20-year view: Boeing expects air traffic boom to boost global airplane market

Boeing Everett plant
A Boeing worker pushes a cart through the 777 production line at the company’s Everett plant. (GeekWire Photo / Alan Boyle)

EVERETT, Wash. – Boeing’s 20-year outlook for the airplane market is as sunny as ever, even though some analysts worry about a shift from more profitable wide-body jets to smaller, more economical single-aisle jets.

The way Boeing sees it, a steady rise in commercial air traffic and the start of a new replacement cycle in the 2021-2023 time frame will take care of any glut in the wide-body market. And between now and then, a hefty backlog of orders should bridge the gap, according to Randy Tinseth, vice president of marketing for Boeing Commercial Airplanes.

Tinseth accentuated the positive in Boeing’s latest Current Market Outlook, a 20-year forecast that was released today in connection with the Paris Air Show. He previewed the forecast for reporters earlier this month at Boeing’s Everett plant, on the condition that the information was held back until the show.

This year’s outlook foresees steady upturns for several key indicators, ranging from gross domestic product (up 2.8 percent per year on average) to passenger traffic (up 4.7 percent).

Over the 20 years to come, Boeing expects the airline industry to require 41,030 new airplanes, valued at $6.1 trillion. The Middle East and Asia, and particularly China, are expected to lead the way. This year’s figure represents an uptick from last year’s estimate of 39,620 new airplanes for 2016-2035.

Tinseth acknowledged that the recent growth in the single-aisle market “truly exceeded our expectations,” and he saw that trend as continuing in the decades ahead.

“There’s no question, the single-aisles create the backbone of the aviation market, not only today but moving forward,” Tinseth said.

Like other analysts, Tinseth expects sales of Boeing 747 passenger jets to fade out – although cargo freighters, VIP jets and the Air Force One deal will keep the line alive. The Boeing 777X, which is gearing up for its debut in 2020, is “going to become the big airplane in the market,” he said.

Demand for the 767 will continue as well, thanks to its role as a cargo freighter as well as contracts for its military derivative, the KC-46 tanker. “I’m confident that I’ll be long gone before the 767 goes out of production,” Tinseth said.

Some analysts suspect that Boeing may be too bullish about the prospects for wide-body sales. Teal Group analyst Richard Aboulafia, for example, notes that much of the interest in the 777X has come from Persian Gulf airlines that are facing fresh geopolitical and economic challenges.

Moreover, there are bigger questions about how wide-body jets fit into the airline industry’s changing ecosystem.

“The market prefers smaller jets,” Aboulafia said last week in an Aviation Week op-ed column. “It hates very large jets. … Most of all, when airlines can use a single-aisle jet instead of a twin, they do so.”

But Tinseth argues that the current softness in sales for the 787 Dreamliner, the 777 and the 777X should firm up in the early 2020s as airlines find themselves needing to replace older 777s and Airbus A330s. Kevin McAllister, president and CEO of Boeing Commercial Airplanes, made the same argument during a separate sitdown with reporters.

Outlook for the Boeing 797

Tinseth foresees a healthy market for a jet known variously as the 797, the New Market Airplane or the middle-of-the-market airplane.

The 797 is currently envisioned as a twin-aisle jet with 220 to 270 seats and a range of about 5,600 miles. Tinseth said such a plane could serve high-density single-aisle routes more efficiently – for example, transcontinental U.S. flights, trips between the West Coast and Hawaii, or flights connecting Beijing, Shanghai and Guangzhou in China.

The plane also could make dozens of routes more economically feasible, just as the 787 did when it was introduced. One example could be direct flights between Washington, D.C., and Prague.

Boeing’s management hasn’t yet given the go-ahead to build the 797, but Tinseth said 4,000 to 5,000 of the planes could be sold over the next 20 years if the project is cleared for takeoff.

The company has been sharing its annual Current Market Outlook since the early 1960s, and Tinseth noted with pride that the 1997-2016 forecast came close to what actually happened.

He cited a quote from Wells Fargo Securities analyst Sam Pearlstein to the effect that Boeing’s previous market forecasts have been “remarkably accurate.” (Pearlstein also noted, however, that the forecast for cargo freighter demand was off by 22 percent.)

Outlook for aerospace services

Boeing Global Services, a division that was created last November in a company reorganization, issued its own market outlook for aerospace services in connection with the Paris Air Show.

Its 10-year forecast pegged the “served market” for services ranging from aircraft maintenance to data analysis at $2.6 trillion, with $1.5 trillion coming from the commercial side and $1.1 trillion coming from government contracts.

The outlook envisions a 3.5 percent compound annual growth rate in the aerospace services market.

Last year, Boeing CEO Dennis Muilenburg said the company was aiming to triple its service revenue to roughly $50 billion a year. Stan Deal, president and CEO of Boeing Global Services, said the Texas-based division would start addressing that challenge when it officially begins operations on July 1.

“We’re ready for Day One,” Deal told reporters. “We have an ambitious growth plan. The growth really will be determined by our customers in meeting the promise … to deliver greater value faster to our customers.”

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