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Air bus global market forecast


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Air bus global market forecast

  1. 1. Flying smart, thinking big 2009 - 2028
  2. 2. True innovation can be difficult to see,but the identification and delivery of technologicalbreakthroughs are critical if the aviation industryis to develop a sustainable future for the spanof this GMF and beyond.This is particularly true in the field of alternativeenergy, so the cover of this years forecastis a graphical representation of oneof 200,000 species of algae availablefor research into aviation bio-fuels thatdo not raise conflicts, such as diverting resourcesfrom food production.The sheer number of possibilities for algaeand the challenges ahead to realise their potential,are useful reminders that resource and timeare arguably more important thanthe original idea when it comes to findingthe best result for all.
  3. 3. 2009 - 2028
  4. 4. Demand for air travel 12 30 Traffic forecast56 Demand for passenger aircraft 142 Air cargo forecast 154 Summary tables
  5. 5. 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
  6. 6. 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
  7. 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
  8. 8. 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
  9. 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
  10. 10. 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
  11. 11. Demand for air travel
  12. 12. 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 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.
  13. 13. 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
  14. 14. 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
  15. 15. 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 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
  16. 16. 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
  17. 17. 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 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
  18. 18. 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 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: An.pdf
  19. 19. 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
  20. 20. 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 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.
  21. 21. 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
  22. 22. 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
  23. 23. 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
  24. 24. 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
  25. 25. 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
  26. 26. 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
  27. 27. 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
  28. 28. Traffic forecast
  29. 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