Current Market Outlook - as777.com

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B O E I N G

C O M M E R C I A L

A I R P L A N E S

M A R K E T I N G

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W O R L D D E M A N D

F O R C O M M E R C I A L

A I R P L A N E S A N D

AV I AT I O N S U P P O R T

S E R V I C E S

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2 Current Market Outlook 2001

PREFACE

Every year, Boeing publishes its latest assessment of the demand for worldair travel. This assessment estimates the jet airplane capacity to meet theprojected growth in travel demand, plus the replacement market for olderin-service airplanes. As the aviation industry has evolved to encompass newstructures and markets, the assessment has been expanded to include theaviation services required to support the operation of the world jet f leet.This document may be referenced as the Boeing world outlook for the future of commercial airplanes and aviation support services.

The sources used in the preparation of the Outlook included Association of European Airlines (AEA), Airclaims, US Department of TransportationForm 41, DRI-McGraw Hill, Jet Information Services, Official Airline Guide (OAG), International Air Transport Association (IATA), InternationalCivil Aviation Organization (ICAO), Association of Asia Pacific Airlines(AAPA), Wharton Econometric Forecasting Associates (WEFA), and Boeing primary research, including the Boeing World Air Cargo Forecast

2000/2001. Historical data are estimates based on Boeing analyses. Data for 2000 are preliminary.

Boeing recently announced plans to focus product development efforts on a new intermediate-size, high-speed airplane. As Current Market Outlook

2001 goes to press, the technical parameters of this offering are not yet fullydefined, so the airplane is not included in this Outlook. However, theunderlying demand for this airplane is documented in this year’s Outlook.That is, passengers require more frequent nonstop service to more citypairs. They want to go, when they want to go, directly to their destinations.The new faster airplane builds on this passenger preference by adding a new dimension to air travel — increased speed and reduced travel time.

The 2001 Current Market Outlook can also be found on the Internet at:

http://www.boeing.com/commercial/cmo

Please take the time to fill out the reader response card

at the back of the Outlook. We rely solely on this method to

maintain an up-to-date mailing list for next year’s document.

For more information about the For more information about the

demand for air travel and airplanes, demand for aviation services,

contact: contact:

Tim Meskill, Director John Griffiths, Senior ManagerMarket Analysis Market Analysis, Aviation ServicesBoeing Commercial Airplanes Boeing Commercial Airplanes

Telephone: 206-766-2503 Telephone: 206-766-2504Facsimile: 425-237-1706 Facsimile: 425-237-1706

Table of Contents 3

E X E C U T I V E O V E R V I E W . . . . . . . . . . . . 4

W O R L D A I R P L A N E D E M A N D . . . . . . . . . . . 8

Commercial Airplanes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Freighters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

R E G I O N A L A I R P L A N E D E M A N D . . . . . . . . 1 6

North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Middle East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Northeast Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Southeast Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Southwest Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Oceania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

A V I AT I O N S U P P O R T S E R V I C E S D E M A N D . . 2 8

Market Forces — Airlines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Market Forces — Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

The Base Year Estimate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

The Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

C O M M E R C I A L A V I AT I O N E N V I R O N M E N T . . 3 6

Regulatory Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Network Development Strategies. . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Infrastructure Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

A P P E N D I C E S . . . . . . . . . . . . . . . . . . . . 4 6

A. World Traffic by Regional Flow. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

B. Airplane Deliveries and Support Services . . . . . . . . . . . . . . . . . . . 50

C. Results by Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

D. Results by Country. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

E. Market Segment Definitions and Estimating Methods . . . . . . . . 56

F. Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

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Executive Overview 5

EXECUTIVE OVERVIEW

The world is moving faster and becoming smaller, social scientists say.Nowhere is this more apparent than in the air travel industry. Air traveldemand continues to outpace economic growth. Technological advances and the ensuing globalization shape the interplay among governmentregulation, airline strategies, and airplane and infrastructure capabilities in a way that best serves passengers. These factors in turn mold industryrequirements for airplanes and aviation support services.During the next 20 years,airlines will take delivery of over 23,000 airplanes and willrequire $3.1 trillion in aviationsupport services.

Just over 50 years ago, the de Havilland Comet, the world’sfirst jetliner, took to the sky.Today, the world f leet consistsof many airplane models. Thisvariety of airplane capabilitiesallows airlines to f ly morefrequencies to an expandingnumber of airport city pairs.Airlines are able to match routesto the airplane model that bestmaximizes profit. More sophisti-cated routing technologies, coupled with advanced revenue manage-ment systems and Internet distribution, also improve airline profitability.Passengers benefit from safe travel that takes them on increasingly directroutings where they want to go, when they want to go.

Globalization, itself influenced by expansion of world airline networks,encourages nations to adjust the regulatory environment. Many countries have removed competitive restraints within their national boundaries, andairlines are free to choose where to f ly, how much service to provide, andhow much to charge. Airlines offer more nonstop flights to more cities withgreater frequency. More diverse and open international financial marketsfurther allow airlines increased flexibility in managing their f leets and operations.

Global Forces Impact Market for Airplanes and Aviation Support Services

6

Global alliances provide benefits of integration and scale to airlines andcustomers alike. Technologies such as the Internet and video conferencinghelp people to form personal and professional relationships around theglobe, which then leads to more travel.

As air travel grows, pressure is put on infrastructure such as airports and air traffic control. As fast as infrastructure has grown in recent years, air travel demand has grownfaster. Although many parts ofthe congestion solution arebeyond their immediate control,airlines are taking some directactions to mitigate congestion.In 2000, empowered by f leetrationalization, increasinglysophisticated revenue man-agement systems, and theInternet, airlines increased load factors to historic highs on many routes. Utilization of secondary airports, hubbypass or development ofsecondary hubs, and coopera-tion with rail on short routesalso grew. Over the longer term, airlines, airports, airtraffic control authorities, andgovernments will need to workcooperatively to solve congestion problems. Air travel is so vital to economic development that infrastructure capacity will expand, even if in an uneven manner and at a slower pace than the market might wish.

Deregulation, privatization, and globalization have fostered competitionand forced airlines to operate at much higher levels of efficiency. Airlinestrategies are increasingly focused on their core business of attracting and keeping loyal customers, while seeking new ways to reduce costs.Emphasis is shifting to management of total life cycle costs. Airlines arelooking for suppliers who can provide total solutions such as integratedsystems, processes, and infrastructure to support the efficient use ofairplane fleets.

Current Market Outlook 2001

20-Year Outlook—Support Services

Worldwide demand for commercial aviation support services,2001–2020

The world fleet will grow to 32,955 passenger and cargo jets in 2020.Total market potential for aviation support services is $3.1 trillion asfollows:

2000 US dollars,billions

■ Airplane servicing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 462

■ Airplane maintenance, repair, and overhaul . . . . . . . . . . . 1,500

■ Major airplane modification . . . . . . . . . . . . . . . . . . . . . . . 153

■ Flight crew training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

■ Airport and route infrastructure services . . . . . . . . . . . . . . 928

■ Used airplane remarketing. . . . . . . . . . . . . . . . . . . . . . . . . 20

Executive Overview 7

The Market Outlook model begins by completing the current economic and airplane cycles. After short-term imbalances have played themselvesout, the long-term forecast averages future cycles to produce a smoothprojection. During the next 20 years, air travel will grow about twopercentage points faster than economies will grow. This additional growth will be stimulated by lower fares, growing world trade, and service improvements such as increased frequencies and more direct service. World RPKs areexpected to grow at 4.7%, with regional-flow forecastsvarying from 2% to 9% growth.Europe and North America aremature economies with lowergrowth rates, although they will continue to take the mostairplane deliveries. Asianeconomies, recovering from the earlier crises, will onceagain experience above-averagetraffic growth and an increasingshare of airplane deliveries.Latin American countries are expected to recover fromrecent financial crises and willexperience some of the world’sfastest traffic growth rates.

The share of large airplanes in the world f leet is projected to decline from 7% to 5%; whereas, the percentage of intermediate-size airplanes will increase from 19% to 22%. Intermediate-size airplanes allow airlines to f ly the increasedfrequencies and additional city pairs requested by customers. The share of single-aisle and regional jets will decline slightly from 74% to 73%. Small jets are transforming regional affiliates at Major airline hubs. Theseregional jets are replacing prop services, substituting for larger jets withunprofitable loads, and opening up new thin feeder markets at hubs.

The segments of the commercial aviation support services market arediverse in terms of sales, activity scope, capital intensity, and competitiveenvironment. They should grow at the rate at which the world airline f leetgrows or at the rate by which fleet utilization grows, depending on marketsegment. By 2020, annual aviation support revenues will more than doubleto over $226 billion.

20-Year Outlook—Airplanes

Economic and traffic growth, 2001–2020

Major projections for the 20-year period 2001 to 2020 are as follows:

■ Worldwide economic growth will average 3.0% per year.

■ Passenger traffic growth will average 4.7% per year.

■ Cargo traffic growth will average 6.4% per year.

Worldwide demand for commercial airplanes, 2001–2020

The world fleet will grow to 32,955 passenger and cargo jets in 2020.The composition of the world fleet in 2020 will be

■ 15% smaller regional jets. ■ 22% intermediate-size airplanes.

■ 58% single-aisle airplanes. ■ 5% 747-size or larger airplanes.

Total market potential is 23,460 new commercial airplanes worth $1.7 trillion in 2000 US dollars. Airlines will take delivery of

■ 4,145 smaller regional jets. ■ 4,875 intermediate-size airplanes.

■ 13,350 single-aisle airplanes. ■ 1,090 747-size or larger airplanes.

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World Airplane Demand 9

E C O N O M I C A N D T R A F F I C G R O W T H

World GDP is forecast to grow by 3% over the next 20 years. In mature economies, GDP growth will average between 2% and 3% per year. By contrast, GDP growth in developing regions may average well over 4%. Mature economies rely on productivity gains, serviceindustries, and consumer markets for much of their gains; whereas,emerging economies are characterized by expanding labor forces, increased manufacturing, and entry into global capital and trade markets. China is forecast to have the fastest growing GDP at 6.1%, as it continues its successful melding of a centrally planned economy with the world market economy.Southeast Asia will also growfaster than the world average,although not at the high levelsexperienced during much of the 1990s when its economieswere less mature.

World air traffic measured in RPKs will grow 4.7% annually over the next 20 years. Themajority of air traffic growth is explained by economicgrowth. International trade,airline service improvements,and declining fares explainadditional portions of trafficexpansion. Europe, South America, andNortheast Asia have the largest growth of air traffic in excess of GDP. Europe will experience the continuing positive effects ofliberalization. South America will recover from present economic slow-downs and will increase air traffic through liberalization, internationaltrade, and tourist development. The traffic projection for Northeast Asia is lower than past forecasts to better reflect a slower pace of economicdevelopment in Japan. Still, both Japanese and Koreans currently travel lessthan their wealth would indicate, so future RPK growth rates will be high.Southwest Asia and Africa GDP and traffic have historically lagged theworld. Both regions are forecast to grow above the world average over thenext 20 years, as their economies and airline industries modernize.

Percentage

RPKGDP

China

GDP and RPK Growth Varies by DomicileAnnual growth, 2001–2020

0 2 4 6 8

WORLD

Northeast Asia

Europe

North America

Oceania

CIS Region

Middle East

Africa

South America

Central America

Southeast Asia

Southwest Asia


T R A F F I C G R O W T H

Two effects determine total air travel growth for a country. The first andmore significant effect is economic growth. The second is the value createdas airlines reduce prices and increase service offerings and as internationaltrade grows. Over time, this second effect causes the share of GDP that acountry devotes to air travel to increase. The share of GDP spent on airtravel by countries with high initial travel shares has tended to grow moreslowly than the world average. These countries have maturing air travelmarkets. In contrast, GDP share spent on air travel by countries with lowhistorical travel shares has tended to rise faster than the world average. TheRPK forecast, thus, shows considerable variation among regional f lows.

Because of its maturity, the North America marketshare of world traffic will decline from 25% to19%, as less-developed markets grow faster. For example, the market share of the combinedsegments of the Asia-Pacific region will increasefrom 14% to 19%. The North Atlantic market willfall from 12% market share to 10%, and the SouthAtlantic will remain constant at 4% share. Europewill maintain a 13% market share. The Europe toCentral America market is a relatively mature, mostly leisure market, which will grow at 4.2% annually through 2020. The Europe to SouthAmerica market has untapped potential for business and leisure traffic and will grow at 5.8%. Latin America, a small region with only 2% marketshare, will increase share to 4% because of a high 7.7% traffic growth ratefueled by liberalization and increased world trade of South America.

RPKs, billions

Africa–Europe

0 500 1,000 1,500

3.1%

4.7

5.3

4.8

2000 traffic2001–2020

growthAnnual growth %

6.7

4.7

2,000

5.4

3.6

9.3

7.7

4.8

5.0

Air Travel Growth Varies by RegionAdded traffic, 2001–2020

North America

Europe

OtherAsia-Pacific

North Atlantic

Europe–Asia

Transpacific

China

Latin AmericaNorth America–

Latin AmericaEurope–

Latin America

Northeast Asia


T R A F F I C A N D F L E E T G R O W T H

Airlines purchase airplanes to f ly specific routes to respond to trafficdemand. Route characteristics vary by region. Thus, the size mix ofairplanes applied by airlines will vary by market.

Short-haul markets dominate the world’s departures, representing adramatic 96% of the total. Although short f lights require relatively few ASKs per f light, a large number of single-aisle airplanes are necessary to support the number of de-partures. More than 4,100 small and intermediate regionaljets will be delivered by 2020.Domestic f lying in Europe and North America alone willconstitute almost 40% of the world’s added ASKs and will absorb over two-thirds of the deliveries of single-aisle airplanes.

A major share of capacity to be added during the 20-year forecast periodinvolves travel within, to, and from the Asia-Pacific region. Markets serving Asia will receive 90% of new large airplane deliveries. Because oflong routes and the high number of seats on these airplanes, relatively fewlarge airplanes are needed to provide the ASKs that market characteristicsrequire. Asian markets also comprise the bulk of intermediate twin-aisleflying, although the North Atlantic will be the largest discrete traffic f lowfor the midsize twin aisles.

In addition to consideringtraffic demand in regional f lows when making their f leet-addition decisions, airlines alsotake into account replacementand reallocation of their existingfleets. The next pages look atthese concepts in more detail.

Short-Haul Markets Continue to Dominate,Even as North America Loses ShareShare of world departures

Long (other)

Percentage0 10 20 30 40

20202000

Intra-North America

Intra-Europe

Short (other)

Intra-Asia

Atlantic

Pacific

Europe–Asia

0 500 1,000 1,500 2,000ASKs, billions

Smaller regional jetsSingle-aisle

Twin-aisle747 and larger

Growth in Regional Traffic Shapes the FleetAdded traffic, 2001–2020

North America–Latin America

North America

Asia-Pacific

Europe

Transpacific

North Atlantic

Asia–Europe

Europe–Latin America

Latin America


A I R P L A N E R E P L A C E M E N T

New capacity is added as older airplanes pass through a series ofreplacement stages. The first stage is lower utilization in response to increasing maintenance downtime or increasing operating costs. The second stage is often the sale of an airplane to another operator who has different utilization requirements. For example, a new owner may modify the airplane for cargo use, or another airline may have a need for an older airplane type to be compatible with the rest of their f leet.Eventually, airplanes are removed from commercial service. Government or private owners may continue to operate these airplanes before perma-nently retiring them. Thus, airplanes often remain in service significantlylonger than they are f lown by their first operator. There is significantvariation among airlines as to the timing of replacement. The forecast is based upon information from airlines whenever possible.The table summarizes guide-lines used to remove airplanesfrom the active commercial f leetwhen airline information is notavailable. Government regula-tions on noise and emissionsalso have an impact onretirements.

A mandate went into effectJanuary 1, 2000, requiring thatall operations into and out of US airports must be made with “Stage 3” noise level-compliant airplanes. A similar mandate will become effective in most European airports in April 2002. Compliance with these policies continues to be a factor for new airplane deliveries and retirements. Aircraft and engine manufacturers, airlines, and airportsare currently working with the International Civil Aviation Organization(ICAO) to formulate “Chapter 4” noise limits for new aircraft types, which will continue to improve aircraft environmental performance. During 2001, the ICAO will finalize these new noise-level standards.Additionally, there could be local and regional restrictions that mightinfluence retirements of in-service airplanes, which will be reflected in future market outlook forecasts.

Guidelines for Replacement in Commercial Airlines Fleets

1. Information from airlines

2. Airplanes designed Before 1980 After 1980

Single-aisle 25 years 28 years

Twin-aisle 28 years 31 years

3. Freighters: 35 years or older

4. Extended services lives (hushkits): 5 to 10 years

F L E E T G R O W T H

The world f leet is expected to more than double by 2020, with total f leet size growing to 32,954 airplanes. Over the 20-year forecast period,5,053 airplanes will be retired from active commercial service and will bereplaced. An additional 18,406 airplanes will be needed to fill capacitydemand. The tally of airplanes added and removed is a straightforwardexercise. Defining the number of airplanes attributable to growth and those attributable to re-placement is not. The reason is that airplanes are not re-placed jet-for-jet, but rather seat-for-seat. The 5,053 air-planes removed from the system will be replaced by some airplanes of equal size, but also by both smaller and larger airplanes. For example, an airline might “replace” its hushkitted 727-200s (156 seats) with 757-200s (201 seats). Only a portion of each 757-200 actuallyserves as replacement; the rest contributes togrowth. Based upon an estimate of the amount of capacity removed from the world f leet, approxi-mately one-fourth of the market for new commercial jets can be thought of as replacement for older in-service airplanes, and the remaining three-quarters for accommodation of both passenger and cargo traffic growth. Two-thirds of the f leet operating today is projected to still be in operation 20 years from now.

The World Fleet Will More Than DoubleOver the Next 20 Years

2020

32,954airplanes

14,548airplanes

8%

66%

19%

7%

5%

15%

58%

22%

Smaller regional jetsSingle-aisleTwin-aisle747 and larger

2000

0

Additions and Removals Impact the World FleetUnits40,000

20202000

14,548retained fleet

9,495retained fleet

5,053 replacements

18,406growth airplanes

30,000

20,000

10,000



D E L I V E R I E S

The current world f leet of 10,818 single-aisle airplanes plus regional jets is expected to grow to 24,045 airplanes by the year 2020. Airlines will use these smaller airplanes to offer more frequencies in domesticservice and short-haul international f lights. The regional jet share willincrease substantially. US regional airlines are operating smaller jets on new nonstop flights. Regional jets extend the geographic reach of Majorairline hubs, augment larger jet operations in off-peak hours, replace Major airline larger jets on thin routes, and substitute for prop flights.European carriers also will operate large numbers of regional jets, especially in hub bypass and point-to-point markets. Although not at the high absolute numbers experienced in Europe and North America,other regions of the world willalso be expanding their use ofregional jets over the next 20years. For example, the share ofOceania’s f leet comprising smaller regional jets will increase from 8% to 15%. In China, the share will increase from 4% to 11%.

Intermediate-size airplanes will be the fastest-growing segment of the commercial airplane market for two reasons. First, some midsize types are now capable of serving long-range intercontinental markets that once were restricted to long-range 747s. Second, airlines can take advantage of lower operating economics for the intermediate-size airplanes to replace older 747s.

The market for very large airplanes is small. Summing the projectedrequirements for 747-and-larger airplanes in all major travel markets reveals a total need for 1,091 airplanes over the next 20 years. Within this size category, about one third of the requirement — or approximately 410 jets — is for passenger airplanes of the size of the 747-400. About onethird of the requirement is for freighters. The market for airplanes largerthan today’s 747-400 becomes significant only during the second decade of this forecast. By the end of the forecast period, most intercontinentalroutes will have at least daily service, and traffic volumes will support an airplane larger than the current 747. The projected requirement for airplanes of 500 seats or greater, however, is estimated at only 340 passenger jets over the study period.

Single-Aisle Airplanes Dominate Future Deliveries2001–2020

1.70 trilliondelivery dollars*

23,459airplanes


5%5%

40%

57%

17%

21%

41%

14%

* In year 2000 dollars

D E M A N D F O R F R E I G H T E R A I R P L A N E S

The freighter f leet will double over the next 20 years from 1,742 to 3,523 airplanes. Freighters as a share of the total airplane fleet will remain stable at 11% to 12%. Taking 1,238 retirements into account, 3,019 airplanes will be added to the freighter f leet by 2020.

Widebody freighters, currently 37% of the f leet, will supply nearly two-thirds of these additions and will end the period comprising 61% of the f leet. The shift toward widebody freighters will result in a f leetwideincrease of 25% in average freighter airplane payload. The mediumwidebody fleet will more than quadruple over the next 20 years, the greatest change of anycategory. By 2020, it is anti-cipated that freighters of all sizes will provide as much as 49% of the world’s total air cargo capacity, an increase of 8 percentage points.

More than 70% of the more than 3,019freighter f leet additions during the next 20 years, satisfying both market growth andreplacement needs, will come from modifiedpassenger and combi airplanes. More than half of these conversions will be widebody conversions.

By 2020, 811 new production freighters will enter the f leet. Although new aircraft will comprise a minority of the world freighter f leet by 2020,many airlines prefer the technical advantages, reliability, and fuel efficiencyof new aircraft. Nearly half of new freighter deliveries will be in the largecategory, one-third will be medium sized, and 16% will be small sized. Thevalue of these new freighters totals $121 billion in current US dollars.

Smaller (<30 tons)Medium standard-body (30–50 tons)Medium widebody (40–65 tons)Large (>65 tons)

Widebody Freighters Dominate a Future FleetThat More Than Doubles

2020

2000

26%

13%

34%

27%

40%

23%

17%

20%

3,523freighters

1,742freighters


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REGIONAL DELIVERIES

The mix of airplane models and number of deliveries varies widely byregion. On the passenger side, North America, with its large number ofexperienced travelers and its need to replace an aging fleet, will require the most airplanes over the next 20 years. Compared with other regions, alarger number of North American deliveries will be regional jets. In Europe,almost 80% of deliveries will be single-aisle airplanes and regional jets.Asia-Pacific will take deliveries of the most 747-and-larger airplanes.

The world’s airlines will add 3,019 new and convertedfreighters by 2020. As describedin the Boeing World Air Cargo

Forecast 2000/2001, factorssuch as airline strategies,retirement rates, and varyinggrowth rates of major tradeflows and market segments will impact the sizes of new and converted freighters addedto each region. For example,large US-based air expresssystems will add many medium and large widebody freighters for bothgrowth and replacement purposes. Asia-Pacific and European airlines willadd many large long-haul freighters, especially new and converted 747s.

Airlines in the Middle East,Africa, and Latin America alsowill acquire main deck cargocapacity to support trafficgrowth that their passengerairplane lower deck compart-ments cannot accommodate, or to provide shippers higherlevels of service. These airlinesare forecast to show a prefer-ence for medium widebodies toserve the nearby Europe, Asia-Pacific, and North Americamarkets. As with airlines in all the regions, they also will require small and medium standard-body freighters to support thinner and developing markets.

North America Europe Asia-Pacific* Latin America Africa andMiddle East

8,000

6,000

4,000

2,000

0

* Includes Southwest Asia

Passenger Airplane Deliveries Vary by RegionNumber of new airplanes, 2001–2020

747 and largerTwin-aisle

Single-aisleSmaller regional jets

North America Europe Asia-Pacific* Latin America Africa andMiddle East

1,600

1,200

800

400

0

* Includes Southwest Asia

Freighter Deliveries Vary by RegionNumber of new and converted airplanes, 2001–2020

LargeMedium widebody

Medium standard-bodySmall

Regional Airplane Demand


N O R T H A M E R I C A

Economic growth in North America is driven by strong increases inproductivity added to a continuing 1% annual population growth fromimmigration. Mainstream economists now accept that productivity growthcan sustain at levels thought impossible five years ago. Higher productivityestimates move the growth outlook for the next 20 years to an average of2.8%. Air travel growth for the region’s carriers should average 3.5%. North American markets are fully liberalized, and travel levels are alreadyabove average for wealth. Yet there is still growth beyond growth in GDP.There is no indication that there is a level of wealth at which people begin to spend smallerpercentages on travel. Travelwill still be stimulated by con-tinued efficiencies in costs andthus fares. Also, internationaltravel in particular will benefitfrom increased routes and in-creasing international trade.

Regional jets will continue to emerge as a major feature of the North Americanmarket landscape, further fragmenting it. The large number of regional jets added will boost the share of North American capacity they provide, as measured by ASKs, from 4% to 12% from 2001 to 2020. Major carriers apply regional jets via their regional airline affiliates for a variety of reasons, including hub feeding, taking traffic from hubs, hub bypass, point-to-point services, as turbopropreplacement, and as a mainline jet complement, especially in off-peak hours. Often these services are aimed at business travelers, who provide airlines with high yields. Some Major airlines are nowconstrained by “scope clauses,” which constrain the application of regional jets by airplane size (less than 70 seats, for example), by how they are operated, and by how many regional jets are permitted to operate within a network.

North America ASK MixDomiciled AirlinesScheduled Nonstops, 2000

North America to:

North America . . . . . 72%

Europe. . . . . . . . . . . 12%

Northeast Asia . . . . . . 6%

Central America . . . . . 4%

South America . . . . . . 3%

Other . . . . . . . . . . . . 3%


8,056 airplanes$501 billion*

20006,642

airplanes

202011,757

airplanes

100

75

50

25

0

North America Deliveries2001–2020

North America FleetPercentage of fleet

20%

64%

13%

3%


19

L AT I N A M E R I C A

Latin American growth is led by the two large economies of Brazil and Mexico. The region is characterized by great differences in wealth,which often puts a strain on economic and political systems. Nevertheless,the outlook for the region is strong, based on continued progress towardpolitical and economic reform and competitive global economic policies.GDP growth in Latin America over the next 20 years is expected to average4.1%. Air travel growth varies considerably by f low. South America will have some of the world’s greatest percentage of traffic growth to serve its large population and vast geography, whereas Central America is arelatively less robust market.

Liberalization is in place in Brazil, and its airlines aregoing through a process ofchange. As happened in NorthAmerica, Europe, and other liberalizedareas, new low-cost carriers will competewith existing carriers and benefit thepassenger. Alliances and partnerships arealready well entrenched in Latin America,especially with US and European airlines.Regional Latin American carriers are alsocooperating among themselves with open skies and trade agreements.Several major airlines have already been privatized. All of these factors will allow Latin carriers to form enhanced networks. For example, over the next 20 years, the number of nonstop airport pairs in the Latin America-Europe market is forecast to increase from 169 to 300. This is similar to the fragmentation that is occurring in otherintercontinental markets.

Over half of the f lying of Latin American carriers is within the region.Regional jets and single-aisle airplanes are forecast to dominate futuredelivered capacity to serve local markets. Smaller regional jets will be useful for providing nonstop service in markets too thin for larger air-planes. More distant intra-Latin American markets as well as business and leisure travel from North America and Europe will drive the strongdemand for intermediate-size airplanes. Overall, the share of intermediate-size airplanes will increase from 12% to 18%.

Latin America ASK MixDomiciled AirlinesScheduled Nonstops, 2000

Latin America to:

Intra-South America . . 38%

Intra-Central America . 16%

C. Amer–N. Amer . . . . 14%

S. Amer–N. Amer . . . . 11%

S. Amer–Europe. . . . . 10%

C. Amer–S. Amer. . . . . 5%

C. Amer–Europe . . . . . 4%

Latin America–Asia . . . 2%


2000956

airplanes

20203,083

airplanes

100

75

50

25

0

Latin America Deliveries2001–2020

Latin America FleetPercentage of fleet

20%

70%

10%





E U R O P E

Economic growth in Europe is a blend of smaller developing economies and larger mature economies. Growth is tempered by slow populationgrowth and limited productivity gains in the mature economies. However, a united Europe could lead to more fluid labor markets and increased trade.Overall, the 20-year forecast for annual GDP growth is 2.4%. Air travel of the region’s carriers is forecast to grow at 4.5%, substantially faster than GDP. Fast growth is driven by continued liberalization of markets. New carriers are adding new routes and developing low fare structures in many parts of Europe. Larger carriers are developing hubs with waves of regional departures.Both schedule and price effectsshould drive traffic gains. Inaddition, parts of Europe do not travel as much as theirincomes would imply. Some ofthis behavior is cultural, especially in southern Europe, where people tend to vacation with their families in the local countryside or drive to otherlocations within Europe.

Increasingly, the leisure airlines of Europe are listing their f lights as scheduled. Combining scheduled and nonscheduled service, European airlines f ly over half of their traffic within Europe and to short-haul markets in the Middle East and North Africa using single-aisle airplanes. Low-cost carriers alsoincreasingly f ly within Europe with smaller jets. By 2020, 78% of theEuropean airlines’ f leet will be smaller regional jets and other single-aisleairplanes. Few scope clauses in Europe are as restrictive as those in theUnited States, nor are they EU-wide, thus creating the potential to makeregional jets an even more powerful strategic force. Connect hubs aregenerally much less developed than in the United States. Populationdistribution, slot limitations, and the relatively embryonic state of the single market impose limits on the ability of airlines to build US-style hubs. The regional jet’s role in Europe is more linked to hub bypass and point-to-point service strategies.

Although European carriers will continue to purchase and utilize largeairplanes, the share of 747 and greater size jets will decline from 7% to 4% over the next 20 years. The share of intermediate-size twin-aisleairplanes will increase from 17% to 18% during the same time period.Fragmentation on the Atlantic and to Asia will drive these trends in larger airplane use.

Europe ASK MixDomiciled AirlinesScheduled Nonstops, 2000

Europe to:

Europe. . . . . . . . . . . 39%


Central America . . . . . 6%

South America . . . . . . 4%

Africa . . . . . . . . . . . . 7%

Middle East . . . . . . . . 4%

Southeast Asia. . . . . . 5%


China . . . . . . . . . . . . 3%

Southwest Asia . . . . . 2%


20003,665

airplanes

20209,478

airplanes

100

75

50

25

0

Europe Deliveries2001–2020

Europe FleetPercentage of fleet

21%

59%

17%

3%Smaller regional jetsSingle-aisleTwin-aisle747 and larger


A F R I C A

With more than 50 countries, Africa presents a wide spectrum of economic and political development. On average, air traffic for the region’s carriers is forecast to grow at 4.8% over the next 20 years. This traffic builds from 4% GDP growth, with South Africa comprising a quarter of the GDP base. The long-term outlook assumes education,health, trade, investment, and government reforms continue to modestlyprogress throughout the continent. A number of airlines are embarking on fleet modernization programs, and some governments are looking at privatization options. African nations are beginning to participate in regional and world liberaliza-tion with resultant increases in trade and air travel. Forexample, a number of countrieshave signed open skies agree-ments with the United States.Nine African countries recently signed a free trade agreement that opens up new fifth freedom opportunities,and more countries are expected to parti-cipate. Several airlines are associatedmembers of major world airline alliances. Other carriers participate in regional code shareand joint purchasing alliances, such as between several North African carriers.

Within Africa, almost two-thirds of f light frequencies serve airport pairs in Southern Africa, with the remainder divided fairly evenly between air-port pairs in Northern and Central Africa. Although single-aisle airplaneswill continue to dominate the African fleet, the percentage of intermediate-size airplanes will double to better serve long-haul and interregionalmarkets. Traffic from Southern Africa to Europe, including the holidaydestinations of Mauritius and Reunion, utilizes large airplanes. Leisuretraffic is a significant component of Africa to Europe flows, with NorthAfrica continuing to increase in popularity. Safari trips from the Americasand Europe comprise a segment of travel to Central Africa. Cultural andeconomic ties with Europe lead to substantial business and VFR (visitingfriends and relatives) traffic.

Air cargo is an important component of Africa air service. Europe is the major air trade partner, comprising 73% of the total. The Middle Eastaccounts for 11%, North America 6%, Intraregional Africa 5%, and Asia 4%. African airlines will add 162 new and converted freighters to theirfleets. For example, they will offer main deck capacity for exporters ofperishables and manufactured goods to African and European markets.

21

Africa ASK MixDomiciled AirlinesScheduled Nonstops, 2000

Africa to:

Europe . . . . . . . . . . .47%

Africa . . . . . . . . . . .31%

Americas . . . . . . . . . .9%

Asia-Pacific . . . . . . . .7%

Middle East . . . . . . . .6%

533 airplanes $34 billion*

2000550

airplanes

2020983

airplanes

100

75

50

25

0

Africa Deliveries2001–2020

Africa FleetPercentage of fleet

35%

43%

20%





M I D D L E E A S T

GDP is expected to grow by 3.9% annually over the next 20 years in the Middle East. This growth is helped by forecasts for strong populationincreases. Otherwise, GDP growth is tied to petroleum exports, their price, and the business and investments caused by the inflow of capital.The forecast assumes that oil prices come down from recent highs andremain at long-term sustainable levels. The outlook also assumes a re-latively stable political environment as well as that Iran and Iraq becomemore open and integrated into the world economy and air travel network.

The pace of liberalization andprivatization has been slower in the Middle East than in otherregions, but several airlines arenow engaged in privatizationactivities. Airlines in the ArabAir Carriers Organisation (AACO)participate in joint buying and operationsactivities, and five of their carriers haveagreed to explore code-sharing options.Although to date no Middle East airlinesbelong to major world alliances, most carriers in the region code share with world airlines.

Middle East airlines’ traffic is forecast to grow at 4.2%. There are several distinct customer groups comprising Middle East air travel. Each year over one million Moslem travelers f ly to Jeddah to attend the Haj or to go on pilgrimage, many on charter f lights. The bulk of these travelers are from Southwest and Southeast Asia, the Middle East, and Africa.Religious pilgrims travel to Israel in significant numbers. The Middle East also attracts leisure and cultural travelers, primarily from Europe.Dubai and Cairo are major economic centers for the Middle East and Africa. Dubai also attracts shoppers from all over the world. Finally, some Middle East traffic is actually connecting flights between Europe and the Asia-Pacific region, which will decline as longer-haul direct f lights increase.

Airlines in the Middle East will add 197 new and converted freighters totheir f leets, three quarters of which are forecast to be medium widebodies.Large freighters also will be added to offer shippers long-haul services toAsia and North America. Many freighters will be needed to handle exportedair cargo, especially to Europe. Freighters will also accommodate importers,such as those of high-value consumer and high technology goods.

Middle East ASK MixDomiciled AirlinesScheduled Nonstops, 2000

Middle East to:

Europe. . . . . . . . . . . 29%

Middle East . . . . . . . 24%

Southwest Asia. . . . . 15%

Southeast Asia . . . . . 12%


Africa . . . . . . . . . . . . 6%

Other Asia . . . . . . . . . 4%

651 airplanes$63 billion*

2000453

airplanes

20201,020

airplanes

100

75

50

25

0

Middle East Deliveries2001–2020

Middle East FleetPercentage of fleet

48%

41%

5%6%



23

Northeast Asia ASK MixDomiciled AirlinesScheduled Nonstops, 2000

Northeast Asia to:

Northeast Asia . . . . . 37%


Europe. . . . . . . . . . . 11%


Oceania . . . . . . . . . . 6%

China . . . . . . . . . . . . 4%

Southwest Asia . . . . . 1%

N O R T H E A S T A S I A

GDP growth in Northeast Asia is forecast at 2.1% annually for the 20-yearperiod. This low rate is driven by Japan and has multiple causes. First, is the decline in birth rate and working age population, and, second, is thesometimes difficult transition from a high-growth economy to a mature one.Movement toward more private consumption and development of service-sector productivity will happen slowly. Korea will grow at a faster rate thanJapan because it is still a developing economy that can rely on moving toincreasingly higher skilled manufacturing for its growth.

The outlook for air travelgrowth for Northeast Asia isquite robust in spite of the levelof GDP growth. Neither Japannor Korea currently travelsmuch, given their level ofwealth. Air travel markets are not fullyderegulated, distribution channels aretightly held, and international routes arestill controlled with bilaterals. As changesoccur, the region will experience rapidlyexpanding air travel. Overall, air travel growth for the region’s carriers is forecast at 5.8% over the next two decades.

North America will remain a popular destination for Northeast Asia leisure, VFR, and business travelers. Europe continues to grow inpopularity. Both of these long-haul markets will be subject to increasingfragmentation as more airport pairs are served with more frequencies using intermediate-size airplanes. For example, 10 years ago, service from Japan to Hawaii essentially originated from Tokyo, with limited service from Osaka and Nagoya. Today, services to Hawaii originate in an additional five cities evenly spaced throughout the Japanese archipelago and go to two Hawaiian cities in addition to Honolulu.

With the opening of the new Incheon International Airport in Korea,additional airport capacity for international as well as domestic services will allow more frequency growth. Constraints to regional growth continueto diminish. The second runway at Narita and new Japanese air serviceagreements with China and South Korea create the opportunity for rapidgrowth in regional frequencies from Tokyo. Longer term, airport develop-ments planned in Nagoya, Kobe, and Fukuoka are much needed as demandfor air travel grows in Japan.

1,247 airplanes $169 billion*

2000597

airplanes

20201,530

airplanes

100

75

50

25

0

Northeast Asia Deliveries2001–2020

Northeast Asia FleetPercentage of fleet

22%

57%

19%





S O U T H E A S T A S I A

The Southeast Asia region is a mixture of countries that have enjoyedconsiderable growth over the last two decades and populations who are not enjoying the conditions for economic growth as yet. Although somecountries are still experiencing instability from the 1998 to 1999 financialcrises, GDP for the region is forecast to grow at 4.8% annually over the next 20 years. A return to the very high rates of growth seen during much of the 1990s is not expected. Those gains came from moving from under-employment to full employment. Future gains will come from productivityincreases, which are more slowly obtained. Air travel growth for the region’s carriers is expected to average 5.3% per year overthe 20-year period, with 6.4%growth within the region.

Southeast Asia has strongcultural ties with both Europe and North America. For example, there are large amounts of VFR trafficbetween the United States and thePhilippines and Taiwan. Several nations, most notably Thailand, managed to increasetourism even during the height of the late 1990sfinancial crises because of attractive exchange rates and well-managed tourism promotion. The region, with its natural resources and cultural attractions, is forecast to continue developing as a leisure destination for Asia as well as Europe and North America. Some of the airlines in the region have already formedglobal alliances and have a worldwide route network. Several airlines areprivatizing and undergoing fleet modernization programs. Indonesia has liberalized its domestic market, encouraging new entrants.

Airlines within the region have diverse f leet requirements. Airlines in Indonesia and the Philippines require large numbers of single-aisleairplanes for their domestic markets. Singapore has a high proportion of twin-aisle jets to serve its regional and intercontinental routes. Carriersin this region will use ultra-long-range airplanes to serve North Americancities nonstop. Intermediate-size airplanes will be used to develop newroutes and accommodate travel requirements from key business centers. The region’s twin-aisle airplane percentage will, thus, increase over theforecast period.

Southeast Asia ASK MixDomiciled AirlinesScheduled Nonstops, 2000

Southeast Asia to:


Europe. . . . . . . . . . . 21%


Oceania . . . . . . . . . . 12%


China . . . . . . . . . . . . 8%

Middle East . . . . . . . . 4%

Other . . . . . . . . . . . . 4%


2000625

airplanes

20201,458

airplanes

100

75

50

25

0

Southeast Asia Deliveries2001–2020

Southeast Asia FleetPercentage of fleet

29%

44%

18%

9%



25

S O U T H W E S T A S I A

In spite of political turmoil in parts of Southwest Asia, progress in economic development is underway. The GDP outlook of 5.1% annualgrowth over the next 20 years assumes that Southwest Asia will continue its current focus on privatization, globalization, infrastructure, and tourismdevelopment. Privatization and the relaxation of rules on foreign investmentare already fostering infrastructure and airline growth in India. Severalairlines are competing domestically in response to liberalization. A terminalexpansion is underway at New Delhi’s airport, and several domestic airportswill open to international f lights. Other nations in the region are exploringalliances and fleet modern-ization programs. Trafficgrowth will vary by regionalflow, ranging from 8.7% withinSouthwest Asia to 5% to 7%growth with other regions.

Southwest Asia encompasses several airtravel markets. Travel within SouthwestAsia and internationally reflects a growingmiddle class that travels for business, leisure,and religious purposes. Travel to the Middle Eastsupports pilgrimage flights and foreign workertrips. North American tourists and VFR traffic travel to Southwest Asia via Europe, the Middle East, and Asia gateways. Tourists also come in substantial numbers from Europe. As airplanesincrease their range, nonstop flights are expected from North America.

Large numbers of single-aisle jets will be used domestically, especially in India’s deregulated market. The use of intermediate-size airplanes will also increase over the next 20 years. Airlines choose to serve theirlargest markets with growing frequencies and to re-open thin markets that were uneconomical with large airplanes. Services to Asia, Europe, and Australia and New Zealand will use all types of midsize airplanes.

Southwest Asia ASK MixDomiciled AirlinesScheduled Nonstops, 2000

Southwest Asia to:

Southwest Asia. . . . . 37%

Middle East . . . . . . . 26%

Europe. . . . . . . . . . . 21%


Europe–No. Amer . . . . 6%

Other Asia . . . . . . . . . 3%

528 airplanes $42 billion*

2000191

airplanes

2020722

airplanes

100

75

50

25

0

Southwest Asia Deliveries2001–2020

Southwest Asia FleetPercentage of fleet

57%

38%





C H I N A

The 20-year China GDP forecast of 6.1% per year is the highest in the world and reflects the successful integration of market forces within thecentrally planned economy. This value reflects occasional interruptions in growth as imbalances in banking, investment, infrastructure, and theregulatory environment adjust to growing levels of economic complexity.

Air travel growth for the region is forecast to keep pace with GDP growth.China will be the largest commercial aviation market outside the UnitedStates over the next 20 years. Air travel is forecast to grow at 9.3% withinChina and will be above theworld average for most inter-regional f lows. China currentlyhas many airlines, which thegovernment is consolidating for improved efficiency. Much of the increase in air travel will be a result of growth in international trade.More liberal international air serviceagreements are being negotiated, and China will benefit from new polar routes thatprovide direct service from North America.Infrastructure modernization including newairports and an improved air traffic management system is forecast.

China’s domestic market will require 1,459 new airplanes. By 2020, 15% will be small and intermediate-size regional jets, 63% other single-aisle, 19% intermediate twin-aisle, and just 3% 747 size and larger. The transpacific market will grow at an average rate of 6.5% over the next 20 years. Trade, VFR trips, and tourism will all boost the China-North American market. 747-size or larger airplanes will serve the largesttranspacific markets, and new market development will occur with inter-mediate-size jets. The Europe-China market saw an increase of 36 netweekly frequencies in 15 markets between 1999 and 2000. This market will grow at 5.2%, and there will be a three-fold increase in frequenciesduring the next two decades.

China ASK MixDomiciled AirlinesScheduled Nonstops, 2000

China to:

China . . . . . . . . . . . 53%

Europe. . . . . . . . . . . 11%




Oceania . . . . . . . . . . 6%

Other . . . . . . . . . . . . 3%

1,764 airplanes $144 billion*

2000561

airplanes

20202,209

airplanes

100

75

50

25

0

China Deliveries2001–2020

China FleetPercentage of fleet

13%

55%

26%



27

O C E A N I A

The large economies of Australia and New Zealand dominate the GDP growth for Oceania. The 20-year economic growth rate is expected to average 2.8% per year. This anticipates continued immigration plus the benefits of increasingly liberalized market economies. While resourcesincluding agricultural land have driven wealth in this region in the past,broader business and services growth should characterize the future.International and regional air travel is already well developed in Oceania,and the 20-year average traffic growth rate of 3.5% for the region’s carriers reflects this maturity.

Although the Australia domestic market has beenderegulated for some time, arecent influx of well-capitalizedlow-cost carriers is spawningnew competition. Australia may be at the forefront of new trends by allowing100% foreign ownership of airlines. Openskies between Australia and New Zealand,and the active role the region’s airlines areplaying in global alliances also illustrate how the region is adapting to world trends.

There are major tourism markets between Oceania and North America, Northeast Asia, and Europe as well as a strong beginning to the developing market with China. VFR traffic is also strong with Europe. Currently, traffic from Europe stops in Asia, and services from North America must begin in California. Nonstop flights from US airline interior hubs will become a reality as manufacturers offer new range capabilities. Nonstop flights from Europe may also be possible as capabilities are extended.

Oceania ASK MixDomiciled AirlinesScheduled Nonstops, 2000

Oceania to:

Oceania . . . . . . . . . . 42%




SE Asia–Europe . . . . . 8%

China . . . . . . . . . . . . 5%

Other . . . . . . . . . . . . 2%

599 airplanes$48 billion*

2000308

airplanes

2020714

airplanes

100

75

50

25

0

Oceania Deliveries2001–2020

Oceania FleetPercentage of fleet

17%

47%

28%

8%




Avi

atio

n S

uppo

rt S

ervi

ces

Dem

and

Avi

atio

n S

uppo

rt S

ervi

ces

Dem

and

MARKET FORCES — AIRLINES

The customers for airplane maintenance can be thought of as the passenger and cargo operations of airlines. The development of airplanemaintenance markets is being driven by the way various maintenance strategies affect airline operations. As the world airline f leet increases in size, the demand for after-market services to maximize operational and economic efficiency contin-ues to grow. Liberalization,globalization, and privatizationhave increased competition andforced airlines to operate at muchhigher levels of efficiency.

Airlines are focusing increas-ingly on total life cycle cost inaddition to individual trans-action cost. Airlines alsocontinue to evaluate theirsupplier base and are betterutilizing existing inventories of parts and components. Whennew airplanes are introducedinto the f leet, operators have to evaluate whether existing maintenance infrastructure can accommodatethem. In some cases, operators will choose to avoid additional infrastructureinvestments, creating opportunities for third-party providers.

Airlines are continuously reducing costs by increasing the scope of purchased maintenance services. Engine maintenance services can now include engine financing, spare engine provisioning, all repair and overhaul parts, and all labor — for a fixed fee per hour of engine use.Airframe overhaul arrangements can now provide for a continuous f low of work over a long period of time to guarantee economic scale. Thisobjective generally involves managing the mix of in-house and third-partywork. Maintenance operators of all types seek to in-source tasks for whichthey have sufficient scale and competitive advantages and outsource tasks they cannot accomplish efficiently. Supply chains can be managed by joint ventures, consortia, third-party suppliers, or original equipment manufacturers (OEM) — whatever works to cut costs and improve reliability.

Aviation Support Services Demand 29

Market Demand for Commercial Airplanesand Aviation Support ServicesYear 2000 dollars in billions

20202000

Aviation Support Services

Commercial Airplanes

400

0

100

200

300

The market for

commercial aviation

support services con-

sists of the after-market

services necessary to

operate airline fleets

effectively and dispose

of surplus airplanes.


As airlines continue to evaluate maintenance operations, they are expanding their focus beyond cost reduction to dimensions of service quality and value. Before an airline can make the decision to outsourcemaintenance work, it must properly understand its labor costs and overhead. Many airlines have turned to third-party providers to takeadvantage of lower labor rates only to be surprised that total maintenancecosts did not go down as expected. Outsourcing decisions need to considerfully the costs of administering and ensuring the quality of work performed; the costs of managing the supplychain and inventorying parts; the costs ofmaintaining facilities and equipment; airplaneperformance costs due to reliability variationresulting from differential check quality; and the level of facility utiliza-tion actually realized by theairline. Also, the realization thatmaintenance has consequentialcosts and benefits is driving theincreased focus on shortenedturntimes, full capabilities,experience, and quality.

When airplanes in the shop do not return to service, there is a considerable operationsreplanning cost. There is also an airplane financing cost thatcould be charged to the main-tenance activity. On the otherhand, every day eliminated from a heavy check schedule is a potential day of revenue-generating service. According to one major industry player, this broader view of mainten-ance costs reflects an increasingtendency for airlines to regardmaintenance, repair, and over-haul (MR&O) in terms of itseffects on airplane utilizationand the resale value ofairframes, engines, andcomponents.

IMPROVING MAINTENANCE

OPERATIONS INCREASES AIRPLANE

UTILIZATION.


Maintenance strategies that seek to reduce airplane service disruptionsimultaneously minimize life cycle costs and maximize revenue-producingpotential. Removing equipment from the airplane when it shows signs of failure and replacing it with new or overhauled equipment from inventoryminimize airplane downtime. Removing equipment and engines accordingto schedules that anticipate impending trouble keeps airplanes in service.Doing MR&O work in back shops or in OEM or third-party shops keeps this work out of the critical path of airplane dispatch and provides for the continuous resupply of f light-criticalequipment. Accomplishing all possible airplanemaintenance tasks as line maintenance reducesout-of-service time over the life of an airplane.Overlapping heavy maintenance checks, painting, and interiors work also reduces out-of-service time.

Access to accurate technical data is critical toimproving these processes. OEMs can add signif-icant value to their customers by authoring datain ways consistent with how operators use it and by developing newprocesses and tools to improve the efficiency of maintenance processes.

Another feature of increasing airline competition is a focus on segmentingmarkets both geographically and by customer class. Competition for high-revenue passengers has never been more intense. Provision of the highest

level of onboard passenger amenities continues to be seen as a competitive weapon. The role of the airplane cabin interior in airline and/oralliance branding has taken on increasingimportance. New airplane designs createopportunities to improve cabin architecture and enhance passenger comfort. Older modelscan then be upgraded with these new interiors

to enhance their passenger appeal. The desire to present passengers with a uniform cabin “look and feel” generates incentives to consider retro-fitting in-service airplanes. Major interior modifications have usually beenscheduled to coincide with heavy maintenance checks. Now, there is someevidence emerging that work on cabin interiors can drive the scheduling of maintenance events.

Access to accurate

data is key to improving

processes.


Two other facets of cabin interior modification are worth noting. As airlines have striven to differentiate their service through the provisionof onboard passenger amenities, in-flight entertainment systems have beena significant battleground. Airlines have invested heavily to upgrade theirsystems to the latest technology, in the process creating an attractive retrofitmarket. Finally, competition for revenue has challenged airlines to optimizethe use of cabin space. The development of extremely long-range routes has forced airlines to consider ways to provide crew rest areas in ways that do not impinge on revenuegeneration. Thus, innovativecrew rest area designs use spacethat was never utilized previ-ously, adding to the value of the airplane.

Cargo traffic continues to grow rapidly, driving growth in the freighter conversionbusiness. Annually from 1996 to 2000, there were on average70 airplanes modified to all-cargo configuration. Thesemodifications were valued atapproximately $400 million per year, excluding airplaneacquisition costs. The replace-ment of existing freightersnearing the end of their usefullives and the increasing avail-ability of attractive candidateairplanes for conversion willfuel this market. The ability of the two major airplanemanufacturers working withtheir partners to deliver high-value passenger-freightermodifications to airlines sug-gests this market will be verycompetitive.

MARKET FORCES — SUPPLIERS

Scale requirements are the number one driver of airplane maintenancemarket organization. High initial capital costs must be matched by sufficient workflow to keep the equipment busy. Skilled labor is required for many airplane maintenance tasks, and keeping productivity highdepends on a sufficient volume of business. New airplanes, in particular,may require large investments in infrastructure. Airplane size, the timing of f leet buildup, and the anticipated reliability of new models may make such infrastructure investment difficult tojustify for any one operator. Avionics and enginesincorporate technologies that give OEMs signi-ficant competitive advantage in capturing theMR&O markets for their products. Specialists in metal-treating, composite repair, glass treating,and so on can also gain large market shares due to their high degrees of specialization and limited competition.

The supplier base continues to respond to airlinecost pressures. Though much of the aviation services market remainscaptive, there has been consolidation in the ranks of third-party suppliers.This consolidation has created suppliers with substantial breadth and depthof product and service offerings. This is allowing major players to redefinemarket boundaries in response to airline demands for better solutions.

A major driver of consolidation and joint venture activity has been theimperative to achieve global reach. Globalization of the airline industry has created pressure on after-market suppliers to service their customersworldwide. This may mean being able to supply parts and componentswherever a customer’s airplanes f ly. It may also mean having maintenancefacilities available close to major customers. Key customers are more likelyto outsource MR&O work if they are relieved of responsibilities for logistics,whether this entails positioning parts or ferrying airplanes.

Efforts to increase the reach of MR&O networks also result in increasingtheir scale. Opportunities for specialization occur if some facilities and/orpartners can be designated centers of excellence. This allows each of themto focus on a smaller number of airplane or engine models. The effect is tocreate an environment conducive not only to scale economies but also to learning curve benefits and process improvements.


Productivity of skilled

labor depends on the

volume of business.


THE BASE YEAR ESTIMATE

We define the market for commercial aviation support services as activities necessary to operate f leets effectively and dispose of surplusairplanes. The definitions of some of the market segments have beenchanged slightly since the Current Market Outlook 2000. These definitionsare detailed in appendix E. To develop the forecasts for each of the segmentswithin commercial aviation support services, the scope of the individualservice market segment is first estimated for the baseline year. The baselineyear for this edition of the Current Market Outlook is 2000.

There is a fundamental difference between the estimating approach taken this year and that taken for Current Market Outlook 2000.

This year, we have taken a bottom-up approach to estimating the MR&Omarket. We have estimated the aftermarket revenues of major OEMs forparts and services. We have also estimated the value added by major airline heavy maintenanceoperations, independent air-frame heavy maintenanceoperators, and independent engine maintenance operators. Individual estimates were made of all the major elements of airplanemaintenance.

The major benefit of this approach is the insights gained into how thesemarkets are organized. There are somedisadvantages, with the major one beingsome loss of visibility on spare parts in theairframe and engine maintenance markets. It isour view that the benefits outweigh the disadvantages. Overall, these results validate the estimates made in Current Market Outlook 2000.

However, estimates of the various MR&O market segments show somevariation from the previous year. The market for heavy maintenance checksappears somewhat smaller, while the markets for engine repair and overhauland component repair and overhaul appear somewhat larger.

This year, we also took a bottom-up approach to estimating the market for airport and route infrastructure services. The result is a significantupward adjustment in the size of this market. The chart shows our baseline estimate for 2000.

Commercial Aviation Support Services Represented a $95 Billion Market in 2000

Airplane servicing$14.1

e maintenance,Airplaneand overhaulrepair, $44.6Major airrplane

modification$4.44

Flight crew training$1.6

Airport and rouuteinfrastructure serrvices

$29.9

Used airplaneremarketing

$0 7$0.7

THE FORECAST

After estimating the baseline year, a method for forecasting each segment of commercial aviation support services is selected and applied to produce a 20-year forecast.

Over the next 20 years, the total service market will grow in size from just over $95 billion to over $226 billion per year. Cumulatively, over the20-year forecast period, 2001 to 2020, the market will be $3.1 trillion.Almost half of this market will be composed of airplane MR&O activities,including airframe heavy maintenance, engine repair and overhaul, andnonengine component overhauland repair. The MR&O segmentwill grow by almost 150% to$110 billion per year over theforecast period. Airport and routeinfrastructure services, including air traffic management services, willrepresent almost 30% of the overallmarket. This segment will grow by120% to almost $66 billion per year by 2020. Airplane servicing, which in-cludes line maintenance, will grow from$14 billion to $34 billion between 2000 and 2020, representing 15% of the total. We estimate the market for major airplanemodifications, including airplane interior upgrades, avionics upgrades, and passenger to freighter conversions, to be over $150 billion during theforecast period. This represents 5% of the total market and grows from $4.4billion to $11.6 billion per year. The market for flight crew training is almost$50 billion between 2001 and 2020. This segment grows from $1.6 billionto $3.4 billion per year and represents less than 2% of the overall market.


Commercial Aviation Support Services MarketsRepresent a $3.1 Trillion OpportunityYear 2000 dollars in billions, 2001–2020

Airplane servicing$462

ne maintenance,Airplanr, and overhaulrepair$1,500Major airpplane

modificattion$153

Flight crew traininng$48

Airport and rouuteinfrastructure servvices

$928


$20$20

20002020

Annual Sales of Commercial Aviation Support ServicesWill Grow Significantly2001–2020


Airport and routeinfrastructure

services

Flight crewtraining

Major airplanemodification

AirplaneMR&O

Airplaneservicing

Year 2000 dollars, billions

0 20 40 60 80 100 120

Com

mer

cial

Avi

atio

n E

nvi

ron

men

tC

omm

erci

al A

viat

ion

En

viro

nm

ent

Commercial Aviation Environment 37

REGULATORY TRENDS

Governments around the world continue to reduce their regulatory roles in the airline industry. Government involvement in the airline sector comes in many forms, including full or partial ownership of airlines,regulation of domestic routes and fares, control of access to internationalroute authorities, and limits to foreign ownership in domiciled carriers. To be competitive and provide passengers with efficient, affordable airtravel, airlines need to engage freely in network development acrossnational borders. The result will be vigorous competitioncharacterized by new entrants,exits by unprofitable carriers,and execution of alliance strat-egies. Since privatization ofnational carriers often requirescapital beyond the capability of local financial markets, many nations are revising rules governing the level ofallowable foreign investment.The shrinking of governmentregulation is forecast tocontinue in the future.

D E R E G U L AT I O N

In many major domestic and regional markets, governments no longerdictate the number of airlines permitted to operate or the fares they charge. The United States, Canada, Europe, Australia, New Zealand, Japan, India, and Brazil have led this trend. Open competition allowsairlines to differentiate themselves in the marketplace, since they are no longer forced to provide similar services. When route entry and exit are restricted, regulated airlines in long-range markets favor largerairplanes with low seat-mile costs, which they operate at lower frequencies.Domestic airlines feed passengers to these long-range operators at majorgateways. Typically, when deregulation occurs, competition increases among airlines to open new nonstop routes and to add frequencies, thus attracting passengers by giving them a greater choice of f lights.Deregulation also fosters development of low-cost carriers, which oftenoperate from secondary airports and offer passengers new nonstop routes.On routes shared with traditional carriers, these low-cost carriers offerpassengers more frequencies and lower fares.

Alliances andAlliances an international investment

Flagcarriers

Regulateddomesticnetworks

Internationaalair serviceagreementss

Domesticownership

t- Profitendriveteprivatesairline

egulatedDerenetworksn

Regulatory Constraints Are Decreasingy Constraints Are Decreasing

egulationDere

Liberalization

Privatization

Consolidation

Open skiesO


L I B E R A L I Z AT I O N

There is a world trend toward more liberalized air service agreementsbetween countries. Historically, bilateral agreements put restrictions on the number of carriers that could operate in a market and on the level of service they could offer. Many air service agreements negotiated in the recent decade are “open skies” agreements. These agreements allowcarriers of each signing country to offer whatever service they desire,fettered only by competition. For example, the United States has signedagreements with the Asia-Pacific nations of Brunei, Malaysia, New Zealand,Singapore, South Korea, and Taiwan. Chile, New Zealand, Singapore, theUnited States, and Brunei recently signed an innovative multilateral agree-ment. Although restrictive bilateral agreements still exist such as thosebetween the United States and the United Kingdom and those of China and Japan with other nations, they are increasingly being renegotiated with added services. An example is the 1998 US-Japan bilateral, which opened up services to new cities and new carriers.

By 2000, almost half of the world’s traffic was moving in open markets, such as between North America and most of Europe, between North America andsome countries in Asia, amongthe countries of Europe, within Oceania, and amongmany countries in the Americas. Ambitious proposals have beenfloated for wider liberalizationin the future, such as betweenthe United States and the entireEuropean Union. By the end ofthe decade, two-thirds of airtravel is forecast to be movingamong open markets.

Air Service Agreements Are LiberalizingWorld RPKs in billions

1970

History Forecast

1980 1990 2000

OpenIn transitionRestricted

0

2,000

4,000

6,000

2010


P R I VAT I Z AT I O N

Competition with f lag carriers by profit-driven private airlines has neverbeen higher than it is today, and this market feature is expected to intensifyin the future. The flag carriers often have higher operating costs than theprivate airlines. They may have more employees than their size shouldsupport, own larger airplanes than routes and load factors would indicate,or f ly unprofitable routes mandated by government decree. Thus, the national airlines may operate at a loss or may suppress travel with high fares. Private carriers without these con-straints can be profitable and stimulate travel.

Privatizing government-owned flag carriers to develop healthy airline competition is agoal of most of the world’snational governments. In thepast 20 years among the world’stop 25 carriers, the share ofcapacity of government-ownedcarriers has declined from 38%to 10%. Currently, out of thetop 25 airlines in the world,which control approximately62% of the world’s airline cap-acity, just four remain undergovernment control. All four, as well as other smaller airlines,have indicated plans to movetoward privatization in thefuture. In more developedeconomies with modern airlinesand financial markets, privat-ization proceeds quickly. Inother countries, state-ownedairlines are often in debt and fly older airplanes. It may take the nationalgovernment some time to develop a business case that will attract investors.Eventually, however, virtually all the world’s airlines plan to be privatized.

World’s Top 25 Airlines Are Movingto Less Government ControlWeekly available seat-kilometers in millions60,000

40,000

20,000

0

Government-controlled airlines

Privatized airlines

1981 2000

PASSENGERS BENEFIT FROM LOWER

FARES AND INCREASED SERVICE IN

COMPETITIVE MARKETS.

C O N S O L I D AT I O N A N D A L L I A N C E S

Alliances allow airlines to expand their networks, provide economies of scale in combined operations such as ticketing and maintenance, and ultimately provide worldwide “seamless” travel to consumers.Passengers now enjoy the benefits of sharedfrequent f lyer miles across a worldwide array of airlines.

To date, airline industry consolidation isoccurring primarily through marketing alliances. Many governments limit the foreign ownership permitted in their carriers, so more formalconsolidation in the form of airline mergers and acquisitions across borders is still limited. For example, the United States effectively limitsforeign ownership to 25% of US carriers. In the long term, it is probablethat governments will reduce airline foreign ownership limitations, just as they have been reducedin other global service sectorssuch as telecommunications and financial services. Antitrust regulation in place to protect consumers from monopolies also has an impact on the pace of airlineindustry consolidation, and willmost likely continue to restrictsome large-scale consolidations.

Even with existing restrictions, 54% of theworld’s airline capacity now operates under broad multi-airline alliance networks. Smallerairlines are also forming alliances on a national orregional level. An example is the strategic alliance between AVIATECA, LACSA, NICA, TACA International, and TACA Peru intoGRUPO TACA. In the United Kingdom and Germany, many of the leisureairlines are merging or changing ownership as the travel industry consoli-dates across Europe. Alliance affiliations will undoubtedly shift over time as airlines revise their business strategies and ownership structures.


Airlines Are Forming Strategic AlliancesScheduled ASKs, percentage of world total

Star

KLM/Northwesst

Oneworld

amSkyTe

iflyerQual

20% 15%

10%6%

3%

Other46%

ALLIANCES PROVIDE AIRLINES

WITH A QUICK WAY TO EXPAND

NET WORKS.

NET WORK DEVELOPMENT STRATEGIES

Numerous factors influence airline network development, includinggovernment regulations, airplane capabilities and economics, passengerrequirements, competition from other airlines, alliances, and the maturityof an airline’s existing network. Over time, network development strategieshave increasingly focused on adding new nonstop services; boosting fre-quencies on existing routes; competing with other carriers on their routes;and building complementary primary, secondary, alliance, domestic, and gateway hub networks. Passengers will avoid itineraries that requireseveral hub connections and numerous segments to complete a journey.Where possible, airlines will provide passengers point-to-point service on busy routes. Whenthis is not economically feasible,passengers will prefer carrierswho move them over a singlehub with one-stop connectingservice to their final destination.

These network strategiesgenerally demand that airlinesmaintain or reduce airplane sizeto provide frequent, nonstopservice. High-fare customers inparticular are sensitive to con-venient departure and arrivaltimes. The value they perceivein more flight time choicesoutweighs the cost to airlines of offering the added flights. A second reason to offer morefrequencies is their role as aprimary form of nonprice com-petition. Whether fares are fixed by regulation, or are forced to similarcompetitive levels under deregulation, in the long run they rarely provide a vehicle for airlines to differentiate themselves in the marketplace. In thebattle for market share and long-term profitability, competitors almostalways match fare reductions. With prices matched, the battle for marketshare takes place in the service arena, with frequency of service being a deciding competitive factor.


Network Development

Early skeletal network

Later increased service

H U B D E V E L O P M E N T

Most added flights in the future, whether they are additional frequencies onexisting routes or new services on new routes, will connect cities to varyingtypes of hubs. These hub airports support both short- and long-haul f lights.Generally, the long-range flights are with larger airplanes, and the short-range flights with smaller airplanes. The point of an airline’s hub strategy is to offer as many flights to as many destinations as possible. This allowsthe greatest choice of f lights compared to com-peting airlines’ hubs. Small airplanes bringconnecting passengers to the hub to supporteither more f lights or larger airplanes. In liberalizing markets, airlines have chosen to add more frequencies to existing destinationsand/or new nonstop flights to new destinationsrather than increasing airplane size. Adding new destinations increases the hub’s competitive-ness with other hubs. Sometimes new services arehub-bypass f lights that f ly over an existing hub,often a competitor’s, to another hub.

Over time, regional hubs strengthen, and the im-portance of gateway hubs declines. For example,in 1977, all of the Europe to Asia nonstop traffic went via only three routes. Today, the top 10 routes carry only 43% of the interregional nonstopservice. On the North Atlantic in 1977, 36% of the traffic was carried via thetop 10 routes. By 2000, the percentage had dropped to 22% as new city pairsdeveloped. The transpacific shows a similar story, with a decline in trafficon the top 10 routes from 91% in 1977 to 44% today. This trend, an aspectof fragmentation, is expected to continue into the future.


Top Routes Will Continue to Lose Market SharePercentage of ASKs on top 10 routes by region

North Atlantic

1980 1990 2000 2010 20200

20

40

60

80

100

TranspacificEurope–Asia

TODAY, PASSENGERS DRIVE

AIRLINE STRATEGIES.

F R A G M E N TAT I O N

The boom in service over the North Atlantic in the last 20 years illustrates the principle of fragmentation. Before US deregulation, TWA had one 747 flight daily from Chicago to London. Today, United and American Airlines, using 767s and 777s, serve 11 destinations inEurope out of Chicago with 22 daily f lights. By 2020, the Outlook forecasts that nearly 200 addi-tional nonstop routes connec-ting new city pairs will open as fragmentation continues in the North Atlantic.

Similarly, the North Pacificmarket is beginning to frag-ment. By 2020, the Outlookforecasts the increased range of airplanes such as the 777 will open nearly 100 new non-stop routes. Newark–Hong Kong and Chicago–Beijing are examples of recentlyinaugurated nonstop city pairs.The Europe–Asia market is also full of opportunities. At thistime, the Europe–Asia marketresembles the North Atlanticjust before deregulation. Onlymajor European gateways arewell-linked to Asian cities, and many flights out of thesegateways are offered on a less-than-daily basis. Projections show, however, that by 2020, over 170 city pairs,including Geneva–Bangkok and Stockholm–Shanghai, will be served in this market,two-thirds of which did not have nonstop service in 1998. A recent offering is nonstopflights to Hong Kong andSingapore from Munich, taking traffic off the tradi-tional Frankfurt routes.


North Pacific Market Is Beginning to Fragment...

Hong KongHong KongHong Kong

OsakaOsakaOsakaTokyoTokyoTokyo

SeoulSeoulSeoul

NewarkNewarkNewark

DallasDallasDallasHoustonHoustonHouston

DetroitDetroitDetroit

MinneapolisMinneapolisMinneapolis

ChicagoChicagoChicago

AtlantaAtlantaAtlanta

Hong KongHong KongHong Kong

BeijingBeijingBeijing

ShanghaiShanghaiShanghaiBangkokBangkokBangkok

Kuala LumpurKuala LumpurKuala Lumpur SingaporeSingaporeSingapore

OsakaOsakaOsakaTokyoTokyoTokyo

SeoulSeoulSeoul NewarkNewarkNewarkPhiladephiaPhiladephiaPhiladephia

St. LouisSt. LouisSt. LouisBaltimoreBaltimoreBaltimoreDallasDallasDallasHoustonHoustonHouston

DetroitDetroitDetroitMinneapolisMinneapolisMinneapolis

ChicagoChicagoChicago

AtlantaAtlantaAtlanta

TaipeiTaipeiTaipei

And It Has a Tremendous Future

Today’s flights Tomorrow’s flights

Europe–Asia Market Offers Increased Opportunities

Hong KongHong KongHong KongTaipeiTaipeiTaipei

BeijingBeijingBeijing

ShanghaiShanghaiShanghai

BangkokBangkokBangkokKuala LumpurKuala LumpurKuala LumpurSingaporeSingaporeSingapore

OsakaOsakaOsakaTokyoTokyoTokyoSeoulSeoulSeoul

LondonLondonLondon

ParisParisParis MilanMilanMilan

Amsterdam Amsterdam Amsterdam

FrankfurtFrankfurtFrankfurt

BarcelonaBarcelonaBarcelona IstanbulIstanbulIstanbul


F L E E T S E L E C T I O N

Airlines can choose from an increasing array of airplane models, whichallows the most cost-effective use of specific airplanes for specific routes.Carriers no longer must purchase large airplanes to tap their range capabil-ity. US and European airlines are applying small- and medium-size regionaljets in large numbers to connect and further develop their hub networks.Airlines around the world are also tapping the longer range of intermediate-size airplanes to move passengers to overseas cities, usually via a regionalhub. Very large airplanes are suited to hub-to-hub missions where there is limited competition andwhere airport capacity orlanding rights are a constraint.As a consequence of the wideruse of intermediate-size air-planes, average seat size will increase only slightly over the forecast period.

Average seat size for most worldairlines shows a reversal in trendfrom a more regulated 1970 to1987 period compared to thelatest period. In the regulatedera, low seat-mile cost airplaneswere the most desirable because frequencies could be limited, and fares wereset based on average costs. During the regulated era, restricted route expan-sion forced airlines to accommodate growth with larger capacity airplanes.After deregulation, airlines became free to expand service using increasedfrequencies, which resulted in declining airplane size.

Average Seat Size Will Increase Only SlightlySeats

100

200

300

400

1971 2000 2010 20201980 1990

Transpacific

Asia–Europe

Atlantic

Asia

Europe

North America

Passenger demand

for nonstop flights

will drive airplane

selection.

1970 202020101980 1990 2000

Intermediate Airplanes Gain Market ShareFrom Small and Large AirplanesPercentage of world fleet

100

75

50

25

0

Seat categorytwin-aisle >400

311–399 230–310

single-aisle 171–240

<170

HRBSHE

PEK

NKG

TPEKHH

XMN

NGB

FOL

CANHAK

BKK

SGN

SIN

HANSZX

KUL

DEL

HKG

NGONRT

KIXFUK

ICN

PUS

SHA

Newly opened airports

Planned new airports

Planned new runways

Planned major expansions

Asia’s Airport Projects Will Support Airlines’ Demand for Intermediate-Size Airplanes

INFRASTRUCTURE DEVELOPMENT

As airlines around the world work to add city pairs and frequencies, buildhubs, and effectively compete in global markets, the infrastructure requiredto handle this growth will need to adapt. History shows that infrastructuresupply and air travel demand in specific markets are often not synchronized.

There is no one solution to the congestion problem. Each region has its own unique set of issues. Some remedies revolve around making theexisting infrastructure more productive. Examples include more banks of f lights at hubs, overflyinghubs, more f lights at uncon-gested times of day, greater useof existing secondary airports,and use of complementaryshort-haul rail service.Fortunately, strategies thatease congestion often alsosupport airlines’ networkdevelopment strategies. Forexample, Manchester in the United Kingdom is developing as a secondary hub to better serve UK customers, and this also reducescongestion at London airports. InDenmark, Germany, France, and other countries, rail connections are being integrated with air ticketingand baggage systems. Other solutions, such as globalnavigation satellite system, free f light, and polar routing, will more efficiently use airspace.

To ease congestion and develop expanded networks, there are major airport projects underway around the world including Paris, Amsterdam,Berlin, Atlanta, and Dallas/Ft. Worth. In Latin America, cities such asCaracas, Buenos Aires, and Santiago are planning modernization projects.In Asia, there are no fewer than 10 planned major expansions, 8 plannednew airports, and 5 planned new runways. In addition, Western China has many new planned airports and airport expansion projects.

Keeping infrastructure growing in tandem with travel growth requires the combined leadership of governments, airports, citizen groups, airlines,and other industry participants. Often solutions lag because of the com-plexity of coordinating all of these parties. US experience with highwaycongestion has taught that the best solutions are often a combination of competitive pricing, economic incentives, and government action.


Development of secondary

airports is not new. In 1936,

Gatwick opened to relieve

congestion at Croyden.

App

endi

ces

App

endi

ces

47Appendices

M A R K E T O U T L O O K R E G I O N S

Market Outlook regions have been formed to best illustrate major world traffic f lows. They do not always exactly match political or geographicregions.

Asia-Pacific

Europe

Africa

Middle East

CIS Region

Southwest Asia

North America

Central America

South America

China

Northeast Asia

Southeast Asia

Oceania


WORLD TRAFFIC BY REGIONAL FLOW, RPKS IN BILLIONS APPENDIX A

1985 1990 1995 1996 1997 1998

Africa–Africa 13.540 14.689 14.775 15.335 16.578 17.340Africa–Europe 43.037 47.732 57.178 66.897 75.259 79.248Africa–Middle East 5.156 7.394 6.479 6.973 7.490 8.187Africa–North America 1.220 1.298 2.640 3.126 4.599 4.201

Central America–Central America 12.820 14.306 18.267 17.858 18.409 19.440Central America–Europe 17.868 27.647 44.193 47.507 51.720 56.737Central America–North America 43.339 63.714 71.097 74.580 76.539 80.835Central America–South America 3.287 3.499 4.271 4.595 5.269 6.608

China–China 8.436 18.254 56.624 61.156 61.679 62.468China–Europe 9.577 16.927 26.611 29.352 32.407 34.157China–North America 7.807 13.434 21.630 24.143 27.094 29.670China–Northeast Asia 6.754 10.916 15.998 17.343 18.037 16.738China–Oceania 3.002 5.810 9.234 10.674 11.102 11.435China–Southeast Asia 8.081 14.489 23.032 27.200 28.532 26.764

CIS Region–CIS Region 175.814 224.240 63.395 50.764 44.489 38.704CIS Region–International 15.863 24.098 33.918 39.483 42.595 44.511

Europe–Europe 170.048 258.346 306.836 324.374 347.578 378.055Europe–Middle East 43.436 41.512 44.920 47.897 51.861 54.869Europe–North America 158.599 230.688 278.895 296.434 324.061 351.578Europe–Northeast Asia 17.025 29.347 46.550 54.561 58.381 59.665Europe–South America 12.250 22.309 32.930 37.211 40.262 46.260Europe–Southeast Asia 26.600 46.386 65.884 72.032 81.483 82.868Europe–Southwest Asia 11.859 17.470 20.666 23.353 22.697 24.354

Middle East–Middle East 17.685 19.462 20.713 21.789 22.373 23.871Middle East–North America 5.012 6.560 10.309 11.258 10.581 12.454Middle East–Southeast Asia 15.136 10.980 20.584 20.442 20.832 20.061Middle East–Southwest Asia 14.505 16.583 23.194 23.762 24.261 25.934

North America–North America 470.633 589.055 670.470 721.958 758.000 781.491North America–Northeast Asia 46.880 95.162 121.512 129.111 139.994 129.993North America–Oceania 11.008 18.972 24.135 24.820 24.996 25.067North America–South America 14.460 19.615 35.885 38.339 43.015 46.217North America–Southeast Asia 8.013 15.324 25.886 25.981 30.705 28.540

Northeast Asia–Northeast Asia 32.273 50.016 67.404 71.708 75.382 74.353Northeast Asia–Oceania 6.055 12.879 31.823 35.322 36.383 25.322Northeast Asia–Southeast Asia 15.998 32.512 44.335 47.832 50.703 45.734

Oceania–Oceania 18.614 26.241 42.671 44.547 45.808 46.511Oceania–South America 0.115 0.688 0.641 0.757 0.756 1.020Oceania–Southeast Asia 12.233 24.286 33.065 36.769 38.936 36.989

South America–South America 29.477 33.841 39.670 42.248 46.600 51.959

Southeast Asia–Southeast Asia 17.665 29.881 53.811 58.223 61.136 48.909Southeast Asia–Southwest Asia 5.658 5.804 8.104 8.873 9.540 9.588

Southwest Asia–Southwest Asia 10.471 11.602 15.205 16.117 16.130 15.775

Rest of the World 5.848 7.534 11.776 15.046 15.449 14.726

World total 1573.158 2181.501 2567.213 2747.755 2919.698 2999.208

49Appendices

WORLD TRAFFIC BY REGIONAL FLOW, RPKS IN BILLIONS

2001–2010 2001–20201999 2000 2010 2020 %/year %/year

Africa–Africa 18.034 19.422 32.957 53.338 5.4 5.2Africa–Europe 88.362 99.407 159.141 248.490 4.8 4.7Africa–Middle East 8.760 9.811 14.832 21.997 4.2 4.1Africa–North America 4.407 4.416 7.273 10.444 5.1 4.4

Central America–Central America 21.384 23.950 48.128 90.493 7.2 6.9Central America–Europe 61.162 66.361 99.077 150.257 4.1 4.2Central America–North America 86.493 93.931 140.336 215.549 4.1 4.2Central America–South America 6.046 7.256 12.399 21.989 5.5 5.7

China–China 64.030 71.073 196.572 419.037 10.7 9.3China–Europe 37.470 40.093 67.947 111.253 5.4 5.2China–North America 30.857 33.171 57.201 117.262 5.6 6.5China–Northeast Asia 17.508 19.434 38.337 71.427 7.0 6.7China–Oceania 11.263 12.130 17.224 24.043 3.6 3.5China–Southeast Asia 27.208 29.330 48.424 79.167 5.1 5.1

CIS Region–CIS Region 39.363 37.001 58.933 94.875 4.8 4.8CIS Region–International 42.063 42.274 78.268 130.807 6.4 5.8

Europe–Europe 406.063 440.578 696.839 1097.096 4.7 4.7Europe–Middle East 59.643 65.011 98.214 147.098 4.2 4.2Europe–North America 380.055 419.961 593.154 856.858 3.5 3.6Europe–Northeast Asia 60.559 63.587 114.361 195.171 6.0 5.8Europe–South America 51.118 53.162 96.371 164.349 6.1 5.8Europe–Southeast Asia 89.912 95.756 156.690 243.267 5.0 4.8Europe–Southwest Asia 24.719 26.227 47.262 83.809 6.1 6.0

Middle East–Middle East 25.303 27.834 41.333 64.107 4.0 4.3Middle East–North America 14.333 16.053 23.139 33.041 3.7 3.7Middle East–Southeast Asia 21.586 23.960 33.171 48.015 3.3 3.5Middle East–Southwest Asia 27.490 29.414 48.041 78.458 5.0 5.0

North America–North America 823.969 858.576 1128.591 1595.199 2.8 3.1North America–Northeast Asia 137.402 140.150 220.551 325.568 4.6 4.3North America–Oceania 26.861 29.950 42.222 63.204 3.5 3.8North America–South America 45.431 44.750 84.483 141.211 6.6 5.9North America–Southeast Asia 31.422 32.050 52.496 93.515 5.1 5.5

Northeast Asia–Northeast Asia 77.104 78.646 142.416 288.159 6.1 6.7Northeast Asia–Oceania 22.284 24.066 45.856 66.458 6.7 5.2Northeast Asia–Southeast Asia 46.649 48.515 90.157 161.242 6.4 6.2

Oceania–Oceania 47.441 49.244 63.415 81.891 2.6 2.6Oceania–South America 1.275 1.282 2.169 3.456 5.4 5.1Oceania–Southeast Asia 41.613 46.190 64.837 94.511 3.4 3.6

South America–South America 52.218 50.913 127.626 250.916 9.6 8.3

Southeast Asia–Southeast Asia 50.376 53.650 104.675 187.068 6.9 6.4Southeast Asia–Southwest Asia 10.355 10.935 20.192 37.167 6.3 6.3

Southwest Asia–Southwest Asia 15.696 16.010 38.787 84.866 9.3 8.7

Rest of the World 14.715 16.054 27.276 43.728 5.4 5.1

World total 3170.003 3371.586 5281.370 8389.858 4.6 4.7


PASSENGER AND FREIGHTER FLEET DEVELOPMENT APPENDIX B

Year-end 2001–2020 Removed Year-endSeat category* 2000 new deliveries from service 2020

Single-aisleSmall and intermediate regional jets 1,193 4,146 358 4,98190–120 and large regional jets 2,425 3,006 1,636 3,795121–170 5,102 7,313 1,964 10,451171–240 1,010 2,891 436 3,465

Twin-aisleSmall 1,267 2,098 741 2,624Intermediate 1,011 2,449 398 3,062Large 798 745 490 1,053

Total passenger airplanes 12,806 22,648 6,023 29,431

Year-end 2001–2020 Removed Converted to Year-end2000 new deliveries from service freighter 2020

FreighterSmall 691 131 549 638 911Medium 697 285 466 1,159 1,675Large 354 395 223 411 937

Total freighter airplanes 1,742 811 1,238 2,208 3,523

Total 14,548 23,459 7,261 32,954

* Categories based on 36-/32-inch mixed-class configuration (includes freighter and combi airplanes in appropriate passenger category; the twin-aisle and large categories also show typical three-class configurations).

SALES OF COMMERCIAL AVIATION SUPPORT SERVICES

2000 2020 2001–20202000 dollars, in billions annual sales annual sales cumulative sales

Airplane servicing 14.1 34.0 462

Airplane maintenance, repair, and overhaul 44.6 110.0 1,500

Major airplane modification 4.4 11.6 153

Flight crew training 1.6 3.4 48

Airport and route infrastructure services 29.9 65.8 928

Used airplane remarketing 0.7 1.4 20

Total 95.3 226.2 3,111

2000 year-end 2020 year-endSeat category* Models Units Percent Units Percent

Single-aisle F 28 1,206 8.3 4,981 15.1Small and intermediate F 70regional jets Bac 1-11

RJ70/RJ85; BAe 146-100/-200Regional jets from Bombardier, Embraer, and Fairchild Dornier

90–120 and large 727-100 2,804 19.3 3,889 11.8regional jets 737-100/-200/-500/-600

717-200DC-9MD-87F 100RJ100/BAe 146-300CaravelleConcordeA318Regional jets from Bombardier, Embraer, and Fairchild Dornier

121–170 737-300/-400/-700/-800 5,401 37.1 11,268 34.2727-200720A319/A320Trident-3MercureMD-81/-82/-83/-88/-90DC-8-10/-20

171–240 737-900 1,407 9.7 3,907 11.9757707-300B/CA321DC-8-30/-40/-50/-60/-70

Twin-aisle 767 1,471 10.1 3,763 11.4230–310 A300(181–249) A310

A330-200

311–399 777 1,231 8.5 3,451 10.5(250–368) A330-300

A340L-1011DC-10MD-11

Large 747 1,028 7.1 1,695 5.1747 and larger (>400) A380

Total 14,548 100.0 32,954 100.0


51Appendices

WORLD AIRLINE FLEET DISTRIBUTION


DELIVERY DISTRIBUTION, HISTORY 1952–2000

2000 dollars Seat category* Models (billions) Percent Units Percent

Single-aisle F 28 38.4 3.4 1,618 8.5Small and intermediate F 70regional jets Bac 1-11

RJ70/RJ85; BAe 146-100/-200Regional jets from Bombardier, Embraer, and Fairchild Dornier

90–120 and large 727-100 118.8 10.7 4,211 22.1regional jets 737-100/-200/-500/-600

717-200DC-9MD-87F 100RJ100/BAe 146-300CaravelleConcorde

121–170 737-300/-400/-700/-800 280.4 25.2 6,479 34.0727-200707-120/-220720A319/A320Trident-3MercureMD-81/-82/-83/-88/-90DC-8-10/-20

171–240 757 138.2 12.4 2,324 12.2707-300B/CA321DC-8-30/-40/-50/-60

Twin-aisle 767 160.7 14.4 1,648 8.7230–310 A300(181–249) A310

A330-200

311–399 777 186.2 16.7 1,494 7.8(250–368) A330-300

A340L-1011DC-10MD-11

Large 747 190.0 17.1 1,261 6.6747 and larger(>400)

Total 1,112.7 100.0 19,035 100.0


52

DELIVERY DISTRIBUTION, FUTURE 2001–2020

2000 dollarsSeat category* Models (billions) Percent Units Percent

Single-aisle RJ70/RJ85 87.3 5.2 4,146 17.7Small and intermediate Regional jets from Bombardier, regional jets Embraer, and Fairchild Dornier

90–120 and large 737-600 106.0 6.3 3,006 12.8 regional jets 717-200

A318RJ100Regional jets from Bombardier, Embraer, and Fairchild Dornier

121–170 737-700/-800 383.4 22.6 7,444 31.7MD-90A319A320

171–240 737-900 195.0 11.5 2,897 12.3 757A321

Twin-aisle230–310 767 276.7 16.3 2,377 10.1(181–249) A300

A310A330-200

311–399 777 416.6 24.6 2,498 10.7(250–368) A330-300

A340MD-11

Large 747-400 228.8 13.5 1,091 4.7747 and larger (>400) A380

Total 1,694.0 100.0 23,459 100.0


53Appendices


RESULTS BY REGION OF THE WORLD APPENDIX C

Africa Asia-Pacific Europe2001–2020 2001–2020 2001–2020

Traffic Growthto/from: %/year %/year %/yearAfrica 5.2 4.6 4.7Asia-Pacific 4.6 6.4 5.3Europe 4.7 5.3 4.7Middle East 4.1 4.4 4.2Latin America 7.2 5.1 5.0North America 4.4 4.8 3.6

Airplane DeliveriesNumber of airplanesSingle-aisle and regional jets 418 2,624 5,547 Twin-aisle 105 2,012 1,215 747 and larger 10 586 223

Total 533 5,222 6,985

Delivery dollars, billions (2000)Single-aisle and regional jets 16.4 114.9 241.8Twin-aisle 15.1 299.1 168.4747 and larger 2.0 123.0 46.3

Total 33.5 537.0 456.5

Middle East Latin America North America2001–2020 2001–2020 2001–2020

Traffic Growthto/from: %/year %/year %/yearAfrica 4.1 7.2 4.4Asia-Pacific 4.4 5.1 4.8Europe 4.2 5.0 3.6Middle East 4.3 3.7Latin America 7.7 4.8North America 3.7 4.8 3.1

Airplane DeliveriesNumber of airplanesSingle-aisle and regional jets 351 1,817 6,736 Twin-aisle 267 195 1,081 747 and larger 33 239

Total 651 2,012 8,056

Delivery dollars, billions (2000)Single-aisle and regional jets 18.2 76.8 303.7Twin-aisle 37.6 27.2 145.9747 and larger 6.7 50.9

Total 62.5 104.0 500.6

55Appendices

RESULTS BY COUNTRY, 2001–2020 APPENDIX D

Investment*Category* 2000 dollars, billions Airplane deliveries*

United States 463 7,406

China 143 1,764

Japan 121 893

Germany 94 1,429

France, United Kingdom 60–70 830–1,000

Australia, Canada, Italy, Singapore, South Korea, Spain 35–60 220–650

Brazil, India, Malaysia, Mexico, Netherlands, Taiwan 20–35 175–600

Argentina, Austria, Chile, Ireland, Pakistan, Saudi Arabia, 10–20 100–250

South Africa, Switzerland, Thailand

Bahrain, Belgium, Denmark, El Salvador, Egypt, Finland, Greece, 5–10 40–220

Indonesia, Israel, Luxembourg, New Zealand, Norway, Philippines,

Poland, Sweden, Turkey, United Arab Emirates

Algeria, Bangladesh, Brunei, Colombia, Cuba, Cyprus, 1–5 10–100

Czech Republic, Ethiopia, Fiji, Hungary, Iceland, Cote de’Ivoire,

Jamaica, Kenya, Kuwait, Lebanon, Malta, Mauritius, Morocco,

Oman, Portugal, Qatar, Romania, Sri Lanka, Sudan, Trinidad and

Tobago, Tunisia, Venezuela, Vietnam, Yemen

* Totals shown are per country in each category.


Methodology for Estimating and Projecting

Commercial Aviation Support Service Markets

The forecasts provided for commercial aviationsupport service markets are all developed in twosteps. First, the scope of the individual servicemarket is estimated for the baseline year. Second, a method for forecasting through time is selectedand applied to the baseline year to produce a 20-year forecast.

The baseline year for this edition of theCurrent Market Outlook is 2000. A baseline yearestimate was developed for the worldwide scope of each support service market, using a variety ofmethods that seem appropriate to these diversemarkets. These methods are discussed below. We are interested in discussing both the detailedestimates and estimating methods with industrymarket analysts willing to share information that will help us refine them further.

Baseline data can be projected into thefuture using a variety of fleet growth factors.Obvious factors include available seat-kilometers(ASK), revenue ton-kilometers (RTK), flight-hours, flight departures, number of airplanes, and pounds of thrust. Some of our forecasts are built up using discrete data such as specificairplanes expected to undergo maintenance,upgrade, or conversion events during the forecastperiod. All of our forecasts are sensitive to thepredicted growth in passenger traffic (4.7% peryear) and cargo traffic (6.4% per year) over theforecast period.

A I R P L A N E S E R V I C I N G

LINE MAINTENANCE includes all maintenanceperformed on in-service airplanes. This includesramp maintenance, light checks and other over-night maintenance, on-wing engine servicing,

and engine removal and replacement. Virtually all line maintenance is performed by airlines ortheir wholly controlled subsidiaries. The marketestimate for line maintenance is based on analysisof a sample of airlines that outsource most or all oftheir heavy airframe maintenance, engine over-haul, and component overhaul work.

AIRPLANE SERVICING includes all on-airplane and off-airplane servicing required to keepairplanes in customer-ready condition. Thisincludes airplane cleaning, preparation fordeparture, and ground support services.

The cost of airplane servicing is estimatedas a percentage of total airline operating cost,following reports of a study based on Form 41data. This was cross-checked through an analysisof headcounts for service personnel reported by asample of US companies in their SEC 10K filings.

Growth of the market for airplane servicing,including line maintenance, will be related togrowth in the number of seats in the world airlinefleet and the number of kilometers flown. Thisforecast uses the world fleet ASK growth rate toproject the size of the market.

A I R P L A N E M A I N T E N A N C E , R E PA I R , A N D O V E R H A U L

ENGINE OVERHAUL includes all engine repairparts, whether sold directly to airlines and third-party operators or included in original equipmentmanufacturer (OEM) service contracts. This cat-egory also includes all engine overhaul services,whether performed by OEMs, airlines, or third-party operators.

This year’s engine overhaul estimate is a bottom-up summing of OEM aftermarket reve-nues, airline internal labor costs and burden, andvalue added by third-party operators. The engineOEMs sell engine repair parts directly to airlinesand third-party operators. They also bundle repairparts into their repair services contracts.

MARKET SEGMENT DEFINITIONS AND ESTIMATING METHODS APPENDIX E

57Appendices

We have not attempted to separate the cost of parts from the cost of services in this year’sbaseline estimate for the engine overhaul market.Engine maintenance contracts include someamount of spare engine lease cost, which is also included in this year’s baseline market scope estimate.

Growth of the engine overhaul marketdepends on engine sizes, ages, and hours flown.This forecast uses the world fleet ASK growth rate to project the size of the market for engineoverhaul parts and services into the future.

COMPONENT REPAIR includes all nonenginereplacement and repair parts, whether solddirectly to airlines and third-party operators orincluded in OEM service contracts. This categoryalso includes component repair services performedby airlines, third-party operators, and OEMs.

The estimate for component repair is basedon an analysis of all known engine and nonengineaircraft maintenance revenues, including OEMaftermarket revenues, value added by airlines, and value added by third-party operators.Individual estimates were made of all the majorelements of airplane maintenance (i.e., engineoverhaul, heavy maintenance checks, interiorsmodification, airplane painting, passenger-to-freighter conversions, and line maintenance).These estimates were deducted from the total to arrive at the market for component repair.

Growth of the component overhaul andrepair market depends on the size mix of airplanesin the world airline fleet, the number of flight-hours that fleet generates, as well as the number of cycles it operates. This forecast uses the worldfleet ASK growth rate to project the size of themarket for engine overhaul parts and services into the future.

HEAVY CHECKS include all structural parts, labor,and overhead related to maintenance checks thatrequire removing an airplane from service.

These checks have a variety of names for different airplane models and maintenanceprograms and include structural repairs related to airplane aging.

Our estimate of the market for heavymaintenance checks considers relevant factorssuch as the composition of the current world fleet, historical heavy check costs for the airplanemodels in service, anticipated retirements, futuredemand for specific airplane types, and averageutilization by airplane model.

Our estimating model performs a bottom-up analysis of the world airline fleet.Airplane operator data detailing average flight-hours per year and average flight-hour intervalsbetween heavy maintenance checks are used tocalculate the average calendar periodicity betweenchecks. In the case of airplane models for whichdeliveries began after 1980, average checkintervals are applied to each year’s deliveries todetermine when heavy checks would be scheduled.Thus, for any given year, the number of airplanesreceiving their first “C” check, second “C” check,and so on, and their first “D” check and so on canbe derived for each airplane model. In the case ofairplane models for which deliveries began before1980, average check intervals are used to calculatethe average number of airplanes for which a C or D check would be scheduled in any year.

The value of the market for heavymaintenance checks is calculated by applyingcheck cost data from Boeing maintenance costmodels to the number of checks estimated. This allows the market estimate to incorporate the effects of airplane aging on the costs of heavy airplane maintenance.


AIRPLANE PAINTING is defined as any exteriorpainting that occurs after an airplane has beendelivered. It includes the costs associated withcleaning and preparing an airplane for painting.The market is estimated on the basis of proprietarystudies and information regarding the cost ofpainting airplanes.

We project that the growth of the market forairplane painting will closely parallel the growth ofthe world fleet.

M A J O R A I R P L A N E M O D I F I C AT I O N

FREIGHTER CONVERSION forecast is a product ofBoeing’s main airplane forecasting tool, whichresults in our annual Current Market Outlook

airplane forecast. That tool provides a bottom-up,airline-by-airline forecast for passenger and freigh-ter airplane requirements given traffic growth andother assumptions. In considering each airline’sfreighter strategy, Boeing incorporates airline-

specific factors such as mission requirements,market strategies, passenger fleet type (if any),retirement schedules, and preference for newversus converted equipment. To assign specificconverted airplane types to airlines, airplane-

specific issues are considered such as the relativeattractiveness of competing candidate airplanes for target missions, used passenger airplaneavailability, and conversion program availability.

The result is a bottom-up demand forecast that also incorporates key supply-side factors.Conversion price estimates are matched to theforecast of future converted units, generating our forecast for industry passenger-to-freighterconversion revenues.

INTERIORS MODIFICATION market is defined as products and services used to modify or update an aircraft interior. Broadly, these partsand services fall into the following categories:seating, structures, galleys and lavatories, andengineering services. This does not includerefurbishment of interiors (e.g., reupholsteringseats, refinishing sidewalls, and heavy cleaning)during heavy checks.

The market for interiors modification iscalculated using revenues of the largest interiorsuppliers. Revenues were obtained from SECfilings, annual reports, and Boeing estimates.OEM and aftermarket portions of the revenueswere then broken out. To the extent possible,revenue generated from regional and corporatejets is eliminated from the market estimate.

This forecast uses the growth rate of seats in the world airline fleet to project the market forinteriors modification over the forecast period.

IN-FLIGHT ENTERTAINMENT (IFE) UPGRADES

market includes hardware, installation, service,and maintenance. This market was estimated using cost data available as a result of previousBoeing projects, several reports from industryconsultants, and other market intelligence. The market was projected using the growth rate of seats in the world airline fleet.

59Appendices

AVIONICS OR ELECTRONIC COCKPIT UPGRADES

market was extrapolated from cost data availableas a result of previous Boeing projects and fromother market intelligence. The market wasprojected using the growth rate of the world fleet.

F L I G H T C R E W T R A I N I N G

The market for flight crew training includes trans-ition and recurrent training for commercial jets of100 seats and above. To calculate the number oftransition training events, the number of replace-ment crews required due to attrition are summedwith the number of crews required to accommo-date fleet additions within each airplane type.Recurrent training events are calculated by sub-tracting the crews in transition training from thetotal crews needed for the various airplane types in the fleet. A weighted-average course cost isapplied in both cases.

Growth of the market for flight crew train-ing is driven by the growth of the world airlinefleet. The Current Market Outlook airplane fleetforecast is used to project the requirement fortransition and recurrent training.

A I R P O R T A N D R O U T EI N F R A S T R U C T U R E S E R V I C E S

AIRPORT SERVICES is limited to revenues derived by airports from landing fees. Financial reports from a sample of airportoperators were used to estimate the proportion of airport revenues derived from landing fees.(Other revenues are generated from in-airportfacility rents, concession fees, parking garage fees, and so on.) This factor was applied to thegross revenues of the 50 largest airport operatingorganizations and extrapolated to estimate thetotal market.

ROUTE INFRASTRUCTURE SERVICES are defined as fees paid for air traffic management services.The operating budgets of the air traffic manage-ment organizations for Europe, the UnitedKingdom, the United States, and Canada wereexamined to derive estimates of the cost ofproviding air traffic management services. Thetotal worldwide market for air traffic managementservices was then extrapolated on the basis offlight departures.

Growth in the market for airport and route infrastructure services will be primarilyrelated to the growth of airplane movements. The market was projected using the growth rate of flight departures generated by the Current

Market Outlook world airline fleet.

U S E D A I R P L A N E R E M A R K E T I N G

This market includes sales commissions, mark-ups, and revenue generated by trade-insurveys of used airplanes. It is estimated as a percentage of revenues reported for usedairplane transactions where both the owner and operator change as a result of the transaction.We project that the growth of the market for usedairplanes will closely parallel the growth of theworld f leet.


G L O S S A RY A P P E N D I X F

ASK: Available seat-kilometers — the number ofseats an airline provides multiplied by the numberof kilometers they are f lown; a measure of airlinecapacity

ATK: Available ton-kilometers — the number oftons capable of being carried multiplied by thenumber of kilometers they are f lown

CIS: Commonwealth of Independent States —states of the former Soviet Union

GDP: Gross domestic product — the total output of goods and services produced within a country;the broadest measure of economic output with theexception of GNP (gross national product), whichincludes a country’s nationals who work in othercountries.

LOAD FACTOR: Revenue passenger-kilometersdivided by available seat-kilometers

RPK: Revenue passenger-kilometers — the numberof passengers multiplied by the number ofkilometers they f ly

RTK: Revenue ton-kilometers — the number of tons carried multiplied by the number ofkilometers they are f lown

SCOPE CLAUSE: Provisions in US Major airlines’ pilot contracts that impose limits on the operation of jet airplanes used by regional“partner” airlines. Limits on seat count(generally 70 seats or less), weight, cruise speed, or ratio of regional jets to standard jets are the most common provisions.

STAGE 2 AND STAGE 3: A measure of noise; newer Stage 3 airplanes are quieter and areallowed to operate into more airports.

TRAVEL SHARE: A ratio measuring the portion of GDP that a country devotes to air travel

VFR: Airline passengers who are visiting friends and relatives

YIELD: Revenues divided by revenue passenger-kilometers; it represents an aggregate of all theairfare and airline charges and is measured on a per-kilometer basis

61Appendices


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