Despite a number of current headwinds, the long-term outlook for the aviation industry remains very strong. The International Air Transport Association (IATA) forecasts (1) that passenger numbers could double to 8.2 billion by 2037, with a CAGR of 3.5% over the next two decades.
Just as striking is what it calls the ‘geographical reshuffling of world air traffic to the East’ which is driving much of the continued growth. In particular, the Asia-Pacific region will account for more than half the total number of new passengers over the next 20 years thanks to robust economic growth, improvements in household incomes, and favourable population and demographic profiles.
Regional breakdown (number of aircraft)
|2018-2027||2028-2037||2018-2037||Share of 2018-2037 New Deliveries|
1: IATA 20-year air passenger forecast - update October 2018
China is set to displace the US as the world’s largest aviation market by the mid-2020s, while India will become the third largest market. Growth in Indonesia is expected to also be particularly strong, with the country climbing from the world’s tenth largest aviation market in 2017, to fourth by 2030. In total, routes to, from and within Asia-Pacific will see an extra 2.35 billion annual passengers by 2037, for a total market size of 3.9 billion passengers.
As the table below shows, in 2019 IATA is forecasting $865bn (€771bn) of revenue in the global commercial airline market, a rise of 6.5%, of which the passenger market will be worth $589bn (€525bn), a rise of 5% on 2018.
|System-wide global commercial airlines||2013||2014||2015||2016||2017||2018||2019F|
|REVENUE $ billion||720||767||721||709||755||812||965|
|Passenger, $ billion||537||538||509||498||534||561||589|
|Cargo, $ billion||92.1||92.9||83.8||80.8||95.9||111.3||111.3|
|Passenger growth, rpk %||5.7||6.0||7.4||7.4||8.1||7.4||5.0|
|Scheduled passenger numbers, millions||3,145||3,328||3,569||3,817||4,095||4,378||4,579|
|Cargo growth, ftk+mtk, %||1.8||5.8||2.3||3.6||9.7||3.4||0.0|
|Freight tonnes, millions||51.7||54.0||54.8||57.0||61.5||63.3||63.1|
|World economic growth, %||2.5||2.7||2.7||2.5||3.2||3.1||2.7|
|Passenger yield, %||-3.9||-5.4||-11.9||-8.8||-0.8||-2.1||0.0|
|Cargo yield, %||-4.8||-4.7||-11.9||-6.9||8.1||12.3||0.0|
Source: IATA June 2019
Against this backdrop it is little wonder that the two industry giants, Boeing and Airbus, continue to announce ambitious growth plans. For instance, in summer 2019 Airbus revealed more than €8.9bn of aircraft orders and launched a new longer range version of its A321 which will fly transatlantic routes from 2023, while Boeing is also planning a new mid-market plane.
However, the IATA warns that should global protectionism continue to expand then growth will be slower. It recently downgraded its 2019 outlook for the global air transport industry to €25bn profit, down from a €31.5bn forecast, citing that the business environment for airlines has deteriorated with rising fuel prices and a substantial weakening of world trade.
The wider industry also continues to be affected by the fallout from the grounding of the Boeing 737 Max following two crashes, which will continue to have an impact on safety issues.
The industry is ever more aware of the need for ongoing improvements in reducing the size, weight and power plus cost of planes, and the need to further drive its digital transformation.
The sector has one of the lowest innovation intensity percentages, but as new technologies such as robotics, autonomous systems, artificial intelligence, additive manufacturing and sensor technologies take hold, it will see an increased push towards the adoption of digital technologies.
The demand for more fuel-efficient aircraft, along with the need to bring down both acquisition and total ownership costs, will further drive demand for electric aircraft. Expect increasing regulation in this area too. For instance, the EU’s Flightpath 2050 programme calls for a 75% reduction in carbon emissions per passenger kilometre by 2050, compared with 2000 levels.
Although an all-electric aircraft is still many years away from scaled production due to challenges in power density, efficiency, safety and regulation, several leading industry players are now working on plans to bring electrically powered aircraft to the market.
What is striking is how the industry is now speaking as one with regards to the challenge of climate change. In an unprecedented show of unity, at the 2019 Paris Air Show industry giants pledged to halve 2005-level carbon dioxide emissions by 2050, and to limit the growth of net CO2 emissions by 2020. They also agreed to join forces to support the development of biofuels, slash emissions and create cleaner engines, planes and new technologies.