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  • World Fleet Forecast 20172036

    World Fleet Forecast 20172036

    Dick ForsbergOctober, 2017

  • World Fleet Forecast 20172036 2

    Dick Forsberg has over 45 years aviation industry experience, working

    in a variety of roles with airlines, operating lessors, arrangers and capital

    providers in the disciplines of business strategy, industry analysis and

    forecasting, asset valuation, portfolio risk management and airline

    credit assessment.

    As a founding executive and Head of Strategy at Avolon, his

    responsibilities include defining the trading cycle of the business,

    primary interface with the aircraft appraisal and valuation community,

    industry analysis and forecasting, driving thought leadership initiatives,

    setting portfolio risk management criteria and determining capital

    allocation targets.

    Prior to Avolon, Dick was a founding executive at RBS (now SMBC)

    Aviation Capital and previously worked with IAMG, GECAS and GPA

    following a 20-year career in the UK airline industry. Dick has a Diploma

    in Business Studies and in Marketing from the UK Institute of Marketing

    is a member of the Royal Aeronautical Society and also a Board Director

    of ISTAT (The International Society of Transport Aircraft Trading).

    Dick ForsbergHead of Strategy, Avolon


    This document and any other materials contained in or accompanying this document (collectively, the Materials) are provided for general information

    purposes only. The Materials are provided without any guarantee, condition, representation or warranty (express or implied) as to their adequacy,

    correctness or completeness. Any opinions, estimates, commentary or conclusions contained in the Materials represent the judgement of Avolon as at

    the date of the Materials and are subject to change without notice. The Materials are not intended to amount to advice on which any reliance should be

    placed and Avolon disclaims all liability and responsibility arising from any reliance placed on the Materials.

  • World Fleet Forecast 20172036 3

    IntroductionAvolons World Fleet Forecast covers all Western-built passenger and cargo jets in airline service, plus the main Russian and Chinese types. Aircraft deliveries, retirements and passenger-to-freighter (P2F) conversions are projected over a 20 year period. The resulting annual forecast of the in-service fleet is modified by an estimate of the number of aircraft expected to be in storage.

    For passenger aircraft, the resulting capacity is compared to a forecast of annual passenger traffic demand. The resulting load factors are used to measure changes in operating efficiency and to estimate the level of capacity surplus or shortfall. Freighter aircraft capacity is benchmarked against forecast demand for air cargo and the proportion of the total that is expected to be transported on dedicated cargo aircraft.

    The resulting delivery funding requirements are identified and applied across the range of available financing channels to provide an estimate of the expected evolution of aviation financing over the coming 20 years.

  • World Fleet Forecast 20172036 4

    The industry will continue to secure further operating efficiencies throughout the forecast period.

    World Fleet Forecast SummaryAgainst a backdrop of 2.9% average annual growth in global economic

    activity over the next 20 years, Avolon is forecasting passenger traffic

    to increase by 5.4% per annum (Chart 1), equivalent to an average 1.8x

    GDP multiple. Capacity is expected to increase slightly more slowly, by

    5.2% annually on average.

    Cargo demand is forecast to grow at a rate of 3.9% a year, although

    freight carried on dedicated cargo aircraft will increase more slowly, by

    3.4% per annum.

    Almost 43,000 aircraft will be delivered over the next 20 years,

    comprising 42,000 passenger aircraft and 800 factory-built freighters

    (Chart 2).

    By 2036, the world jet airliner fleet will have doubled, increasing from

    25,600 to 51,800 aircraft, of which 2,800 will be dedicated freighters.

    P2F conversions will satisfy over 2/3rds of the freighter requirement,

    which will total 2,800 additional aircraft over 20 years.

    Over 16,000 aircraft will be retired over the period, representing

    64% of todays fleet. Consequently, 40% of all deliveries will support

    fleet replacement, with the balance meeting the industrys growth


    The industry will continue to secure further operating efficiencies

    throughout the forecast period. Fuel efficiency is the most significant

    area of improvement, with a 24% reduction in fuel burn per ASK over

    20 years, equivalent to an annual reduction of 1.4% (Chart 1), achieved

    GDP 2.9%

    RPKs 5.4%

    ASKs 5.2%

    Cargo Traffic 3.9%

    Fleet Size 3.6%

    Fuel burn per ASK -1.4%

    Chart 1: Average 20 year growth rates

  • World Fleet Forecast 20172036 5

    Avolon also expects fleet utilisation to increase by 7% and average seat capacity will rise by 14% over 20 years, maintaining the trend to up-gauge within aircraft families.

    through the migration of the in-service fleet to new technology

    equipment. Avolon also expects fleet utilisation to increase by 7% and

    average seat capacity will rise by 14% over 20 years, maintaining the

    trend to up-gauge within aircraft families. System load factor will end

    the 20 year forecast period close to where it began, just above 80%, and

    will remain in a narrow range around that level throughout, although the

    occupancy rate for widebody aircraft is expected to come under more

    pressure in the medium term than that for narrowbodies.

    The 20 year financing cost of new deliveries will amount to more than

    $4.2 trillion in delivery prices and the annual requirement will rise from

    $110 billion to over $200 billion over the next ten years, averaging

    $170bn per annum (Chart 3). At the end of the forecast period, Airbus

    and Boeing will still account for over 90% of total delivery dollars.

    Chart 2: Components of Avolons 20 year world fleet forecast



    New deliveries











    2016: 23,700


    2016: 1,900

    2036: 2,800

    Chart 3: Ten year delivery financing outlook

    Airbus Boeing Other

  • World Fleet Forecast 20172036 6

    Key forecast themes and assumptions

    Airbus and Boeing single aisle

    We continue to give Boeing close to 50% of single aisle deliveries

    over the next 20 years, despite the current market share situation. At

    the market sweet-spot around 180 seats, the A320neo and 737MAX

    are clearly able to share the market equally

    However, whilst the A321neo has already proved to be a strong seller,

    the equivalent 737Max product remains unconfirmed. The launch

    of the -10MAX has led to a reallocation of future demand across the

    family members, with the -8 still taking the lions family share (66%)

    and the -10 replacing the -9 as the growth model of choice, with 20%

    of deliveries, compared to the A321s 40% share of the family

    The smallest single aisle family members account for less than 2% of

    A320 and 737 deliveries

    Boeings NMA has not been included in the analysis

    Airbus and Boeing twin aisle

    Both Boeing and Airbus have now taken the necessary measures to

    taper widebody production ahead of new model introductions. The

    forecast assumes a gradual ramp up again, from 2018 for the A330 and

    from 2021 for the 777. A350 and 787 rate increases will also be measured

    The past 12 months has seen a marked decline in backlog for

    very large widebodies and the forecast assumes that meaningful

    passenger production will end in the near future for the 747 and

    before the middle of the next decade for the A380

    Boeing will continue to own the dedicated freighter space, delivering

    over 80% of factory built cargo aircraft

    Other OEMs

    The C-Series is performing well in service and, assuming that the Airbus

    deal closes and the US penalty tariff requirement goes away, is now well

    placed to pick up future orders, although not a mass market contender.

    The larger CS300 is expected to account for 70% of deliveries.

    Sales of Embraers E2 family have been slower than expected over

    the past two years and the delivery forecast has been moderated

    accordingly. The E175E2 is expected to be the strongest family

    member with around half the total sales, mostly within North

    America despite the currently scope-busting MTOW

    Another setback in the MRJs program momentum has resulted in

    a lower medium-term delivery forecast. Sales are assumed to be

    limited to the MRJ90 and no stretch model has been assumed

    COMACs C919 is not expected to enter service before 2020, with

    deliveries of around 600 aircraft forecast through to the end of

    the period

    The C-Series is performing well in service and now well placed to pick up future orders...

  • World Fleet Forecast 20172036 7

    The Russian MC21 is also forecast to deliver around 600 aircraft from

    2021 onwards, with 2/3rds of sales going to the larger -300 variant.

    Industry cycles

    Avolon remains a firm believer in the industry cycle and, whilst factors

    other than GDP play an increasingly