Boeing also for the first time gave a partial breakdown for the first half of the 20-year period, showing steep declines for the coming decade on the heels of the COVID-19 crisis.

It predicted 18,350 deliveries in 2020-2029, down 10.7% from an unpublished forecast of 20,550 embedded in the last report.

“The industry clearly has been dramatically impacted ... by the pandemic,” Commercial Marketing Vice-President Darren Hulst said.

Revelation wrote:

Reuters ( https://uk.reuters.com/article/boeing-f ... KL1N2GW1ZZ ) has posted a summary:

Boeing also for the first time gave a partial breakdown for the first half of the 20-year period, showing steep declines for the coming decade on the heels of the COVID-19 crisis.

It predicted 18,350 deliveries in 2020-2029, down 10.7% from an unpublished forecast of 20,550 embedded in the last report.

“The industry clearly has been dramatically impacted ... by the pandemic,” Commercial Marketing Vice-President Darren Hulst said.

As you suggest the 'dramatic' part is the next year or two. As for 10% decline across a decade, if true it's a big enough thing to those in the industry, but there's time to make the correction if it happens over the span of a decade.

It also says the key metric for passenger growth per year has changed from 5% down to 4%. I guess those in the industry should be glad they are still in a growth industry. Time will tell how good their forecast is.

I downloaded Boeing's PDF ( https://www.boeing.com/resources/boeing ... wnload.pdf ) and the graph on pg 5 is interesting. It should show people that indeed this is different than 9/11, GFC, SARS, etc. It also gives a good indication of how far ahead of even the historical exponential growth curve the 2010-2020 period was.

I was hoping to find some info about the methodology used by their forecast, but did not find such.

lightsaber wrote:

The most interesting aspect is it shows 2019 over supplied. Hmmmm...

Forecast                     2019      2020      Delta
--------                     ----      ----      -----
GDP Growth Rate              2.7%      2.5%      -7.4%
RPK Growth Rate              4.6%      4.0%     -13.0%
Fleet Growth Rate            3.4%      3.2%      -5.9%
20 Year Fleet Size         50,660    48,400      -4.5%
20 Year Deliveries         44,040    43,110      -2.1%
Widebody Deliveries         8,340     7,480     -10.3%
Narrowbody Deliveries      32,420    32,270      -0.5%
Regional Deliveries         2,240     2,430       8.4%
Freighter Deliveries        1,040       930     -10.6%
Pilot Demand              645,000   605,000      -6.2%

lightsaber wrote:

I cannot recall a CMO being downgraded this much. Did I miss any? Going from 6.5% to 5% growth is staggering! Predicting a slow, I scale 6 years, recovery is just scary.

lightsaber wrote:

That pg 5 graph tells a huge story. As I noted, it scales to about six years for a recovery. Yikes! The slowdown of expected growth resets the last decade away from a new faster growth normal to an mal-investment bubble.

lightsaber wrote:

This CMO lacks details, but is the most pessimistic I can recall. Unfortunately, I speculate the total ten year aircraft demand is too high due to the need to unwind another credit bubble.

JonesNL wrote:

They estimate an average of 378 widebody deliveries per year And 1613 single aisle deliveries per year on average over the next 20 years.

Seems over optimistic to me.

lightsaber wrote:

Boeing CMO for 2020 released:

https://www.boeing.com/commercial/marke ... t-outlook/

A small cut, but not much.

The most interesting aspect is it shows 2019 over supplied. Hmmmm...

Lightsaber

Late edit:
Basically, re-baselining for 5% growth, down from 6.5% for the last decade.

jbs2886 wrote:

Interesting note from Jon Ostrower - this is the first contraction ever in the report.

https://twitter.com/jonostrower/status/ ... 00545?s=20

MIflyer12 wrote:

Transparency in forecast model development? No. Does Wal-Mart give a 20-year number for store demand and explain in detail how they arrive at it? Um, no. Boeing/Airbus are outliers in even providing forecasts of this duration and type.

Suppliers should be studying this diligently and preparing a list of questions.

Revelation wrote:

jbs2886 wrote:

Interesting note from Jon Ostrower - this is the first contraction ever in the report.

https://twitter.com/jonostrower/status/ ... 00545?s=20

Sure, if you understand 'contraction' means 'not growing as fast as we thought it would' instead of 'not growing at all'.

For instance on pg 8 of the PDF there are no negative numbers.

The point is, the aviation business is still projected to be a growth business.

MIflyer12 wrote:

Transparency in forecast model development? No. Does Wal-Mart give a 20-year number for store demand and explain in detail how they arrive at it? Um, no. Boeing/Airbus are outliers in even providing forecasts of this duration and type.

Suppliers should be studying this diligently and preparing a list of questions.

Thank you for your comments.

I wonder, will Boeing answer such questions?

Narrowbody airplanes will lead the way to recovery as domestic and short-haul markets are forecast to recover earlier, followed by widebody fleets as airlines progressively bring their networks back online.

lightsaber wrote:

Revelation wrote:

jbs2886 wrote:

Interesting note from Jon Ostrower - this is the first contraction ever in the report.

https://twitter.com/jonostrower/status/ ... 00545?s=20

Sure, if you understand 'contraction' means 'not growing as fast as we thought it would' instead of 'not growing at all'.

For instance on pg 8 of the PDF there are no negative numbers.

The point is, the aviation business is still projected to be a growth business.

MIflyer12 wrote:

Transparency in forecast model development? No. Does Wal-Mart give a 20-year number for store demand and explain in detail how they arrive at it? Um, no. Boeing/Airbus are outliers in even providing forecasts of this duration and type.

Suppliers should be studying this diligently and preparing a list of questions.

Thank you for your comments.

I wonder, will Boeing answer such questions?

Per my recollection, every CMO increased demand over the prior CMO, this one has less demand...

But the sharp multi year dragons tooth down should give vendors an ulcer. We have another thread on production chicken:

viewtopic.php?f=3&t=1451221

I looked in sharper detail and I think I can discern the per year data points in trillions of RPK per year
2019: 8.4
2020: 4.0
2021: 7.0
2022: 8
2023: 8.4 (match 2019)
2024: 9 (first year of growth).

Then back onto the exponential curve.

I'll comment on the chicken thread to discuss needed production (I am of the opinion production rates, even if based on this optimistic survey, are too high).

Lightsaber

lightsaber wrote:

Per my recollection, every CMO increased demand over the prior CMO, this one has less demand...

Boeing’s analysis predicts that two decades from now, the world fleet will be 87% larger, numbering 48,400 aircraft in 2039.

The bottom line is that this 2039 fleet projection is almost 4,000 jets smaller than expected when compared to last year’s forecast for 2038 extrapolated with the pre-COVID-19 growth rate for one more year.

That represents a huge loss of business revenue for Airbus and Boeing. And the brunt of that pain will be felt in the next few years and especially in the manufacturing of widebody jets, which Boeing builds in Everett and North Charleston, S.C.

Aircellist wrote:

Revelation, I do hope you're wrong… However, I am even less optimistic… (therefore, I hope I'm wrong too!).

I believe we've seen the summit of commercial aviation, for quite a long time, if not for good. The other day, there was a news flash on Radio-Canada (in French) about Air Canada having lost something like 90% of last year's turnover in the second or third trimester. Sorry, I can't find the link. That's deeper than normal deep.

Salaries help from governments will only go a certain way towards helping airlines. What I see now is that people can't fly (borders closed, quarantines enforced), can't afford to fly (job losses), are afraid to fly (contagion, being caught abroad without insurance or possibility to come back home). Admittedly, my close circles are not the high-fare takers, but as far as I understand, corporate travel has been severely curtailed everywhere… Those are heavy fundamentals to fight.

Lowering its estimates for revenue passenger-kilometres, the airline association now expects December traffic levels to be 68% lower than last year, against a 55% reduction that it forecast in July. It does not see sector profitability returning until 2022.
...
At the heart of the problem is that while carriers have seen their revenues fall by around 80%, costs have declined only 50%, as aircraft and staff costs are difficult to reduce. “This is why airlines burning through cash and still making significant losses,” notes Pearce.

MIflyer12 wrote:

Instead, look at the last several CMOs and look for trend- inflection up or inflection down.

lightsaber wrote:

Revelation wrote:

Reuters ( https://uk.reuters.com/article/boeing-f ... KL1N2GW1ZZ ) has posted a summary:

Boeing also for the first time gave a partial breakdown for the first half of the 20-year period, showing steep declines for the coming decade on the heels of the COVID-19 crisis.

It predicted 18,350 deliveries in 2020-2029, down 10.7% from an unpublished forecast of 20,550 embedded in the last report.

“The industry clearly has been dramatically impacted ... by the pandemic,” Commercial Marketing Vice-President Darren Hulst said.

As you suggest the 'dramatic' part is the next year or two. As for 10% decline across a decade, if true it's a big enough thing to those in the industry, but there's time to make the correction if it happens over the span of a decade.

It also says the key metric for passenger growth per year has changed from 5% down to 4%. I guess those in the industry should be glad they are still in a growth industry. Time will tell how good their forecast is.

I downloaded Boeing's PDF ( https://www.boeing.com/resources/boeing ... wnload.pdf ) and the graph on pg 5 is interesting. It should show people that indeed this is different than 9/11, GFC, SARS, etc. It also gives a good indication of how far ahead of even the historical exponential growth curve the 2010-2020 period was.

I was hoping to find some info about the methodology used by their forecast, but did not find such.

That pg 5 graph tells a huge story. As I noted, it scales to about six years for a recovery. Yikes! The slowdown of expected growth resets the last decade away from a new faster growth normal to an mal-investment bubble.

This CMO lacks details, but is the most pessimistic I can recall. Unfortunately, I speculate the total ten year aircraft demand is too high due to the need to unwind another credit bubble.

Lightsaber

Noshow wrote:

Concerning that graph: The return to normal is only hoped for until further notice.

What does the CMO tell us about NMA and NSA? If the narrowbody market will be so strong something new is needed sooner than later isn't it?

MIflyer12 wrote:

As for perpetual, optimistic growth I'll suggest that national CO2 reduction commitments may be a bigger factor than the fairly small probability of another industry-busting pandemic. Few in this forum have seemed to want to address that. Keep on polluting!

keesje wrote:

lightsaber wrote:

Revelation wrote:

Reuters ( https://uk.reuters.com/article/boeing-f ... KL1N2GW1ZZ ) has posted a summary:


As you suggest the 'dramatic' part is the next year or two. As for 10% decline across a decade, if true it's a big enough thing to those in the industry, but there's time to make the correction if it happens over the span of a decade.

It also says the key metric for passenger growth per year has changed from 5% down to 4%. I guess those in the industry should be glad they are still in a growth industry. Time will tell how good their forecast is.

I downloaded Boeing's PDF ( https://www.boeing.com/resources/boeing ... wnload.pdf ) and the graph on pg 5 is interesting. It should show people that indeed this is different than 9/11, GFC, SARS, etc. It also gives a good indication of how far ahead of even the historical exponential growth curve the 2010-2020 period was.

I was hoping to find some info about the methodology used by their forecast, but did not find such.

That pg 5 graph tells a huge story. As I noted, it scales to about six years for a recovery. Yikes! The slowdown of expected growth resets the last decade away from a new faster growth normal to an mal-investment bubble.

This CMO lacks details, but is the most pessimistic I can recall. Unfortunately, I speculate the total ten year aircraft demand is too high due to the need to unwind another credit bubble.

Lightsaber

Agree, while Boeing argues market is resilient and will recover as it has been before, the picture shows we never saw this before. There's tons of hope, but nobody knows.


Boeing market outlook 2019-2039

Aither wrote:

The proportion of westerners in this forum is too high...hence maybe some over pessimistic comments.
3/4 of the world population is from "emerging" countries or "to emerge" (hopefully). More people are educated (speak English) and have access to internet which stimulates demand for travel.
For the next few years air travel will be cheaper, which should have huge stimulation effects on a demand which is increasingly price elastic.
Probably the business class will suffer but travelling for business will come back strongly, first because videconferencing is not new, second because business opportunities across the globe are more spread out rather than just focused on a few cities or countries. In particular during time of crisis every corporation should look at expanding their customer base - and eventually diversify their supply chains.
These are strong rationales for air travel growth, and the covid crisis may accelerate some of these trends (providing vaccines/cure are found)

Chipmunk1973 wrote:

I’m of the opinion that 2022/23 will see a massive growth in flying; domestically within regions, as well as international travel. I’m basing that assumption on recent results from CoVid vaccine trials (University of QLD) as well as potential travel bubbles between Aus, NZ, Fiji, Singapore, et al.

Obviously time will tell but I think we’re on a favourable path at this time.

seahawk wrote:

Lower prices for travel, that will have to be seen. With airlines falling and all airlines reducing their fleet size, a lot of capacity has been taken from the market. In addition when the crisis is over all airlines will have burned through their cash reserves and most will have a huge burden of new outstanding debts, that they will want to reduce quickly. So imho we will see a lot less capacity in the market, for prices to be low the demand would nerd to be lower than this already strongly reduced capacity, but then we are far away from a quick recovery. And for the emerging markets, do not underestimate the time if will take to roll out any vaccine to the population and the costs to do so.
Add that governments have also added new debts like never before, we can be certain that tax reductions are out of the question and tax increases are likely, which will also reduce available income.

lightsaber wrote:

seahawk wrote:

Lower prices for travel, that will have to be seen. With airlines falling and all airlines reducing their fleet size, a lot of capacity has been taken from the market. In addition when the crisis is over all airlines will have burned through their cash reserves and most will have a huge burden of new outstanding debts, that they will want to reduce quickly. So imho we will see a lot less capacity in the market, for prices to be low the demand would nerd to be lower than this already strongly reduced capacity, but then we are far away from a quick recovery. And for the emerging markets, do not underestimate the time if will take to roll out any vaccine to the population and the costs to do so.
Add that governments have also added new debts like never before, we can be certain that tax reductions are out of the question and tax increases are likely, which will also reduce available income.

Airlines were already struggling in 2019. Many did not have their costs in line with their pricing.

It isn't just government debts. IATA notes airlines are losing $13 billion per month (link above) and will still lose money into 2021. Airlines will need money to pay down debt which means letting fares rise.

I agree vaccine distribution will effect demand. That will be brutal, but is off topic, other than to note it will cut demand.

Lightsaber

keesje wrote:

Agree, while Boeing argues market is resilient and will recover as it has been before, the picture shows we never saw this before. There's tons of hope, but nobody knows.


Boeing market outlook 2019-2039

chonetsao wrote:

Safe to say the coming 6-10 years majority of new aircrafts are for fleet renewal, not expansion.

JonesNL wrote:

Looking at the graph shows how optimistic they are. The lowest point is around 4 while 2019 ended with a little above 8. Only 50% reduction, while in reality it is -64% year to date while getting worse with every month that is passing by. See: https://www.iata.org/en/iata-repository ... gust-2020/. With the current trend it will end up around -70%.

And the real recovery seems much slower than the graph of Boeing is portraying. We are definitely going up, but at a much slower pace. I can't fathom an RPK that is higher than 2019 in 2022.

seahawk wrote:

Lower prices for travel, that will have to be seen. With airlines falling and all airlines reducing their fleet size, a lot of capacity has been taken from the market. In addition when the crisis is over all airlines will have burned through their cash reserves and most will have a huge burden of new outstanding debts, that they will want to reduce quickly. So imho we will see a lot less capacity in the market, for prices to be low the demand would nerd to be lower than this already strongly reduced capacity, but then we are far away from a quick recovery. And for the emerging markets, do not underestimate the time if will take to roll out any vaccine to the population and the costs to do so.
Add that governments have also added new debts like never before, we can be certain that tax reductions are out of the question and tax increases are likely, which will also reduce available income.

Revelation wrote:

keesje wrote:

Agree, while Boeing argues market is resilient and will recover as it has been before, the picture shows we never saw this before. There's tons of hope, but nobody knows.


Boeing market outlook 2019-2039

Yes, that is the 'dragon tooth' that LS and I mentioned earlier, thanks for posting it.

Point is, I think the CMO is too optimistic.

JayinKitsap wrote:

No one knows the depth of that tooth, nor the width, added snaggle tooth peaks and valleys, that is what is worrying. What happens if it just stalls for a year at 5% growth from this low level - or things get far better in a few months. Virus histories usually fade over a number of months, but is it 10 or 30 months to that point in this case.

Yes, too optimistic but they usually are by a bit, mainly by assuming no future 'episodes'. What isn't mentioned is all the excess frames already built, be it lease returns, distress sales, fleet consolidation, etc. It's like 2 years of production. To be healthy, supply and demand needs to be in balance, if it takes 5 years to get to balance it means production should be below half of previous rates, quite painful.

MIflyer12 wrote:

Revelation wrote:

The only way I see that happening is there are so many airline bankruptcies that we end up with forced liquidations of old fleets. But that wouldn't be a win for Boeing either, since re-emergent airlines aren't known for buying large fleets of new aircraft.

Oh, there are going to be airline bankruptcies. That's not to say I'm predicting a slew of liquidations.

Just using the American framework of Chapter 11, carriers will terminate leases and/or return secured aircraft to lenders. That doesn't mean all those returns go on the secondary market, though: when carriers (established or startup) can get perfectly good 15-20 year-old A320/738s at low prices it will drop the bottom out of the market for 25-year old A320s. They'll be scrapped rather than returned to use. Same thing with A319s, 737-700s, A330-200s... anything where the operating economics are a little iffy will suffer premature death -- no matter how low the acquisition cost goes (it can't below zero). There will be plenty - PLENTY - of more compelling used aircraft. (For anybody who wants to come back in a few years and tell me eight A319s went to someplace in Africa that lacks money but has cheap labor... that doesn't make a market, not when there are hundreds, hundreds and hundreds of surplus aircraft.)

For current production rates the projections beyond years 5-7 really are meaningless. There's too much time to change course; there's too much uncertainty in passenger demand. There's too much uncertainty in new money finding its way to support leasing companies.

Revelation wrote:

MIflyer12 wrote:

Revelation wrote:

The only way I see that happening is there are so many airline bankruptcies that we end up with forced liquidations of old fleets. But that wouldn't be a win for Boeing either, since re-emergent airlines aren't known for buying large fleets of new aircraft.

Oh, there are going to be airline bankruptcies. That's not to say I'm predicting a slew of liquidations.

Just using the American framework of Chapter 11, carriers will terminate leases and/or return secured aircraft to lenders. That doesn't mean all those returns go on the secondary market, though: when carriers (established or startup) can get perfectly good 15-20 year-old A320/738s at low prices it will drop the bottom out of the market for 25-year old A320s. They'll be scrapped rather than returned to use. Same thing with A319s, 737-700s, A330-200s... anything where the operating economics are a little iffy will suffer premature death -- no matter how low the acquisition cost goes (it can't below zero). There will be plenty - PLENTY - of more compelling used aircraft. (For anybody who wants to come back in a few years and tell me eight A319s went to someplace in Africa that lacks money but has cheap labor... that doesn't make a market, not when there are hundreds, hundreds and hundreds of surplus aircraft.)

For current production rates the projections beyond years 5-7 really are meaningless. There's too much time to change course; there's too much uncertainty in passenger demand. There's too much uncertainty in new money finding its way to support leasing companies.

Sorry if I wasn't very clear, I was speaking of fleet liquidations in the same way you are, airlines shedding older unwanted planes during bankruptcy, with the end result the oldest and least desirable frames being permanently retired.

The real issue is airlines emerge from BK with the finances to operate hopefully long enough to return to profit and eventually buy new aircraft, but that process usually takes a long time. The creditors are agreeing to take a big haircut in the hopes of getting the airline back into the black, but of course they'll want to minimize that haircut so the airline is not given a big margin for success coming out of BK. In their recovery time, as you suggest it's relatively easy for nimble competitors or new startups to either pick through the used aircraft market and cobble together a fleet at very low cost, or for them to take advantage of desperate manufacturers to get a great bargain on a new fleet. At the same time the newly elected board of the post-BK airline is not going to sign up for a big spending budget to buy new aircraft. Also the passengers are the ultimate variable, if they don't have spending money the whole industry shrinks.

I agree that everything can change in the 5-7 year window, for the better or the worse.

tomcat wrote:

This discussion makes me think that a lot of public money has been wasted to save airline jobs in an environment affected by an oversupply of aircraft (although I take the point from the all the returns are not going on the secondary market with the older ones going straight for scrap). Indeed, if on one hand, airlines are restructuring and get rid of aircraft which on the other hand will end up in the fleet of new competitors, the oversupply will persist for a long time on the air transport market. That's an unhealthy environment. The public money would be better spent in scrapping significant portions of the current fleets so that all the markets (air transport, aircraft leasing and aircraft manufacturing) can be rebalanced as quick as possible.

Of course this approach would permanently squeeze the capacity to a point that it would be detrimental to the economy when the air travel demand would be back. An alternative to this would be to use the public money to auction temporary reductions of capacity, both from the airline fleets and from the leasing companies. This approach would solve the oversupply issue without impairing a quick return of the supply when the demand would be back. It would be up to the airlines to adjust their headcount accordingly.

Thinking of it, I now remember that scrappage schemes have been discussed in the last few month.

https://www.flightglobal.com/farnborough-2020/would-scrappage-scheme-help-keep-airbus-and-boeing-afloat/139100.article

Revelation wrote:

tomcat wrote:

This discussion makes me think that a lot of public money has been wasted to save airline jobs in an environment affected by an oversupply of aircraft (although I take the point from the all the returns are not going on the secondary market with the older ones going straight for scrap). Indeed, if on one hand, airlines are restructuring and get rid of aircraft which on the other hand will end up in the fleet of new competitors, the oversupply will persist for a long time on the air transport market. That's an unhealthy environment. The public money would be better spent in scrapping significant portions of the current fleets so that all the markets (air transport, aircraft leasing and aircraft manufacturing) can be rebalanced as quick as possible.

Of course this approach would permanently squeeze the capacity to a point that it would be detrimental to the economy when the air travel demand would be back. An alternative to this would be to use the public money to auction temporary reductions of capacity, both from the airline fleets and from the leasing companies. This approach would solve the oversupply issue without impairing a quick return of the supply when the demand would be back. It would be up to the airlines to adjust their headcount accordingly.

Thinking of it, I now remember that scrappage schemes have been discussed in the last few month.

https://www.flightglobal.com/farnborough-2020/would-scrappage-scheme-help-keep-airbus-and-boeing-afloat/139100.article

The various aid programs were always based on speculation of the 'V' shaped recovery, quickly in and quickly over, with out much evidence to show that this is what would happen.

Instead they ended up providing some time for airlines to sort out how to make the inevitable cuts.

I am not a fan of public funding of scrapping schemes.

Isn't the whole point of capitalism that the market itself is the best way to heal all wounds?

Or are we going to continue to capitalize profit and socialize debt?