Market Insight: The Global Commercial Aircraft Cabin Interiors Market - New Aircraft Deliveries and Retrofit Programs to Drive the Market

- Monika Lawrzecka, Industry Analyst, Frost & Sullivan

© 2011 Frost & Sullivan

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Market Overview

Commercial aircraft cabin interior markets have begun to grow again, following the

economic crisis which had forced airlines to postpone retrofit programmes and new aircraft

deliveries while restructuring their operating fleets. The first delivery of B787s has had a

positive influence on the cabin interior market by opening a new demand channel; the same

growth effect will come with new aircraft programmes, especially the Airbus A350 and A320

Neo and the Chinese C919. Retrofit markets are also booming, fuelled by significant

numbers of aircraft returning to operations after inactivity during the crisis period. A large

number of retrofit programmes which were postponed for financial reasons are now going

to be realised.

Rising fuel prices have created demand for lightweight materials and more energy-efficient

lighting systems. In the European market the effect is going to be even stronger because of

airlines’ incorporation into the European Union Emission Trading Scheme (beginning 1

January 2012) which will entail new financial obligations for airlines. Additional costs

incurred will depend on the quantity of CO2 emissions, so European airlines are expected to

increase number of retrofit programmes and fleet exchange programmes in order to

decrease fleet fuel consumption. This will result in increased demand for new cabin

interiors made from advanced, lightweight materials which will reduce fuel consumption and

CO2 emission per passenger kilometer ratios.

These positive factors entail a considerable rise in aircraft cabin interior spending.

Nevertheless, some factors which are expected to drive the cabin interior market in the

near future, like fuel prices and environmental taxes, may become restraints in the future.

Some airlines have announced likely capacity cuts when fuel prices and new aviation taxes

exceed the level which is allowing them to maintain profitability; this fuels uncertainty

among industry stakeholders and slows increases in production capability. The market also

has to cope with high certification requirements which are making new product

development processes long and expensive.

However, Frost & Sullivan anticipates that the drivers will outpace the restraints in short

term and that new, reduced fuel consumption engines will help to mitigate the potential

future restraints of fuel prices and aviation taxes in the long term. The result will be with

major positive growth rates in all cabin interior segments.

© 2011 Frost & Sullivan

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Market Forecast

The commercial aircraft cabin interior market is predicted to grow at a CAGR of 8.7 percent,

with most of the revenue opportunities occurring after 2016, when new aircraft programmes

are being introduced and the B787 and A350 reach their full production levels. The retrofit

market will be fuelled by a significant number of retrofit programmes, especially in Western

Europe and North America.

Figure I: Global Commercial Aircraft Cabin Interior Revenue Forecast (2010-2020)

Source: Frost & Sullivan

0.0

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6,000.0

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2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Linefit Retrofit

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Market Drivers:

• Growing number of new aircraft orders

• High fuel costs and new environmental regulations

• New aircraft

programmes

• Growing demand for cabin customisation due to passenger comfort requirements.

Market Restraints:

• Economic uncertainty and market volatility

• Delays in aircraft deliveries as part of new programmes

• Supplier production

capacity limitations

© 2011 Frost & Sullivan

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Main Cabin: Need for light and strong composite materials

The main cabin segment is facing the growing demand for new materials which both reduce

aircraft weight and allow the passenger more personal and luggage space. Bigger

overhead bins, sidewall panels which give the impression of more cabin space, non-

electrical floor lighting, and lighter carpets and floor panels are becoming standard cabin

interiors.

Galleys: Growing number of low-cost carriers a potential risk for galley producers

Many different aircraft operators with diverse needs are big challenge for the sector. While

low-cost carriers are reducing galley equipment to the necessary minimum, airlines which

want to reach clients with extraordinary service offerings are looking for new galley

solutions which allow them to offer passengers fresh meals prepared on board.

Nevertheless, all of them want galley equipment be as light as possible and to consume

minimal space and energy.

The global economic situation will have significant influence on the segment and on the

popularity of airlines’ business models; the growing number of low-cost fleets may restrain

demand for galleys. Airbus predicts that within the next 10 years the market share of low-

cost carriers in global short-haul traffic will increase from 23% to 29%. In addition, Airbus

predicts that within 20 years low-cost carriers’ market share of intra-Western European and

domestic Southeast Asian short-haul traffic could increase to up to 60 percent.1

Lavatory: Standard sizes with customised interiors

Competition in the cabin lavatory segment is increasing, with greater numbers of interior

producers extending their offerings and manufacturing lavatories. While standardization of

size is required by primes to simplify their production processes, airlines are demanding the

ability to customise lavatory interiors - including colours and materials, illumination,

dispensers, mirrors, showers, and equipment to make the lavatory handicapped-accessible.

Non-contact interiors, with photocell-activated taps or self-cleaning toilets are to increase in

prevalence, according to the need to increase passenger comfort through improvements in

hygiene. In new generations of aircraft the passenger-to-lavatory ratio is decreasing, from

an average of approximately 60 to a present average of 50.

1 Airbus Global Market Forecast for 2011-2030, page 53

© 2011 Frost & Sullivan

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Lighting: LED technology driving lighting opportunities

LED technology is changing aircraft interiors by providing lighting with low operating and

maintenance costs, which compensate for its high installation cost. LED lights are strongly

driving the retrofit market and slowly coming to the line-fit market, with new aircraft like the

B787 being fully LED-lit. The revenue potential of LED retrofitting will decrease over time,

due to the long lifecycle of LED lights.

Seating: Three sub-segments with different requirements

The three types of aircraft passenger seats have been developed to suit different

requirements, but all are required by primary aircraft operators to be as light and space-

efficient as possible without reducing passenger comfort. In first and business class seats,

the trend is to give the passenger as much comfort as possible by offering (for example) flat

beds, working spaces, special reading lights, and high quality in-flight entertainment. For

economy seats, airlines are mostly going for weight decrease and space saving, especially

in the case of seats projected for short-haul operations. These measures include lighter

covers and smaller and slimmer headrests and tables, with the aim of increasing the

number of economy seats on board and decreasing the fuel consumption per passenger.

Growing fuel costs and new environmental taxes are strongly driving the seating sector and

fuelling a number of big retrofit programmes, such as the Lufthansa seats exchange

programme.

Regional Opportunities

Demand for aircraft cabin interiors is going to rise in all global regions. Nevertheless, some

present more growth potential than others. The markets of Western Europe and North

America are slowly losing their positions as the most important cabin interior markets. The

Middle Eastern, Chinese and Indian markets will together comprise 27.3 percent of global

demand for cabin interiors in 2020.

China is seen as one of the greatest potential single markets. Lower than expected traffic

growth in 2011 is leading aircraft operators to think about increasing their fleet of slightly

smaller aircraft, such as opting for B737s instead of B787s. In addition, it is expected that

the number of aircraft equipped to low-cost carrier standards will grow. Low-cost carriers

are expected to have significant influence on cabin interior market values, not just in China

but also in the Asia-Pacific region.

© 2011 Frost & Sullivan

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Figure II: Regional market share as percentage of global market revenue

Source: Frost & Sullivan

Competitive Overview

Zodiac Group, B/E Aerospace Inc., and Diehl Group are increasing their leadership position

through mergers and acquisitions. The growing demand in India, China, and the Middle

East presents huge challenges for market leaders based in Europe and North America. The

location of demand centres is shifting, not just because of growing needs of aircraft

operators in China, India and the Middle East, but also because of the new Chinese C919

programme. Frost & Sullivan expects new competitors from Asia to enter the market; these

newcomers may have significant influence on the market structure in the long term.

Conclusion

Post-crisis growth is already evident in the commercial aircraft cabin interiors market.

However, predictions of a new global economic crisis bring with them significant

uncertainty, which has made market participants careful in their investment decisions. The

effects of this wait-and-see strategy are already visible, especially in the galley and seating

segments, where waiting times for new equipment are increasing. High levels of safety

standards and certification costs are also restraining the pace of technological change.

Conversely, the market is being driven by a fast-growing number of new aircraft orders,

already at previously unseen levels. Rising fuel prices combined with new environmental

W. Europe21.7%

E.Europe4.0%

N.America23.7%

LATAM4.6%

APAC20.8%

China7.4%

India2.0%

M.East11.5%

Africa4.3%

2010

W. Europe16.9%

E.Europe4.1%

N.America21.8%

LATAM5.4%

APAC16.9%

China8.6%

India3.7%

M.East15.0%

Africa7.5%

2020

© 2011 Frost & Sullivan

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taxes are creating demand in the retrofit market, especially in the seating segment. New

aircraft programmes bring new opportunities for manufacturers to increase their market

share and present new technologies. However the level of competition is expected to

increase, with Airbus and Boeing currently planning to decrease their number of cabin

interior suppliers. Frost & Sullivan expects growing demand for cabin interiors, especially in

Asia and the Middle East, and further market consolidation as the biggest players increase

their M&A activity.

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