Global commercial aviation to add more than 10,000 planes by 2027

04 May 2017 Consultancy.uk

The global air transport fleet is set to undergo considerable upgrades and growth as new deliveries outpace retirements, as recent profitability spurs companies to invest in new, more efficient, stock. The fleet is set to grow at 3.4% CAGR to 2027, adding around 10,000 new planes – largely narrow- and wide-body classes. China is set to see its fleet grow by almost 4,000 planes as consumers become more interested in domestic and regional travel.

A new report from Oliver Wyman, a global management consulting firm, explores key features of the commercial air transport network. The report, titled ‘Global Fleet & MRO Market Forecast Summary’, considers wider trends within the market, as well as the effect of the key trends on the aviation maintenance space.

Global air transport industry financial performance

The air transport industry has, after many years of lacklustre performance, enjoyed strong profitability. Profitability for the industry has been lifted by two key trends, low fuel prices, which have fallen to lows not seen since prior to 2006, as well as increased demand as passenger numbers soar.

The net profit increased to $35 billion in 2015, with projections for 2016 at $40 billion. The lion’s share of profits are expected to occur in the US, accounting for 60% of global profits over the past two years. The high profitability has given the industry a period of breathing room, with many using the additional funds to acquire newer generation aircraft, which are more robust, fuel efficient and have higher capacity, as well as develop new customer journeys.

Global aircraft demand

The addition of more modern aircraft is going hand-in-hand with the retirement or conversion of older stock. Overall however, the global stock is expecting to increase from 25,368 aircraft in 2017 to 35,501 aircraft by 2027. The growth rate will start off at 3.8% annually during the first five years, before falling to 3% annually for the remaining five years, with deliveries expected to fall while retirements continue to be high.

The industry is expecting to see around 9,500 planes retired from the global stock to 2027, while around 20,200 deliveries will be taken. The cargo delivery sector will see relatively few new deliveries, while retirements levels see the segment decrease the number of total planes by 140.

Global fleet forecast by aircraft class

The research also noted changes in the makeup of the global fleet in terms of aircraft class. The turboprop and regional jet classes are expecting to see numbers fall by 0.4% and 1.1% CAGR respectively as airliners increasingly focus on narrow- and wide-body jets, whose numbers are set to rise by 4.6% and 5.3% respectively. The number of regional jet and turboprops are expected to see even more significant falls between ’22 and ’27, at -3.5% and -2.8% CAGR respectively.

Overall the number of narrow body aircraft is set to grow by 14,300 aircraft to just over 23,100, at CAGR 4.9%, while wide-body class aircraft will grow by 4.0% on average to 7,400 by 2027.

Fleet growth by region

The research notes that the global picture for additions, and retirements, varies considerably between regions. In North America, for instance, while deliveries will be high, at around 4,500 in the years to 2027, the number of retirements (~4,000) means that overall growth is limited to 11%. Western Europe on the other hand is expecting around 3,800 new deliveries, while retirements stand at close to 2,000.

China however is a somewhat different profile. The rapid growth of its economy, and the large population, have created a burgeoning middle class, whose appetite for travel, within and outside the country, is expected to increase demand for air travel in the near future. The region is expecting around 4,400 new deliveries, while expecting less than 500 retirements in the coming decade. Only India score higher in terms of the discrepancy between new deliveries and retirements, at 90%; while only Africa is expecting to see the total number of aircraft in the region fall, by -24%. The influx of new planes is creating additional capacity requirements on support staff and pilots in the region.

Fleet share change by region

The effect of growth the fleet in China, the Asia-Pacific, India and Middle East will see a shift in the global market share of air transport. China sees its total share increase by almost 8%, while North America sees its position slide by just under 7%. Western Europe, Eastern Europe Africa and Latin America too are expected to see declines in market share, although not nearly as steeply.

The authors add, “Net fleet growth by world region will be uneven, resulting in changes in regional size rankings over the period. The major growth engine will be Asia, especially China and India, which will become the largest region, nearly doubling in in-service fleet and related MRO demand. By contrast, North America will experience little absolute growth, although there will be a significant upgrading of the fleet over the period. North America will slip to the third-largest region, behind Asia and Europe.”

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