Boeing has reasons for optimism. It has just announced orders for 182 aircraft apparently worth US$26.8bn, driving its overall back-log to 321 aeroplanes. The rate of new purchases is slowing somewhat but overall demand looks robust.
This optimism is reflected in Boeing’s forecast for growth. In its most recent ‘Current Market Outlook’ the company sees the appetite for new aircraft expanding by an average of 4.1% a year for the next 20 years. A little under half of this will be the replacement of older aircraft but 57% will represent organic growth serving new customers, particularly in China, South East Asia and the Middle East.
Of course, passenger demand will drive much of this, with higher income per head in so many economies resulting in higher demand for both leisure and business traffic. Yet Boeing is also optimistic about the long-term health of the air freight market. Although it recognises that demand has been very weak over the past several years it views this as “a temporary situation” as “the world economy and industrial production, which are primary leading indicators of air cargo traffic, are forecast to recover and return to long-term trend growth rates in 2017. In turn, air cargo traffic will grow, and sustained growth should lead to improvements in capacity balance and yields.”
Boeing is implicitly rejecting arguments about the restructuring of the freight market towards sea freight and away from air freight. Despite the meagre 1.6% annual increase in freight tonnage seen between 2010 and 2015, which contrasted with the annual 6% rise in passengers, the Seattle plane maker believes that growth will return “as global GDP and world trade growth accelerate, air cargo traffic, as measured in revenue tonne kilometres, is projected to grow an average 4.2% per year over the next 20 years. World air cargo volume, in spite of exogenous shocks arising from economic and political events and natural disasters, grew an average of 5.2% per year over the last three decades.”
Therefore, Boeing thinks that the world’s economy will see a return to a situation where air freight expands consistently faster than overall economic growth, which would be a return to the market dynamics seen prior to the crash of 2008.
Source Transport Intelligence, 20th July 2016
Author: Thomas Cullen
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)