets in Asiathe world’s nations. By 2017, it is forecast that 70% and indeed, the world.of the world’s population will be responsible for 18% ofworld GDP: double the 1997 level of just 9%.GDP increasingly spread over the worldWorld Population (%)100% 90% 80% 2017 70% 2007 60% 1997 50% 40% 30% Future air travel capture 20% 10% 0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: Gobal Insight, Airbus World GDP (%)
Traffic forecastLCC’s continue to grow and influence traffic growthEurope The European LCC market is well established andLow Cost Carriers (LCC) now carry over a third of the beginning to mature. As well as seeking new routes, forscheduled traffic in Europe and will continue to act as a which the number of opportunities will steadilystimulus for air traffic growth into the future. Despite being decrease, operators will look to consolidate and growheavily affected by a higher oil price, the LCC model in existing markets and routes, inevitably leading to theEurope has not lost ground and many airlines have need for larger aircraft. Three quarters of the LCC capa-actually strengthened their positions. Even the economic city is today on intra-European markets, where LCCsdownturn provides some opportunities, with business often already exceed 50% market share on large non-passengers in particular increasingly flying LCCs as travel adjacent markets.budgets 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 flows Millions sheduled seats (Sept 2008) 0 0.5 1.0 1.5 2.0 2.5 3.0 Spain-United Kingdom Germany-Spain Republic Of Ireland-Italy Germany-Italy Germany-United Kingdom France-United Kingdom LCC’s exceed Italy-United Kingdom 50% on some Italy-Spain France-Germany European France-Spain markets France-Italy Netherlands-United Kingdom LCC Airlines Austria-Germany Germany-Switerland Other scheduled airlines Germany-Greece Switerland-United Kingdom Poland-United Kingdom Portugal-United Kingdom Netherlands-Spain France-Switzerland Spain-Switzerland Germany-Sweden Germany-Poland Denmark-Norway Germany-Netherlands France-Netherlands Italy-Netherlands Portugal-Spain Belgium-Italy Denmark-Germany Sweden-United Kingdom Germany-Portugal Belgium-Spain Denmark-United Kingdom Norway-United Kingdom Republic of Ireland-Spain France-Portugal Denmark-Sweden Source: Airbus, OAG, Scheduled seats (millions), September 2008 Global Market Forecast 41
Domestic European LCC operations primarily focused on a small number of key countries today 0.0 1.0 2.0 3.0 4.0 5.0 Domestic Spain Domestic Italy Domestic Germany Domestic United Kingdom Domestic France Domestic Norway Domestic Sweden Domestic Greece Domestic Finland Domestic Portugal Domestic Denmark Domestic Ireland Republic LCC Airlines Domestic Switzerland Domestic Poland Other scheduled airlines Domestic Austria Domestic Romania Domestic Croatia Domestic Israel Domestic Iceland Domestic Greenland LCC Market share: 22% Domestic Bulgaria Domestic Czech Republic Domestic Slovakia Domestic Cyprus Domestic Latvia Domestic Netherlands Domestic Estonia Domestic Bosnia And Herzegovina Domestic Macedonia Former Domestic LithuaniaSource: Airbus, OAG, Sheduled seats (millions), September 2008 There is still significant potential for LCCs in the largest Despite a challenging year for air transport in 2008, domestic markets, such as in Spain or Italy, although LCCs in Europe offered 10% more seats than in 2007. competition with other modes of transport, such as This strong performance largely benefited the two the high-speed train, is more pronounced on shorter major LCC carriers in Europe, which account for over distances. In addition, many domestic markets are 40% of the LCC market and saw capacity increase limited to regional jet operations, an aircraft segment by 21% between 2007 and 2008. in which LCCs have traditionally not operated.
Traffic forecastTwo strong performers Even with this consolidation, the European LCC marketin a difficult environment will remain more fragmented than its US counterpartdominating a fragmented because of the greater diversity of markets, travellers and airline business models. The difficulties facing somebut now consolidating LCC secondary network carriers in Europe will continue tomarket in Europe allow better placed LCCs to increase their share of key markets, while the trend towards greater European Daily seats (Thousands) cultural and political integration will continue to provide 500 growth and new network opportunities. LCCs will conti- 450 +3.6% nue to play a key role in the mobility of Europeans, 2008 total growth particularly to and from the more disparate destinations 400 2007 seat capacity in the European Community, with their weighted 350 average route length having increased 20% to 1,050km 300 +21% in the last five years. 250 200 150 100 50 LCCs are flying longer 0 Ryanair & Easyjet > 30 other LCC carriers routes participating in the unification of EuropeSource: Airbus, OAG, Scheduled seats (millions), September 2008 Average distance (km)The US and European LCC markets are similar in size. 1,200However, while 95% of the US LCC traffic is carried bythe top four airlines, the European market is still largely 1,050 kmfragmented, with 30 carriers splitting 60% of the traffic 1,000and increasing capacity by 3.6% between 2007 and 2008.Though very few bankruptcies occurred in 2008, the last 924 km18 months have seen the European LCC market slowly 800begin to consolidate, helped by the absence of new 791 kmLCC start-ups and a more difficult environment wherenumerous survival plans involve mergers between LCCairlines or network carriers reabsorbing LCC affiliates. 600 2000 2004 2008 Source: Airbus, OAG, LCC routes average great circle distances. Weighted by the scheduled seats, September 2008 Global Market Forecast 43
Organic growth, or growth of existing markets, is still in 2008 was organic. By the year 2028, it is estimatedmodest, but is key to forecasting future LCC traffic that 40% of the LCC traffic will be on routes with moregrowth as additional new network opportunities dimi- than 500 daily seats, so many will require larger aircraftnish. For one major European LCC, 30% of the growth than the 737s and A319s typically used today.More larger aircraft will be needed for theLCCs to operate higher density marketsNumber of airline routes 41%400 of the LCC capacity350 LCC Routes* > 500 daily seats300250200150 19% of the LCC capacity100 50 0 2000 2004 2008 2012 2016 2020 2024 2028 History EstimatesSource: Airbus, OAG. Number of LCC routes* > 500 daily seats*Airport pairs operated by a specific airlineAsian market split. LCCs have captured the largest share(62%) in domestic ASEAN(1) markets 11% % of seats offered by LCCs 70 62%11% 65% 60 50 Domestic markets excl. 9% ASEAN markets 40 37% Domestic ASEAN markets 4% Intl. Markets not linked to ASEAN 30 Intl. Markets from ASEAN Intl. Markets between ASEAN Nations 20 11% 10 8% 2% Total: 2.5 million daily seats 0 LCC share (1) Association of South East Asian Nations (ASEAN) : Brunei, Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam Source: Airbus
Traffic forecastAsia markets in North American or Europe. However, whileLCC growth in Asia-Pacific has remained high. Over 30 similar in size, the Asian market differ with these moreoperators generated 19% more traffic in 2008 than in mature markets significantly. For example, in half of the2007, with the top five carriers accounting for 68% of top ten domestic Asian markets, LCCs have over 40%that growth. In addition, there are still opportunities for market share, more than some western markets areLCC markets to become more widespread, with poten- experiencing. However, LCCs are basically non-existenttial for new operations and even some new operators in on the two largest domestic markets, Japan and China.parts of Asia where LCCs are not well established.However, the overall number of LCC operators in the Asian LCCs will continue to grow in their domesticregion should remain stable. markets by both increasing their market share and by benefiting from impressive regional economic growth.In a very short time LCCs in Asia have captured 14% of However, they are also increasingly considering thea regional market that is the same size as the domestic potential of international markets.Domestic Asia markets: 14% market share for LCC’sTop 10 markets (95% of total domestic traffic) Daily seats (Thousands) 0 100 200 300 400 500 600 700 Domestic China 58% of Asia-Pacific domestic traffic Domestic Japan LCC share: 3% Domestic Australia Domestic India Domestic IndonesiaDomestic Republic Of Korea Half of the top 10 markets with a LCC market share > 40% Domestic Malaysia Domestic Thailand Domestic Philippines Domestic New Zealand Daily seats (Thousands) LCC Airlines Other scheduled airlinesSource: Airbus Global Market Forecast 45
Intra-Asia: LCC’s have taken just an 8% market share,but increasing rapidlyTop Asian markets(74% of total international traffic) Daily seats (Thousands) 0 5 10 15 20 25 30 35 40 45 China-Hong Kong-China China-Japan China-Republic Of Korea Japan-Republic Of Korea Hong Kong-China Australia-New Zealand Japan-Chinese Taipei Singapore-Indonesia Singapore-Australia Malaysia-Indonesia Hong Kong-Japan Hong Kong-Thailand China-Singapore Singapore-Thailand Japan-Thailand Malaysia-Singapore LCC Airlines India-Singapore Other scheduled airlines Malaysia-Thailand Hong Kong-Singapore Hong Kong-Philippines Hong Kong-Australia Macao (Sar) China-Chinese Tapei Japan-Singapore China-Thailand Hong Kong-Korea Republic Of Korea-Thailand Thailand-Australia China-Malaysia Philippines-Republic Of Korea Chinese Taipei-Thailand India-Thailand Japan-Philippines Thailand-Vietnam Singapore-VietnamSource: Airbus, OAG, Scheduled seats (millions), September 2008LCC 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.
Traffic forecastTraffic from the ASEAN countries to other countries Intra-ASEAN countries:within the region has increased by 67%, fuelled by a LCC now represent moregreater liberalisation that has mainly been achieved than a quarter of the trafficthrough bilateral agreements. Today, 60% of that marketis on routes with ranges below 2,000nm (3,700km), 73% 27%where LCC airlines traditionally operate. However, anumber of LCCs are operating at ranges above thatand are mainly using larger aircraft, particularly wide- LCCsbody types. Other ScheduledToday, 20% of all international Asia-Pacific traffic is over service2,000nm (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 to % of seats offeredgrab a significant share of this traffic, while also develo- between ASEAN countriesping operations to further destinations, in particular to • Market share > 25% (2008)North East Asia, where LCCs are emerging, notably • Passenger growth > 25% (2008 vs 2007)from South Korea. For example, LCC traffic among Source: AirbusASEAN 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- people in the Asia-Pacific region an opportunity to reapkets of Japan and China become more accessible to the benefits of air transport through new routes andLCC operations, the growth rates would be much more affordable travel, as well as helping to drive worldhigher. The growth of these LCCs will continue to offer traffic growth to its projected highs.40% of the demand from ASEAN countrieswith in Asia is on distances over 2,000nm% of total cumulative demand from ASEAN countries to the region100% 90% LCCs 80% market share: 2% 70% 60% 50% 40% LCCs 30% market share: 11% 20% 10% 0% 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 Range (nm-Great circle) Global Market Forecast 47
Deregulation drives growth in inevitable growthChinese Cross Straits: as deregulationprogresses, more direct flights and a surgein air traffic demand are expectedJanuary 2009 : direct non stop scheduled flights to mainland China • One of the most regulated markets in the world with few PEK DLC scheduled direct flights. XIY TSN CTU CGO TAO • Strong visitor growth: 8.1% per year on average during NKG WUH PVG the last 10 years. CKG HGH CSX FOC HGH KMG XMN • Has the potential to become the number one network CAN within Asia. SZX KHH HAKSource: AirbusAs well as economic and LCC growth, continued dere- In January 2009, following additional deregulation,gulation, particularly in the developing markets in Asia, is over the Chinese New Year, 108 weekly scheduledexpected to drive future traffic growth. Recent examples flights were allowed to operate between mainland Chinainclude the expanded trans-Atlantic agreement between and Chinese Taipei. Thirteen carriers operated these fre-the US and Europe. However, developments on one quencies and new routes.important Asian flow, in particular, China to Taiwan, hasalso taken significant steps forward in recent months. In the medium term, providing the trend continues and there is full deregulation over time, the direct routesChinese Cross Straits traffic remains one of the most between Taiwan and mainland China could becomeregulated markets in the world, but is still one of the the number one intra-Asian network in terms oflargest intra-Asian traffic flows with almost five million air traffic.travellers using all modes of transport each year. Themarket has experienced solid growth during the pastdecade with an average annual growth rate of 8.1%.
Traffic forecastemerging markets :from Cross Straits travel Today, most air traffic between these points goes Arrivals in mainland China through Hong-Kong or Macau, where scheduled direct from Taiwan by mode air links are allowed from Taiwan. Passengers then of transportation connect by air or other modes of transport to reach their final destinations in mainland China. Others points of entry to mainland China also involve non-aerial trans- Air Other modes ports. Overall, 60% of the visitors still complete their 40% 60% journey to their final destinations by using non-air modes of transport. On direct Moslty flights and through continuation Hong-kong from & Macau Just five mainland Chinese destinations are responsible Hong-kong for half of the demand. These are cities mainly located in & Macau the 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 travelling to Taiwan, demand is expected to spread from many Source: Airbus, OAG, more cities in mainland China, thereby increasing the National Tourist Administration (September 2008) average trip length and therefore aircraft utilisation. Chinese cross straits forecast: the number one intra-Asian network Direct non-stop scheduled routes with regular flights to mainland China within the next decade PEK DLC • Air Traffic to almost triple within the next decade. XIY TSN YNT (Includes traffic to Hong-Kong and Macau). CGO CTU TNA TAO WUH NKG CKG HGH • > 8 million air travellers per year on the direct routes KWL FOC HGH to Mainland China only. CAN KMG NMG SZX KHH • More routes, average distance to increase. HAK • Single-aisle up to very large aircraft needed to operate the different markets. Source: Airbus Global Market Forecast 49
The magnitude of the effects of the deregulation and Many of the passengers expected to fly the new directwhen they will occur is uncertain, but recent events air links between Taiwan and mainland China will beshow developments happen sooner rather than later. diverted from the current Hong-Kong and Macau routesFrequencies will increase significantly in 2009, if we to Taiwan, as two thirds of the traffic on these routesassume frequencies trebling to around 350 a week with consists of passengers connecting to mainland China.the additional new routes, this implies that 75% of the Overall 20% of Hong-Kong regional traffic has thecurrent visitors will be able to fly to their desired destina- potential to be affected by the new direct air services.tions directly. There would also be enough flights to However, in the short term only 35% of this demand iscapture all the demand on the routes served in January expected to effectively translate into lost traffic, as2009 with a mix of single-aisle and wide-body aircraft. Hong-Kong Airport will remain an attractive gateway for nearby mainland destinations, in Guangdong pro-Assuming progressive, total deregulation and with a vince, and will continue to offer more destinations andconservative scenario, more than eight million air travel- flights to mainland Chinese cities. While the connectinglers will fly annually one way on the direct air routes traffic will continue to erode, direct traffic between Hong-between mainland China and Taiwan within the next Kong and Taipei will continue to increase at an averagedecade. That is similar to Japan-PRC. Total traffic rate estimated at 5.2% per year (2008-2020), morebetween Taiwan and China, including Hong-Kong and than offsetting the decline of the connecting traffic toMacau, could almost triple within the same timeframe. mainland China beyond the next 5 years. Therefore, byThis as deregulation, particularly for passengers from 2020, the HKG-TPE route will increasingly become amainland China, will boost demand and some existing route serving origin and destination demand betweendemand switching to air travel. As traffic levels grow, these points directly, with 72% of traffic being thoseaverage distance flown increases and top destinations people only wanting to travel between the citieswill continue to attract most of the demand, a large of Hong Kong and Taipei.number of aircraft, ranging from single-aisles to verylarge aircraft will be necessary to fly Cross Straits. 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 resulting unleashed demand.
Traffic forecastAir travel will double in the next 15 yearsAir travel remains a growth As a result of drivers such as these, worldwide Revenuemarket Passenger Kilometres (RPKs) will grow at an average of 4.7% per annum over the next 20 years. Among theWorld annual traffic - RPKs trillion largest submarkets, annual RPK growth on domestic Indian and PRC flows are expected to average 10% and ICAO Airbus total traffic GMF 2009 7.9% respectively. This reflects optimistic long-term pro-10 jections for economic growth in these countries, as well as a growing tendency for their populations to travel by air, reaping the benefits of vastly reduced journey times 8 for largely similar prices. Growth will also be driven by Air traffic increased wealth and improved access to air transport will double generally. Some other markets linked to the Indian 6 in the next Air traffic 15 years Subcontinent are expected to grow strongly, with an ave- has doubled every 15 years rage annual RPK growth of 5.8% for the Indian 4 Subcontinent-Western European market and 5.8% for + 10.5% per year the Middle East-Indian Subcontinent market for example. 2 For other, more mature markets, such as the domestic US and the intra/domestic European market, Airbus forecasts average annual RPK growth of 2% and 3.3% 0 respectively. Although these seem to be relatively small 1970 1980 1990 2000 2010 2020 2030 numbers, they are still significant due to the already highSource: ICAO, Airbus levels of traffic in these regions. The pace of growth on Indian and Chinese domestic flows is set to increase seven-fold and five-fold respectively over the next 20 years. However, by 2028 the total volume of traffic, including growth, will still be larger in the US and Western Europe. Global Market Forecast 51
History and forecast of world top ten traffic flow by RPK 1. Domestic US 1. Domestic US 1. Domestic US 2. Intra - Western Europe 2. Intra - Western Europe 2. Intra - Western Europe 3. US - Western Europe 3. US - Western Europe 3. US - Western Europe 4. Japan - US 4. Japan - US 4. Domestic PR China 5. Asia - Western Europe 5. Asia - Western Europe 5. Asia - Western Europe 6. Asia - US 6. Domestic PR China 6. South America - Western Europe 7. Domestic PR China 7. Domestic Western Europe 7. Japan - US 8. Domestic Japan 8. South America - Western Europe 8. Domestic Western Europe 9. Domestic Western Europe 9. Domestic Japan 9. PR China - Western Europe 10. South America - Western Europe 10. Asia - US 10. Central Europe - Western Europe 1998 2003 2008Largest 20 traffic flows in 2028 RPKs (Billions) 20-year % of 2028 0 200 400 600 800 1,000 1,200 1,400 1,600 growth World RPKs Domestic US 2008 traffic 2009-2028 growth 2.0% 12.2% Domestic PR China 7.9% 8.7% Intra West. Europe 3.3% 8.4% US - West. Europe 4.0% 6.8% PR China - West. Europe 7.0% 2.6%South America - West. Europe 5.7% 2.5% Asia - West. Europe 4.6% 2.5% Asia - PR China 7.1% 2.3%Central Europe - West. Europe 6.7% 2.3% Domestic India 10.0% 2.2% Japan - US 4.2% 1.8% Asia - US 5.6% 1.8% Middle East - West. Europe 5.5% 1.8% Intra-Asia 5.4% 1.5% PR China - US 6.8% 1.5% India Sub - West. Europe 5.8% 1.5% Domestic West. Europe 3.0% 1.3% Domestic Asia 4.6% 1.3% North Africa - West. Europe 4.4% 1.3% Canada - West. Europe 4.3% 1.3%Source: Airbus 20-year world annual traffic growth 4.7%
Traffic forecast 1. Domestic US 1. Domestic US 1. Domestic US 2. Intra - Western Europe 2. Intra - Western Europe 2. Domestic PR China 3. US - Western Europe 3. Domestic PR China 3. Intra - Western Europe 4. Domestic PR China 4. US - Western Europe 4. US - Western Europe 5. Asia - Western Europe 5. Asia - Western Europe 5. PR China - Western Europe 6. South America - Western Europe 6. South America - Western Europe 6. South America - Western Europe 7. Japan - US 7. PR China - Western Europe 7. Asia - Western Europe 8. Central Europe - Western Europe 8. Central Europe - Western Europe 8. Asia - PR China 9. PR China - Western Europe 9. Japan - US 9. Central Europe - Western Europe10. Asia - PR China 10. Asia - PR China 10. Domestic India 2013 2018 2028 India and China the fastest growing, but US remains the largest market Traffic volume in 2028 RPKs(billions) 1,600 Domestic US 1,400 1,200 Western Europe (Dom + Intra) 1,000 Western Europe - US Domestic PR China 800 Indian Subcontinent - PRC 600 Western Europe - Asia PRC - US Domestic India 400 Domestic Japan 200 x1 x2 x3 x4 x5 x7 Ratio to 2008 traffic Source: Airbus Global Market Forecast 53
In addition, the combined Middle Eastern traffic flows rage during this period, as air transportation and itsare expected to expand rapidly, with 6.9% annual benefits continue to be more evenly distributed aroundgrowth to 2028. Flows from and within the the world. As a result, traffic will be much more evenlyCommonwealth of Independent States (CIS) will gene- shared across the world, with Asian airlines forecast torate 5.9% average annual growth, while Africa and Latin triple operations to represent 33% of all traffic by 2028.America are expected to increase by 5.2% and 5.8%respectively. The fastest regional traffic growth will be in the Middle East, where the ambitions of countries and airlines willThe progress made by Chinese flows is equally clear. drive annual growth of 6.9%. Over the next 20 years thisThe country’s domestic flow moved up from seventh will result in the region increasing its world share to 8% ofplace in 1998 to fourth in 2008 and is expected to be the total.the third largest by the end of 2028, with flows linked toAsia in general representing five of the top ten largest Looking at traffic evolution from a different point of view,flows in terms of traffic. As a consequence, airlines this time segmenting airlines at a very broad level (or thebased in Asia are expected to develop their traffic more highest possible granularity), the network airlines arerapidly than those based in other regions, growing by expected to remain dominant with 75% of the totalan average of 6.0%. This is fuelled by the aspirations of worldwide traffic, whether they are global, major, suchairlines and in some cases the countries themselves, as a large national flag carrier with a large fleet, or small.as well as by access to burgeoning markets driven by The 42 global network airlines, which grow more slowly,liberalisation and a growing propensity to travel. will still represent 55% of total worldwide traffic in 2028.The airlines of Latin America, the CIS and Africa are also Todays LCCs are expected to grow 1.2% per annumexpected to register growth higher than the global ave- faster than the global network airlines (the 84 included in this GMF represent 98% of global LCC traffic).World traffic growth by regional flow - 2028 versus 2008 W. Europe - South America W. Europe - Middle EastRPKs (billions) Other flows W. Europe - C. Europe Domestic & Intra-W. Europe Domestic & Intra Asia W. Europe - Asia World 2028 3,009 11,602 W. Europe - PRC Domestic India 100% Asia - USA W. Europe - US Asia - PRC Domestic US Domestic PRC 141 138 193 171 202 195 222 50% 225 227 426 462 30% 536 World 2008 790 4,665 0%Source: Airbus
Traffic forecastPassenger traffic growth by airline domicile World 20-year 2009-2018 2019-2028 growth 4.6% 4.8% 4.7% Europe CIS 20-year 2009-2018 2019-2028 growth 20-year 2009-2018 2019-2028 growth 4.0% 4.7% 4.3% North America 6.2s% 5.6% 5.9% 20-year 2009-2018 2019-2028 growth Middle East 20-year 1.9% 2.9% 2.4% 2009-2018 2019-2028 growth 7.6% 6.3% 6.9% Africa Latin America Asia-Pacific 20-year 20-year 2009-2018 2019-2028 growth 20-year 2009-2018 2019-2028 growth 2009-2018 2019-2028 growth 5.4% 5.1% 5.2% 5.9% 5.6% 5.8% 6.6% 5.5% 6.0%Asia to lead in world traffic by 2028 Traffic by airline domicile RPKs (billions) 20-year % of 2028 0 500 1,000 1,500 2,000 2,500 3,000 3,500 growth World RPKs Asia 2008 traffic 2009-2029 growth 6.0% 33% Europe 4.3% 26%North America 2.4% 20% Middle East 6.9% 8% Latin America 5.8% 6% CIS 5.9% 4% Africa 5.2% 3%Airline segmentation - world traffic evolution 6% 5% 6% 4% 55% 13%57% Global Network 16% Major Network 4% Small network 4% LCC Charter Regional 14% & Affiliates 16% Traffic at end 2008 Traffic at end 2028 4.7 trillion RPKs 11.7 trillion RPKsSource: Airbus Global Market Forecast 55
Demandfor passenger aircraft
Demand for aircraft hen in very difficult periods for the industry, it isW sometimes easy to forget the importance ofaviation and the growth expected over the coming In terms of value, the single-aisles and twin-aisles will represent 44% and 31% of the total demand respecti- vely. Some 1,318 very large passenger aircraft (VLA), likeyears. Over the next 20 years, the world’s airlines will the A380, will be required, accounting for 5% in termsrequire 24,097 new passenger aircraft with more than of units and worth an important share of total business100 seats, worth US$2.9 trillion, to meet the demand for at 15% of total value. Each of these seat segmentsair travel. In terms of units, single-aisle aircraft, such as is driven by market conditions, the opportunities andthe A320 will account for more than two thirds of this constraints prevailing on each traffic or regional seg-demand and twin-aisles, such as the A350 XWB, will ment, as well as airline strategies and manufactureraccount for 24%. product offerings.New passenger aircraft demand willaverage 1,205 per year Number of new aircraft 18,000 16,000 14,000 12,000 10,000 8,000 16,977 6,000 4,000 2,000 4,097 1,705 1,318 0 Single-aisle Small Intermediate Very large twin-aisle twin-aisle aircraft Passenger aircraft > 100 seats (excluding freighters) % unit: 71% 17% 7% 5% % value: 44% 27% 14% 15%
Demand for passenger aircraft20 year demand for 24,097 passengeraircraft worth US$ 2.9 trillionFleet size30,000 28,11125,000 + 3.5 % per annum Growth 14,09520,000 24,097 new aircraft15,000 14,016 US$ 2.9 trillion10,000 Replaced 10,002 5,000 Recycled 3,134 0 Stay in service 880 Beginning 2009 2028Passenger aircraft > 100 seats (excluding freighters)Aircraft replacement 2009-2028 Replacement (Passenger and combi aircraft released by an airline) 13,136 Recycled (resuming Replaced passenger service (leaving with passenger or another airline) combi services) 3,134 10,002 Converted Retired (into freighter) (withdrawn 2,585 from use) 7,417 Global Market Forecast 59
As the different world regions are stimulated by different in Asia, will require nearly 400 widebody aircraft over theeconomic timing, demographic, geographic, regulatory next 20 years. Regional airlines will also require aboutand air transportation structural forces, demand within 700 single-aisle aircraft with more than 100 seats. Ineach region will also differ. addition to the greater demand for aircraft with more than 100 seats, there will be a need for 6,078 regionalAlthough air travel growth in the larger, more mature aircraft with more than 30 seats (either jets or turbo-domestic markets of North America and Europe will props which have seen a resurgence of interest followingslow over the forecast period, demand for aircraft will the high fuel prices in 2008). Some 60% of these aircraftcontinue to be strong, due in part to replacement acti- will be delivered to regional airlines, however, the globalvity. In these regions, efficient wide-body aircraft will and major network airlines, especially in Europe and Asiaform a larger share of the total requirement, as interna- will need 1,823 of them. Scope clause evolution in thetional long-haul demand will be fuelled by the need to US, fuel prices and the declining competitiveness overincrease travel, to and from the emerging and dynamic time of the current crop of smaller regional jets, willmarkets of Asia. greatly influence the requirement for large regional and smaller single-aisle aircraft in both regional and networkIn the Americas, single-aisles will represent 84% of their airlines fleet. The Asia-Pacific region, with its growingtotal demand for aircraft with more than 100 seats, while emerging markets, is expected to take the largest shareEuropean and African demand will be more evenly of deliveries. Although Asia’s fleet is currently aroundspread across market segments. The Middle East, and 20% of the world fleet, Airbus expects demand forAsia in particular, will represent a larger share of demand 7,672 new aircraft in Asia-Pacific, continuing to repre-for twin-aisles and VLAs. This is due to the fast growing sent up to 31% of the total world demand over the nextmega-cities on both side of Asia’s international flows, 20 years for aircraft over a hundred seats. The moredemographics, the need to use such aircraft on trunk mature, yet still significant, markets of North Americadomestic and intra-regional routes, geographical consi- and Europe are expected to take 25% and 23% of totalderations, the effectiveness of these aircraft in alleviating deliveries respectively. The rest of the world will take thecongestion and the desire to reduce costs. remaining 21%, including 7% for Latin America, a slight increase on the GMF view expressed last year.However, it is interesting to note that Asia will also takean equal share of the single-aisle market with North Airlines will acquire aircraft not only to accommodateAmerica and Europe, with 27% of single-aisle deliveries, growth, but also to replace older equipment with moreas deregulation and increased inter-regional flying eco-efficient, more comfortable and lower cost models.develop further across Asian markets. Increased productivity and larger aircraft, will see the traffic demand grow by 4.7% per year and the aircraftBy segmenting airlines using a set of pre-defined fleet by 3.5% per year to satisfy demand for air travel.characteristics 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, particularly
Demand for passenger aircraftA 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 yearsAverage aircraft capacity (number of seats) per flight163162161160159158157156 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Source: Airbus, OAG, January 2009 Aircraft >90 seats only Global Market Forecast 61
The move to larger aircraft has been a global trend and That trend is sure to continue; not only because ofmost regions have shown double-digit growth since the increasing numbers of very large and efficientthe 1970s, even with the introduction of the numerous A380s already operating around the world, but also withsingle-aisle types from the eighties and efficient twin and upcoming aircraft like the 787 and the A350XWB (extraquad engine types through the nineties. However, some wide body), which will replace smaller aircraft like theregions have demonstrated a need for even greater A300/A310, 777 and 767, and eventually with the nextincreases in size because of particular characteristics generation of single-aisles, which will bring a stepsuch as location, cities, demographics and airlines. For change in economic and environmental performance.example, 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 yearsAverage aicraft capacity (number of seats) per flight200 190 +41% Middle East +34% Asia-Pacific 180 170 +31% Africa 160 +28% Europe & CIS 150 +21% North America 140 +16% Latin America 130 120 110 1972 2008 Aircraft >90 seats onlySource: Airbus, OAG, January 2009
Demand for passenger aircraftRegional aircraft getting biggerThere is also a clear trend towards larger aircraft on This growing demand is illustrated by the developmentregional operations, including jet and turbo-prop, with of several 70 and 90 seat regional jet programmes,the average aircraft size increasing from 27 to 50 seats some of which are being produced by new entrantssince the early 1980s. to the international regional market. As they come into service, these will further boost the numbers of largerJust 15 years ago, one could watch banks of small regional aircraft and continue the upward trend.30 or 40 seat turbo-props buzzing in and out of the main By contrast there has been a steady decline in 50 seatUS hub airports. Today, most have been replaced with aircraft in recent years. This is partly because ofregional jets, with an increasing proportion of fleets increases in fuel prices and, therefore, operating costs,made up of new, larger variants as more of these aircraft but also because as regional routes continue to matureare delivered. organically, they need more capacity rather than more frequency to meet growth needs. Global Market Forecast 63
Regional aircraft getting biggerAverage aicraft capacity (number of seats) per flight5550454035302520 1983 1988 1993 1998 2003 2008Source: OAG, January 2009Less 50 seater aircraft in serviceShare of aircraft in service per category100% 6% 6% 7% 16% 80% 60% 40% 87% 78% 20% 0% 1985 2008 Western Passengers only 50 70 85Source: Airbus, Ascend, January 2009
Demand for passenger aircraftBigger single-aisle aircraft Single-aisles getting bigger Share of aircraft in service per category 100% 2% 90% 13% 80% 48% 70% 46% 60% 50% 5% 40% 30% 29% 45% 20% 10% 12% 0% 1985 2008 Western Passengers only 100 125 150 175 210 Source: Airbus, Ascend, January 2009Several factors have pushed up the average aircraft size deliveries to Asia to support the growth of domestic andof single-aisle aircraft. Firstly, organic growth on core regional operations, particularly in light of demand fromdomestic and inter-regional routes is a key driver. emerging markets. Historically, the number of largerSecondly, LCCs are already operating an increasing single-aisles with 150 seats or more delivered to Asianumber of aircraft with relatively high-density configura- has not been significantly different from deliveries oftions. However, to support future growth not only will smaller aircraft. However, in the last four years, therethey gradually adopt new routes, but they will also have been more than four times as many of the largerincreasingly consider the use of larger single-aisles. And aircraft entering Asian fleets, which has boosted thethirdly, there has been a surge in the number single-aisle average for single-aisle seating. Global Market Forecast 65
Larger single-aisles needed over timeAverage aicraft capacity (number of seats) per flight150145140135130125120115110105100 1973 1978 1983 1988 1993 1998 2003 2008Source: Airbus, OAG, January 2009Airbus 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 increasedDeliveries per year250200150100 50 0 1992 1994 1996 1998 2000 2002 2004 2006 2008 50-125 150-210Source: Airbus, Ascend, February 2009
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 biggerAverage aicraft capacity (number of seats) per flight300295290285280275270 2001 2002 2003 2004 2005 2006 2007 2008Source: Airbus, OAG, January 2009 Global Market Forecast 67
As mentioned, the desire to reduce costs is already a up making these tactics very costly. A more reliablekey factor and will increasingly drive demand for larger option is to use larger aircraft, with a similar technologyaircraft in the future. Taking the middle market as an standard, as a sort of operational hedge. Not onlyexample, it is simple to demonstrate the benefits; parti- is the cost per seat benefit guaranteed simply becausecularly in a market where recent experience has shown of the extra seats, but that benefit actually grows ashow volatile fuel prices can be. the price of fuel increases. Clearly, load factors need to be sufficient for this trade between aircraft size andTypically airlines have used financial hedges to help frequency; however, this simple reality is likely to furtherremove some of the uncertainty, but as recent expe- encourage growth in average seating.rience has shown, price fluctuations and timing can endLarger aircraft have lower fuel costper seat; an advantage with higher oil pricesCost per seat advantage between same generation 260-seater and 230-seater3533 3129272523 21 19 17 15 2 2.5 3 3.5 4 4.5 5 Fuel price ($ per US Gallon)
Demand for passenger aircraftIf further evidence was needed,very large aircraft have arrived!With 16 A380’s already operating – a number which is As well as providing complete cabin flexibility, the aircraftset to increase still further by the end of this year - ever has demonstrated incredible operational flexibility - meetingincreasing numbers of very large aircraft will make their airline requirements for capacity and low operating costs,presence felt on the market. The combination of size while providing unrivalled environmental pedigree for everyand new technology give operators enormous flexibility type of operator be they mainline network, low-cost,in terms of how they use the space on board. domestic, medium or long-haul carrier.Airlines are already demonstrating this flexibility. Some By 2009, A380s were already operating out of many ofhave opted for unprecedented comfort and service the world most important airports and as deliveriesacross first, business and economy classes. Others increase so too will the destinations, making the world’sprefer to take advantage of unbeatable seat mile costs biggest aircraft, a familiar sight at all of the biggestand profitability by opting to carry over 800 passengers airports.a single class configuration, but with 21st centurypassenger amenities and comfort.The VLA network is growing fast LondonToronto Paris Seoul Los Angeles Tokyo New York Dubai Bangkok Singapore Sydney Melbourne Auckland 16 A380s in service > 4,000 revenue flights Over 1,500,000 passengers *Data at July 2009 Global Market Forecast 69
Big hubs more resilient to crisis32 of the world’s biggest hubs are moreresilient to crisisMonthly ASK (Billions)155150 -3.8%145140135130125120 -1.9%115110 2007 2008 Between big hubs Rest of the worldSource: OAG, AirbusIt 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.
Demand for passenger aircraftDemand for air travel will worsencongestionEvery year, an ever-growing population needs and to draw more and more people, with their greaterwants to fly; put simply, air travel and access to its prospects for wealth and security. It is unsurprising,significant benefits, is now possible for more of the therefore, that at as these large centres of populationworld’s population than at any point in history. grow and people become more economically mobile, the need for travel between them increases as theirThis demand has caused air traffic to increase 10-fold inhabitants do business, take holidays or visit friendsin the last 30 years - a rate of growth so rapid, that at and relatives. All putting pressure, on what is in sometimes the industry’s infrastructure and in particular air- cases, already limited airport capacity.port capacity, has not been able to keep pace. Despitethe current industry woes, traffic is expected to double Capacity-constrained airports are more likely to faceagain in the next 15 years, so sufficient airport capacity delays and service breakdown than other airports,is likely to remain an issue for politicians, airlines and as their facilities remain under constant pressure.passengers. More passengers without adequate capacity invariably imply more people in waiting lines to check-in, forOne factor helping to fuel these congestion concerns security screening and to collect bags. Likewise, moreis the growth in the world’s major cities, which gene- aircraft have to share the same air space, gates,rates most of the increase in air transport. As the world runway capacity and even parking, creating increasedbecomes inexorably urbanised, mega cities continue congestion. Global Market Forecast 71
Congestion: costly for passengers,airlines, airports, economiesand the environmentCongestion occurs when the available infrastructure is That wasted fuel was worth US$1.6 billion in 2007 andclose to its designed capacity. The congestion may be considerably more in 2008, given the very high fuelthe result of a capacity problem at an individual airport, prices up to October and is equivalent to 7.1 millionbut the resulting delays can have knock-on effects tonnes of pointless CO2.across an entire network. For example, New YorkMetropolitan airports represent approximately 7% of US The Air Transport Association in the US estimated thedelays: the greatest delays in the country. Unfortunately, cost of delays to US airlines over a rolling year, tothese airports are also one of the country’s most impor- September 2008. The fuel portion of these delay relatedtant gateways, connecting numerous international and costs increased a staggering 41% compared to thedomestic flights, which means that any congestion has year before.a massive knock-on effect, with three quarters of thecountry’s flight delays cascading from them. More widely, delays cost passengers up to US$12 billion on US domestic flights alone, mostly as opportunityIn addition to being simply time-consuming, coping with costs such as lost productivity and missed opportunitiesdelays is costly for passengers, air carriers, the eco- for business travellers, lost leisure activities and missednomy and the environment. In 2007, taking the US as an holiday time for tourist travellers, and missed connec-example as the data is more easily available, airlines tions and disrupted ground travel plans for passengerseffectively wasted up to 740 million gallons of fuel in general. Consequently, these costs cascade throughin delays, equivalent to 32,000 Paris-New York trips, the rest of the economy. The US Travel Industryor three years of air traffic between these two cities. Association estimated the loss to US tourism in 2007 at more than US$9 billion.
Demand for passenger aircraftCapacity vs. traffic balance is tough for some airportsPassengers (millions) 0 20 40 60 80 100 120 140 London Heathrow Los Angeles Paris Charles-de-Gaulle Frankfurt Beijing Madrid 2007 passengers Amsterdam Projected 2015 passengers Hong Kong Current capacity Toronto Projected 2015 capacity Dubai Shangai Pudong Mumbai Shangai Hongqiao Johannesburg Most of these airports current expansion plans are already below 2015 forecasted traffic.Source: ACI, AirbusExpansion is a major need for most airports% of used design capacity (2007)200% High growth and no capacity – congestion path180% London LHR Dubai160% Mumbai140% Frankfurt Sydney Beijing Seoul ICN120% Toronto Hong Kong100% Airport design Johannesburg capacity limit 80% Singapore 60% Amsterdam Los Angeles 40% Sao Paulo GRU 20% Spare capacity and growth potential – the perfect path 0%Bubble size proportional to airport size(in passengers per year)Source: Airbus Global Market Forecast 73
Although the current downturn has slowed demand at However, congestion doesn’t always mean that anmany major airports worldwide, with some even trying airport has reached full capacity. Airport activityto combat this by adjusting their pricing, as traffic reco- fluctuates throughout the day, with most airport facilitiesvers, congestion issues will once again become evi- heavily used only during peak hours and under utiliseddent. Airlines will need to find alternative solutions to for the rest of the day. Traffic is concentrated on strate-satisfy their short-term capacity needs, as many air- gic hours of the day, such as mornings and evenings,ports will find themselves approaching the limitations of when most people start and end their working day. Thetheir capacity and having to deal with sudden market problem is that these periods are concentrated in a fewchanges, such as with the extra traffic created by rapid short time ranges. For example, New York JFK airportliberalisation in the Indian market. handles half of its daily departing traffic (about 580 per day) within just six of the 21 hours it operates each day.Extra terminals and runways can all facilitate growth, With higher volumes and reduced margins at peakbut these are neither quick nor simple solutions due times during the day, this type scheduling can leadto space constraints, financing, environmental and to the problems associated with congestion.political concerns, particularly in Europe and the US,where there can often be opposition from residential Moreover, airports are not the only facilities that needcommunities situated close to airports. to be upgraded to cope with more traffic. In some congested regions, such as US East Coast or EuropeanFor example, spare runway capacity is scarce in the areas like Greater London, air traffic management some-Greater London area, especially at Heathrow. Its times have difficulties managing the increasing flows ofrunways have already been close to capacity for many aircraft. For example, the US National Aviation System isyears: 25% of London’s flights were delayed in 2005 reported to have caused over half of 2007 departureand 30% in 2007. With the possibility of a much-nee- delays at New York Kennedy airport.ded third runway under considerable pressure, bothfrom environmental groups and on the political front, Fortunately, there are plans to modernise both Europeanthe problems in growing key global hub airports are evi- and American air traffic control systems. Europeandent. Competition from hub airports in other countries SESAR and US NexGen programmes aim to introducewith spare capacity can alleviate some demand cutting-edge satellite-based navigation technologies,constraints. However, this does not support develop- offering more precise flight tracking, enabling more air-ment and competitiveness at airports where expansion craft flying in the same airspace and optimised flightis hindered by, for example, noise or land use concerns. paths. With air traffic controllers able to manage moreIn these areas expansion projects will become increa- aircraft at the same time, even in bad weather, thesesingly difficult to achieve. So traffic will grow, but capa- new generation air traffic control systems will offer quic-city and facilities will not keep pace, which will increase ker flights, less fuel burn and emissions, shorter routesdelays even further: and less congestion.Similarly in Asia, airports at Hong-Kong and Beijing are This technology will complement growth in airport infra-improving facilities to accommodate traffic that is set to structure to increase the system’s overall capacity.grow at an impressive seven to eight percent per year. However, they won’t replace 50-year old ground radarHowever, the new facilities are already expected to technologies on the busiest route, so it is unlikely trafficbe operating at or beyond capacity when they open, demand requirements will be met before 2012.effectively postponing, rather, than solving the area’scongestion issues. JFK: Half Departures/day in just 6 hours
Demand for passenger aircraftUS National Aviation System responsible for overa half of New York JFK airport delays in 2007 Delays by cause 16.8% 24.3% 3.7% Air carrier delay Weather delay National Aviation System delay 0.2% Security delay Aircraft arriving late 55%Source: US Department of Transportation, AirbusEuropean traffic control capacity maynot catch up with traffic demand until 2012Flights per day40,000 ATC Capacity Traffic Forecast capacity Forecaste traffic35,00030,00025,00020,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Source: Eurocontrol, Airbus Global Market Forecast 75
Larger aircraft = Larger Traditionally, traffic growth has been accommodated across the network by a combination of new route, greater frequencies and improved aircraft productivity, including aircraft size growth. That ‘mix’ is dictated by a number of factors, competition, availability and capa- bility of aircraft, the required level of service, deregulation and, crucially, airport capacity. Should airport capacity be insufficient and development opportunities limited, then it is really only through an incremental increase in aircraft size that demand can be met - or lost to a competing airline or airport. Just prior to the current downturn, 114 airports had been identified as ‘capacity constrained’; these airports are congested and no capacity expansion is achievable in the near future. Significantly 72% of world traffic passes through these airports.114 capacity constrained airports* Constrained airports represent 72% of worldwide trafficSource : IATA, OAG, Airbus * level 3 airports with over 30 daily scheduled movements in Sept. 2007
Demand for passenger aircraftairport capacity In the past few years, smaller regional aircraft replaced However, actions such as these will not be sufficient to a number of larger aircraft in many US major airports, solve congestion. Demand elasticity for travelling at peak despite the seat mile cost benefits of larger aircraft, times is very low, which means that most passengers which has also served to increased congestion. Even will want to fly at these particular peak times, even with though traffic congestion at New York JFK airport, 35 higher fares. Larger aircraft make it possible to carry percent of aircraft departing during 4pm-8pm peak more passengers per slot, therefore, relieving pressure times are regional aircraft with less than 100 seats. on infrastructure on peak times for an increased number of passengers. The use of larger aircraft would allow more passengers, limit the number of movements and potentially reduce Today, the spectre of soaring fuel costs is less of a the CO2 emissions per passenger. It could also poten- concern, but as the world economy recovers so too will tially postpone the need for additional runways at air- the price of commodities like oil, which will widen the gap ports and air traffic control centres. For some airports, between smaller and larger aircraft costs per passenger. congestion has become such a major issue that tough Therefore, using smaller aircraft to provide increased political decisions have had to be made to help combat service, through high frequency on busy routes, may no congestion. New York Kennedy Airport’s movements longer be sustainable for many air carriers. Indeed the were capped to 82 movements per hour at peak times movement from today’s 50-seat aircraft to larger to make airlines shift their flights to times of the day types and at least one regional jet Original Equipment where there was unused capacity. Manufacturer to consider entering the large aircraft market, is an indication of some of the existing and future pressure to move aircraft size higher. Global Market Forecast 77
Bigger is cheaper?Airports previously based the landing fees charged In fact the trend to larger aircraft has already started. Theto airlines on the weight of the aircraft. Now, the US lack of capacity at some of the worlds largest airports isDepartment of Transportation has allowed American helping to drive aircraft size upwards, with an increasedairports to calculate charges based on arrival time, average aircraft size at three quarters of the worlds topwhich means peak-hour slots will become more expen- ten airports in the last few years. The pressures and costsive. So, as well as being more efficient to use larger accrued as a result of congestion are likely to mean thataircraft per slot, it will also be more profitable for airlines the others will have to follow that example.seeking 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.3/4 of the worlds ten biggest airports have used biggeraircraft for international flights since 2003 Top ten airports by number of seats (2007) Airports Average seats per aircraft* Growth 2003 2007 1. 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%* On international flights onlySource: OAG, Airbus
Demand for passenger aircraftGood for businessGood for the environmentGood for travellersThe task facing aircraft manufacturers is clear but chal- So, it’s clear that what’s good for business is also goodlenging: lower costs for operators, less impact on the for the environment and good for travellers. But maintai-environment and practical, affordable connectivity for ning or, even better, increasing the pace of improvementtravellers and freight companies. This is particularly requires massive investment and co-operation, not justimportant, as many forecasts, including the Airbus GMF, across the aviation industry but also across the widercontinue to predict the sound growth of air travel over transport and energy sectors, to ensure that we makethe coming decades. While the 20-year timeframe of the the best use of each new technology or alternative fuelforecast is long, the corresponding years, as well as pro- as they become available.viding challenges, will provide further opportunities tofind solutions to some of the key issues we face today. Airbus has over 400 R&T initiatives in progress and 80% of the company’s R&T, worth up to €500 million per year,Airlines recently faced fuel bills that represented up to offers environmental benefits for current and future40% of their operating costs and continue to face oil aircraft. All such projects are in line with the Vision 2020price fluctuations that can impact profitability and pri- research targets of the Advisory Council for Aeronauticscing, as well as noise restrictions that limit the services Research in Europe (ACARE), which aim for 50% lessthey can offer from some of the world’s busiest airports. CO2, 80% less NOx and 50% less noise than compara-In the last 40 years the aviation industry has created air- ble aircraft designed in 2000.craft that are 70% more fuel-efficient and 75% quieter,which means that they also produce 70% less C02 Airbus innovation at workemissions and are less restricted by airport curfews. • 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
Innovation is keyEvolution or revolution? • airline economics • environmental performanceUntil now, progress in aircraft performance has been a • simplicity for operations, maintenance and passengermatter of evolution rather than revolution. For example, scenarios.the entry into service of the A310 back in 1983 markedthe introduction of composites on secondary structures, Technical and engineering teams at Airbus are identi-before applying them to primary structures two years fying and fostering the most promising technologieslater and then gradually increasing their use up to 25% (to develop a range of scenarios), which can be evalua-on the A380 and to over 50% on the A350XWB. ted to ensure we move forward with a game-changer that meets market expectations. However, while indivi-But that may be about to change. dual technologies can offer a significant step change in a specific aspect of aircraft performance, the real break-A new aircraft programme is launched when sufficient through will come from evaluating them as an integra-benefits are available to airlines, through the advance- ted solution. For example, a new piece of technologyment of the broad range of mature technologies neces- may offer a dramatic reduction in fuel burn, but couldsary to create a step change in performance and effi- have a negative impact on weight, drag or noise; aciency compared to anything already available on the game changing aircraft design comes from achievingmarket and when there is both sufficient market demand the optimum combination of all these elements.to build a sound business case. Airbus continues toresearch and identify technologies that may enable a The following are examples of scenarii that havestep-change to become a reality and has launched simply been designed to illustrate that while improvingcorresponding research for an aircraft to enter service on all criteria, there comes a point when there mustaround the end of the next decade. The market expects be a decision on priorities. They have been drawnmore than an evolution, it demands a revolution in: qualitatively. > 1969 > 1978 > 1981 The A300, the world’s first The A310, seating A300 performs first flight twin-engine widebody 218 passengers, is launched with a two-man crew jet is launched offering a smaller long range FFCC (forward facing at the Paris Airshow. alternative. crew cockpit).
Demand for passenger aircraft Example 1: This concept concentrates on fuel burn and passenger experience Cost of Operation Simple to Manufacture Airline Productivity Passenger Noise experience Fuel burn Simple Operations & Emissions Recycling Example 2: This concept emphasises noise and simple operations Cost of Operation Simple to Manufacture Airline Productivity Passenger Noise experience Fuel burn Simple Operations & Emissions Recycling> 1987 > 2000 > 2006A320 becomes The A380 was launched, The A350 is launchedthe first passenger aircraft the world’s first double incorporating groundto fly with full digital deck passenger aircraft breaking metallic andcomputer-driven fly-by- ever built. composite structure, cabinwire controls and side and cockpit. The next stepstick controller. into the future. Global Market Forecast 81
As time progresses, new technology becomes matureand can be used to expand aircraft capabilitiesin the desired direction Cost of OperationSimple to Manufacture Airline Productivity Passenger Noise experience Fuel burn Simple Operations & Emissions RecyclingDeveloping alternative energy sources Alternative fuels – Growing Innovationfor aviation – Fuelling Innovation The development of such ‘drop-in’ alternative fuelsWhile fuel burn is a key factor in developing scenarii for remains a fledgling industry, with, as yet, little standardi-futur aircraft, it is just as big an issue for aircraft opera- sation, which means that they will not be produced inting today. The need to find alternative sources of fuel significant quantities within the next 10 years or so. Evenwas dramatically reinforced by the spiralling cost of fuel then, they are unlikely to become available in quantitiesin 2008, which more than doubled due to increased to meet the needs of all the forms of transport and all thedemand, particularly from the emerging markets. industries seeking to use them, which will lead to consi- derable competition.Not only did this highlight that environmental ambitionand commercial reality are inextricably linked in the avia- To help lead the industry, Airbus has defined a globaltion industry, but it also made the search for sustainable, roadmap on alternative fuels, integrating research, part-energy sources compatible with existing technology and nerships, test flights and co-operation with fuel standardinfrastructure an industry priority. certification authorities. Airbus remains open minded The future...?
Demand for passenger aircraftabout all possible alternatives, but when it comes to bio- in a “cold” combustion. Fuel cells could eventuallyfuels, the focus is on second-generation and beyond, replace aircraft functions that currently require thesuch as algae and micro-organisms, which includes Auxiliary Power Unit (APU), such as main engine startbacteria, yeast and micro-algae. However, in all cases and air conditioning, paving the way towards emissions-such research will stay clear of anything that could com- free ground operations. What’s more, the only by-pete with food resources, fresh water supplies or land product from fuel cells is water, which could be used foruse (See algae example). the aircraft’s water and waste system, saving weight and, therefore, reducing fuel consumption.Assuming that sufficient quantities are made availablefor aviation, Airbus believes that biofuels could provide In February 2008, Airbus, with the German aerospaceup to 30% of all commercial jet fuel by 2030. In support centre (DLR) and Michelin, successfully performed theof this, it has teamed up with Honeywell Aerospace, first test flight on a civil aircraft (an A320) where a fuelUOP (a Honeywell Company), International Aero engines cell system provided the power for the aircraft’s electri-(IAE) and JetBlue Airways to pursue development of a cal and hydraulic back-up systems. During the test,sustainable second-generation biofuel for use in com- the fuel cell system produced up to 20 kilowatts ofmercial aircraft. electrical power. It powered the electric motor pump for the aircraft’s back-up hydraulic circuit and controlledExploring the potential for Fuel cells the spoilers, ailerons and elevator actuator. Fuel cellEmpowering Innovation systems for commercial aviation are still in their infancy and it is unlikely that they would be used for commer-As well as looking at fuel burn to power flight, Airbus is cial aircraft propulsion, which requires a thousand timeslooking at all aspects of energy consumption on aircraft, the electric energy that was produced on the test flight.including for ground and auxiliary operations. To use fuel cells more extensively on-board commercial aircraft, further improvements need to be made in termsFuel cells transform the energy contained in hydrogen of the amount of energy they produce versus theirinto electricity by combining the hydrogen with oxygen weight (ratio kilo watt per kilogramme). Global Market Forecast 83
Converting pints to gallons Fuel from micro-organisms, Just 80 years ago, most people would not have even considered the idea that flight would eventually become a 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-efficient solution to the long-term availability and affordability of fuel, mean that it is fast becoming a very real and viable option. In this context, Airbus has been actively suppor- ting the development and possible application of gene- ric alternative fuels (including bio-jet fuel) and their approval for commercial aviation via agreed industry protocols. However, Airbus believes that the innovation rich route to bio fuels should not only reduce the carbon footprint of aviation, but also meet agreed sustainability criteria, such as avoiding a “food versus fuel dilemma”. Second-generation bio-fuels typically refer to fuels not adversely impacting the food chain, fresh water supply or deforestation. There are a number of terrestrial plants that could potentially be candidates to meet these criteria. Algae, particularly micro-algae, are probably one of the more promising options and have been a main focus for those studying the potential opportunities for sustainable bio-fuels.
Demand for passenger aircraftthe future? Mainly because they have no roots or stems, micro- week of July 2009). Algae culture costs are likely to algae show significantly higher growth rates, which represent the biggest part of the bio-jet fuel user price. could result in higher volumes of bio-jet fuels, after the appropriate refining process (e.g. Fischer-Tropsch, As time passes and work in this area progresses, it is hydrotreatment). Generally speaking, algae have the sure that the price will tumble thanks to full industrialisa- potential to produce more than 5,000 litres per hectare tion of the production process. This will allow the start of fatty acids in a year, several times more than their ter- of large-scale commercial production within the 20-year restrial counterparts at the origin of first generation bio- timeframe encompassed by the GMF. fuels, such as rape seed or palm. And this is not the end of the story. Among the other Another advantage is that there are over 200,000 spe- microorganisms being considered for their potential cies of algae, which represents a huge field of investiga- benefits are yeasts, which offer two main advantages. tion to identify the strains with the best potential to Firstly they are known to provide a very high accumula- manufacture bio-jet fuels. Selection of the most suitable tion yield (up to 70% weight) and secondly, industrial strains will ultimately be based on the specific conditions processes (fermentation plants) already exist for food that will be encountered during the industrial production applications. Airbus has been partnering with academic process and a compromise between growth speed, and industrial bodies to investigate yeasts since 2005, lipid content, photosynthetic efficiency and resistance obtaining promising results by working with CNRS- to contamination or diseases. INRA(1) and by participating in the French CALIN(2) and the pan-European ALFA-BIRD(3) and SWAFEA(4) projects. However, even though the basic principles for producing algae are understood, there are still many technical So why has this subject inspired the cover of this year issues that need to be resolved before the production of GMF? It is expected that by 2030 some 30% of aviation (micro) algae can be scaled up to make it a commercially fuels will come from these and other alternative sustai- viable alternative fuel for civil aviation. For example, one nable sources. However, this assumes that aviation will area requiring further investigation is the means of be given fair access to sufficient supplies. This is harvesting the cells, which can vary in size from a few crucial because unlike other forms of transport and nanometres to a few microns. industries that may find other ways to reduce their carbon footprint, aviation will have to rely on fuels as Today, with production at pre-industrial scale, the price its main energy for a long time to come – low carbon of a gallon of algae derived fuel is not on the same scale lifecycle fuels are therefore an even more essential part as a gallon of kerosene (around US$1.85 in the last of aviation roadmap to drastically reducing its carbon emissions, helping to ensure that the benefits of avia- tion can be increasingly enjoyed into the future, whilst at the same time minimising its environmental impact. (1)CNRS-INRA: Centre National de la Research Scientific L’Institut National de la 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 Global Market Forecast 85
Storage and aircraft retirements balance uring down cycles, it is usual for airlines to withdrawD passenger aircraft and place them into some form ofstorage, in order to help adjust their fleet capacity require- In 2001, the steep rise in aircraft storage was striking for the influx of old generation aircraft that ultimately would not be returned to service. In fact, 64% ofments; this to maintain load factors and ultimately yields. the aircraft in storage at that time could be classifiedThis cycle was slightly unusual early in its development, as as old. Today, the situation is slightly different, whilecapacity reductions were driven, particularly in the US, by the proportion of new types in storage is roughlythe need to reduce costs as a result of the high fuel prices the same, the proportion of mid generation typeswitnessed in 2008. At the end of the first quarter 2009, has risen dramatically, with more than 860 in storagethe proportion of the fleet in storage, 12%, was still less at the end of the first quarter 2009. This possiblythan that in 2001, the last major cycle, which reached as a precursor to the ultimate retirement of those15% of the fleet. less efficient models.Storage increases as cycle develops, not to 2001 levelsNumber of aircraft stored Share (%)2,000 20 % Old Mid New Share fleet in service 1,750 1,500 15 % 1,250 1,000 10 % 750 500 5% 250 0 0% 2000 2002 2003 2004 2005 2006 2007 Q1 Q2 Q3 Q4 J F M A M J 2001 2008 2009 * Western-built passenger aircraft >100seatsSource: Airbus
Demand for passenger aircraftand shape demand Another way of looking at the likely return from storage of particular aircraft is simply their age. Examining the profile of aircraft returning from storage, it can be seen that over time the older the aircraft the less likely that it will return to service. For example, between 1990 and 2000 more than 85% of the aircraft returned to service from 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 old currently in storage. Little chance of return for stored aircraft more than 25 years old Cumulated % of de-storage events 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 0 5 10 15 20 25 30 35 40 Source: Airbus, Ascend December 2008 Western jets Pax only 1970-1980 1980-1990 1990-2000 2000-2008 Global Market Forecast 87
Replacements are a key part of any forecast, as the As mentioned, the relative operating cost of new versustime at which aircraft leave passenger service to retire older aircraft types can be a stimulus to take the deci-or be converted for other uses has an impact on both sion to replace or retire a particular aircraft type from athe level of demand and timing of new aircraft delive- fleet. This became particularly apparent with the highries. When aircraft enter this phase of their lifecycle is fuel prices witnessed in 2007 and 2008. With fuel pricesdependant on many factors: airline finances, financing at around US$2 per gallon airlines can save aroundavailability, new aircraft availability both in terms of US$700,000 per aircraft per year by operating a newdelivery positions and capability e.g. operating costs, generation types, like the 737NG and A320, versus aand not least business cycles, due to their fluctuations typical mid-generation single-aisle aircraft; at US$4 mil-in passenger demand. However, making an extremely lion this increases to US$1.4 million. For larger long-precise evaluation of what, when and how many, is range types, the delta is even more significant. At US$2made more difficult by the fact that this is essentially an per gallon the comparison shows a US$2.3 millionairline management decision. benefit from new generation aircraft like the A330, at US$4 million per gallon this rises to US$4.5 million perAt a top level, it can be expected that aircraft retire- aircraft per year. As fuel prices are expected to recoverments, as opposed to replacement, will increase as with the economy over the short to medium term, andaircraft delivered in periods of historically high delive- at the same time environmental factors will continue tories, hit an age when typically aircraft retire in greater increase importance, this fact will play a greater rolenumbers. Some simple analysis, assuming a retire- in airlines fleet planning considerations. By broadlyment age of 25 years, shows these peaks and troughs segmenting the current fleet by generation, there is aclearly, with the industry entering a period of increased clear potential to replace more than 5,000 old or midretirements over the next six to seven years. However, generation aircraft well before the end of the forecastgiven the factors described above, the decision to period of this GMF.retire or replace aircraft could be taken sooner ratherthan later.Retirements: 3 waves, first peak in 2016 Number of aircraft to be retired 1,000 Twin-aisle 900 Single-aisle 800 700 600 500 400 300 200 100 0 2009 2020 2022 2023 2024 2025 2026 2028 2029 2030 2032 2033 2027 2010 2012 2013 2014 2015 2016 2018 2019 2021 2031 2017 2011 Passenger aircraft >100seats (western & Russian aircraft) Source: Ascend (Dec 2008), Airbus, assuming retirement at 25 years
Demand for passenger aircraftLarge replacement The Airbus replacement forecast is primarily basedopportunity for passenger either on the actual fleet replacement plans of each air-aircraft driving demand line, or a default replacement age, (which is determined through detailed analysis of the airline’s previous aircraft 13,785* replacements and the region in which it is based). In the Today, more than Old** Average GMF, any passenger aircraft removed from an airline’s (821 aircraft age : 25 5000 old/mid 6%) fleet, either through lease termination, second-hand generation aircraft to be replaced by Mid** sale, cargo conversion, storage or decommissioning more eco-efficient (4,440 aircraft Average model 32%) age : 15 and recycling, provides an opportunity to place a new more eco-efficient aircraft. A number of the aircraft replaced in the forecast will go back into service with other airlines, thereby competing with new aircraft to New** Average meet airline needs. These are the ‘recycled’ aircraft (8,524 aircraft 62%) age : 5 referred to in the GMF. Others become available for cargo conversions and compete with factory-built cargo aircraft; these trends will be discussed in more detail in 2008 fleet the Freight section of the forecast.*Passenger (>100seats) fleet in service at end 2008**Old: DC8, DC9, DC10, L1011, 707,727, 737-100/200, 747-100/200 & A300B Mid: F100, MD80, MD90, MD11, 737-300/400/500, 757, 767, 747-300, A300-600 & A310 New: ERJ190, 717, 737NG, 747-400, 777, A320Fam, A330 & A340Oil price gives incentive to replace older generationaircraft sooner Single-aisle: new vs. older Twin-aisle: new vs. olderYearly fuel cost savings ($ million) Yearly fuel cost savings ($ million) 2.0 7 6 1.0 5 4 1.0 3 2 0.5 1 0.0 0 2 2.5 3 3.5 4 4.5 5 5.5 2 2.5 3 3.5 4 4.5 5 5.5 Fuel price ($ per US Gallon) Fuel price ($ per US Gallon)At 4$/US gallon a new generation aircraft saves $1.4M per aircraft At 4$/US gallon a new generation aircraft saves $4.5M per aircraftper year in fuel vs. an older generation aircraft per year in fuel vs. an older generation aircraft500nm trip, 2,000 annual trips 1,500nm trip, same number of seats offered per year Global Market Forecast 89
Productivity improvements derivedOver 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.Large potential to increase propensity to travelTotal daily flights (all airlines combined)6040 Capacity Capacity growth only share Capacity/20 frequency split10 Maximum 8 service levels 6 4 Satisfactory regional Frequency Frequency 2 service levels growth only share (Europe-Asia 1 shown) 200 400 600 800 1,000 2,000 4,000 6,000 8,000 10,000 Source: Airbus Distance (km)
Demand for passenger aircraftfrom innovation and smart flying Frequency or capacity are distributed depending on the As traffic grows on any particular route, the extent to specific characteristics of each individual city pair, within which it will be accommodated by an increase in aircraft every one of the 156 traffic flows forecast. When service seat capacity, as opposed to an increase in frequency, starts on a particular route, airlines typically offer one will depend on where it is situated between the two flight per day as soon as possible and then increase thresholds. This analysis for each airport pair shows that frequencies to capture market share and to stimulate by 2028, assuming the infrastructure can cope with the demand. However, as mentioned earlier, the benefits of greater volume of flights, airlines worldwide will increase convenient schedules reach a point beyond which there the number of departures they offer, by an average of are diminishing returns and no further generation of 3.2% per year. This is significantly higher than the 2.5% travel demand. That is why mature markets have just per annum increase achieved since 1980 and will a handful of domestic city pairs with 60 daily flights, present a major challenge to the world’s airports and air equivalent to one every 18 minutes. traffic control systems. Meanwhile, the number of seats per aircraft (including regional aircraft) will increase by 1.2% per year, from an average of 137 in 2008 to 173 by 2028, in comparison to a 0.5% yearly increase since 1980. Travel demand growth Capacity growth accommodated accommodated by bigger by productivity and more numerous and capacity aircraft RPK per seat Capacity (seats in service) Average aircraft Number of aircraft size in service 0.7 World traffic 4.7 4.0 1.2 World capacity 4% 2.8 1.0 Latin America 5.8 4.8 1.5 Latin America 4.7 3.2 0.6 Asia-Pacific - PRC 6.1 5.5 1.1 Asia-Pacific 5.4 4.3 2.5 CIS 5.9 3.4 1.0 CIS 3.3 2.3 0.8 Africa 5.3 4.5 1.5 Africa 4.5 3.0 0.6 North 2.5 America 1.9 North 0.8 America 1.9 1.1 0.7 Middle East 6.9 6.1 0.9 Middle East 6.1 5.2 0.6 Europe 4.4 3.7 0.6 Europe 3.7 3.1 3 2 1 0 1 2 3 4 5 6 7 3 2 1 0 1 2 3 4 5 6 Average annual growth (%) Average annual growth (%) Source: Airbus Source: Airbus Global Market Forecast 91
Single-aisle aircraft demandMore will be seen in AsiaBy 2028 the world’s major airlines will need 19,724 new the equivalent of Madrid to Berlin or Shanghai to Manila.and ‘recycled’ single-aisle passenger aircraft to accommo- Over the next 20 years, existing LCCs will require a totaldate traffic growth and renew their fleets. of 5,141, or 30%, of the world’s new single-aisle aircraft.Of these, 2,747 aircraft will be replaced by their current Asia-Pacific LCCs are expected to develop their single-operator and recycled back into the fleet to continue ser- aisle fleets quickly from a relatively low base of 340vice with another airline. Therefore, there will be demand today, to more than 1,470 by 2028. With the shift tofor deliveries of some 16,977 new, more efficient aircraft. larger regional aircraft, a significant portion of deliveries is expected to be in the bigger categories, particularlyThe demand for single-aisle aircraft will be evenly spread the 70 to 85-seat category. Today, there are a conside-between the three major regions of Asia, Europe and rable number of in production and development turbo-North America, with 81% of all single-aisle demand split fan aircraft in this segment. Overlap between mainlineevenly at 27% each. Whilst the latter two regions have jets and regional jets with around 100 seats is expectedbeen traditional markets for this class of aircraft, delive- to continue. However, the spread of demand, eitherries to Asia-Pacific are expected to increase with the upward or downward, for a particular airline, and thegrowing low-cost presence and demand from emerging desire for commonality and cost benefits, will both helpmarkets stimulated by progressive deregulation. Latin define aircraft demand in this sector.America, the Middle East and Africa will take a significant15% of deliveries between them. By 2028, the active fleet Demand above 100 seats, remains centered aroundof 20,478 single-aisles will be operating out of 1,815 the 150-seat segment, which is currently characterisedairports, linking 12,619 airport pairs. Unsurprisingly ope- by the extremely successful A320 Family. Meanwhile, ofrations will be largely focused on domestic US routes. those airlines’ with single-aisle demand, 64% haveFlights from the top 25 airports, led by Atlanta and demand both above and below 150 seats, representingChicago O’Hare, will absorb 20% of the fleet’s productive more than 90% of deliveries. This makes commonalitycapacity. across the whole range of seat categories an important element for current and future single aisle programs,Single-aisle aircraft will be overwhelmingly flown on short particularly for airlines intent on reducing the number offlights and by 2028, 70% of them will be used on flights aircraft types in their fleets in order to improve operationalof 1,850 kilometres/1,000 nautical miles or less, which is efficiency.Single-aisle fleet will grow to morethan 20,000 aircraftFleet size 20,47820,000 + 3.2 % per annum15,000 Growth 9,671 10,807 16,977 new aircraft US$ 1.2 trillion10,000 Replaced 7,306 5,000 Recycled 2,747 Stay in service 754 0 Beginning 2009 2028Excluding freighters
Demand for passenger aircraftAsia becoming a large single-aisle market Europe % of world CIS 2009-2018 2019-2028 deliveries % of world North America 2009-2018 2019-2028 deliveries 2,198 2,383 27% % of world 2009-2018 2019-2028 deliveries 362 371 4% 2,543 2,021 27% Middle East % of world 2009-2018 2019-2028 deliveries 307 254 3% Latin America Asia-Pacific % of world % of world 2009-2018 2019-2028 deliveries Africa 2009-2018 2019-2028 deliveries 746 594 8% % of world 2,332 2,226 27% 2009-2018 2019-2028 deliveries 341 299 4%2009-2028 new regional aircraftand single-aisle demandNumber of new aircraft7,0006,000 5,3775,0004,000 3,610 3,343 3,4573,000 2,557 2,468 2,2432,0001,000 0 50 70/85 100 125 150 175 210 Seat categoryExcluding freighters Global Market Forecast 93
Twin-aisle demandA broad market,with broad requirementsUnsurprisingly, just over two-thirds of the demand for the A330/A340 Family achieving net orders of 138 intwin-aisles will come from airlines that operate large 2008 and selling the 1,000th A330 in the same year. Onglobal networks and will, therefore, make use of the size entry into service in 2013, the A350 XWB Family will alsoand range capability of these aircraft, mainly on routes address demand from the 250-seat segment all the wayfrom major hubs to secondary airports. Most of these to the 400-seat segment, operating on routes withairlines will require aircraft in all sizes, with varying range ranges up to 15,400kms, while retaining commonalityrequirements. Airbus’ current products in this category with other Airbus family of aircraft, which today rangecontinue to prove their popularity with customers, from 105 to 525 seats.2009-2028 new twin-aisle demand: 5,802 aircraftNumber of new aircraft2,500 2,1842,000 1,9131,500 1,0571,000 648 500 0 250 300 350 400 Seat categoryExcluding freighters
Demand for passenger aircraftSmall twin-aisle demandConnecting the worldThere will be 4,454 aircraft in service in the 250 and airlines will take 59% of all deliveries in this class, repre-300-seat category by 2028. Demand for 273 of those senting some 2,428 aircraft. By 2028, 4,454 small twin-aircraft will be met by aircraft being recycled back into aisle aircraft will be operating at 632 airports, linking athe fleet as the original operators take delivery of one of total of almost 3,117 airport pairs. Flights from the topthe 4,097 new aircraft that will be required between 50 airports led by London Heathrow and Dubai will use2009 and 2028. Unlike for single-aisles, the North the productive capacity of half the total demand. AsAmerican market represents only 15% of worldwide much as 70% of the small twin-aisle demand is concen-demand in this category. European and Asia-Pacific trated with just 49 airlines.Small twin-aisle fleet will grow to more than 4,000 aircraftFleet size 4,454 4,500 4,000 3,500 + 3.5 % per annum Growth 2,193 3,000 4,097 new aircraft 2,500 2,261 US$ 797 billion 2,000 1,500 Replaced 1,904 1,000 500 Recycled 273 0 Stay in service 84 Beginning 2009 2028Excluding freighters Global Market Forecast 95
Intermediate twin-aisle demandFor growing marketsThe world’s major airlines will operate a total of 1,861 Of the top ten airports served, seven will be in the Asia-passenger aircraft in the 350 and 400-seat category by Pacific region, including three in China, two will be in2028; a market segment covered by the A340-600 Europe, the remaining one will be in the Middle-East.today as well as the A350-1000XWB in the future. Of Compared with the world fleet as a whole, the operationthese, 1,705 aircraft will be new, which will replace 768 of intermediate twin-aisles will be relatively concentra-of the existing fleet and provide 937 for growth. The ted, led by London Heathrow, Shanghai and Beijing air-types of operations and distances involved in Asia- ports. Half of these aircraft will be used on flights fromPacific mean that it will need the bulk of all deliveries in the top 19 airports. In addition, half of intermediate twin-this category, with 785 aircraft, or 46%. Europe will take aisles will be used on flights of no more than 5,925 kilo-396 aircraft, or 23%, and the growing Middle Eastern metres/3,200 nautical miles, which is roughly the equi-market will take 193 aircraft, or 11%. Twenty years from valent of Frankfurt to Boston, while the other half will benow, 1,861 intermediate twin-aisles will be operating at used on flights less than 12,965km/7,000nm, which is337 airports, linking a total of about 1,260 airport pairs. roughly the equivalent of Hong Kong to New York.Intermediate twin-aisle fleet will growto almost 1,900 aircraftFleet size 2,000 1,861 1,800 1,600 + 3.6 % per annum 1,400 Growth 937 1,200 924 1,705 new aircraft 1,000 US$ 419 billion 800 600 Replaced 768 400 200 Recycled 114 0 Stay in service 42 Beginning 2009 2028Excluding freighters
Demand for passenger aircraftNew twin-aisle (small and intermediate)demand concentrated in Asia-Pacific and Europe Europe % of world CIS 2009-2018 2019-2028 deliveries % of world North America 2009-2018 2019-2028 deliveries 573 633 21% % of world 2009-2018 2019-2028 deliveries 82 72 3% 442 381 14% Middle East % of world 2009-2018 2019-2028 deliveries 335 333 12% Latin America Asia-Pacific % of world % of world 2009-2018 2019-2028 deliveries Africa 2009-2018 2019-2028 deliveries 139 160 5% % of world 1,125 1,278 41% 2009-2018 2019-2028 deliveries 121 128 4%Twin-aisle operations in 2028 will be concentratedlargely on Asia-Pacific and Europe 1 LHR 8 10 7 FRA ICN JFK 5 CDG 2 PEK 4 6 3 NRT DXB PVG 9 BKK 10 SIA Rank Airport Global Market Forecast 97
Very large aircraftDelivering large benefitsTo maximise the profit potential of operations in an era 80 VLA, as already confirmed with the routes announ-characterised by fluctuating fuel prices, pressure on ced by current A380 customers. The VLA will be usedyield mix, increasing competition, a need to differentiate on the complete range of domestic, intra-regional andairline product offering through comfort, as well as intercontinental routes, in single and multi-class configu-increasingly stringent infrastructure and environmental rations.constraints, airlines will operate 1,318 very large aircraft(VLA) such as the A380, by 2028. Regional demand for With many of the top routes being centred in Asia-VLA, will be centred on the Asia-Pacific region, with 711 Pacific, it is understandable that most of the VLA delive-aircraft, or 55%, of world demand. Europe’s airlines will ries will be made to the region. However, with theneed 281 aircraft, or 21%, to meet growing demand strength of traffic between Europe and Asia and demandto the Asia-Pacific region, while North America and on some trans-Pacific routes, other regions’ airlines,the Middle East will take 253 aircraft, or 19%, between notably the Middle East, will take a significant share ofthem. VLA deliveries over the next 20 years. Unsurprisingly, the global network airlines will use as much as 82% of theBy 2028, these VLA will be serving 198 airports, linking world’s large aircraft to meet their requirements on491 airport-pairs and operating in a diverse set of mar- routes between the mega hub cities like London, Beijing,kets. Airbus anticipates that flights from just these top Tokyo, New York and Dubai. Very large eco-efficient20 airports will use the productive capacity of 881 air- aircraft, like the A380, are able to move people at lowercraft, or 67% of the 2028 VLA fleet. London, Hong seat mile costs than any other aircraft in airline revenueKong, Beijing and Dubai will require nearly 304 VLA. service today. This class of aircraft is also expected to beAlthough Los Angeles is the only North American city of interest to LCCs and charter airlines that may findwithin the top 15, together with San Francisco and New themselves in competition on certain long-haul routesYork, they will use the productive capacity of nearly in the future.1,318 new VLA passenger aircraftwill be neededFleet size 1,400 1,318 1,200 1,000 800 Growth 1,294 1,318 new aircraft 600 US$ 446 billion 400 200 24 Replaced 24 0 Beginning 2009 2028Excluding freighters
Demand for passenger aircraftVLA new deliveries concentrated in Asia-Pacificand Europe Europe % of world CIS 2009-2018 2019-2028 deliveries % of world North America 2009-2018 2019-2028 deliveries 105 176 21% % of world 2009-2018 2019-2028 deliveries 10 4 1% 8 56 5% Middle East % of world 2009-2018 2019-2028 deliveries 88 101 14% Latin America Asia-Pacific % of world % of world 2009-2018 2019-2028 deliveries Africa 2009-2018 2019-2028 deliveries 7 12 1% % of world 266 445 55% 2009-2018 2019-2028 deliveries 12 28 3%By 2028, 12 of the top 20 large aircraft airportswill be in Asia-Pacific 2 LHR 9 15 20 FRA ICN 8 3 SFO CDG PEK 11 5 PVG 10 NRT 19 4 14 DEL 18 JFK DXB LAX 12 1 16 HND BOM 7 HKG TPE BKK 6 SIN 17 JNB 13 Rank SYD Airport Excluding freighters Global Market Forecast 99
AsiaTiger, tiger, burning bright lready known as the “world’s producer”, the Asia- Intra-Asian marketsA Pacific region will become the “world’s largestconsumer” as a huge middle class emerges among the Although traffic amongst Asia-Pacific countries repre-3.5 billion living in the region. Countries such as sents only 25% of the passengers carried in the region,Singapore or South Korea, which rely heavily on world it accounts for almost half of the Available Seatstrade, have been particularly impacted by the global Kilometers (ASKs). For years, bilateral regulations haveeconomic crisis. This having been said, two-thirds of prevented the full expansion of air transport betweenAsia-Pacific nations are still expected to experience many countries in the region. The economies of thesepositive economic growth in 2009. In the medium to countries were largely focused on the US, Europe orlong term, the crisis may well accelerate Asia-Pacific Japan, limiting the potential for more regional economiceconomic integration, making the countries more integration.dependent on regional trade and enabling them tobenefit more from the growth of their giant neighbours, Today, there are more structures to deal effectively withChina and India, as well as from other smaller but fast trans-national issues within the region. The ASEAN(1)growing economies, such as Vietnam. countries are at the forefront, having formed their own free trade area between South-East Asian countries.In terms of air travel, the emergence of a huge middle The result of all this is stronger economic ties and a moreclass, increasing regional co-operation and progressive deregulated environment, which has allowed Low Costair deregulation are making Asia-Pacific one of the fas- Carriers (LCCs) to emerge successfully, opening thetest growing regions in terms of traffic. It is also one in region up to more travellers and boosting the tourismwhich the airlines’ operational environment is changing industry.the most, making it impossible to determine which jour-neys passengers will make, which carrier they will use The emergence of a the middle-class also means thatand even which mode of transport they will select, leisure oriented travel between Asian countries looksbased solely on analysis of passed trends alone. promising, although greater deregulation will be needed to allow the region to realise the region’s full potential. As these barriers ease, with the notable example of the pro- gressive deregulation of flights between mainland China and Chinese Taipei, airlines will need to adapt their strategies: high growth and starting from constrained markets generates more rapid change than any other region. (1) Association of Southeast Asian Nations: Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam
Demand for passenger aircraftHalf of the intra-Asian demandwill be to China & India% of intra-Asian passengers demand100% 1% 1% 1% Between China - India 90% 14% 16% ASEAN from/to China+India 20% 80% 18% 70% 21% 17% ASEAN from/to Other Asia* 60% 19% 50% 27% 32% Other Asia* from/to China+India 40% 20% 30% 18% 16% Between ASEAN countries 20% 28% 10% 17% 14% Between Other Asia* countries 0 1988 2008 2028*Other Asia : primarily Japan, South Korea, Australia & New ZealandSource: AirbusMore 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. Global Market Forecast 101
Asia Asia-Pacific integration boosting links between blocks The majority of these fast-developing markets involve P.R.C Japan, Korea long routes, with ranges exceeding 2,160nm/4,000km. Indian Subcontinent Traffic on such routes has more than doubled in the last ten years and most flows can be considered emergent. Widebody aircraft such as the A330 almost exclusively operate this type of route. Larger aircraft will also conti- nue to be used on shorter distances where demand ASEAN is high enough and where there is a high concentration of demand in the region, with almost half of the intra- Asian demand wanting to fly between just 11 cities. Australia / New Zealand Links with traffic more than doubled the last 10 years Intra-Asian growth benefitting the longest routes the most Though the traffic to major cities will continue to inten- sify, secondary destinations will develop as the econo- Seats 2009 v.s. 1999 3.00 mies grow and deregulation takes effect. This is particularly true for mainland China, with more direct air services being allowed, such as between the country’s 2.50 x2.4 southern cities and Thailand. The rapidly developing intra-Asian tourism market is also playing a key role in developing secondary cities, which will mainly be 2.00 x1.7 served by single-aisle aircraft. 1.50 Big cities, big demand ; 1.00 intra-Asia demand concentrated 0.50 Beijing Seoul Tokyo Osaka 0 Routes < 4,000km Routes > 4,000km Shanghai Source: Airbus, OAG Taipei Travellers between Asian Hong Kong countries : Bangkok > 46% want to travel between these cities only. Half Kuala Lumpur > 91% want to travel Singapore from or to these cities. of intra-asian Jakarta demand between just Source: Iata Paxis, Airbus - full year 2008 11 cities.
Demand for passenger aircraftDomestic marketsChinaChinese domestic scheduled air traffic has trebled high density routes where aircraft ranging from single-during the last ten years, helped by deregulation, aisles to very large aircraft will be used to ease congestionmodernisation and strong economic growth. Most of and address environmental issues.this growth was on the existing network and today there Meanwhile, the country’s secondary cities are experien-are 18 high density airport pairs with more than 1,000 cing significant growth and the “transversal” marketsdaily passengers, compared to only three a decade linking them are exceeding average growth rates. On thebefore. However, just three cities - Shanghai, Beijing and whole, this will be addressed by more frequencies withHong Kong - account for 45% of China’s domestic traf- single-aisle aircraft, which also offer the capacity andfic. This high concentration of demand, combined with flexibility to link these secondary cities with frequencystrong economic growth, will continue to generate more constrained top destinations.Domestic China: high concentrationand fastest growing cities (air traffic) NDG HEK CIF TGO PEK PEK TSN 45% JGN UYN YNZ of the domestic XNN TYN WEF traffic from/to CIH these 3 cities XUZ LXA LZO LYA NKG PVG BSD CKG YIW JJN LZH CGD HKG LJG XIC SYK High concentration of demand Fastest growing cities Beijing, Shanghai and Hong Kong Airport pairs expected to grow above average domestic traffic growth Source: AirbusDuring the past ten years domestic traffic in India, Competition from other modes of transport, particularlyIndonesia, the Philippines and Vietnam has also more high-speed trains, is also having a major impact on twothan doubled. While some of this is the result of econo- domestic markets: The Republic of Korea and Chinesemic growth, it has been largely fuelled by the emer- Taipei. The opening of a high speed ground transportgence of LCCs, which have now captured more than between the two main Taiwanese cities last year caused60% of the domestic ASEAN traffic and are increasingly domestic traffic to drop more than 40%. Taiwaneselooking towards international traffic. domestic air traffic has decreased almost 80% in ten years. However, it should be noted that both cases involve cities less than 200nm/370 kms apart, whereas 98% of the available seats kilometre (ASKs) within Asia- Pacific are on routes with ranges exceeding that. Global Market Forecast 103
Asia Significant growth maintained in Asia-Pacific RPKs growth: annual average 2009-2018 CIS 8.1% Europe North America 5.2% 5.5% Middle East Asia-Pacific 6.1% 7.2% Africa 8.6% Latin America 5.9% Asia-Pacific World 20-year 20-year 2009-2018 2019-2028 growth 2009-2018 2019-2028 growth 6.4% 5.5% 5.9% 4.6% 4.8% 4.7% Asia-Pacific air transport demand summary Asia-Pacific 2009-2018 2009-2028 Traffic (yearly growth) Total passenger traffic 6.4% 6.1% Domestic & intra-regional traffic 7.2% 6.3% International traffic 5.6% 5.5% Total freight traffic 7.1% 6.3% Asia-Pacific 2009-2028 Deliveries Passenger (< 100 seats) 1,054 Passenger (> 100 seats) 7,672 Total 8,726 Asia-Pacific passenger fleet evolution Fleet at start 2009 Fleet at end 2028 7% 14% 53% 1% 15% 8% Global Network Major Network Small Network 6% LCC 6% Charter Regional & Affiliates 15% 19% 56% Includes regional aircraft
Demand for passenger aircraftOver the next ten years, air traffic growth within Asia- New passenger aircraft deliveries to the region arePacific is expected to surpass all other regions, with an expected to be dominated by aircraft over 100 seats,average 6.4% per year. This impressive growth will be nearly 90%. From these, over 40% or some 3,100stimulated by the continued expansion of the region’s aircraft, will be twin-aisle types and VLA. This is due toLCCs, its established ‘tiger’ economies and its emer- the huge population centres and significant distancesging markets. This will subsequently act as a catalyst between them and to other parts of the world. Thefor growth in more mature parts of the region, such as global passenger network airlines will continue toJapan. dominate the Asia-Pacific over the next 20 years,Traffic growth to all other regions of the world is fore- expanding their presence both internationally and inter-cast to far exceed the world average of 4.7% per year, regionally, and operating more than 50% of the region’swith significant growth in inter-regional and domestic fleet. However, the current LCCs will also be evolvingmarkets likely to be around 6.4% for the next 20 years and growing their share over time.Benefits of aviation to the Asia-Pacific regionA recent report by Oxford Economics estimated that Contribution of air transport to the Asia-Pacific economythe air transport industry directly employs more than1.2 million people in the region and contributes more +than US$60 billion to GDP. The industry is more than 244.2 GDP (US$bn)seven times as productive as the economy as a whole. 169.2Combining the direct, indirect and induced contribu-tions, the air transport sector supports more than three 135.4million jobs in Asia-Pacific and contributes US$170billion to GDP. 61.8 1,177 2,552 3,190 11,670 +Asia-Pacific is expected to be the fastest growing region Direct Jobs (’000s)in the world for air transport over the next 20 years.It has been estimated that close to the end of period + indirectcovered by this forecast, air transport will contributeUS$540 billion in GDP, providing and supporting jobs for + inducedaround five million people. It will also support an additio- + tourismnal 13.5 million jobs in the tourism sector, generatinga further US$780 billion in GDP. + other catalyticOver that period, every percentage point lower growth Source: Oxford Economicsin 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. Global Market Forecast 105
North AmericaWhere the importanceof flight is never forgotten he US economy officially entered recession inT December 2007, marking the end to an economicexpansion that began six years earlier. In addition – on The region’s airline industry has been proactive in its response to the twin difficulties of managing the impacts of a global economic recession and highly volatile jet fuelthe back of extremely volatile crude oil prices, jet fuel prices. The most significant responses to the recessionprices fluctuated wildly throughout 2008, reaching a and falling passenger demand have been both a signifi-peak of US$4.33 per gallon in early July and a trough of cant reduction in the production of flights and AvailableUS$1.28 per gallon in late December. These factors will Seat Miles (ASMs) offered, together with efforts tobe remembered as the key drivers in the latest cyclical enhance passenger revenues, through the introductiondownturn, which as in most similar periods has seen of ancillary fees. However, both efforts started as athe US airline industry, having to respond to resulting response to spiralling fuel prices and the need topressures as the worlds leading aviation market. improve revenues.One benefit of the economic woes witnessed in the US Current global economic woes are likely to have a lesswas a billion dollars set aside for airport related projects adverse impact on the North American airline industry,as part of the multi-billion dollar stimulus package. While due in large part to cost cutting efforts that had alreadya large part of this money will be used to enhance secu- been put into place since the 9/11 and SARS crises.rity at a number of airports, the funding will also create Whether this means that the industry makes an opera-some 3,000 jobs and potentially free up capital for other ting profit in 2009 remains to be seen at time of writing,projects. as fewer travellers are flying and in turn are generating lower yields.Congestion issues and other problems are often forgot-ten in downturns, but over the long term, infrastructure One group of airlines that has benefited from adjust-in the region could be further enhanced should privately ments in capacity by the US majors on their domesticfunded airports take off. Today, all 552 airports in the US networks are the Low Cost Carriers. Domestically, theirreceive some kind of federal money and are owned by overall presence is up by three percentage points, in justpublic entities, municipalities, transportation districts or over two years, to 27%. Recently, these airlines have fur-airport authorities. However, if these airports are to grow ther strengthened their position by expanding theirin number from the very few projects that exist today domestic operations with new routings, when othersfinding private equity post “credit crunch” will be the have been consolidating around core international feedchallenge. operations, through the reduction of routes. In the long term, the GMF forecasts that the share of the entire North American fleet operated by LCCs will increase Lessons from 15% to 22% of the fleet in service. learned from past downturns
Demand for passenger aircraft Airlines adjust capacity to respond to high fuel price then the downturn 10% 6.8 5% 3.1 0% -0.5 -0.3 -0.1 -1.2 -1.0 -2.3 -5% -6,8 -7.3 -7.6 -8.6 -8.4 -8.3 -8.5-10% -9.3 -9.6 -10.5 -12.4-15% 02/08 03/08 04/08 05/08 06/08 08/08 09/08 02/09 03/09 04/09 05/09 06/09 07/08 07/09 01/08 10/08 12/08 01/09 11/08Consolidated US value for: WN, DL, NW, UA, AA, US, CO, FL, F9, NK, B6, VX, AS. Source: Airbus, OAG Schedules. Domestic load factor sustained by capacity adjustment 90 88 86 84 82 80 78 76 74 Sep-05 Mar-06 Oct-06 Apr-07 Nov-07 Jun-08 Dec-08 Jul-09 Source: Airbus, ATA Global Market Forecast 107
North America Liberalisation will still have a major part to play in the Over the next 20 years, the region’s fleet is forecast to coming years for the region. Even the significant flow grow from 7,075 to 8,817 passenger aircraft, as a result between the US and Europe had the opportunity for of increased passenger traffic and the need for replace- the scope of its air service agreement to be expanded ment aircraft, particularly in the single-aisle market seg- significantly in 2008. There is still the potential for even ment. The average US fleet remains at 12 years old, a greater liberalisation between markets. For example, year older than the world average. As many as 46% of the pact between Europe and Canada signed in May these aircraft can be considered old or mid generation 2008 goes further. As well as allowing direct flights aircraft. Given the expected rise in fuel price as econo- without restriction, it has also increased the possible mies recover and growing environmental pressures, level of foreign direct ownership from 25% to 49%. In these aircraft are not as efficient, either economically 2007, nine million people travelled between Europe or ecologically, as new generation aircraft like the A320 and Canada. Despite the slump in air travel as a result Family. The airlines concerned are expected to address of the economic downturn, the European Commission this in the coming years to reduce costs, while minimi- has estimated that the agreement could increase that sing the impact on the environment. The structure of number by half a million during the first year, generating the North American fleet will remain fairly stable, in terms €72 million, or roughly US$95 million, in additional of operator segmentation. Global network airlines will business and adding 1,000 jobs, as flights are added continue to operate most of the aircraft in the region; between the regions. 7,225 aircraft in 2028. The regionals and their affiliates will operate 30% of the fleet, mainly aircraft with less than 100 seats (jet and turbo-props). A380 at Oshkosh 2009
Demand for passenger aircraftNorth America passenger fleet evolution Fleet at start 2009 Fleet at end 2028 2% 1% 15% 34% 30% 44% 1% Charter Regional & Affiliates Global Network 3% Major Network LCC 48% 22%Includes regional aircraftNorth America is the largest and most mature of Asia-Pacific with 5.5% growth, the Commonwealththe regional markets. This is reflected in the fact that of Independent States (CIS) with 7.1% and the Middle20 year average annual growth is forecast to be below East with 8.2%. Growth will be driven internationallythe world average, at 3.4%. However, the US domestic by the major US carriers continuing to seek new oppor-market will remain the largest in size throughout tunities outside of the US domestic market, but alsothe next 20 years, whilst growing at just 1.5% per year. by carriers domiciled in growth regions, benefiting fromExternal flows will grow at a much faster pace as deve- continuing opportunities in the growth in mutual tradeloping markets and regions rapidly develop links with and tourism these regions will deliver in the comingthe North American market. These include flows to years. Global Market Forecast 109
North America New markets, new international growth RPK growth: annual average 2009-2018 NORTH AMERICA CIS 7.1% Europe 1.6% 3.6% Middle East 8.2% Asia-Pacific Africa 5.5% 6.7% Latin America 3.6% North America World 20-year 20-year 2009-2018 2019-2028 growth 2009-2018 2019-2028 growth 3.0% 3.9% 3.4% 4.6% 4.8% 4.7% North America air transport demand summary North American 2009-2018 2009-2028 Traffic (yearly growth) Total passenger traffic 3.0% 3.4% Domestic & intra-regional traffic 1.6% 2.1% International traffic 4.5% 4.7% Total freight traffic 4.2% 5.1% North American 2009-2028 Deliveries Passenger (< 100 seats) 2,224 Passenger (> 100 seats) 5,451 Total 7,675
Demand for passenger aircraftContributions of air transport to the North American economy In particular, air transport supports regional tourism. The tourism industry is an important source of jobs, skills and incomes throughout North America. With an estimated 0.9 million jobs in tourism supported by air transport, contributing around US$64 billion to the continent’s GDP. More than 8 million jobs will be supported by North America’s air transport sector in the next 20 years With the expected growth in the North American market over the next twenty years, it has been estimated in a recent report by Oxford Economics that this will support jobs for more than 8 million people towards the end of this forecast. An additional 1.3 million jobs are expected to be supported in the tourism sector. Every one percen- tage point lower growth in passenger and freight traffic would reduce the number of jobs supported by air trans- port in the next 20 years by close to 1.5 million and the level of GDP contribution by around US dollar 210 billion. + 614.3 GDP (US$bn) 550.3 440.2 211.5 2,333 4,813 6,016 6,900 + Direct Jobs (’000s)It has been estimated that the air transport industrydirectly employs approximately 2.3 million people in North + indirectAmerica and contributes more than US$200 billion toGDP. Combining the direct, indirect and induced contri- + inducedbutions, the air transport sector supports over 6 million + tourismjobs and contributes US$550 billion to GDP. + other catalytic Source: Oxford Economics Global Market Forecast 111
EuropeMore liberalisation + more integration s in other regions, European economic growth was any US city and allows American airlines to fly withinA severely impacted by the global economic slow-down and financial crisis in late 2008. For example, Europe. It also avoids restrictions on international routes between the two continents (3rd and 4th freedom rights)Eurozone countries, which form a significant part of and on routes beyond them (5th freedom rights). In 2007,European GDP, plunged 2.5% quarter-on-quarter and Heathrow accounted for a fifth of all trans-Atlantic seats.4.6% year-on-year in the first three months of 2009. It is This 2008 ‘Open Skies’ agreement opens thealso projected to contract 4.5% in 2009, which would airport to any EU or US carrier and 12 new routes havebe the first decline since it was formed in 1999. already been added, half of which are new city pairs ope-However, according to Global Insight, recovery is projec- rating to the main hubs of US airlines.ted to develop gradually through 2010 as monetary and The current agreement brings opportunities for enhancedfiscal stimuli take effect, credit conditions ease and the co-operation in areas such as safety, environment, compe-global economic activity picks up. Longer term, the tition and state aid, with a second stage already envisa-region is forecast to achieve around 2% annual growth ged, which would bring further liberalisation of traffic rightsaverage between 2011 and 2020. and the possibility of foreign investment. However, itThe economy of Central Europe, which forms the other remains to be seen whether the impact of the economicpart of the GMF’s European region, is forecast to fair downturn will make this next step easier or harder tobetter. A 3.7% contraction is forecast for 2009, with a achieve.modest recovery in 2010, followed by growth rates of asmuch as 4% to 2012. These countries, particularly Croatia, Increased competition can also generate increasedTurkey, Bosnia and Macedonia, will also fuel further EU co-operation, which, in turn, encourages consolidation asgrowth and opportunities in the medium term, a develop- airlines seek to capitalise on the advantages it brings.ment providing more opportunity for the regions airlines. There has already been consolidation among large trans-As has been discussed at various points in the GMF, grea- Atlantic operators in 2008, including mergers, attemptedter liberalisation of aviation markets is often a driver for mergers and wide-ranging alliance discussions. Shouldaviation growth. In addition, greater competition and pas- regulations relax even further, particularly in terms of foreignsenger choice and the opening of new markets ownership restrictions, it is probably just a matter of timestimulate greater efficiencies across the system as a before a major trans-Atlantic merger is sealed. So, overall,whole. the consolidation effects on airlines and networks areLast year the first part of the EU-US Open Sky Treaty expected to exceed the fragmentation effects.came into force, replacing more than 20 other European Beyond the London market, the latest trans-Atlantic‘open skies’ and bi-lateral agreements. The new agree- “Open Sky” treaty is not expected to trigger major changesment allows EU airlines to fly from any European nation to in terms of route development, as 57% of the traffic bet- ween Europe and the US was already covered by previous bilateral agreements. Most of the remaining traffic was between the US and UK, with more than 40 non-stop routes already serving over 80% of the demand for travel between the two countries.
Demand for passenger aircraft= more traffic Number of carriers* 220 Number of carriers 210 at the level of the 80’s 200 190 180 170 160 Number of carriers 150 down 23% in 10 years 140 130 120 * Airline groups operating 110 in Domestic & Intra-Europe 100 Only carriers > 100 daily seats 1991 1992 1985 1986 1987 1988 1989 1990 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Passenger traffic in the region is expected to grow faster The number of airlines in Europe has now reached the in the second ten years of the forecast from 2018, partly levels they where in the late 1980’s, with the absolute as a result of the financial crisis and subsequent down- number of airlines declining 23% in ten years suggesting turn. However, traffic growth is still expected to average some level of consolidation, even if some is through air- 4.4% per year. Compared to other regions, this growth lines joining larger airline groupings. This change does will be reasonably well distributed among major interna- not appear to have constrained demand with traffic gro- tional flows, although growth between Europe and the wing 49% since 2000. The number of airlines in Europe Middle East, CIS and Asia-Pacific will be the most signi- fell significantly following the downturn of 2001, recove- ficant at 5.7%, 5.3% and 5.2% over the next ten years. ring somewhat in the early years of the new century with At 4.7% per year for the next 20 years, growth on inter- the emergence of more low cost ventures. It remains to national routes from Europe is expected to slightly be seen what effects the current downturn will have. At exceed that of domestic and intra-region routes, which time of writing in the middle of 2009, there is little sign of will be around 4.5%. a similar negative effect, however the evolution of fuel prices through the cycle could play a greater role this time as compared to post 2001, when pricing levels were relatively low and stable. 100% >25 70% of European fleet 90% 80% 21-25 less than 15 years old 70% 16-20 60% 50% 11-15 40% 6-10 30% 20% 0-5 10% 0% Africa Asia Latin Middle North Europe America east America and Caribbean Aircraft >100 seats Source: Airbus, Ascend May 2009 Global Market Forecast 113
Europe Europe RPK growth: annual average 2009-2018 CIS 5.3% EUROPE North America 3.6% 3.4% Middle east 5.7% Asia-Pacific Latin America Africa 5.2% 4.6% 4.2% Europe World 20-year 20-year 2009-2018 2019-2028 growth 2009-2018 2019-2028 growth 4.1% 4.8% 4.4% 4.6% 4.8% 4.7% European air transport demand summary EuropeTraffic 2009-2018 2009-2028 (yearly growth) Total passenger traffic 4.1% 4.4% Domestic & intra-regional traffic 3.4% 3.9% International traffic 4.5% 4.7% Total freight traffic 3.6% 4.5% Europe 2009-2028 Deliveries Passenger (< 100 seats) 1,517 Passenger (> 100 seats) 6,068 Total 7,585 The European fleet of aircraft with over 100 seats is rela- The majority of aircraft, 75%, delivered to the region will tively young and eco-efficient compared to other regions; be single-aisle types, although nearly 1500 aircraft will be more than 70% have been in service for 15 years or less needed by the region’s airlines to meet demand for larger and over 50% for a decade or less, which is better than twin-aisle and VLA aicraft. The LCC’s are expected to any region except for Asia. However, that still means that increase their presence and will account for 26% of the 30% of the fleet is over 15 years old and will need to be region’s fleet by 2028, driven by growth on existing replaced well before the end of this 20-year forecast. As routes and the need for greater connectivity as the new generation aircraft can be up to 40% more fuel- European Union develops further. However, network efficient than their older versions of the same model, airlines, particularly those with global operations, will fluctuating fuel prices will also play a role in the way this continue to dominate, accounting for 54% of the develops. European fleet by 2028.
Demand for passenger aircraftEuropean passenger fleet evolution Fleet at start 2009 Fleet at end 2028 11% 15% 36% 33% 9% 11% Global Network Major Network Small Network 26% LCC 18% Charter Regional & Affiliates 17% 4% 16% 4%Includes regional aircraft Contributions of air transport to the European economy It has been estimated that the air transport industry Contribution of air transport to the European economy directly employs more than 1.6 million people in Europe and contributes more than US$134 billion to GDP, + making it some 50% more productive than the economy as a whole. Combining the direct, indirect and induced 575.6 GDP (US$bn) contributions, the air transport sector supports over 4.5 376.6 million jobs and contributes US$380 billion to GDP. 301.3 In addition, air transport supports European tourism generating an estimated 3.3 million jobs (around 5% of 134.1 1,617 3,566 4,458 7,764 + total European employment) and contributing around Direct Jobs (’000s) US$200 billion to the region’s GDP. This is a key indus- try for the region with five EU countries among the top + indirect seven destinations in the world, including the UK, which + induced is currently ranked sixth and relies on air transport to bring 70% of tourists into the country. + tourism Close to 12 million jobs could be supported by Europe’s air + other catalytic transport sector in the next 20 years Source: Oxford Economics With the expected rise in air travel within the region it has been estimated that towards the end period covered in a further US$470 billion of GDP. For every percentage this forecast, air transport will provide and support jobs point lower growth in passenger and freight traffic, for more than seven million people, while contributing the number of jobs supported by air transport in the next some US$870 billion to GDP. An additional five million 20 years would be reduced by around 1.5 million and jobs will be supported in the tourism sector, generating the level of GDP contribution by around US$225 billion. Global Market Forecast 115
Latin America & New opportunities in the new worldConsumer atin America has not been immune to the impact ofspending to grow L the latest downturn, particularly because some countries in the region have close economic links to the by 4.1% US 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 the economic storm well compared to previous downturns, thanks to “improvements in policy frameworks and balance sheet positions.” Global Insight, recently stated that the long-term prospects for the Latin American economies remain positive, with few exceptions.
Demand for passenger aircraftthe Caribbean Even allowing for the current economic issues, Latin America is clearly well placed among other emergent regions in terms of some of the key drivers for aviation growth. For example, the region’s GDP is expected to grow on average at 3.6% per year until 2012 and consumer spending is expected to grow at around 4.1% per year over the same period. This growth exceeds that of more developed regions and is closer to those of the Middle East, Russia and India. Several leading economies stand out in the region, parti- cularly Brazil, which is one of the BRIC(1) nations, Chile and Peru, which have impressive economies and corres- ponding growth, and Mexico, which benefits from its proximity to the US, helping to drive their economy and air travel when times are good. (1) BRIC nations: the world’s key emerging nations: Brazil, Russia, India & China Peru, Uruguay, Chile and Brazil will lead Latin America economic recovery GDP growth 2008-2013 6% Peru 5% Chile Uruguay 4% Colombia 3% Argentina Brazil 2% Ecuador 1% Venezuela Mexico 0% 0% 1% 2% 3% 4% 5% 6% Real consumer spending growth 2008-2013Bubble size proportional to real GDP at PPP (Purchasing Power Parity) in US$billions in 2013Source: Global Insight, Airbus Global Market Forecast 117
Latin America & the Caribbean Over the period between 2000-2008, which includes the US. The US even suggested they might offer to the effects of the previous economic downturn, Latin waive nationality clauses present in existing agreements, American capacity increased 20% internationally, to further stimulate interest across the region. domestically and between member states. Growth to the emerging markets was impressive over this period. While international traffic has grown impressively in the last For example, there was an increase of 145% to the CIS 20 years, the share of these markets operated by and 40% to Europe, where cultural and business ties airlines from the region has fallen steadily to around 25% remain strong. Capacity to North America grew just 1% of capacity. The fact that the market has grown over this over this period, perhaps driving the calls at the end of time is a clear sign of its strength and future potential; a 2008 by US representatives for more expansive open fact clearly not lost on the world’s other major international skies agreements between the region’s countries and operators, who have gradually increased their presence. New markets, new international growth 2000-2008 capacity growth in ASKs CIS +145% North America Europe +1% +40% Asia No direct traffic in 2000 Middle East No direct traffic in 2000 Africa LATIN AMERICA +27% Pacific +21% +93% Latin America Intra+Domestic: +21% Latin America international: +20% Latin America Total: +20% Latin American capacity up 20%
Demand for passenger aircraftStrong growth of Latin America int’l traffic but LatinAmerican carriers share down to 25% in 2008 Monthly traffic from/to Latin Share of Latin American America (million ASKs) carriers on Int’l markets35,000 70%30,000 60%25,000 50%20,000 40% 15,000 30% 10,000 20% 5,000 10% 0 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Europe 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 Global Market Forecast 119
Latin America & the Caribbean Fast growing tourism demand to Latin America Tourism int’l arrivals Tourism receipts Million tourists Billion US$ 80 70 70 AAGR* 60 AAGR* 1992-2007 1992-2007 +3.6% +3.6% 60 50 50 40 40 30 30 20 20 10 10 0 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 * Average Annual Growth Rate Source: World Tourism Organization “Cross Straits” Caribbean Style The Caribbean, which is included in the Latin worth noting that in 2008, Cuba reported 2.3 million American region for the purposes of the GMF, may tourists, mostly Canadian or Europeans, compared be about to have its own version of the “Cross to 3.4 million in the nearby Dominican Republic. Straights” deregulation that fuelled growth between China and Chinese Taipei (see page 50 & 51). In addition, many major US brands are now registe- ring their trademarks in Cuba, hopeful that the In March, the US eased travel restrictions to Cuba, easing of travel restrictions will set a precedent allowing Cuban-Americans to make the journey as for trade restrictions, which could also have a often as they want and to stay as long as they want. significant impact on air transport between the two Air travel increased almost over night. At just one countries. of eight agencies booking trips to Cuba, the daily booking capacity was up from 369 in March 2009 to The number of visitors will grow significantly should 900 in June 2009; growth of over 140% in just three this positive progress be maintained, adding to months. They also estimated that up to 18,000 peo- the growth of air travel from and to the region as ple would travel to Cuba with them in May 2009. a whole. Already at least one US airline CEO has With the government now considering further publicly stated his interest in operating scheduled relaxation of rules to allow any US citizen to travel to flights to the country, given the political will to lift Cuba, that figure is likely to increase substantially: it’s restrictions.
Demand for passenger aircraftIn the meantime, the regions airlines as a whole have 6.7% respectively. However, the growth between Latincontinued to build their fleets and networks. Tangible America and the Middle East is the highest at 7.9%.evidence of the region’s growing strength can be seen Traffic within the region is also expected to grow stron-in the average age of the fleet, which is now around gly, at an average of 5.6% per year. However, depending12 years - more than three years younger than it was on the pace of economic policies, social development,a decade ago. This has been achieved through the intro- innovation and consolidation of its industries, the regionduction of numerous new single and twin-aisle aircraft could experience even higher levels. There is still a lotby an increasing number of trendsetting airlines; with a more potential in reserve for Latin American air travel.significant number new eco-efficient Airbus types. In factsince 1980 the Airbus share of the Latin American fleet As a result of the forecast traffic growth and deliverieshas grown from nearly nothing to more than one third. for both new and used aircraft, Airbus predicts that the fleet of passenger aircraft with over 100 seats inAt 4.9% per annum, traffic growth in Latin America Latin America will more than double. Global and majorduring the next 20 years is forecast to exceed the world network carriers are expected to increase their share ofaverage. Traffic to new and emerging markets in Africa the Latin American fleet. The LCC model will alsoand the Commonwealth of Independent States (CIS) are increase its presence, with 14% of the fleet, although notexpected to exhibit the strongest growth, with 7.3% and to the levels witnessed in North America and Europe. Airbus fleet now represents 34% of Latin American in service total fleet 34% ft share 1% Airbus aircra Number of aircraft in service 1,200 1,000 800 600 400 200 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Source: Ascend (data as of end December for each year), Airbus Passenger aircraft >100 seats and freighter aircraft Global Market Forecast 121
Latin America & the Caribbean Latin America air transport demand summary Latin America 2009-2018 2009-2028 Traffic (yearly growth) Total passenger traffic 4.7% 4.9% Domestic & intra-regional traffic 5.6% 5.6% International traffic 4.3% 4.6% Total freight traffic 4.1% 4.7% Latin America 2009-2028 Deliveries Passenger (< 100 seats) 432 Passenger (> 100 seats) 1,658 Total 2,090 Latin America RPK growth: annual average 2009-2018 CIS 7.3% North America Europe 3.6% 4.6% Middle-East 7.9% Africa LATIN AMERICA 6.7% Pacific 5.6% 5.5% North America World 20-year 20-year 2009-2018 2019-2028 growth 2009-2018 2019-2028 growth 4.7% 5.1% 4.9% 4.6% 4.8% 4.7%
Demand for passenger aircraftLatin America and the CaribbeanA recent report by Oxford Economics found that the air Contribution of air transport to the Latin Americantransport industry directly employed more than 225,000 and the Caribbean economypeople in Latin America and the Caribbean, contributing +around US$8 billion to GDP. The industry is almost threetimes as productive as the economy as a whole. 44.8 GDP (US$bn)Combining the direct, indirect and induced contribu- 21.8tions, the air transport sector supported close to600,000 jobs in the region and contributed US$22 billion 17.5to GDP. In particular, air transport supports regionaltourism, which is particularly important source of jobs, 8.1 226 493 616 2,370 +skills and income throughout Latin America and the Direct Jobs (’000s)Caribbean. It was estimated that nearly 1.8 million jobsin tourism are supported by air transport, contributing + indirectaround US$23 billion to the region’s GDP. + inducedWith the expected rise in air travel in the region it has + tourismbeen estimated that towards the end period covered inthis forecast, air transport will provide and support jobs + other catalyticfor more than one million people, while contributing Source: Oxford Economicssome US$55 million to GDP. An additional 3 million jobswill be supported in the tourism sector, generating afurther US$57 billion of GDP. ted by air transport in the next 20 years would be redu-However, for every percentage point lower growth in ced by around 430,000 and the level of GDP contribu-passenger and freight traffic, the number of jobs suppor- tion by around US$18 billion.Latin America fleet evolution Fleet at start 2009 Fleet at end 2028 23% 23% 27% 35% Global Network Major Network 1% Small Network LCC Charter 14% 19% Regional 1% & Affiliates 22% 8% 13% 14%Includes regional aircraft Global Market Forecast 123
The Middle East At the heart of air transport1976 2006 Close-up uring the last three decades, significant parts of & Tourism Council, the United Arab Emirates is cur- D the Middle East region have been transformed, thanks to a strategic foresight that has sought to rently leading Middle Eastern nations with air transport, road and port hubs now ranked 7th, 12th and 9th in convert the region’s geographic and raw material the world respectably. bounty into a number of major locations for tourism and business, creating an air traffic crossroads of global Even in the downturn, which took hold of the industry in importance. 2008, the Middle Eastern carriers have showed the strength of their ambitious business models, being less Vast iconic developments - from palm islands to the impacted than many others. In terms of international world’s tallest building, the Burj Dubai - have helped traffic’ as reported by IATA, the region was the only one make this vision a reality. As the share of local invest- to record positive growth in the first quarter of 2009. ment is constantly increasing, there is enormous Major airlines in the region have confirmed significant potential for the region to develop itself further in all delivery commitments as a sign of their determination areas: tourist attractions as well as transport or busi- to expand, while others have eyed or implemented ness infrastructure. According to the World Travel capacity reductions.
Demand for passenger aircraftInternational MarketThe Middle East has This unique location on the globe makes it the ideala geographical advantage place to position a truly sixth freedom world hub. In fact, a look at the evolution of the traffic between Europe and Asia-Pacific clearly illustrates that an increasing amount of traffic is routed through Middle 8,000nm East airports instead of using direct routes. The region offers transiting visitors tremendous hotels, 4,500nm shopping malls and other attractions. For example Abu Dhabi is investing massively in arts. It has plans 2,500nm to build the Saadiyat Island Complex by 2012, offering new “Louvre” and “Guggenheim” museums. These developments and those like them will no doubt drive a 86% world population trend for connecting passengers in the region to spend 63% world GDP some time between flights, enjoying the sights and sounds on offer. As a result of all these factors the main hubs situated within Middle East are growing at a very fast pace. In less than ten years the number of passengers has 36% world population increased by more than 300%, when considering 16% world GDP the combined passenger traffic at Dubai and Abu Dhabi’s airports. Number of people within various great circle distances of the Middle East Hubs in the region continueThe Middle East, as well as beinguniquely situated geographically their impressive growthon the earth’s surface, is uniquely Monthly passengers (Millions)situated between the worlds 4.5major regions, North America, 4Europe and Asia, in terms ofwealth and population. It is loca- 3.5ted less than 4,500nm (8,340km) 3from 63% of the world’s total +334% in less than 10 years 2.5GDP and within 86% of theworld’s total population. These 2shares are expected to increase Dubai and Abu Dhabi 1.5over the 20 year period of thisforecast. 1 0.5 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: ITA, Airbus Global Market Forecast 125
The Middle East The domestic market - more short range flying to come Several indicators in the region show that the domestic 30 years old, compared to 35% in Europe. The Saudi market is about to boom. One of the top priorities for the Arabian population, the largest in the Gulf region, will no Middle Eastern air transport industry is to sustain the doubt help to shape this, with similar estimates for the liberalisation momentum achieved since the open-skies spread of age in its population over time, and is itself initiatives signed in 2004. Even if a full open-skies looking to the future. agreement is reached quickly, bilateral agreements will As well as looking to increase domestic tourism within facilitate the continued expansion of the domestic the country, Saudi Arabia is considering options market, potential identified by LCC carriers with several to attract up to 8.8 million international and religious newcomers emerging in the region, all sharing ambitious travellers by 2020 interested in the country’s history, expansion plans. effectively doubling current levels. Today, Saudi Arabian’s spend more than US$10 billion on internatio- These developemts are no doubt driven by the expecta- nal travel. In order to help overhaul existing air travel tion that as the region’s youthful population matures, infrastructure in the country, to meet future needs and to they will increasingly seek to benefit from opportunities help drive economic development through the additional the region can offer, both economically and in terms of creation of adjacent development zones, reports sug- leisure activities and will increasingly utilise domestic gest the country will invest more than 46 billion Saudi and intra-regional air travel in order to facilate this. riyals (US$12.3 billion) through to 2020 and is setting up Today, about 60% of the regions population is less than a new company to manage its 27 airports. Middle east will sustain very strong traffic growth RPK growth: annual average 2009-2018 CIS 6.0% Europe North America 5.7% 8.2% Middle East 5.2% Asia-Pacific Africa 6.1% 8.7% Latin America 7.9% Middle East World 20-year 20-year 2009-2018 2019-2028 growth 2009-2018 2019-2028 growth 6.4% 5.4% 5.9% 4.8% 4.8% 4.7%
Demand for passenger aircraft A wave of new air travellers on the horizon Arab world Europe 25 20 15 10 5 0 5 10 15 % of population 80+70-7960-6950-5940-4930-3920-2910-19 0-9 Age Source: Airbus, UN Population Division, The Economist Saudi Arabia seeking to attract 8.8 million travellers Global Market Forecast 127
The Middle East During the next ten years, the region’s ideal geographi- very long range and very large aircraft will join the fleets of cal location near to growing markets like those the leading airlines of the region. The total passenger fleet of India, the CIS and Eastern Europe will also serve of airlines domiciled in the Middle East will grow to 1,790 to provide opportunities for more traditional and low- by the end of 2028. In addition, the rapid development of cost carriers. Traffic is forecast to grow at 6.6%, faster cargo operations at the region’s major hubs means that than any region, including Asia. Whilst domestic and the freighter fleet will grow to 99 large freighters by 2028. intra-regional markets in the region will continue to grow The region’s global airlines, of which there are few today, at an impressive rate as networks develop and LCCs are expected to continue their current domination of enter the market, the intercontinental network will grow growth markets over the next 20 years taking more more quickly, as new routes are added by the regions than 50% of total aircraft deliveries in the region, but more airlines and their operations expand. Therefore more than 70% of the regions twin-aisle and very large aircraft. Middle East fleet will almost treble by end-2028 Middle East 2009-2018 2009-2028 Traffic (yearly growth) Total passenger traffic 6.4% 5.9% Domestic & intra-regional traffic 5.2% 5.0% International traffic 6.6% 6.0% Total freight traffic 3.6% 4.1% Middle East 2009-2028 Fleet in service Passenger (> 100 seats) 1,418
Demand for passenger aircraftAir travel supporting the Middle East’s strategic goalsA recent report by Oxford Economics suggests that the +air transport industry directly employs close to 150,000 28.9 GDP (US$bn)people in the Middle East and contributes more thanUS$6 billion to GDP. Combining the direct, indirect and 16.9induced contributions, the air transport sector supports 13.5close to 400,000 jobs in the region and contributesUS$17 billion to GDP. 6.2 143 304 379 1,012 +In addition, air transport supports regional tourism, an Direct Jobs (’000s)important source of jobs, skills and incomes throughoutthe Middle East. Over 600 thousand jobs in tourism are + indirectsupported by air transport, contributing around US$12billion to the region’s GDP. + inducedTowards the end of the GMFs forecast period, air trans-port will provide and support jobs for close to 750,000 + tourismpeople making a GDP contribution of US$50 billion to + other catalyticGDP. 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. Global Market Forecast 129
The CommonwealthNew aircraft, new markets hilst steadily increasing fuel prices, peaking in July prices, economic growth and demand for air transport inW 2008, were causing problems for airlines in theregion, the economies of countries such as Russia, the region. The fact that the number of aircraft in the CIS fleet wasKazakhstan and Ukraine, all benefited from record-high lower in 2008 than in the early 1990s could be seen asworld-market prices for their commodity exports. As well a cause for concern. However, it is a sign that the mar-as oil, this included metals and other key commodities, ket has become more efficient through the introductionaccounting for very large shares of their total exports. of newer, latest generation eco-efficient aircraft, whichAccording to Global Insight, economic growth in the can operate at significantly higher utilisation levels thanCommonwealth of Independent States (CIS) will not the aircraft they have replaced. One clear indication ofrepeat the impressive performance in 2007 at 8.5%, up this is the fact that the number of western built aircraftfrom an already strong 8.4% in 2006. A reduction of the delivered into the market (new build, second hand andgrowth rate of the aggregate CIS economy is estimated at leased) has increased from just 1% in 1992 to 56% of5.5% for 2008, led by a moderation in Russian growth as the fleet in 2008. However, there remains a real oppor-third-quarter expansion slowed and the economic down- tunity to further increase the efficiency of the region’sturn took a greater toll in the fourth. Russias GDP had operations as an analysis of the fleet in service showsgrown at a startling 8.1% in 2007, dominating the region. that 80% can be classified as old or mid generation, withGrowth in the medium term is expected to hover in the 44% in the oldest technology category. In reality this is arange of 3.5-4.5% per year after a moderately paced vast improvement of the situation compared to just eightrecovery in 2010. The pace and strength of recovery will years ago, when 90% of the fleet could be classified asbe firmly linked to the value of exports which in turn old generation, and illustrates the pace of change in thisappear firmly linked to commodity prices like oil. As the market.world economy gradually recovers so too will commodityIncreasing oil prices will trigger medium termeconomic growth in the CIS US$ per barrel US$ billions 120 1,200 History Forecast 100 1,000 Oil price 80 800 60 600 CIS exports 40 400 20 200 0 0 2000 2002 2003 2004 2005 2006 2008 2009 2007 1998 1999 2001 2010 2012 2013 2011Source: EIA, Global Insight (April 2009), Airbus
Demand for passenger aircraftof Independent States Western-built aircraft now represents more than half of CIS fleet in service… 56% 15% raft share 1% Western-built airc Number of aircraft in service 1,000 900 800 Western-built aicraft 700 600 500 400 200 Russian-built aircraft 200 100 0 2000 2002 2003 2004 2005 2006 2008 2007 1992 1993 1994 1995 1996 1998 1999 2001 1997 Source: Airbus, Ascend (passenger aircraft in service >100 seats, data as of December for each year) … but old generation aircraft still accounts for 44% of CIS fleet in service Number of aircraft in service* 1,000 New generation 900 Mid generation 800 Old generation 700 600 20% 500 36% 400 300 200 44% 100 0 2000 2002 2003 2004 2005 2006 2008 2007 1992 1993 1994 1995 1996 1998 1999 2001 1997 Source: Ascend, Airbus Global Market Forecast 131
The Commonwealth of Independent States The CIS nations continue to spread their wings, with As a result, the traffic growth forecast by the GMF will impressive growth in the number of large international exceed world average levels at 5.7% per annum over routings. In 1992 there were 36 routings with over 4,000 the next 20 years, with impressive growth to key monthly seats. In 2008 there were 126, with the web of markets in Asia and North America, 8.1% and 7.1% res- routes spreading across Europe and into North America pectively. This means the fleet in the region is expected and Asia. to more than double to 1,500 by 2028. CIS air traffic will grow faster than world average RPKs growth: annual average 2009-2018 CIS 5.2% North America Europe 7.1% 5.3% Middle East 6.0% Asia-Pacific Africa 8.1% Latin America 6.3% 7.3% CIS World 20-year 20-year 2009-2018 2019-2028 growth 2009-2018 2019-2028 growth 5.8% 5.6% 5.7% 4.6% 4.8% 4.7% Region’s fleet to more than double
Demand for passenger aircraftCIS nations spread their wings 1992 2000 2008 36 int’l city pairs 56 int’l city pairs 126 int’l city pairs > 4,000 monthly seats > 4,000 monthly seats > 4,000 monthly seatsSource: OAG, AirbusCIS air transport demand summaryCIS Traffic 2009-2018 2009-2028(yearly growth)Total passenger traffic 5.8% 5.7%Domestic & intra-regional traffic 5.2% 5.3%International traffic 6.4% 6.1%Total freight traffic 5.0% 6.1%CIS 2009-2028DeliveriesPassenger (> 100 seats) 901 Global Market Forecast 133
AfricaRegional flying set to take off ith a population of 950 million people across moreW than 50 countries in 2008, Africa is the secondmost-populous continent after Asia. In addition, as its construction sector, (4) improved performance in agri- culture and (5) increased tourism activities.30 million km2 covers 20% of the world’s total land The continent was relatively shielded from the initialsurface, it is the third largest continent after Asia and effects of the current economic downturn, thanks to theAmerica. The huge scale of this continent and the resul- very low direct exposure of the region’s banks to theting geographic challenges mean that neither road financial crisis. However, a subsequent decrease innor rail travel are practical options, which makes air foreign direct investment and falling commodity pricestransport expansion the only realistic solution for the are now taking a toll on short-term growth prospects. Asinterconnectivity necessary to support future economic a result, the African economy is expected to expand bygrowth. only 1% in 2009. Over the medium term, commodity prices are expected to pick up once again, meaningFrom 2003 to 2008, African economic performance has Africa will be in the top four economic performers inbeen impressive with average growth of 5.6% per year. terms of growth, together with China, India and MiddleThis momentum has been achieved through (1) high East. Africa is, therefore, expected to enjoy an averageexport revenues and the resulting fiscal expansion, (2) of 3.8% real GDP growth per year, over the next fiverapid growth in foreign direct investment inflows, years, compared with 1.9% average annual growth forparticularly in the energy sector, (3) expansion in the the world as a whole.China, India, Africa and Middle Eastwill lead world economic recoveryGDP growth 2008-2013 10% China 8% India 6% Latin Africa 4% America Eastern US Middle Europe East 2% Russia Australia 0% Western Japan Europe-2% -2% 0% 2% 7% 6% 8% 10%Bubble size proportional to real GDP at PPP Real consumer spending(Purchasing Power Parity) in US$billions in 2013 growth 2008-2013Source: Global Insight (April 2009), Airbus
Demand 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 Africa African inbound tourism African tradeMillion tourists Billion US$50 100045 900 AAGR* AAGR*40 1993-2008 800 1993-200835 +6.2% 700 +6.5%30 60025 50020 40015 30010 200 5 100 0 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008* Average Annual Growth RateSource: Global Insight, World Tourism Organization, Airbus Global Market Forecast 135
Africa African trade has been boosted by the double-digit Changes in the policy framework regulating air transport growth rates of import demands from resource-intensive services in Africa began in the 1960’s, when efforts were economies such as China, India and other more indus- made to transform national regulation into a regional trialised nations. As an example, Sino-African trade agreement. The result was the declaration on a new reached a “historic” level of US$106.8 billion in 2008, African Air Transport Policy in 1988. The Heads of up from US$10 billion back in 2000. It is estimated African States endorsed the resulting policy framework, that today there are around one million Chinese workers the Yamoussoukro Decision in 2000, for broad imple- in Africa. mentation across the continent. The objectives were to liberalise the air transport market in Africa, by focusing Africa is also keen to attract lucrative business from tou- on the gradual elimination of all non-physical barriers rism, which now represents 5.1% of world tourism in to air transport services, and to lift restrictions linked terms of arrivals, up from 3.3% back in 1990. Tourists to fifth freedom traffic rights, air carrier capacity, and flying into Africa support nearly three million jobs and frequency of passenger and cargo flight operations. US$22billion and, according to the World Tourism However, progress has been patchy, with African pro- Organization (WTO), it was, together with Latin America, gress considered slower than other regions. the only region to enjoy growth of tourism in the first quarter of 2009. Not withstanding the progress of deregulation, the African international market gained 94% more Available A number of countries like Kenya, Tanzania, Namibia Seat Kilometres (ASKs) from 1998 to 2008. This impres- and South Africa are capitalising on growing demand for sive growth has been achieved through bigger routes eco tourism. In addition, tourism infrastructure conti- (average size of individual city pairs has increased by nues to develop all over Africa and especially in North 46%) in parallel with international network development Africa where low cost carriers are stimulating an already (162 additional city pairs). However, African airlines’ well-established air travel market. The massive media share of the international market is down to 40%; a coverage that will accompany the 2010 football World concern for indigenous airlines no doubt, but also a sign Cup will also accelerate international recognition of of the increasing importance of this market at an inter- sub-Saharan Africa as a major tourist destination. national air transport level. Strong growth of Africa int’l traffic but African carriers share down to 40% in 2008 Monthly traffic from/to Africa (million ASKs) Share of African carriers on Int’l markets Americas** Middle East Asia-Pacific Europe* 25,000 50% 20,000 40% 15,000 30% 10,000 20% 5,000 10% 0 0% 2000 2002 2004 2006 2008 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 1978 * includes CIS / ** includes North America and Latin America / Source: September ASK traffic from OAG, Airbus
Demand for passenger aircraftAfrican’s international network has more than doubled in 30 yearsAfrican international network development Africa intra-regional* network development Number of city pairs Number of city pairs 700 1,400 600 1,200 500 1,000 400 800 300 600 200 400 100 200 0 0 1973 1978 1983 1988 1993 1998 2003 2008 1973 1978 1983 1988 1993 1998 2003 2008 * Intra-regional includes domestic Source: OAG, AirbusNearly 100 (or 17%) old generation passengeraircraft still in service in AfricaNumber of aircraft in service 600 New generation Mid generation Old generation 500 50% 400 300 200 33% 100 17% 0 2000 2004 2006 2008 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 Passenger aircraft >100seats Source: Ascend, Airbus Global Market Forecast 137
Africa Intra-regional demand in Africa has remained largely Therefore, with fuel prices expected to pick up again in untapped over the last 20 years. Indeed, from 1988 to the foreseeable future, improving competitiveness 2008, it grew at a low average rate of 4% per year, through fleet renewal will be a significant consideration below the 6.1% achieved by the African international for African airlines. market. Contrary to the international market, the intra- regional market has not yet been stimulated by network With a regional economy expected to rebound in paral- development, so the number of city pairs being opera- lel with commodity prices, it is expected that flourishing ted has dropped from 1,260 in 1988 to 1,050 in 2008. trade and tourism, greater liberalisation and the emer- This is largely due to delays in implementing further gence of a low cost sector will drive a strong growth in regional deregulation. Africa’s passenger traffic. Therefore, Airbus forecasts that Revenue Passenger Kilometres (RPKs) will grow Should greater air traffic freedoms be achieved, they well above the world average, at 5.6% per annum over would provide new opportunities for growth at a regio- the next 20 years, with more significant growth of 5.8% nal level and leave African carriers better positioned to over the next 10 years. If Africa achieves full liberalisa- counter some of the competitive issues from outside of tion, intra-regional traffic has the potential to grow at an the region. With the introduction of newer, more efficient impressive yearly rate of 6.7%. Likewise, international aircraft, this will allow African carriers to improve their markets are expected to grow strongly. Traffic to North competitive strength. At the end of 2008 there were still and Latin America are both expected to grow by 6.7% nearly than 100 old-generation passenger aircraft in ser- and traffic to Asia-Pacific will increase by an impressive vice in Africa. This represented 17% of the region’s fleet, 9.0% per year over the next 10 years. which contrasts with an 8% share for old generation types at a worldwide level. Today, 45% of the African Over the next 20 years, strong passenger demand and fleet is over 15 years old. aircraft replacements needs, particularly in the single- aisle market segment, mean the African passenger aircraft fleet, like that in the CIS, is expected to more than double to about 1,200 aircraft. African traffic to grow much faster than world average RPKs growth: annual average 2009-2018 CIS 6.3% North America Europe 6.7% 4.2% Middle East +8.7% AFRICA Asia-Pacific 9.0% Latin America 6.7% 6.7% Africa World 20-year 20-year 2009-2018 2019-2028 growth 2009-2018 2019-2028 growth 5.8% 5.4% 5.6% 4.6% 4.8% 4.7%
Demand for passenger aircraftAfrica air transport demand summary Intra-regional flying will helpAfrica Traffic 2009-2018 2009-2028(yearly growth) to drive fleetTotal passenger traffic 5.8% 5.6% growthDomestic & intra-regional traffic 6.7% 6.2%International traffic 5.6% 5.5%Total freight traffic 4.9% 4.5%Africa 2009-2028DeliveriesPassenger (< 100 seats) 341Passenger (> 100 seats) 929Total 1,270 Africa It has been estimated that the air transport industry Contribution of air transport to the African economy directly employs more than 150,000 people in Africa and contributes US$3.5 billion to GDP. The industry is about + four times as productive as the economy as a whole 31.5 GDP (US$bn) Combining the direct, indirect and induced contribu- tions, the air transport sector supports close to 450,000 9.5 jobs and US$10 billion GDP. 7.6 Air transport also supports regional tourism, which is an 3.5 158 357 446 3,431 + important source of jobs, skills and incomes throughout Direct Jobs (’000s) Africa. It has been estimated that three million tourism related jobs in the region are supported by air transport, + indirect contributing around US$22 billion to the continent’s GDP. + induced Oxford Economics estimates that towards the end of + tourism our forecast period, air transport will provide and sup- port jobs for almost 700,000 people in Africa, making a + other catalytic GDP contribution of US$25 billion, plus an additional Source: Oxford Economics four million jobs and US$77 billion of GDP supported in the tourism sector. Every one percentage point lower growth in passenger and freight traffic will reduce the number of jobs suppor- ted by air transport in the next 20 years by around 500,000 and GDP by approximately US$13 billion. Global Market Forecast 139
Latin America, Middle East Latin America Latin America& Africa to represent 16%of 20-year new passengeraircraft demand 1,658 aircraft demand US$159 billion 1% 18% 81% • Stability and new confidence • Economies to grow further • Aviation resistant to downturn • Many emerging markets Middle East Middle East Africa 1,418 aircraft demand 929 aircraft demand US$243 billion US$107 billion 13% 4% 69% 27% 47% 40% • Central to world population & wealth • Home of the next India • 5 billion people next door • Economic promise to reality • Global ambition and vision • Sustaining the momentum • High growth • Intra-regional market untapped20-year new passenger aircraft demand > 100 seats (excluding freighters)
Demand for passenger aircraftAsia-Pacific: largest Asia-Pacificand most diverse market 7,672 aircraft demand US$1.1 trillion 9% 31% 60% • High growth • Large developing markets • Large cities • Fast developing LCCs Europe & CIS North America 6,969 aircraft demand US$763 billion 5,451 aircraft demand US$495 billion 4% 2% 20% 15% 76% 83% • Sustained growth • Large replacement market • Still untapped Central European markets • Mature domestic market • Strong long haul international market • Still developing international market • Asia’s largest international market • Largest freight base20-year new passenger aircraft demand > 100 seats (excluding freighters) Global Market Forecast 141
Air cargo forecast
Freighter fleet development he 2008 freighter fleet was composed of 1,731 T aircraft, including 53 ‘combi’ aircraft, (i.e. aircraft combining passengers and freight on their main-deck) and 59 quick-change aircraft (i.e. aircraft that can be converted between passenger and freight operations through the removal of palletised seats, in just a few hours). In the past these aircraft facilitated postal services in some countries. Those combi aircraft remai- ning in the fleet continue to be gradually converted into full freighter and with no new combis being delivered by manufacturers, we can expect that in a few years they will have disappeared from the market completely. A total of 190 operators are flying the current freighter fleet, but the majority have a very limited number of air- craft. The major freight integrators operate the largest share, which represent 50% of the global fleet. The largest of these, by some margin, is operated from North America, where 40 operators are using more than 57% of the world fleet. This is because most of the major integrators are based in the US. Europe and the CIS have the next largest fleets of freighter aircraft, clo- sely followed by the dynamic Asia-Pacific region. For the time being there are relatively few dedicated freighters in the Middle East, but this region is evolving rapidly. The GMF assumes that freighter aircraft on average are operated until they reach the age of 35, whether being
Air cargo forecastnew or converted. Small freighters are typically retired service, meaning that 1,306 aircraft will be retired. Someafter 37 years of operation, while combis and other 94% of the smaller freighters currently flying will reachaircraft converted to freighters are converted at around the end of their lives by 2028 and the vast majority of20 years of age meaning that they are operated as regional freighters will also be retired; 563 aircraft arefreighters for about 15 years. Whether a particular type forecast to become too old to sustain profitable opera-is converted or not is heavily dependent on several tions. On the other hand, the fact that large cargofactors including: availability, residual value, operational aircraft, are as a whole significantly younger today thansuitability (range, cargo capability etc.) and, not least, other classes of freighter, means that just a half of themone or more suitable conversion programmes. Over the will leave service in the next 20 years, resulting in lowernext 20 years, 72% of today’s freighter fleet will leave overall demand in this segment.2008 freighter operators and fleet World Operators Fleet 190 1,731 Europe and CIS Operators Fleet North America 37 289 Middle East Operators Fleet Operators Fleet Asia-Pacific 40 982 12 41 Operators Fleet Africa 46 277 Latin America Operators Fleet Operators Fleet 34 61 21 81 72% of today’s freighters will retire by 2028 Global Market Forecast 145
Market trendsAfter years of steady growth from 2003, air cargo traffic The price of fuel is a very important parameter in airhas faced a severe downturn, linked to the global econo- cargo economics, even more so than for passengermic conditions and a slump in consumer and therefore transport, as in this case, all passenger-related costs aremanufacturing demand. However, most in the forecasting irrelevant. Between 2005 and mid-2008, fuel pricescommunity remain convinced that the market will recover, increased dramatically, leading to major changes inas economic fundamentals are expected to once again the global fleet, with many older types coming undercreate a real demand for the transportation of goods, par- pressure due to their inefficiency. High fuel prices alsoticularly by air. drove some airlines to apply fuel surcharges to helpAir freight offers the advantage of speed compared to cover higher operational costs, with the resulting higherother means of transport, particularly advantageous for prices driving freight from the air to other modes ofsome products like high technology or perishable goods. transport.It offers additional value by freeing up capital more quickly, From the time the crisis began to bite and demand foras the value of goods transported by ship for example, is air freight began to be negatively affected, the numberlocked in over longer journey times. As borrowing is more of these older types entering storage increased in ever-difficult today and liquidity key, this benefit of air transpor- greater numbers. The best of these stored aircraft maytation is now even more valued by customers and freight return to service when demand resumes, but a vastforwarders. Finally this is often taken for granted, but majority of the oldest, less fuel efficient aircraft won’tsending goods by air has the additional benefit of being fly again, which will effectively increase the pace ofprobably the most secure method of transport for high retirement.value goods. This is an important factor when trans- We can be confident that, as economies and marketsporting goods in regions of the world where security recover over the coming months and years, demand forthreats, such as piracy, have increasingly become a airfreight will also recover, particularly in emerging coun-serious consideration. tries, which as in the passenger market, are expected to have higher rates of growth. FTKs* (billions) 550 History Forecast 500 AAGR 2009-2028: 450 5.2% 400Freight traffic 350to triple in 20 years 300 250 AAGR 1999-2008: 85% World FTKs 3.8% 200 150 100 86% World FTKs 50 0 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 International Domestic
Air cargo forecastRegional overviewAsia-Pacific North AmericaAsia-Pacific has been by far the most dynamic region North America, and the US in particular, is by far theover recent years and should remain the leading region most important point in terms of world freight traffic. Inin terms of growth over the next 20 years. Economic 20 years this region as a whole will be responsible forgrowth is higher than in western countries and a subs- over 40% of freight tonnes every year. Today, the UStantial population is becoming increasingly consumerist, domestic market is the single most important marketwhich is expected to drive their economies further worldwide as measured by the amount of freight traffic.through increased spending. Moreover the geography of However, while this market will grow at 1.5% per annum,the region, in terms of distances, terrain and large cen- other flows including that between China and the US,tres of population, makes surface transportation difficult and the domestic Chinese market will develop at a fas-and substantial an opportunity for airfreight. ter pace, to replace it in the overall world ranking of freight traffic flows. Today, 57% of the freighter fleet isHowever, sea transport is a strong competitor to air in located in the region mostly in the US. However, as thethe region particularly for local shipments. Due to low world’s dedicated cargo fleet grows and trade and eco-labour costs in some cases and a focus on world class nomies develop in other parts of the world, like Asia, thismanufacturing of consumer and industrial goods in share is expected to decline to 40% by 2028, with Asia’smany others, Asian countries have become key loca- fleet reaching a similar size with 1,147 aircraft or 37%tions for the production of a wide range of goods from of the world fleet. Nevertheless, the North Americantextiles to computers or household equipment. Part of fleet as a whole, will grow by 58% to 1,550 aircraft,this production goes to local markets, but most of it is despite the clear issues faced by the industry in 2009.exported to developed countries outside of the region,mainly North America and Europe. Air cargo has played Integrators like FedEx and UPS have built impressivea crucial role in the trend to lean and just-in-time type express freight businesses in the region, based on themanufacturing processes. Companies and individuals need for the timely delivery of all manner of small parcelsexpect to have their goods in very short timeframes, and packages door to door, primarily using or integratingenabling significant inventory and cost reductions, which road and air transportation. This business has historicallycan be passed on the final consumer or shareholders. driven the need for small freighters like the 727 and DC9. These aircraft have declined in use in recent years as they are retired due to age and in a significant number of cases have been replaced by ground transportation, primarily long-haul trucks. However, speed, distance and cost considerations will mean continued demand for a numberFocus on North America of this class of aircraft, the vast majority, if not all, conver- sions of existing passenger types like the A320.1,200 1000 800 MD-11, 747 DC-10, 767, 757 600 A300, A310 400 DC-8 200 DC-9, 727 0 2002 2009 Small jet Regional Long-range Large freighters freighters freighters freighters Global Market Forecast 147
People’s Republic of China Middle EastPeople’s Republic of China (PRC) markets dominate With its unbeatable geographical location, the Middlefreight traffic. During the last decade, huge economic East has a clear advantage over other regions to reachgrowth has occurred in China, leading to a dramatic Europe, Asia or Africa easily. This region has experien-rise in air cargo, mainly from and to a lesser extent, ced huge growth over the last decade, thanks to thereturning to China. Over the next 20 years, traffic flows exceptional economic growth linked to oil, but alsolinking China with other countries are expected to through other industrial developments. Infrastructure incontinue their growth. For example, the flow between the region has improved over the last decade, allowingChina and the US will be the largest, representing more for more capacity without some of the constraints thatthan 15% of total FTKs in 2028. This can be explained airports in Europe and North America have to face.by the continuous development of Chinese industry, Dubai International Airport is one of the busiest in theexporting manufactured goods to western countries as world for cargo activity, helped by a focus on multimodalwell as to other Asian markets. Domestic China will be freight activity, with steady growth since the mid-90s.the second largest market in terms of the number of The Middle-East now has freight traffic links to all partsFTKs, with 8.2% of the total by 2028. This growth is of the world, with North America and the Indian sublinked to the level of goods needed to be exchanged continent being the largest flows. In the next 20 years,within the country during its continued industrial North America will remain a key partner for the region,development. but China will become more important as its economy grows.The Eastern and South-Eastern regions of China arevery industrialised, whilst at the same time other parts Latin Americaof the country like the West and South-West are muchmore rural. Today, the Chinese government is trying to Although this region represents just 7.5% of the globalstimulate growth in these regions, with improved trans- FTKs today, it has the potential to grow thanks to aportation links and air cargo likely to play a major role dynamic population and improved economic condi-in this effort. For instance the western province of tions. Flows to and from Latin America are now equalSichuan is developing Chengdu airport to help compa- to 11.5 billion FTKs and by 2028 are expected to reachnies settle in the region, particularly those in high 28.3 billion, therefore driving the need for significantlytechnology businesses. As a result, a number of air- more capacity than today. The largest increase will belines have launched regular cargo activities between between the PRC and South America, as China seeksSichuan and Hong-Kong and the east of the country. to further extend trade ties with the region. The strongThe use of belly hold capacity in passenger aircraft links between South, Central and North America willused to be sufficient from Chengdu, but is now supple- remain important, with South and Central Americamented with pure cargo aircraft, which often prove to major suppliers of perishable produce for Northbe the most efficient solution in light of growing American markets, as well as for Europe, although ondemand. Internationally, links between China and a smaller scale.Africa 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.
Air cargo forecastAfricaAfrica is as diverse in its economic development as the Kenya. The plant, which will produce between 10 andcontinent’s flora and fauna, with many countries exhibi- 60 buses per month, will boost sales, as they will notting signs of strong growth potential. Goods exported attract import duty and therefore cost 25% less whenfrom Africa have been primary raw materials, as well as locally manufactured. This will also allow TATA to sup-fresh produces like flowers, fresh fruits and vegetables. ply vehicules to the neighbouring markets of Tanzania,Interestingly, the countries emerging today, are sho- Rwanda, Uganda, Ethiopia, Zambia and Malawi. TATAwing interest in African markets and capabilities, with consider Africa a key emerging market for its products.places like China, keen to safeguard supplies of oil and With growth in this sort of inward investment, beyondother raw materials. However, this interest is not just mining or farming for example, economies will benefitlimited to natural resources. For example, Indian manu- and grow, leading to an increased need for air freight.facturer TATA Motors has targeted Africa for vehicle Today, the highest number of FTKs goes to Europe andproduction. In 2008, the company announced that it North America, but in the coming years other emergingwould build a bus manufacturing plant in Mombasa, markets including China will represent a bigger part of the trade from this continent.PRC markets dominate international traffic FTKs (billions) 2009 2009 20 year % of 2028 0 10 20 30 40 50 60 70 80 -2018 -2028 growth World FTKs PRC-North America 8.7% 8.9% 8.8% 15.4% PRC-Europe 7.4% 8.2% 7.8% 7.7% Europe-PRC 7.6% 7.5% 7.6% 4.0% Asia-North America 4.0% 4.6% 4.3% 4.0% Europe-North America 2.1% 3.8% 3.0% 3.7% North America-PRC 7.8% 8.5% 8.2% 3.5% North America-Europe 1.2% 4.7% 3.0% 3.2% Asia-Europe 2.4% 3.9% 3,2% 2.6% North America-Asia 2.2% 4.7% 3.4% 2.5% Europe-Asia 2.9% 4.3% 3.6% 2.0% South America-Europe 4.6% 5.0% 4.8% 1.4% Asia-PRC 8.6% 9.0% 8.8% 1.2%Indian Subcontinent-North America 3.2% 4.3% 3.7% 1.1% Africa-Europe 3.8% 4.2% 4.0% 1.1% Japan-Europe 2.2% 4.2% 3.2% 1.1% Europe-Indian Subcontinent 6.3% 6.8% 6.6% 1.1% Japan-North America 1.0% 3.7% 2.3% 1.0% Europe-Africa 2.7% 4.0% 3.3% 1.0% 2008 traffic 2009-2028 growth US-PRC flow will be world’s largest at 15% of FTKs Global Market Forecast 149
IndiaThe Indian subcontinent is developing quickly thanks to grow slightly faster than the world average, butthe size of the country and the pace of its economic tremendous growth will come from the rapid expansiondevelopment, both domestically and internationally. With of those domestic express freight operations, whicha current fleet limited to only 12 aircraft, there is very high should increase on average 16.5% per annum overpotential for traffic and fleet development, with Airbus the next two decades. The freighter fleet startedforecasting that 164 cargo aircraft will fly within and to increase regularly from the year 2000, firstly with afrom India by 2028. Part of this development will be limited number of single-aisle aircraft, but since 2005linked to the expansion of an express market, as com- regional wide-body aircraft like the A310 have joinedpanies and individuals will increasingly need to ship the fleet.urgent goods and documents. International freight willIndia freight traffic to grow almost four-fold over the next20 yearsA huge development of domestic air freight in India to satisfy a growing middle-class population India domestic express freight India international freightFTKs (billions) FTKs (billions)2.5 30 History Forecast History Forecast 25 2 201.5 15 1 10 + 5.4% per year0.5 5 + 16.5% per year 0 0 1995 2000 2005 2010 2015 2020 2025 1995 2000 2005 2010 2015 2020 2025 Indian fleet to grow 13.5 times
Air cargo forecastFleet evolutionSmall jet freighters Small jet freighters 1,000Today, these predominanty single-aisle derived aircraftare mainly flown by North American operators and arerelatively aged. Most of the current fleet is expected to 812 800be phased-out in the next 20 years, as they reach theend of their economic lives. Only converted aircraft, like +2.4%p.a.the A320, will replace them, with little expectation of any 600new build freighter offerings over this period. The growth 508 786in the number of aircraft flying in this segment will be limi-ted, mainly because the US domestic market is now 400mature. 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- 200tions. 0 26 2009 2028 Retained Conversions in serviceRegional and long-range freighters Regional and long-rangeThis dynamic market segment will experience 4.6% freightersgrowth over the next 20 years, for two main reasons. 2,000Firstly, the long-range segment has been underserved, 1,816 1,800with a clear need for such aircraft for such operations.With manufacturers now offering aircraft increasingly 1,600 340suited to airlines needs such as the 767 and the A330, 1,400operators have been encouraged to increase their fleets.Secondly, there will be development of integrator activity 1,200 +4.6%p.a.in China and India over the next two decades. These 1,000airlines and operations will need aircraft offering greater 800 1,285payload and range capabilities to serve their customers 754in a very limited time frame. 600 400 200 191 0 2009 2028 Retained Conversions New in service freighters Global Market Forecast 151
Large freighters Large freightersThis segment of the market differs from others as the 1,400 1,236fleet flying today is relatively young, which means a lower 1,200proportion of large freighters will cease operations in the 1,000 514next 20 years. It is forecast that some 44% of the aircraft +5%p.a.flying today will remain in service until 2028, with a 800growth of the segment of 5%. This represents a fleet 600increase of more than 750 aircraft, which can be explai- 469 514ned by high growth rates expected on routes 400linking China with distant markets like South and 200Central America. From North America to the PRC the 208 0growth rate will be more than 8% per year over the next 2009 2028two decades. This means that airlines operating on this Retained Conversions Newflow will have a strong requirement for large freighter in service freighterscapability. 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 freighter fleet to more than doubleWorld fleet developmentThe cargo aircraft fleet will increase globally from just Large aircraft will represent 60% of new deliveries, withover 1,700 aircraft in 2008 to 3,864 in 2028, with both the vast majority of these flown by operators from thenew and converted freighters. This means that the Asia-Pacific region. The value of the new freighters deli-dedicated freighter fleet will grow 2.2 times from today’s vered during the next two decades will be aroundlevel. North America’s mature market, where the expec- US$210 billion at current list prices. Latin America willted growth rate is limited to 1.5% over the next 20 see an 86% increase of its freighter fleet, with essen-years, will mainly be a replacement market with little tially small, converted aircraft flying regionally. The big-growth. Younger converted aircraft will replace the rela- gest increase will be in the Asia-Pacific region, whichtively old single-aisle aircraft and a few new freighters will start with a modest fleet of 277 aircraft but is fore-will supplement the need for larger aircraft among the cast to reach 1,447 units in 2028, thanks to the deve-North American airlines. Globally, 3,439 aircraft will join lopment of long-haul routes to North America andthe freighter fleet, 75% of them being conversions. Europe as well as to destinations within Asia.
Air cargo forecast Asia-Pacific freighter fleet to increase five-fold 2009-2028 freighter fleet World 2009 2028 1,731 3,864 100% 100% Europe and CIS 2009 2028 North America 290 547 Middle East 2009 2028 17% 14% 2009 2028 Asia-Pacific 982 1,550 41 99 2009 2028 57% 40% 2% 3% Africa 277 1,447 Latin America 2009 2028 16% 37% 2009 2028 61 72 80 149 3% 2% 5% 4% 2009-2028 freighter demand… 2009-2028 Total new aircraft 854 Total converted 2,585 Total aircraft 3,439 1,800 ...with new deliveries 1,600 worth > $200 (billion) 340 1,400 US$ (billions) 1,200 175 151 1,000 150 800 0 125 514 600 1,285 100 400 786 75 514 58 200 50 0 25 Small jets Regional Large 0 & Long-range 0 Small jet Regional Large Conversions New freighters freighters & Long-range freighters Source: Airbus Market Research and Forecasts Source: Airbus Market Research and Forecasts Small jet freighters 727, 737, A320P2F, Bae 146, DC-9, Tu-204 Regional & long-range freighters 707, 757, 767, A300, A310, A321P2F, A330, DC-8, DC-10 Large freighters 747, 777, A350*, MD-11, A380** Future freighter programmes Global Market Forecast 153
Passenger traffic forecast AAGR* AAGR*Sub market 2009-2028 Sub market 2009-2028Africa Sub-Sahara - Asia 5.0% Canada - Pacific 3.9%Africa Sub-Sahara - Australia/New Zealand 5.9% Canada - Russia 5.2%Africa Sub-Sahara - Indian Subcontinent 7.1% Canada - South America 5.1%Africa Sub-Sahara - Middle East 7.5% Canada - US 4.3%Africa Sub-Sahara - North Africa 9.0% Canada - Western Europe 4.3%Africa Sub-Sahara - P.R. China 9.3% Caribbean - Central America 6.2%Africa Sub-Sahara - Russia 2.4% Caribbean - Russia 6.4%Africa Sub-Sahara - South Africa 7.4% Caribbean - South America 4.7%Africa Sub-Sahara - South America 4.3% Caribbean - US 2.2%Africa Sub-Sahara - US 4.8% Caribbean - Western Europe 5.0%Africa Sub-Sahara - Western Europe 4.2% Central America - Japan 4.0%Asia - Australia/New Zealand 4.8% Central America - South America 7.1%Asia - Canada 4.7% Central America - US 4.8%Asia - Central Europe 7.5% Central America - Western Europe 3.3%Asia - CIS 6.3% Central Europe - CIS 6.5%Asia - Indian Subcontinent 7.1% Central Europe - Indian Subcontinent 7.3%Asia - Japan 3.5% Central Europe - Middle East 1.9%Asia - Middle East 4.4% Central Europe - North Africa 5.5%Asia - North Africa 4.4% Central Europe - P.R. China 6.9%Asia - P.R. China 7.1% Central Europe - Russia 5.8%Asia - Pacific 2.8% Central Europe - US 3.9%Asia - Russia 6.2% Central Europe - Western Europe 6.7%Asia - South Africa 6.6% CIS - Indian Subcontinent 6.0%Asia - South America 6.4% CIS - Japan 4.7%Asia - US 5.6% CIS - Middle East 5.2%Asia - Western Europe 4.6% CIS - North Africa 2.9%Australia/New Zealand - Canada 5.3% CIS - P.R. China 9.4%Australia/New Zealand - Indian Subcontinent 5.0% CIS - Russia 6.5%Australia/New Zealand - Japan 3.3% CIS - US 6.4%Australia/New Zealand - Middle East 7.3% CIS - Western Europe 6.0%Australia/New Zealand - P.R. China 6.6% Domestic Africa Sub-Sahara 5.3%Australia/New Zealand - Pacific 5.9% Domestic Asia 4.6%Australia/New Zealand - South Africa 5.7% Domestic Australia/New Zealand 4.9%Australia/New Zealand - South America 6.8% Domestic Brazil 5.8%Australia/New Zealand - US 5.3% Domestic Canada 2.9%Australia/New Zealand - Western Europe 3.5% Domestic Caribbean 2.3%Canada - Caribbean 3.3% Domestic Central America 4.5%Canada - Central America 7.8% Domestic CIS 5.3%Canada - Central Europe 5.8% Domestic Central Europe 4.1%Canada - CIS 6.0% Domestic Western Europe 3.0%Canada - Indian Subcontinent 8.0% Domestic India 10.0%Canada - Japan 4.1% Domestic Indian Subcontinent 5.8%Canada - Middle East 6.9% Domestic Japan 2.2%Canada - North Africa 6.2% Domestic Mexico 5.5%Canada - P.R. China 6.9% Domestic Middle East 4.2%* AAGR: Average Annual Growth Rate
AAGR* AAGR*Sub market 2009-2028 Sub market 2009-2028Domestic North Africa 5.1% North Africa - P.R. China 9.4%Domestic Pacific 2.8% North Africa - Russia 6.0%Domestic P.R. China 7.9% North Africa - South Africa 8.6%Domestic Russia 4.9% North Africa - US 7.0%Domestic South Africa 5.7% North Africa - Western Europe 4,4%Domestic South America 4.2% P.R. China - Pacific 6.7%Domestic Turkey 10.1% P.R. China - Russia 8.5%Domestic US 2.0% P.R. China - South Africa 8.7%Domestic Africa Sub-Sahara 5.4% P.R. China - South America 6.9%Indian Subcontinent - Japan 4.7% P.R. China - US 6.8%Indian Subcontinent - Middle East 5.8% P.R. China - Western Europe 7.0%Indian Subcontinent - P.R. China 8.4% Pacific - South America 1.9%Indian Subcontinent - Russia 6.0% Pacific - US 4.1%Indian Subcontinent - South Africa 7.7% Pacific - Western Europe 4.1%Indian Subcontinent - US 8.2% Russia - US 7.3%Indian Subcontinent - Western Europe 5.8% Russia - Western Europe 4.9%Intra-Africa Sub-Sahara 4.9% South Africa - South America 6.5%Intra-Asia 5.4% South Africa - US 5.8%Intra-Australia/New Zealand 3.8% South Africa - Western Europe 5.2%Intra-Caribbean 1.3% South America - US 4.5%Intra-Central America 6.4% South America - Western Europe 5.7%Intra-Central Europe 6.2% US - Western Europe 4.0%Intra-CIS 4.0%Intra-Indian Subcontinent 4.9% World 4.7%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% Global Market Forecast 157 Summary tables
Freight traffic forecast AAGR* AAGR*Sub market 2009-2028 Sub market 2009-2028Africa - Africa 4.3% CIS - P.R. China 6.2%Africa - Asia 3.2% CIS - South America 2.2%Africa - Central America 5.5% Domestic India 16.5%Africa - CIS 2.5% Domestic P.R. China 11.9%Africa - Europe 4.0% Domestic US 1.5%Africa - Indian Subcontinent 3.8% Europe - Africa 3.3%Africa - Japan 0.9% Europe - Asia 3.6%Africa - Middle East 4.7% Europe - Central America 4.4%Africa - North America 3.6% Europe - CIS 3.8%Africa - Pacific 3.7% Europe - Europe 3.2%Africa - P.R. China 7.6% Europe - Indian Subcontinent 6.6%Africa - South America 5.1% Europe - Japan 1.8%Asia - Africa 3.9% Europe - Middle East 3.4%Asia - Asia 4.0% Europe - North America 3.0%Asia - Central America 5.8% Europe - Pacific 3.0%Asia - CIS 4.4% Europe - P.R. China 7.6%Asia - Europe 3.2% Europe - South America 2.8%Asia - Indian Subcontinent 5.1% Indian Subcontinent - Africa 5.5%Asia - Japan 3.2% Indian Subcontinent - Asia 4.2%Asia - Middle East 3.1% Indian Subcontinent - Central America 6.9%Asia - North America 4.3% Indian Subcontinent - CIS 2.1%Asia - Pacific 4.0% Indian Subcontinent - Europe 4.8%Asia - Africa 8.8% Indian Subcontinent - Indian Subcontinent 4.4%Asia - South America 4.9% Indian Subcontinent - Japan 3.9%Central America - Africa 5.5% Indian Subcontinent - Middle East 5.0%Central America - Asia 2.3% Indian Subcontinent - North America 3.7%Central America - Central America 2.4% Indian Subcontinent - Pacific 3.9%Central America - CIS 4.1% Indian Subcontinent - P.R. China 7.6%Central America - Europe 3.3% Indian Subcontinent - South America 6.1%Central America - Indian Subcontinent 6.2% Japan - Africa 4.4%Central America - Japan 3.1% Japan - Asia 3.5%Central America - Middle East 3.5% Japan - Central America 3.3%Central America - North America 2.6% Japan - CIS 3.2%Central America - Pacific 4.7% Japan - Europe 3.2%Central America - P.R. China 6.9% Japan - Indian Subcontinent 4.0%Central America - South America 5.0% Japan - Middle East 3.9%CIS - Africa 1.3% Japan - North America 2.3%CIS - Asia 2.7% Japan - Pacific 4.3%CIS - Central America 3.7% Japan - P.R. China 9.0%CIS - Europe 2.0% Japan - South America 2.6%CIS - Indian Subcontinent 2.2% Middle East - Africa 4.5%CIS - Japan 1.5% Middle East - Asia 3.2%CIS - Middle East 2.3% Middle East - Central America 5.7%CIS - North America 2.2% Middle East - CIS 2.7%CIS - Pacific 1.8% Middle East - Europe 2.3%* AAGR: Average Annual Growth Rate
AAGR* AAGR*Sub market 2009-2028 Sub market 2009-2028Middle East - Indian Subcontinent 4.8% South America - CIS 4.1%Middle East - Japan 1.7% South America - Europe 4.8%Middle East - Middle East 3.3% South America - Indian Subcontinent 6.6%Middle East - North America 3.2% South America - Japan 4.3%Middle East - Pacific 3.4% South America - Middle East 3.0%Middle East - P.R. China 7.7% South America - North America 2.4%Middle East - South America 3.6% South America - Pacific 5.2%North America - Africa 4.8% South America - P.R. China 8.9%North America - Asia 3.4% South America - South America 6.0%North America - Central America 2.8%North America - CIS 4.3% World 5.2%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% Global Market Forecast 159 Summary tables