Insatiable Demand for Commercial Aircraft

Along with several other industry analysts, we have often wondered when the demand for aircraft will slow down. There seems to be an insatiable appetite for more and more among airlines. How long can this go on? We undertook an analysis of the fleet size and aging. As is our approach, we go to the data. We start with single aisles. The chart shows the average age on the left and years along the bottom. The ball size reflects fleet size. The red line is a trend line. What we see is that over the past 17 and one-half years, the active fleet has grown 75%. Even with this growth, the fleet's average age has grown by 27%. This is remarkable. Even though the fleet has nearly doubled, the demand is so great the retirements are not happening at the rate one would expect. Why is this? Demand is so great and fuel prices have been low, so keeping older aircraft in service has worked well. Moreover, as we can see now more clearly than ever, the OEM rate increases have not been sufficient. In addition, these rate increases have also run into hiccups. All the more reason to keep old planes flying. Next twin aisles. As before, the chart shows the average age on the left and years along the bottom. The ball size reflects fleet size. As is the case with single aisles, it is a growth story. There was a slower growth period for this segment, but recently it has accelerated again. Over the period the fleet has grown 56% while average age has risen 31%. Once again it appears there is insatiable demand. These two charts support the positive news we hear from Airbus and Boeing. Recall how often you have heard Airbus cite the doubling of traffic every fifteen years? Or Boeing saying they have to increase rate because customers need aircraft? An intriguing aspect of the data is the changing ratio of world active single aisles to twin aisles. From 2000 there was a rapid growth in the ratio of 3.3 single-aisle aircraft per twin-aisle to 3.7 in 2010 But since then the ratio stabilized at 3.7. Given the two earlier charts, it would seem airlines have required the two types in a consistent ratio for over a decade. Let's look at parked aircraft over the same period. First single-aisles. As we pointed out above, airlines have kept old aircraft in service. Slow deliveries and traffic growth have meant airlines have even raided the parked fleet. Between 2015 and 2Q18 this raid reactivated nearly 17% of the parked fleet. Low-interest costs and cheaper fuel combined with slow deliveries can make that happen. Next twin-aisles. Here we see a different pattern. Following the fleet curve, we note that after 2005 there was a brief lull in the parked fleet. While of the older aircraft will have been broken up, many were sent back to work. But by 2015 the parked fleet size was growing again and has been rather stable since. Since 2010 the parked fleet averaged about 25 years old. The number 25 should be noted in reference to the twin-aisle ball chart above. The 2Q18 fleet averages 25.1 years. Have we reached an inflection point? Is there a demand building for new twin aisles that has not been mentioned before? Both Airbus and Boeing must be hoping there is. In summary, the OEMs confidence in the demand for new aircraft seems well placed. This is not a view based on where we are today, but looking back over nearly 20 years. Everyone in the industry thinks the "supercycle" has to end. But the data suggests that all things being equal, the cycle may have some years to go. Over the past 17 and one-half years the industry has endured and overcome several shocks and kept right on growing. This is a resilient industry.

US Flight Planner - US DoT On-Time Data	Airbus vs Boeing - Official OEM Data
US Airline Schedule Performance - US DoT Data	Daily OEM Production & Deliveries -

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