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.
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