LYNNWOOD, Wash. — You don’t need a crystal ball to tell that Boeing and commercial aviation are riding an updraft — but it’s handy to have someone around to explain the whys and wherefores.
Boeing Commercial Airplanes’ man for the job is Randy Tinseth, vice president of marketing, who provides a 20-year forecast for the global economy, travel trends and the resulting demand for airplanes in an annually updated report called the Current Market Outlook.
Today Tinseth laid out the latest Current Market Outlook here at the Pacific Northwest Aerospace Alliance’s Commercial Aerospace Conference.
Among the top trends:
- World economic growth is projected to average a healthy 2.8 percent per year, pointing to 4 percent average annual growth in airline passengers, 4.2 percent growth in cargo traffic and 4.7 percent in passenger traffic.
- That suggests the world’s airlines will need 41,030 airplanes over the next 20 years, valued at $6.1 trillion. A little less than half will be replacements, and a little more than half will be needed to handle increasing demand.
- Half of the air traffic growth will be in the Asia-Pacific region. “Every year in Asia, another Atlanta is added,” said Tinseth, referring to passenger traffic at the busiest U.S. airport.
- Although the market for airplane sales is big, the projected market for aviation services is bigger: $8.5 trillion over 20 years. Boeing Global Services was created as a new business unit in 2016 to grab a bigger share of that market.
- For the year 2018, Boeing projects higher than average growth in the world’s economies (3.2 percent) and in passenger air traffic (more than 6 percent).
Tinseth said the world’s airlines carried an estimated 4.3 billion passengers last year. “Twenty years from now, we expect that to be in excess of 9 billion travelers,” he said.
“So every year as we do the forecast, we have to ask ourselves, not only will we meet the demand moving forward, but will the infrastructure around the world be there?” he said. “Will we be able to train and have enough pilots? Will airports be built as we expect?”
Boeing is working to keep on top of the wave, with the first 737 MAX 9 and the first 787-10 Dreamliner due to be delivered during 2018. Production of Boeing’s 777X wide-body plane began last October, in preparation for deliveries in 2020. Just last week, the first 737 MAX 7 was rolled out at Boeing’s Renton plant.
Tinseth pegged the company’s order backlog at 5,864 aircraft, valued at $421 billion, which represents enough work to keep production lines busy for the next seven years.
Single-aisle airplanes such as the various subspecies of the 737 MAX are projected to account for 72 percent of the airplane deliveries between now and 2037.
Meanwhile, sales of Boeing’s biggest passenger jet, the 747, are expected to be so low that the figures are no longer broken out as a separate category. Going forward, the 747 is being marketed primarily as a cargo freighter — as evidenced last week by UPS’ decision to order 14 more of the 747-8 freighters.
Boeing is also in the midst of deciding whether to design and build a new breed of “middle-of-the-market” airplane to fill a niche between the single-aisle 737 and the twin-aisle 767. Just today, Bloomberg News quoted Delta Air Lines CEO Ed Bastian as saying that he’d like to be a launch customer for such a plane, informally known as the 797.
Ronald Epstein, an aviation industry analyst at Bank of America Merrill Lynch, said Boeing’s talks with Brazilian jet maker Embraer on a potential joint venture or acquisition may well bear on the 797 issue.
“When you think about the business case, Embraer could become very important, because my understanding is they’ve done some work on a big tube, on an airplane that looks a lot like this,” Epstein said. “So some of the homework might already be done by them. … It’s hard to believe that Embraer isn’t a part of it.”
After his presentation, Tinseth confirmed to a reporter that Boeing is projecting a worldwide demand for 4,000 middle-of-the-market airplanes.
“You take a little bit from the top of single-aisles, you take a little bit from the bottom of the wide-body market, you stimulate some growth, and then of course you have a little bit of a numbers game, because you’re taking bigger airplanes and then you’re replacing them with smaller airplanes,” he explained.
“What’s different about this is, this isn’t a conventional airplane,” Tinseth added. “This is an airplane that’s all about changing, in a fundamental way, the networks of our customers.”
“But will airplanes change over the next 20 years? Absolutely,” he told GeekWire after his talk. “One of the premises of the forecast is that 20 years from now, we expect airplanes to be more capable. … How you get there will be through conventional methods and new innovations.”