Air bus global market forecast

Flying smart,
thinking big

2009 - 2028

True innovation can be difficult to see,
but the identification and delivery of technological
breakthroughs are critical if the aviation industry
is to develop a sustainable future for the span
of this GMF and beyond.

This is particularly true in the field of alternative
energy, so the cover of this year's forecast
is a graphical representation of one
of 200,000 species of algae available
for research into aviation bio-fuels that
do not raise conflicts, such as diverting resources
from food production.

The sheer number of possibilities for algae
and the challenges ahead to realise their potential,
are useful reminders that resource and time
are arguably more important than
the original idea when it comes to finding
the best result for all.

Demand for air travel
12
30 Traffic forecast
56 Demand for passenger aircraft
142 Air cargo forecast
154 Summary tables

Executive

Background
Underlying demand strong
Over time, a number of significant developments have
influenced passengers and airlines, affecting the shape
and direction of the aviation industry, as well as deter-
mining the level of future demand for air transportation
around the world.

The latest development has clearly been the recent eco-
nomic downturn, which has given everyone in the
industry cause to reassess their business in light of
the 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 significantly
impact the long-term trends of the industry. The good
news is that, despite bringing difficulties that can range
from falling demand, load factors, yields and profitability,
such cycles are generally relatively short lived compared
to the timescales considered for aircraft investment and
fleet turnovers. In addition, the industry can be subtly
changed for the better as a result of efficiency improve-
ments introduced to beat the downturn. This means
that 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 large
Recycled
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, given
Passenger 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 fleet
The world’s fleet, which includes both passenger (from As many as 5,802 twin-aisle passenger aircraft will
100 seats to very large aircraft) and freighter aircraft, will be required to serve the existing, mainly international
grow 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 passenger
models. 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 the
generation 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 its
remaining 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 the
through environmentally sensitive programmes, such as economic ability as well as the desire to fly among these
the Airbus PAMELA project. The Airbus forecast conti- destinations.
nues to predict that the greatest demand for passenger
aircraft 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 for
its mix of global, low-cost and charter airlines. Europe will 3,439 freighter deliveries, 2,585 of which will come from
receive 25% of the total, with North America and Asia- conversions and 854 of which will be new generation
Pacific taking 23% and 31% respectively. In addition, the factory-built freighters, mainly long-range or regional
world’s airlines will require more than 6,000 smaller air- freighters.
craft, either jet or turbo-prop, (with 19 to 100 seats) to
serve 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 freighter
While traffic demand will nearly triple, airlines will more aircraft, worth US$3.1 trillion at current list prices. Most
than 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 aircraft
28,111 in 2028. will account for 19% of total aircraft delivery value.
Despite concerns about aircraft deliveries following the
This will include deliveries of 24,097 new aircraft. Some economic downturn, strong underlying demand will
17,000 of these will be single-aisles for domestic and emerge with the recovery, which means airlines require
intra-regional flows, which is more than in previous fore- an average of 1,248 new, eco-efficient aircraft deliveries
casts due to the emergence of low-cost carriers and per year over the next 20 years. Combined with the
increased liberalisation. A large number of aircraft, decommissioning of older generation aircraft, this will
where new products must deliver even greater benefits gradually reduce the average fuel consumption of the
to 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


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 trillion

Number of new aircraft* US$ (billions)
18,000 16,977 1,400

16,000 1,206
1,200
14,000
1,000
12,000
819
10,000 800

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)


Aviation growth :
more than just

Balancing benefits and costs

While 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 can
emissions 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 people
Aviation 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 million
emerging 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 just
While the impact of the aviation industry and its supply as tangible but are harder to quantify, which magnify the
chain 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; delivering
real 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 between
account the indirect and induced contributions, the air travellers and regions where economic growth could
transport industry is expected to contribute around 23 otherwise be limited, as well providing essential funding
million jobs and US$2.6 trillion. Adding the contribution and incentives for the protection of biodiversity.


aircraft 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.


Benefiting investment
Air 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 air
tain international markets, investment and business. transport networks are “vital” or “very important” for
As 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 highest
ranked 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 companies
need good air transport such as Siemens, Samsung, Dell, GM, HP and IBM all
links 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 the
35 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


Airport development as an integral part of social and economic development
initiatives in South Africa

The Dube TradePort (DTP) is a strategic and critical infra- As well as its direct impact on GDP, the DTP is designed
structure investment, which aims to serve as a major to have catalytic benefits in terms of local economic
catalyst 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, related
tral role that improved air services play in facilitating sus- efforts to eradicate malaria from destination areas have
tainable 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 day
investment, natural habitat preservation and the deve- when the country’s trade and tourism prospects will
lopment of tourism. be freed of the curse of malaria. South Africa's 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, temperate
trade 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 unique
export of high-value goods through KwaZulu-Natal. By archaeological sites and battlefields, the availability of
providing 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 of
motor components, electronics, clothing and textiles, King Shaka International Airport at DTP and the potential
perishables and value-added logistics, which are criti- it offers for direct flights from key markets, is a central
cally dependent on specialised and scheduled air cargo part of the strategy to increase the flow of tourists to a
that guarantees timely delivery. region. The FIFA World Cup in 2010 provides a major
incentive to have construction complete and the airport
The plans also include an integrated agricultural export operational.
zone. This will include land and facilities for the cultivation
and 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 believe
sensitive, 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 blighted
on-site producers and growers from surrounding areas. the continent of Africa.


Benefiting
productivity & efficiency
From the aforementioned IATA survey, 80% of busi-
nesses also said that air transport was important to Cork Airport Business Park: symbol
efficiency and 50% thought it was vital. More than two
thirds believed that air transport enabled them to reach of transition from agriculture to hi-tech
greater economies of scale and improve efficiency, while
over half were convinced that it reduced costs for their
Since the early 1990s, the Irish economy has experienced
businesses.
growth at an extremely accelerated pace. The 1980s had
seen many leave the island in search of employment, as
Opening 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 economic
improvements. Over a quarter of companies believe
boom around the turn of the century can be attributed to
that innovation and investment in research and develop-
various policies implemented specifically to attract foreign
ment would probably be badly affected if air transport
companies. These policies included low corporation tax
services 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 local
industry itself. In 2006, 39 aerospace and defence com-
initiatives that have made some regions of the country
panies undertook US$19.9 billion of R&D expenditure.
particularly attractive for foreign investors. The business
Successful 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 minutes
social return on aerospace R&D spend is estimated to
from Cork airport was set up in 1998. By 2005, the park
be 70%, compared with 50% for manufacturing as a
had attracted many international companies employing
whole(3). In other words, once it matures, a typical invest-
around 1,800 people. Building on this success, the Irish
ment of US$100 million in R&D by the aerospace sector
government launched a new phase, which would nearly
adds 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 tenants
Two 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 the
tion connectivity typically leads to a sizable improvement
local economy’s diversification away from declining agri-
in labour productivity. To capitalise on such efficiency
gains, some cities and regions have developed business
parks next to airports. These typically attract highly
productive companies that benefit from the exchange
of ideas and skilled personnel, as well as the opportunity
to 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


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 source
culture to the fast growing pharmaceutical and IT sectors,
of economic growth for many areas, some governments
two 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 flight
Since 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 are
that 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, the
approximately 60% in the mid-1980s to 72% today. The
promotion of eco-tourism started in the 1980s. Since
number of jobs has increased by 83% over the same
then, international tourism has increased six-fold to
period, 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 more
Based on the key metrics of share of regional GDP,
importantly, it has also helped to pay for the preservation
growth 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 air
Among 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 Oxford
Economics); ‘Regions as Technology and Life Science Locations’, BAK Basel
Economics Forum 2006


Airborne tourists provide a path to jobs and development
- Morocco’s Vision 2010

The country’s location at the nexus between Africa and Fès lies inland, 200km northeast of Casablanca. It is the
Europe 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 of
of 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 site
Continuing this rich tradition of inclusiveness is the has been declared a UN World Heritage Site, and has
Festival of World Sacred Music (Festival des Musiques been extensively renovated as part of the Vision 2010
Sacrées du Monde). Each June sees performers from plan. The medina is a maze of mosques, food markets
every corner of the Earth fly into Morocco for a week of and bazaars. Noted for its quality craftsmanship, Fès is
artistic 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 and
peaceful, pluralistic, generous and joyous, with the aim its tourist potential unexploited. Accordingly, the regio-
of honouring all the world's 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 Millennial
The Moroccan government has been keen to promote Museum, based on its authenticity as the only remaining
the country’s rich cultural heritage and to encourage cul- place in the world where daily lives still reflect an ancient
tural 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 the
It is hoped that the attendant media interest in the Medina by converting houses with high historical value
band’s choice of recording venue will rekindle Morocco’s and Fondouks into high-quality guest houses
reputation as a favourite artistic retreat in the 1950s and • the conversion of Fondouks into theme-based cafés or
60s, when artists such as the Rolling Stones were regu- exhibition spaces
lar visitors. The legendary rock group returned to • the creation of a religious arts museum
Morocco 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 walls
Jajouka, 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


But what if….
Today, many of these benefits are so obvious and so
integrated into the social and economic fabric of our
society that they are, in many ways, taken for granted.
However, aviation has never been so closely scrutinised
nor had its future growth so acutely threatened from so
many sides.

So consider this: should growth in passenger and cargo
traffic 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 the
indirect and induced effects, and over 6 million when
adding the impact on tourism. That would represent
0.2% of world employment in 2026, including around
2 million in Asia-Pacific, 1.5 million in each of Europe
and North America, 400-500 thousand in each of Africa
and Latin America and more than 200,000 in the Middle
East.

The direct, indirect and induced contribution of the air
transport sector to world GDP would be US$440 billion
lower, with an additional US$164 billion lost through
lower tourism activity. Therefore, in total air transport
would contribute 0.6% less to world GDP in 2026 than
in the base case.

That’s a lot to take for granted.


The Future :
a greater concentra
and traffic

Introduction
The 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 be
In 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 when
challenging 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 was
attributed to network development. The number of non- In 2008, the number of airline routes has only increased
stop routes on the three main long-haul flows (trans- by 15 compared to 2007 on the three main long-haul
Atlantic, 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, which
travel 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 city
pairs could survive without the connecting traffic, but Even with such constraints, Airbus forecasts the need
also 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 their
one 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.


tion 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


Translating growth into aircraft demand:
Historically, the choice of aircraft for a given operation such as urban population growth, historical local
was 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 to
range 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 future
and future passenger demand to determine the most feasibility and to identify from which existing routes
likely 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, with
down 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 typologies

The trans-Atlantic flows will have
the 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 39

Source: Airbus


Regional network development
All three of the main long-haul flows are expected to expe- • Frequencies are limited by time windows, passenger
rience 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, the
the 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 has
The way traffic is allocated on each of these flows will emerged from distant destinations. People are flying
directly impact demand and, more specifically, the aircraft further, simply because they want to visit places that
capabilities 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 thanks
While different in many aspects, the three flows tend to to the dynamism of the 32 global hub cities and the
share 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 passengers
flying 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


The trans-Atlantic
In the year to September 2008, 113 scheduled routes During recent years, smaller trans-Atlantic traffic flows
of all sizes, (in terms of seats offered), were opened have quickly emerged. In 2000, only three regular
across the overall transatlantic network, which non-stop routes existed from the Middle East to the
includes non-EU states, Africa and the Middle East Americas, but by 2008 there were 19 in operation. In
to/from Canada and Latin America. However, 106 of 2028, more than 70% of the passengers flying from the
all 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-aisle
It has been forecast that that there will be nearly 200 aircraft such as the A350XWB and very large aircraft
additional trans-Atlantic airline routes, 60% of which like the A380.
will be between the North America and Western
Europe, in the next 20 years. However, most of the Today 45% of trans-Atlantic passengers fly on 42 city
growth 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 on
additional network opportunities, but will remain limited the main flows, airlines consolidate and emerging flows
due to the historical concentration of demand in largely having demand concentrated in a few cities, a
Europe and continuing consolidation among airlines. larger proportion of the growth will be allocated to the
As 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 these
routes today; making this a clear market for large routes will be accommodated by an increase in both
aircraft. aircraft frequencies and seat capacity.

Trans-atlantic: number of city
pairs with more than 1,000 daily
departing passengers

Number of city pairs
140
132

120

100

80

60
40
40

19
20

0
1977 1987 1997 2007 2017 2028

Source: Airbus


Between Asia and Europe :
recent developments
The long-haul market between Europe and Asia-Pacific, Significant growth to and from Europe has also been
which includes the Indian Subcontinent, China and observed in some South Eastern Asian countries like
Japan, is the 2nd largest in terms of traffic (RPKs(4)). Half Vietnam, the Philippines and Malaysia. New direct
of the volume of passengers added in the last three non-stop routes are expected from South East Asian
years were to China and India. High growth from China countries to the largest markets in Europe, although the
and India will continue to create new network opportu- Middle Eastern hubs will capture a significant part of
nities, 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 the
from and to secondary cities, but more are expected to Europe to Asia flow has continued to increase to
emerge by the end of the next decade as wealth around 14%, depending on the season. Many of these
spreads and the country’s aviation network develops. passengers are travelling from Europe to India and
The high organic growth of these routes will result in a other South East Asian countries, while China, Korea
high density of routes. and Japan remain relatively untapped. As the Middle
Eastern hub network expands to encompass more
However, India’s network is more mature, with shorter direct routes to North East Asia, they will capture some
distances from Europe and traffic in new markets 30% additional traffic.
less dense than in China. This is consistent with average
long-haul trends, where the longer the route, the larger (4) RPK: Revenue Passenger Kilometres

non-stop markets.

Europe-Asia: share of passengers transiting through
Middle 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


The trans-Pacific
Trans-Pacific network development will remain largely but most of the demand will continue to connect through
dominated by the trunk routes linking major cities on other regions due to range and costs.
both sides of the ocean. This flow is characterised by
the high concentration of the demand to and from a few One conundrum today is: “how can a passenger travel
Asian and American cities. from one side of the Pacific to the other without crossing
the Pacific?” The answer is to fly through Europe and the
The share of routes linking global hub cities on both sides Middle East. In Europe new connecting Asia-Americas
of 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 services
growth 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 increase
opened 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 the
South 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% of
represent more than 1% of trans-Pacific traffic by 2028 the trans-Pacific RPKs). As almost three quarters of
and 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 emphasis
The 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


Higher fuel prices, stronger hubs

The long-term effects of crisis are expected to be more tions on foreign ownership is reduced. Large airline hubs
pronounced on network evolution than on overall pas- will benefit from this consolidation, even when airlines
senger demand growth. Long-haul network develop- adopt a multi-hub structure. However, while big routes
ment is also particularly sensitive to the increases in fuel would remain non-stop, routes from absorbed airlines to
price. Therefore, it is important to consider alternative secondary destinations are more likely to be operated
scenarios linked to these variables. For example, analy- from the main airline hub.
sis shows that on the trans-Pacific the total number of
non-stop city pairs in 2020 would be similar to today’s The combined effects of higher than expected energy
levels 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 still
rate still exceeding 4% per year). However, very long thin continue to connect. For example, with oil costing
routes would be expensive to operate, with the costs US$100 per barrel in 2020, 45% of traffic from Europe
and 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 connecting
a major effect on the forecast for network evolution. traffic would increase to 52% (+7pt) making the routes
Airbus 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.


People want and
Key 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 Domestic
Product (GDP), exports, imports, unemployment rate,
quence of lower airfares and improved journey times.
In the maturing LCC markets of North America and
inflation, private consumption and disposable personal Western Europe, the LCC growth will ultimately depend
income. 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 in
are selected follows the testing and statistical evalua- India is a good example of this, because although
tion 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 access
that best fits the historical traffic provides the best to air transportation, either through new destinations or
explanation 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 and
While the current downturn has highlighted the impor- governments keen to take advantage of the benefits of
tance of GDP as an explanatory variable in traffic fore- air transportation.
casting, in some market segments, classic econometric
modelling is not sufficient to adequately forecast traffic Airbus is often asked how variations in underlying
growth and the use of hybrid models is required. For factors, such as the oil price, a recession or accelerated
example, 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 such
within each country and of liberalisation between others. variations could have, the forecast uses econometric or
In Mexico for example, a portion of air traffic growth hybrid models to conduct sensitivity analysis around our
depends on the number of people switching from the baseline traffic forecast in a more systematic way.

World air traffic growth is closely correlated
to economic growth
Air traffic growth (%) Real GDP growth (%)
30% 7%
Air Traffic
25% 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

1978

Source: Global Insight, ICAO, Airbus

Traffic forecast

need 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


Air bus global market forecast

Air bus global market forecast

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