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Global Market ForecastMethodology

Agenda

Global Market Forecast

GMF process

GMF 2018 results

Market Forecast Team Missions and Deliverables

3

Assess market trends

for our current aircraft1. Forecasting

travel demand2.

GLOBAL MARKET FORECAST (GMF)

20 year aircraft demand &

passenger traffic forecast

Explain Airbus strategy

Share our vision

First GMF: Early 80s

ICAO ADAP – July 2019

GMF team skills

4

November 2018

Operations Research

PythonStatistics

Computer programming

Optimization

Visualization

Economics

• Our team has a diverse range of skills…

Systems Dynamics

R

SQL

Machine Learning

• …But mathematical models can only take you so far

• The world is too complex to capture everything – pragmatic interpretation is needed

Client contact & Market awareness are absolutely essential

Network Analysis

Market Research


Agenda

Global Market Forecast, why ?

GMF process

GMF 2018 results

The GMF answers the 3 following questions

6

How many passengers will fly?

Traffic forecast

Where will passengers fly?

Network forecast

How will passengers fly?

Demand forecast


Global Market Database sources

7 Source: Airbus GMF

Economy

Finance

Other airport data

Geography

Fleet

ADS-B data Offer

ENAC & other

Traffic

Created using UNREGISTERED Top Draw 9/14/95 3:14:10 PM

Airlines reports

+ Airlines and Airports

associations

Bureau of statistics Civil

Aviation authorities

CONSOLIDATED & CROSS-VALIDATED

GLOBAL MARKET DATABASEHistorical data since 1972


145

6068

50

111

184

26

57

30

67 65

101

202

78

0

50

100

150

200

250

Airlines distribution per region

Num

be

r o

f a

irlin

es

48%

19%

5%

17%

3%

8%

4%9%

20%

6%

16%

45%

Global Network Major Network Small Network

LCC Regional & Affiliate Charter

Installed seats in service (outside circle)

Number of airlines (inside circle)

Airlines distribution per type

8

GMF Operations – Airlines

• Source: Ascend, Airbus GMF2018



9


Traffic forecast


Network forecast


Demand forecast


10

Traffic Forecast – Problem Definition

How to predict traffic growth based on economic forecasts?

Traffic growth is not that closely correlated to GDP growth…

Source: ICAO, IHS Economics, Airbus GMF

Traffic (RPK) and real GDP growth - % (year-over-year)

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2017

RPK growth 2016-2017

+7.6%

GDP growth 2016-2017

+3.0%


11

Liberalisation

Tourism trends

Geopolitics

Airlines Business models & strategy

Jet fuel price

Air fares

Traffic Forecast – Problem Definition

…So we need to use other variables too


12

The world is divided into 20 traffic regions…

…And traffic is predicted on ~70 flows

Accuracy versus validityAs many aggregations as possible, as many exceptions as necessary

Traffic Forecast – Flow Aggregation

Source: Airbus GMFICAO ADAP – July 2019

13

Traffic Forecast – Multi-Model comparison

Model 1:

GDP, CPI

Model 3:

GDPR, PC

Model 2:

GDP, DPI

Model 4:

GDPR, CP

Forecast trends

Best combination of parameters for each flow


(Models are illustrative)

14

Traffic Forecast - Long term validity

World annual traffic (trillion RPKs)

0

2

4

6

8

10

12

14

16

18

1992 1996 2000 2004 2008 2012 2016 2020 2024 2028 2032 2036

• Source: ICAO, Airbus GMF2018

GMF2018

4.4% growth p.a.

GMF 2000

forecast

History


15

Over the last 30 years, air transport’s centre of gravity has moved south and east

16

Centre of gravity movement will slow as air traffic equalises globally


17 • Source: Airbus GMF


Traffic forecast


Network forecast


Demand forecast


18

First traffic flows are disaggregated…

Network Forecast – Where will passengers fly?

…to reflect the global network at base year

How will the global traffic network evolve?


• Source: OAG, Airbus GMF2018

Network Forecast – Where will passengers fly?

19

Prediction of specific new routes is very difficult… …But statistically, pattern reflect existing network:

How much traffic will go to the new network?

2017 Routes 2018 New Routes

# N

ew

Ro

ute

s (

no

rma

lize

d)

Distance Band Km

Existing Routes New Routes


Network Forecast – How much fragmentation?

20

2010 2011 2012 2013 2014 2015 2016 2017 2018

Tra

ffic

(P

ax)

Historic Fragmentation trend

Traffic on Existing Routes Traffic on New Routes

Level of fragmentation depends on:

Region

Growth Rate

Leg Length

Frequency constraints

• Source: OAG, Airbus GMF2018



21


Traffic forecast


Network forecast


Demand forecast


Demand Forecast - Overview

• Need to convert Traffic & Network Forecast into a Demand Forecast

• This is the most complex part of the process

• Fundamental idea is to match:

…with actual FleetOperations-based Demand…

Route 1

Route 2

Route 3

Route 4

Demand for

New Aircraft


Y = 0

Y = N

Y = 20

Age Distribution

23

Fleet & backlog is derived from fleet data supplier

Demand Forecast - Base Fleet Preparation

Assumed Replacement age/Airline

Commercial feedback & market knowledge

Most fleet replacement ages are

not explicitly defined

How to know when an aircraft

will be replaced?

Source: Airbus GMF


24

Demand Forecast – Operations-based Demand

Frequency

CapacityBubbles proportional to ASKs

Step 1

increase in Frequency only

Step 2

increase in both Frequency & Capacity

Step 3

increase in Capacity only

Route

opening

Traffic (RPK index 100 @ year1)

0

50

100

150

200

250

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Time (years)

Typical evolution on a route enjoying growth

Frequency increase

Frequency

&

Capacity

increase

Capacity

increase

Threshold depending on

market characteristics

Airlines business models

Traffic flow (region)

Route length

Number of players

• Frequency/Capacity model to capture changing nature of demand


Demand Forecast – Operations-based Demand

25

• Use aircraft utilization statistics to calculate number of A/C required

Average utilisation

rate by A/C type

Annual hours flown

along route

Annual hours flown

per A/C

Fit the average

utilisation curve

Get number of A/C

Compare with Route

requirements

Source: Airbus GMF


Route 1

Route 2

Route 3

Route 4

Operations-based Demand

(Colour indicates seat count)

Demand Forecast – Open Demand

26

• From the Demand-based Forecast…

How much demand can be satisfied by recycled aircraft?

(Graphs are illustrative only)


(Colour indicates seat count)….Fleet Forecast can be computed

27

Demand Forecast – Recycled & Leasing Market

• Part of the Open Demand will be filled in by either:

• Recycled aircraft

• Leased aircraft on backlog that have not yet been allocated

• Attrition curve What is the probability that an aircraft will be flying after X years?


28

Demand Forecast – Recycled & Leasing Market

Y = 0

Y = N

Y = 20

Age Distribution

Recycled &

Leased aircraft

Applying the recycled & leased

aircraft to fill up part of the Open

Demand…

Recycled Pool

…Gives the final market of

new aircraft

(For illustrative purposes)


Agenda

Global Market Forecast, why ?

GMF process

GMF 2018 results

GMF18 anticipates an additional 2,500 new aircraft deliveries over 20 years

GMF17 GMF18GDP20-year avg. growth 2.8% 2.8% +US$ 2.9 trillion

at end of period

RPK20-year avg. growth 4.4% 4.4% +2.4 trillion RPK

at end of period

FLEETstart

21,50020,500 +1,000

47,99042,530FLEETend

+5,460

DELIVERIES20-year NEW

37,40034,900 +2,500

Notes: Passenger aircraft (≥ 100 seats) | Jet freight aircraft (>10 tonnes) | 20-year forecast period

Source: Airbus GMF 201830

The world fleet will more than double over the next 20 years

Notes: Passenger aircraft (≥ 100 seats) | Jet freight aircraft (>10 tonnes), Rounded figures to the nearest 10

* Assuming same rules as today


Number of aircraft

20-year

new deliveries

Replace

Grow

Stay

47,990

21,450

10,600

10,850

26,540

37,390

-

10,000

20,000

30,000

40,000

50,000

Beginning 2018 2037 New Deliveries

1,760 (5%) $0.6 tn (10%)

$1.4 tn (25%)5,480 (15%)

$3.2 tn (54%)

$0.6 tn (11%)

S

M

L

XL

Around 37,400 aircraft will be required over the next 20 years

Notes: Passenger aircraft (≥ 100 seats) | Jet freight aircraft (>10 tons)


2018-2037 new deliveries

37,400aircraft units

$5.8 trillionaircraft value

S

M

L

XL

28,550 (76%)

1,590 (4%)

The Airbus

Global Market ForecastApp

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