The Jetliner industry stands alone as the only major world manufacturing segment that actually saw output grow during the Great Recession of 2008/2009. While there was a program-related output reduction in 2010, aggregate jetliner output rose by a 6.8% compound annual growth rate (CAGR) between 2008 and 2011. Considering that 2008 was the worst year for the world economy since World War Two, that indicates a very healthy level of jetliner demand.

Airbus and Boeing have announced highly ambitious plans to greatly increase twin aisle production rates over the next three years. Last year, just 191 twin aisle jets were delivered. In 2014, the manufacturers each plan to ramp up significantly on twin aisles, while also delivering over 450 single aisles. Using aircraft value multipliers, this equates to a 137% production output increase relative to 2010 deliveries.

 The biggest risk to the manufacturer’s objectives, of course, is that economic growth could be derailed, causing a traffic drop and a demand drop. While the past few years have seen deliveries conform to economic growth trend lines, there are no global growth forecasts that would justify a 13.3% CAGR in 2010-2014. Indeed, given the fragility of the economic recovery, there are no guarantees of any kind of additional deliveries growth at all. Nothing would be more harmful to the aviation industry than stagflation, a horrible combination of weak demand and very high fuel and other commodity prices.

Our forecast makes myriad assumptions. We can’t forecast the key exogenous matters – oil prices and world economic growth – but we can look at the issues within the industry. Here are the key hinge issues that could affect the future.

• The 787. Big questions: operating economics, performance goals, and production schedule. Our forecast calls for production rates to reach ten per month by 2016, with a product improvement plan that gets performance close to the promised level within two years of service entry.
• Bombardier’s C Series. A moderately appealing plane, with a very promising engine. But it began life with a remarkably feeble launch, and an even worse production plan. It really needs more than two airline customers. We assume a modest level of success, and an 18 month delay, but there’s a lot of risk and not much opportunity, as long as Airbus and Boeing react accord-ingly.
• Airbus and The A350 XWB. While Boeing will need to face reality with single aisles, Airbus has faced reality with twin aisles. The decision to pursue a new variant of the Trent XWB for the 1000 is a long overdue idea, and it could lead to a very good plane, at least against the 777. Airbus is also finally on the right path in terms of product and subcontract arrangements, although there is considerable risk ahead. As for the A350, our forecast calls for it to arrive in mid 2015, 18-24 months late.