Airbus released its Global Market Forecast a few weeks ago. And, true to form, trying to compare it with Boeing’s Commercial Market Outlook is not easy. The two firms define the segments differently. This requires some editing liberty on the part of analysts.
Here’s how the two OEMs define the period from 2012 to 2031. They have a significant difference in their projections of the total number of aircraft to be delivered, with a nearly 6,000 aircraft difference, primarily in single aisle aircraft. At $75 million per aircraft, there is a difference of about $450 billion between the two companies’ forecasts. Who is more accurate is the half a trillion dollar question?
There is an important item to note – Airbus does not report on regional jets under 100 seats whereas Boeing does. Airbus responded “…we focus our results and publications on the markets that we are involved in (?100 seat aircraft)”. We assembled our own view on these two outlooks as follows:
Airbus estimates the VLA market (over 400 seats) to be more than twice as large as Boeing, which has been the case since at least 2000. Airbus believes in the need for the A380 to serve crowded hubs, while Boeing has touted smaller aircraft and route dispersion. The difference in forecasts to some degree reflects their market intelligence and competitive positioning resulting from those forecasts.
When we adjust the numbers to be comparable, we produced the following table for freighters. But even then the 9.5% difference is clearly more subtle when you look at the breakdown. Boeing includes both 777 and 747-8F in the “large freighter” category and the A330 freighter in the other category. Once again, the forecasts appear to reflect the company’s product lines and competitive positioning within each segment.
Boeing estimates the VLA freighter market 55% bigger than Airbus. But Airbus sees the smaller freighter market 58% bigger than Boeing estimates. Perhaps the absence on an A380 freighter is likely why Airbus large freighter market assessment is so much smaller than Boeing’s — or because the 747-8F is doing far better than the 747-8i passenger version, Boeing emphasizes that sector.
In the single aisle category – which is by far the biggest commercial segment (69% of Airbus’ total and 68% of Boeing’s total) – the two OEMs are 19% apart. They are much closer on the twin aisle segment with only an 11% difference.
Even if the explanations for the differences are definitional, the overall market difference remains more than 20% apart, which is substantial. The differences are substantial when one realizes that Airbus estimates the market at $4 trillion and this is the lower of the two estimates. Removing the regional jet component from Boeing’s numbers the difference shrinks to 11.9% in airplane numbers – which is still substantial.
The question is whether the forecasts are colored by the product lines of each OEM, or whether the product lines have been developed from different forecasting methodologies and assumptions about the marketplace. Is Airbus gung ho on the 400+ seat market because their A380 is showing strength in the market and they foresee good times, whereas Boeing’s 747-8i is struggling and therefore they are of the view that market is more limited?
Airbus’ VLA-passenger forecast of 1,330 requires orders of 67 per year (747-8i and A380). In the Rolls-Royce-Pratt & Whitney lawsuit, Rolls’ filing revealed Airbus expects to deliver ~650 A380s over 20 years. That is half the amount needed to match its forecast, but matches Airbus’ contention that it will capture 50% of the VLA forecast. But Airbus does make a compelling case that we are likely to see continued growth in air travel between mega cities. Currently there are 42 cities (i.e. New York, Tokyo, London, Paris, Frankfurt, etc.) that handle more than 10,000 long haul passengers per day and Airbus expects over 90 by 2031. The A380 is right in the sweet spot to serve such traffic at airports with fixed slots.
In the twin aisle market (250 and 400 seats) both OEMs are closer in market estimates. This is the area where the A330 and A350 battle the 787 and 777. For most airlines these aircraft are their primary long range tools and both OEMs make a lot of money in the segment. Airbus has a highly developed product in the A330 which is delivering better results than probably either OEM expected. A350 development continues apace and it appears Boeing is biding its time on a 777 update. But, as experience has shown, (most recently neo vs MAX) dithering on development can bite. Despite unsettling comments from airlines in the Gulf, Cathay voted for the A350 over waiting for updated 777. The 11% difference between forecasts for this segment, while relatively small, appears to indicate both OEMs will continue to fight over every order.
The backup information both firms provide does not give an indication of precisely how they develop their forecasts. Clearly the methodologies are not going to be shared publicly. The table below is a guide we find somewhat comparable. The table on the left comes from Boeing while the two charts on the right are from Airbus. Both make it clear the future lies in the Asia market. Boeing shows its results for estimating airplanes by market – but Airbus does not.
Airbus sees a global passenger fleet growth between 2012 and 2031 at 109% compared to Boeing’s 100%. But Airbus says the 2011 passenger fleet was 15,560 while Boeing says it was 19,890 – so they differ by 28% before they even get to 2012. Perhaps this is because Boeing includes regional jets in its analysis, and Airbus does not. But the net result is that differing by 21% in 20 years’ time brings them closer rather than farther apart.
Airbus says that 2/3 of the passenger fleet flying today will need to be replaced by 2031 (10,350 aircraft out of the 15,560 in service). Boeing says that 70% of the fleet will be replaced by 2031 (14,110 out of 19,890 in service today).
Even as they disagree on definitions and therefore overall numbers, there are a few things they agree on:
- Emerging markets are where the growth will be
- Growing middle class drives travel demand
- Particularly in Asia
- Fuel costs are manageable
- Boeing sees rising supplies
- Both OEMs cite rising efficiency of new airplanes
- The biggest growth segment will be single aisle fleets at more than two-thirds of orders
- This will be driven by LCC growth
- Boeing believes LCCs will account for 19% market share by 2031
Co-Founder AirInsight. My previous life includes stints at Shell South Africa, CIC Research, and PA Consulting. Got bitten by the aviation bug and ended up an Avgeek. Then the data bug got me, making me a curious Avgeek seeking data-driven logic. Also, I appreciate conversations with smart people from whom I learn so much. Summary: I am very fortunate to work with and converse with great people.
I believe it is a case of what they have, what they are selling and what they want to have happen that taints their methodologies for these forecasts. I do get the impression that Boeing does seem to be a bit more objective as far as these forecasts go.
I do believe that some of their strategies (e.g. Boeing waiting to build a new single aisle) would have worked if the fuel prices weren’t such a critical factor. But many airlines are now in big trouble, and study after study indicates that their largest expenditure and hence the largest reason for their losses, is increasing, or high, fuel prices.
Even the most successful LCC’s seem to be struggling with this.
Another factor which seems to be ignored or overlooked is the longevity of airlines. Will all of these LCCs still be there in 10 or 20 years? Or will it be the legacy carriers that will go the way of the dinosaur?
To me, there are so many unknown factors to take into account when making these forecasts. A daunting task indeed.
Apologies, late comment. With regards the Airbus VLA forecast, they said 1,300 pax VLA’s over 20 years, and Airbus has always said they’d work for a 50% market share. Turns out that their 50% of the predicted market is actually 90% of the actual market, current build/order rates seem to suggest they’ll reach their business case.
Airbus was never going to build 1,300 VLA’s, they probably never said that.
So, whatever the size of the size of the market, Airbus seems to be meeting their original market plan. The size of the market has no bearing on the A380’s viability because they’re building what they originally set out to, probably. Still, Boeing’s CMO seems to track the market much closer than the Airbus GMO. Again, to get an actual idea of the VLA market, consult the Boeing CMO, and since Airbus is taking the whole lot, they’d be happy to look at it too.