Holding patternOutlook for the global commercial and business aircraft industry |
While the global economy is in a state of change and uncertainty, the long-term prospects for the global commercial aircraft industry are strong, although not immune to the economic downturn. A new report developed by Deloitte Touche Tohmatsu Limited (DTTL) entitled Holding pattern: Outlook for the global commercial and business aircraft industry provides a current and forward perspective, while taking into account the rapid daily changes in the industry. The report focuses on the key trends that have affected the commercial and business aircraft industry and forecasts that will shape its future success. Growth is projected to come from the Asian markets. In China, 600 million people are expected to reach middle class status over the next two decades, which will dramatically increase business, tourist, and freight traffic. The Middle East and India will also fuel growth.
The current situation in context
The report states the current impact in aviation is threefold including high oil prices, the global recession, and the credit crunch. First, even in 2008 when the cost of crude oil dropped per barrel, fuel accounted for 32 percent of operating expenses. Secondly, the global recession prompted a dramatic drop in load factors, which forced airlines to take aircraft out of service and rethink plans to order replacements for existing planes. Thirdly, the credit crunch made it difficult for airlines to find financing resulting in deferrals, delays, and inability to take delivery of new aircraft.
What will the recovery look like?
In the next 20 years, Asian airlines are expected to have tripled their fleet to represent 31 percent of the world’s commercial aircraft. Today, Asian airlines are responsible for 36 percent of the total large commercial aircraft backlog. The growth from the economies in Asia, China and India in particular, are expected to serve as the future growth engine for the industry. Looking at China, it employs about 500,000 people in the aerospace and defense industry. Two of China’s most significant investments in the commercial aircraft industry include AVIC, a company developing a next generation regional jet, and Commercial Aircraft Company of China (COMAC), with plans to produce large jets by 2020.
Regional jets verse commercial narrow bodies
The future of the lower end of the narrow body jetliner market may be affected by the pending introduction of the next generation regional jets from China, Russia, and Japan. These three new entrants in this regional jet space point to the growing demand in this specialized market including the Sukhoi Superjet 100 from Russia, the Mitsubishi Regional Jet (MRJ) from Japan, and the ARJ21 from AVIC in China.
The business jet
The global economic crisis has severely impacted the business jet industry. Corporations are reluctant to purchase jets in today’s uncertain economic environment and wealthy businessmen are having difficulty in financing their purchases leaving the outlook for the business jet industry grim.
A recovery to watch
Although the global commercial and business aircraft industry is feeling the effects of the global economic downturn, history demonstrates and consensus forecasts predicts that the demand for large commercial aircraft will return. Business jets provide privacy, flexibility, and convenience and have a long-term brighter future ahead. No two recoveries are exactly the same. Understanding the nature of the upturn will be key to optimizing the advantages presented by it.
Read the press release.
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Holding pattern
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