Jetrader - September/October 2012 - 15

“We see more movement in the single aisles out of smaller planes into slightly bigger ones. Among twins, we see more demand for 300-400 seat airplanes, like the 777,” forecaster Warner explains. “Efﬁciency is the biggest reason. As you go up in airplane size, you come down the cost-per-seat curve. It’s really about ﬁnding the most efﬁcient airplane that’s driving industry to slightly bigger aircraft.”

Boeing’s Tinseth on the Airline Market of the Disco Era
Music isn’t the only thing that has changed since 1977 and the CMO spokesman’s ﬁrst ﬂight In talking about the 2012 edition of the Current Market Outlook (CMO), Boeing’s Randy Tinseth recalled some of the marked differences between today’s airline marketplace and that of 1977 which, for Tinseth, marked his introduction to air travel. “It was 35 years ago this August when I got on an airplane for the ﬁrst time. It was a ﬂight from my small town in Montana to a small town in New York to go to college,” Tinseth recalls. “It was ﬁve stops, and the last segment was 32 miles. A few years later, I was looking for a job and I missed the ﬂight from my college town. I got into a car and drove to the next destination to catch the plane.” As a young engineering student who didn’t join Boeing until 1981, Tinseth better recalls the era’s musical backdrop—Fleetwood Mac and their Rumours album, and the Bee Gees’ best-selling sensation, Saturday Night Fever, than its airline industry particulars. However, his research for this year’s CMO found him considering the industry environment of the later ‘70s and how its competition and ﬂeet sizes compared to today. “In 1977, it was an industry dominated by North American airlines. Seven of the top 10 were North American; the other three European (see Chart 5: 1977 vs. Today: Top 10 Airlines). Today, there’s a Chinese airline in the top 10, as well as cargo carrier, a regional operator and two low-cost carriers,” Tinseth says. “The market has changed so much over time,” he continues. “The world’s ﬂeet has tripled; the market is deeper and more diverse than it was then. Clearly it’s a more competitive market today. I think airlines in this time of deregulation are better managed than they were then. And our airplanes are much more efﬁcient and capable.” To that point, Tinseth compared his ﬁrst air journey to what the ride would cost today. “The fare was about $300, which was a lot for our family and for a kid earning minimum wage. Today, it would be two stops and cost about $500. Travel today is about onethird of what it was then. Instead of it being a luxury, it’s become a vital part of modern life. It’s critical to business and something we do for pleasure, to connect with family and friends. As the market continues to grow, especially as we see growth in emerging economies, air travel will become affordable to even more people.” And for Tinseth, what is remarkable is the “unique balance,” in his words, of where today’s air trafﬁc is occurring and where its growth is being fueled. “Today, only one-quarter of the trafﬁc comes from North America, while another one-quarter comes from Europe, another from Asia, with the remaining one-quarter representing the rest of the world,” Tinseth said. By the late ‘70s, Boeing already had some 13 of its annual 20-year, commercial-market forecasts under its belt. During his researching, Tinseth also stumbled across a CMO presentation from the early ‘60s that reminded him of how little has changed about the company’s reason for investing in the well-respected summary. “Back then, we said we had four reasons for doing the CMO—for product and market planning, for sales planning and forecasting, for business planning, and to support our customers and suppliers,” Tinseth said. “Those always have been the driving factors for why we do the forecast, and it hasn’t changed over all that time.”

Diverse Growth, Backlog Helps Balance Demand
Robust growth in China, India and other emerging markets is a major factor in the increased deliveries forecast. Lowcost carriers are also growing faster than the market as a whole. As a result, 59 percent of new deliveries will come from growth. There is also a strong demand to replace older, less fuel-efﬁcient airplanes. Replacement accounts for 41 percent of the forecast. The market for new airplanes is also set to become more geographically balanced. Asia Paciﬁc, including China, will continue to lead the way in total airplane deliveries (see Chart 3: Global Diversity).

Freighter Growth, but Slower
With the sluggish current cargo market, Boeing this year revised downward its projection for freighter growth. The world freighter ﬂeet is still expected to increase from 1,740 to 3,200 airplanes. Fleet additions will include 940 new-production freighters (market value of $250 billion) and 1,820 airplanes converted from passenger models (see Chart 4: New Freighter Demand). “The market hasn’t grown as fast as we’ve anticipated,” CMO spokesman Tinseth said. “That’s because fuel prices are higher, and that’s driven some of cargo that was carried on airplanes before back to ships. Ships are more competitive than they were, and manufacturers are doing a better job of just-in-time inventory management, meaning there are fewer problems to solve by using air freight. There’s still strong demand to move perishable or high-value items by air. The situation had us take freight growth down, but it’s still a growing market,” he said.

On the Web and Soon an App
Reﬂecting today’s digital information focus, Boeing’s CMO has become largely an online resource. The report and related feature materials, including an interactive database of forecast elements, can be found at

www.boeing.com/cmo. For the ﬁrst time this year, the CMO will be offered as an app for the iPad and will be available for free via Apple’s iTunes Store. Thanks to Boeing for supplying editorial content for this story. Jetrader 15

http://www.boeing.com/cmo http://www.naylornetwork.com/ist-nxt/

Jetrader - September/October 2012

Table of Contents for the Digital Edition of Jetrader - September/October 2012