During the presentation of the launch of Boeing’s Current Market Outlook (CMO) 2009-2028, a couple of key points during VP Marketing Randy Tinseth’s presentation stood out. As with all things up for discussion, the underlying emphasis of Tinseth’s message was that of market resilience along with stability.
To suggest the downward revisions on the CMO are a “surprise” ignores the realities on the ground (or in the air, so to speak).
Image courtesy of Boeing / Randy Tinseth
Equally, Tinseth drummed home the point about Boeing’s diversified backlog and continued to advocate as he had opined to me earlier on this year that the strategy was all about backlog retention over seeking new orders.
This is well demonstrated by Boeing’s orders to date (click).
One of the key points that stood out for me was this chart here.
The forecast for 2009-2028 shows the region-centric split for future deliveries and shows that the Middle East region will account for just 6% of all new airplanes. Contrast this with Airbus’ inherent exposure on the A380 and A350XWB programs reliant so heavily on the likes of Emirates, Etihad Airways and Qatar Airways – it’s pretty difficult to argue against Tinseth’s points about have strength through backlog diversity.
Factoring the current product strategy, Boeing sees a greater number of new build freighters accounting for the bulk of the large airplane sales, which Tinseth said excluded the possibility of any A380 Freighter. Economic growth, he noted, would be the driver behind the demand for freighters citing the Asia-Pacific region as being the catalyst given that almost “30% of revenue” Asian carriers make stems from cargo movements. While cargo may have, in IATA’s eyes, seen the worst of its days during this downturn, the drive for more efficient cargo jets has seen Boeing maintain orders for the 747-8F due to enter service later next year.
As oil prices climb towards highs this year, accelerated capacity cuts and phasing out of these older airplanes means that most, if not all of these jets will not return to active service – instead being parted out, recycled and used for other models still in the world fleet.
It’s worth remembering that the annual market outlook given has tended to since with under-estimating demand.
Given Boeing’s accuracy at reading the wider market correctly, we see that their product strategy today coupled with long haul, long range twin engine airplanes along with a growth in the number of seats for single aisle jets means that we could see Boeing even vacate the 140-seat and below market to competitors when it eventually replaces the Next Generation 737.
Tinseth stated that any replacement “would be a composite” airplane but that the company remained undecided whether this would be one or two families of airplanes to replacing the existing line up.
Seats count may well be going up in single aisle jets, but historic evidence of the fundamental shift towards frequencies and fewer seats in large airplanes means this forecasts reduction in the number of larger passenger jets than the 777 is most eloquently summed by by Tinseth thus:
“It would seem that the competition has a very challenging task ahead to meet its forecast. In the first 10 years of their projection, Airbus will have delivered a total of 27 A380s. Their forecast in 2000 was more than 1,200 A380s. My math might be wrong, but that means that in the next 10 years they will have to deliver about 120 A380s a year to meet their goal. “
That said, the most interesting aspect of this forecast may not be until 2010 when the Current Market Outlook is updated and to contrast it with this years assessment.
If anything, the chances of another downward revision to the large airplane segment is all but a certainty.
