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JoeCanuck
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What happens after all those new planes get delivered?

Mon Jul 23, 2018 6:31 pm

In the next 5 years or so, more than 10,000 planes will be added to airline fleets around the world. We are living in a unique time when I suspect we will see a saturation point in the industry where growth in the airline market will drastically slow.

If so, what happens to the current aircraft? Most are still modern and relatively efficient. Is the used market big enough to absorb them? Will used aircraft have any significant residual value with that kind of glut on the market?

The number of aircraft on order is staggering and unparalleled. Is there a genuine threat of mass deferments and/or cancellations of new orders?

How much more crowded can the skies get?
What the...?
 
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william
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Re: What happens after all those new planes get delivered?

Mon Jul 23, 2018 6:47 pm

That's why you see Boeing and Airbus rushing to turn those orders into hard cash trying to find ways of upping production. Before the airlines in mass realize they over ordered.
 
wave46
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Re: What happens after all those new planes get delivered?

Mon Jul 23, 2018 6:50 pm

There is a fair bit of capacity coming out of the system, especially in North American legacy airline fleets. The MD-80/-90, Boeing 757 and early build A320s will all soon be retired. That's a significant chunk of currently flying fleets. Combined with upgauging from smaller regional jets as CRJ200s and whatnot are retired, I suspect North America will be most resistant to the bubble popping.

The used prices of 737NGs and A320ceos will face pressure, especially if fuel prices continue to rise.

The bubble 'popping' will likely be airlines such as VietJet, Indigo and AirAsia finding that their growth tapers off and doesn't require the large commitments they've made. Those airlines don't necessarily have the history and backing to weather a recession - there could be some ugliness if those upcoming economies find that the high growth rates they've had in the past don't hold to future expectations.
 
JoeCanuck
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Re: What happens after all those new planes get delivered?

Mon Jul 23, 2018 6:59 pm

wave46 wrote:
There is a fair bit of capacity coming out of the system, especially in North American legacy airline fleets. The MD-80/-90, Boeing 757 and early build A320s will all soon be retired. That's a significant chunk of currently flying fleets. Combined with upgauging from smaller regional jets as CRJ200s and whatnot are retired, I suspect North America will be most resistant to the bubble popping.

The used prices of 737NGs and A320ceos will face pressure, especially if fuel prices continue to rise.

The bubble 'popping' will likely be airlines such as VietJet, Indigo and AirAsia finding that their growth tapers off and doesn't require the large commitments they've made. Those airlines don't necessarily have the history and backing to weather a recession - there could be some ugliness if those upcoming economies find that the high growth rates they've had in the past don't hold to future expectations.


True. N.America's airline industry is probably a bit more future proof than other major markets simply because there is no real transcontinental rail service. The other current major markets, the EU, India and China, have extensive rail networks which compete with airlines.

The bursting of the ME3 bubble has been predicted for a long time and it seems more than ever, that it is inevitable with the increase of point to point bypassing the middle east, and regional competition from India, Turkey and Ethiopia.

SE Asia is festooned with islands and inhospitable terrain, so air traffic is a necessity but do the people have the wealth to fill all of the planes on order?

Whatever happens...we are in for interesting times ahead.
What the...?
 
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trpmb6
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Re: What happens after all those new planes get delivered?

Mon Jul 23, 2018 7:38 pm

There are emerging markets around the world that have yet to be tapped into yet as well. As long as there is continued prosperity and growth across the world with nothing major to disrupt said growth we will see continued growth in airlines.

What may become more of a concern for the Boeing's and Airbuses of the world is what the introduction of composites means for aircraft life. Composite materials don't fatigue in the way that metallic parts do. Not in the traditional sense at least. We are still learning a great deal about composite materials and we may yet find very pertinent reasons to limit their lifetimes but at this point I see no reason a 787 fuselage couldn't fly for a hundred years (outside of accidental and environmental damage that is).
 
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sunking737
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Re: What happens after all those new planes get delivered?

Mon Jul 23, 2018 8:13 pm

The deserts around the world will become aircraft parking lots.
"Don't believe it unless its parked on the ramp, or printed in the schedule...SUBJECT TO CHANGE"

I'm a SUNDUCK......Worked for RC & SY @ MSP
 
Planesmart
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Re: What happens after all those new planes get delivered?

Mon Jul 23, 2018 9:14 pm

Software and engine OEM's will re-price obsolescence, taking a year or two off economic life to eliminate the surplus.
 
ExMilitaryEng
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Re: What happens after all those new planes get delivered?

Mon Jul 23, 2018 9:42 pm

As more efficient aircrafts enter service, obviously older aircrafts (having higher CASM/maintenance) will fly less (just at peak hours by example), and/or will get axed at the next expensive check (while also simplifying the number of aircraft type).
Last edited by ExMilitaryEng on Mon Jul 23, 2018 9:58 pm, edited 1 time in total.
 
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scbriml
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Re: What happens after all those new planes get delivered?

Mon Jul 23, 2018 9:50 pm

JoeCanuck wrote:
In the next 5 years or so, more than 10,000 planes will be added to airline fleets around the world. We are living in a unique time when I suspect we will see a saturation point in the industry where growth in the airline market will drastically slow.

If so, what happens to the current aircraft? Most are still modern and relatively efficient. Is the used market big enough to absorb them? Will used aircraft have any significant residual value with that kind of glut on the market?

The number of aircraft on order is staggering and unparalleled. Is there a genuine threat of mass deferments and/or cancellations of new orders?

How much more crowded can the skies get?


Current delivery rates are barely sufficient to meet the forecasts for new airliners that both Airbus and Boeing produce. If the forecasts are anywhere close to accurate, production rates still need to increase.

Older planes are being retired nearly as fast as new ones join the global fleet.
Time flies like an arrow. Fruit flies like a banana!
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Confuscius
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Re: What happens after all those new planes get delivered?

Mon Jul 23, 2018 9:59 pm

JoeCanuck wrote:
In the next 5 years or so, more than 10,000 planes will be added to airline fleets around the world...

The number of aircraft on order is staggering and unparalleled.


That's a lot of airplanes.

Slightly off topic (Note: no mention of specific airplane model(s)) How many four-engine VLAs are expected to be delivered in that time frame? My guess is less than 50 (excluding freighters).
Ain't I a stinker?
 
PlanesNTrains
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Re: What happens after all those new planes get delivered?

Mon Jul 23, 2018 10:10 pm

Might be time to buy a handful of acres and create a tiny village of airliner cabins. Build a little clubhouse "terminal" like John Travolta's house and have some fun.
-Dave


MAX’d out on MAX threads. If you are starting a thread, and it’s about the MAX - stop. There’s already a thread that covers it.
 
bzcat
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Re: What happens after all those new planes get delivered?

Mon Jul 23, 2018 10:19 pm

scbriml wrote:
JoeCanuck wrote:
In the next 5 years or so, more than 10,000 planes will be added to airline fleets around the world. We are living in a unique time when I suspect we will see a saturation point in the industry where growth in the airline market will drastically slow.

If so, what happens to the current aircraft? Most are still modern and relatively efficient. Is the used market big enough to absorb them? Will used aircraft have any significant residual value with that kind of glut on the market?

The number of aircraft on order is staggering and unparalleled. Is there a genuine threat of mass deferments and/or cancellations of new orders?

How much more crowded can the skies get?


Current delivery rates are barely sufficient to meet the forecasts for new airliners that both Airbus and Boeing produce. If the forecasts are anywhere close to accurate, production rates still need to increase.

Older planes are being retired nearly as fast as new ones join the global fleet.


Exactly... lots of places in the world are just getting to the hockey stick part of the growth curve for air travel. Demand for air travel is going to jump exponentially in South Asia, China and Southeast Asia (just to name three areas) in the coming years. Air travel rates are much higher in the US, Northeast Asia, Australia, and Western Europe on income parity basis. So as emerging markets grow and per capita income climb, air travel levels will go up. I think the problem we face is not there is 10,000 planes coming. The issue is that we ONLY have 10,000 planes coming. That and we are probably not building enough terminal capacity in a lot of places that will need them.
 
spacecadet
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Re: What happens after all those new planes get delivered?

Mon Jul 23, 2018 10:40 pm

bzcat wrote:
Exactly... lots of places in the world are just getting to the hockey stick part of the growth curve for air travel. Demand for air travel is going to jump exponentially in South Asia, China and Southeast Asia (just to name three areas) in the coming years.


I agree - even to just look at *one* country, I don't think most people realize how big China is and how much room there still is to grow there. Consider that with 1.4 billion people, they had 551 million total passengers in 2017. The United States, by contrast, had 849 million passengers with a population of 325 million. The USA is what a mature market looks like, but if you extrapolate US-like travel statistics to China, you're looking at about a six-fold increase in traffic, and literally *billions* more passengers carried per year. In one country.

India might be an even more dramatic case, because India, with a population of 1.3 billion, had only about 140 million passengers last year. But that's up, on a percentage basis, even more than China over the past few years, and India's economy is growing similarly fast. So these countries and others in the region really are going to need a lot more planes.

Check the statistics here: https://data.worldbank.org/indicator/IS.AIR.PSGR

Even the main graph at the top is pretty enlightening. Sure, someone could use the Disco Stu "if these trends continue!" argument from The Simpsons, but all that's potentially going to stop this is, I dunno, a couple of the world's biggest economies getting into a trade war, or something.
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PlanesNTrains
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Re: What happens after all those new planes get delivered?

Mon Jul 23, 2018 10:47 pm

spacecadet wrote:
Even the main graph at the top is pretty enlightening. Sure, someone could use the Disco Stu "if these trends continue!" argument from The Simpsons, but all that's potentially going to stop this is, I dunno, a couple of the world's biggest economies getting into a trade war, or something.


Looking back over the past 20 years, we've had the bird flu, recession, 9/11, Iraq War, GFC, etc. I think the optimism over the next ten years is certainly warranted, but there is a very good chance, whether it be epidemic, war, recession, trade disputes, etc, that we will hit a wall. It bums me out, but I can think back to many times over the decades where it was all roses and the next thing you know you're going "Who saw that coming?" Well, sure, there's always people that see things coming, but it was just a few years ago that oil was at $40/barrel and we were told it'd hit $20 before it ever hit $80. Right....
-Dave


MAX’d out on MAX threads. If you are starting a thread, and it’s about the MAX - stop. There’s already a thread that covers it.
 
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PatrickZ80
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Re: What happens after all those new planes get delivered?

Tue Jul 24, 2018 6:13 am

scbriml wrote:
Current delivery rates are barely sufficient to meet the forecasts for new airliners that both Airbus and Boeing produce. If the forecasts are anywhere close to accurate, production rates still need to increase.

Older planes are being retired nearly as fast as new ones join the global fleet.


If the forecasts are accurate, then yes. However "if" is a tricky word. They could not be accurate. As predicted by several people here, the predicted growth in developing countries could level off or could even burst. Then those airlines wouldn't need those ordered planes anymore and would be forced to cancel their orders. A very likely scenario if you ask me.

If Boeing and Airbus would increase production rates now and in a few years a lot of orders would be canceled, that increase would have been in vain. It would cost a lot of money for nothing. You don't want to come to a point where you got an empty order book, so you don't want to over produce.
 
MIflyer12
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Re: What happens after all those new planes get delivered?

Tue Jul 24, 2018 12:56 pm

william wrote:
That's why you see Boeing and Airbus rushing to turn those orders into hard cash trying to find ways of upping production. Before the airlines in mass realize they over ordered.

There is so much in economics wrong with those two sentences it's hard to know where to begin.
 
JustSomeDood
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Re: What happens after all those new planes get delivered?

Tue Jul 24, 2018 3:21 pm

william wrote:
That's why you see Boeing and Airbus rushing to turn those orders into hard cash trying to find ways of upping production. Before the airlines in mass realize they over ordered.


Regardless of what their predictions of airline behavior may entail, bringing future deliveries forward is just a good way to maximize present cash flow..
 
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william
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Re: What happens after all those new planes get delivered?

Tue Jul 24, 2018 3:47 pm

JustSomeDood wrote:
william wrote:
That's why you see Boeing and Airbus rushing to turn those orders into hard cash trying to find ways of upping production. Before the airlines in mass realize they over ordered.


Regardless of what their predictions of airline behavior may entail, bringing future deliveries forward is just a good way to maximize present cash flow..


Yes, we are saying the same thing. Orders are nice, deliveries are better.
 
dtw2hyd
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Re: What happens after all those new planes get delivered?

Tue Jul 24, 2018 3:58 pm

sunking737 wrote:
The deserts around the world will become aircraft parking lots.


And blame employees for not working long hours for peanuts, passengers for not paying higher prices, airport for not giving slots, other countries for not allowing them to dump capacity and other airlines for not going out of business so their own surplus can be deployed.

Never the fault of the guy who ordered a ton without any clue.
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lightsaber
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Re: What happens after all those new planes get delivered?

Tue Jul 24, 2018 4:46 pm

ExMilitaryEng wrote:
As more efficient aircrafts enter service, obviously older aircrafts (having higher CASM/maintenance) will fly less (just at peak hours by example), and/or will get axed at the next expensive check (while also simplifying the number of aircraft type).

I agree with your thinking except they are necessarily scrapped. Only the newest are used in high utilization. For example, JetBlue will fly the A220 a full 12+ hours per day vs. E-190.
https://finance.yahoo.com/news/jetblue- ... 00197.html

But the oldest will be scrapped as it isn't worth putting in next gen avionics. The CEO and NG will fill the role now being vacated by the MD-80 (see Allegiant). Once over 20% of the fleet is NEO/MAX/A220, expect all CEO and MAX to begin exiting high utilization duty (economy depending, of course).

The NG and CEO (as well as E-jets) are not new. It is time for them to fade to low utilization duty.

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kanban
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Re: What happens after all those new planes get delivered?

Wed Jul 25, 2018 4:15 pm

all in all eventually there is a saturation point when all those potential fliers either can not afford to fly, don't want to fly, or are just fed up with the crowded/smelly cattle cars. the masses everybody thinks will fill the planes in the future are living at a poverty level, the group with disposable income is shrinking.. I for one can see order cancellations starting in the next couple years.
 
ILNFlyer
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Re: What happens after all those new planes get delivered?

Wed Jul 25, 2018 7:52 pm

Cargo operators will have their pick of cheap airplanes in the desert.
 
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TheRedBaron
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Re: What happens after all those new planes get delivered?

Wed Jul 25, 2018 8:15 pm

We are in the midst of the start of a trade war, problematic relations with Russia (remember those overflight rights) and a lot of things can be unforeseen like a huge epidemic, large catastrophe and such... Id be more cautious in ordering those gigantic fleets, if things don't pan out like they have foreseen, we might have a few threads in less than 2 years that read : Airbus VS Boeing 2021 cancellations and deferrals.

But thats is my chicken little attitude

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TRB
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gwrudolph
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Re: What happens after all those new planes get delivered?

Wed Jul 25, 2018 9:05 pm

Don't forget that by the time many are delivered, some other fleet types will be coming out, including many of the 772s, original 319/320, 767, 757, NG 737s. Heck, by the tail end of these deliveries, even some of the 787s will be starting to be 15 years old

If a recession or other event takes place, the airlines will do what they've always done, which is to trim their fleets by accelerating retirement of the oldest aircraft, and slowing down utilization of the next oldest and least efficient

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