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Clear skies ahead for aviation industry: Boeing

Over the next 20 years, global air traffic growth is projected to
increase at a rate of 5% a year, in line with historical trends. This
year, a 6% expansion is forecast for global passenger growth, which is
greater than capacity growth. Airlines are expected to register record
profits, thanks in part to operational efficiencies.

Boeing stresses that since they were first published in 1961, its 20
year forecasts have proven to be quite accurate, even slightly
conservative. Forecasts are based on a variety of projections for fuel
price, the development of high speed rail, and air traffic
infrastructure.

For example, Boeing calculated that the deployment of high speed rail
in China has taken away 1 to 2% of traffic away from air transport in
that market. Also, insufficient development of airports may create
‘choke points’ that constrain traffic and ultimately, demand for
aircraft.

A major change in air traffic trends that will impact aviation are
the types of routes that are increasingly serviced, according to Randy
Tinseth, Boeing’s Vice President of Marketing.

“Big planes to big cities = big market” has long been the motto of
the air transport industry. However, that all changed when customers
began to demand more non-stop routes to regional destinations. The
success of low-cost airlines (LCA), whose hub is often located in
relatively small cities, also had an impact. “Small planes to smaller
cities = big market” is the leading strategy now.

This has led to surging sales in smaller single-aisle planes rather
than the largest wide-body aircraft. “Since 2000, LCA market share in
Europe has grown from zero to 40% and thus, over the next 20 years,
Boeing expects 80% of its European sales to be for this type of planes,"
said Tinseth.

European skies

Boeing now expects air traffic in Europe to grow 3.5% a year, mostly
in line with past trends. Over the next 20 years, Europe is projected to
represent about 20% the manufacturer’s sales and over half of these
will be for replacement aircraft.

The US and Russia are other key replacement markets, while Asia is
the leading growth market with, increases of traffic projected at 6.6% a
year for the Chinese domestic market alone.

The focus on replacement in Europe is mostly due to the fact that it
already has a large installed base and that airline fleet expansion will
probably be more limited there.

Indeed, “there is likely to be more consolidation for European
airlines in the coming years. There is room for it since currently the
number of major airlines is still quiet high compared with the US for
example. Tough competition from LCA and Middle-Eastern airlines further
supports consolidation”, ventured the Boeing VP.

Thus, the news is mixed regarding the air transport job outlook in
Europe. The bright forecast on European air traffic is encouraging for
the European aircraft industry and its suppliers which, in 2012,
represented 287,000 jobs according to trade association Air Transport
Action Group.

But merger and acquisition activity may put a dent in the EU28 airline workforce, which ATAG estimates at 462,000.

Clean air transport

Cleaner and quieter transport is also high on Boeing’s agenda for the years ahead.

“Our main focus is to keep the noise confined to airport grounds,”
stressed Tinseth, pointing to

Boeing's latest 737 and 787 models which
reduce aircraft noise by 40 and 65% respectively.

Meanwhile, lower engine consumption, advanced aerodynamics and the
use of lightweight materials should contribute to gains of 15% in fuel
efficiency per passenger and per new model over the next 20 years.

This is not only driven by the global agenda to combat climate
change, but by customer demand to cut operational costs—including fuel
costs.

Biofuels are an additional option under research. “We have mostly
resolved the first challenge—identifying biofuels that would not require
any major engine modifications."

"Two challenges remain: the cost of biofuels, and the necessity to
find local sources of biofuels. Shipping (from) an approved biofuel
source ( let’s say Argentina) to all of the world’s air transport hubs
would not constitute an improvement from an environmental standpoint”,
Tinseth explained.

Tinseth also emphasized the need to find second generation, that is,
non-food based, biofuels in order to avoid the negative impact of
emissions released from indirect land use change, an issue the EU is
planning to address through new legislation. For example, a blend of 50% kerosene and 50% recycled cooking oil was tested in the Netherlands and Finland.

Regarding the integration of air transport in the EU ETS — a process that is currently suspended
— Tinseth told EurActiv that there is too much uncertainty at this
stage: “Who would absorb that tax? Would it be airliners, and in that
case, that may put pressure on aircraft demand, or would the tax be
passed on to passengers and what would be their reaction?”

Boeing believes, however, that the International Civil Aviation Organization is the appropriate negotiation forum to resolve aviation emissions reduction at the global level.

Further, the aviation industry should not be solely responsible to
improve air transport’s environmental footprint, the Tinseth stressed.
“Airlines and the air traffic management community can also contribute
(the EU’s Single Sky
initiative is going in that direction) and a solution can only come
from negotiation with all these entities, a process that will take
time”.