Wide-Body Commercial Aircraft Strengthen Over Next 10 Years

Teal Group regularly tweaks its civil aircraft production forecasts as new details emerge on both supply and demand for new aircraft. Mostly this has more of an impact on short term expectations of delivery performance rather than any changes that we might make in our underlying assumption.

At the beginning of this year, however, we took a hard look at some of the underlying assumptions in our Commercial Aircraft forecast and that resulted in a notable increase in our 10-year forecast starting in January 2023 from the forecast we published in December 2022. At a very high level the number of large commercial aircraft (excluding regional aircraft) forecasted to be delivered over our 10-year forecast horizon grew more than eight percent from ~18,600 in our 2022 forecast to ~20,200 in our 2023 forecast. The biggest driver of this is twin-aisle deliveries which saw a forecast increase of more than 30% from ~2,800 in our 2022 forecast to ~3,700 in our 2023 forecast. In contrast, forecasted single-aisle deliveries grew at a more normal rate of under five percent although with 16,500 they remain by far the largest category by units.

Part of the increase is technical: the January 2023 10-year forecast swaps a relatively weak 2022 with a comparatively strong 2032. But the other part is our more optimistic view of traffic growth over the next ten years coupled with a reassessment of the strength of the twin-aisle market given the strength of the rebound in international and intercontinental travel. While we don’t expect to see a return to 2019 levels of international travel until 2025, we think there are a number of drivers that support a rebound of twin-aisle demand over the next 10 years.

One of the factors we have reassessed is the impact of longer-range single aisles such as the A321XLR. While there are many compelling reasons why these aircraft can take on a greater role in longer range international traffic, twin-aisle aircraft offer a number of advantages over single-aisles. The first is that there remain a significant number of routes that are longer than the 4,500-mile range of the A321XLR. Secondly, twin-aisle aircraft can carry a lot more belly freight than a single-aisles and contribute to the economics of twin-aisle aircraft. Thirdly, airport congestion and curfews limit how many flights can be operated into many airports and on many routes forcing airlines to operate larger aircraft, especially as air traffic grows and the number of available airports in high demand cities don’t (e.g., London and New York).

Finally, a lot of twin-aisle equipment got parked and were ultimately retired as the pandemic dragged on and long-haul traffic was especially affected. Now that traffic has come roaring back, especially across the Atlantic, airlines are scrambling to find additional capacity. While some of the parked aircraft are trickling back in, a lot of older capacity was permanently retired. As traffic rebuilds in Asia and over the Pacific, the persistent high price of jet fuel, and environmental concerns means that newer, more efficient aircraft are going to be needed to meet that demand.

Most of the new demand for twin-aisle aircraft will begin to come online after 2025, which is when, as we note above, we expect long-haul traffic will recover to its pre-pandemic level. Some of this will be satisfied by single-aisle aircraft but we think it is unlikely that that will turn out to be as significant as we originally thought.

In terms of values, the 2023 forecast translates into a 22% increase in value over 2022. Part of this can be chalked up to inflation (we changed the basis from 2022 dollars to 2023 dollars). But a lot of it can be attributed to the increase in higher value twin-aisle deliveries and the growing impact of larger single-aisles such as the A321 and 737 MAX 10.

Finally, a word about the COMAC 919 and Irkut MS-21. With the first delivery of the C919 last year, we have ramped up our expectation of the C919 given the government attention it is getting and continuing geopolitical tensions. As for the MS-21, we expect entry into service to lag another year – probably more - as we see a lot of risk to this program given the current sanctions due to the Russian invasion of Ukraine. Perversely, we see that western sanctions have more helped this program than hurt it by denying Russian airlines any viable alternative. We don’t expect much of an export market for either type so domestic market demand will pretty much dictate those programs’ success. Both programs are expected to remain modest compared to Airbus and Boeing single-aisle programs, but we see Boeing as taking the biggest market share hit with Airbus remaining the single-aisle champ. 

WMCAB subscribers can view the detail by logging into their Teal Group account and clicking on the Commercial Aircraft link in our spreadsheets section.