Growth in Passenger Traffic to Trigger Increased New Aircraft Orders and Significant Fleet Expansion

LONDON, February 1/PRNewswire/ — To accommodate burgeoning passenger traffic on domestic and international routes, airlines across the world are engaged in the expansion of their fleets. Record orders for new airplanes placed in 2005 have almost doubled the total orders of aircraft manufacturers such as Boeing and Airbus and most aircraft deliveries are likely to take place over the next five years.

“The record orders of 2005 placed by airlines worldwide indicate rapidly increasing seating capacity in the following years,” notes Ms. Kamila Zlobinska, Research Analyst at Frost & Sullivan (http://aerospace.frost.com). “A significant number of deliveries will be devoted to fleet renewal as many airplanes are in need of replacements. New-generation airplanes will increase efficiency and help reduce operating expenses, particularly fuel costs.”

With 33.9 per cent share of the total orders, North America will continue to be the biggest customer in the world airline market. At the same time, lured by developing economies particularly in China and India, the Asia Pacific airline market is rapidly investing in aviation infrastructure improvements. Further, as European airlines hold over 500 options and purchase rights, which are likely to be realised in the future, the European airline market will contribute to further market growth.

Current orders for airplanes are likely to provide an additional capacity of about 1.0 million seats and further growth is likely to take place due to the exercised options and purchase rights of future aircraft deliveries as well as new orders that airlines will place in the near future. In particular, 2007 is likely to mark significant growth with deliveries of the new Airbus A380.

At present, the world fleet includes a seating capacity of over 3.1 million seats and is expected to grow by 20.3 per cent by the end of 2010. The North American aviation industry accounts for 37.4 per cent of the total world fleet and is likely to witness an increase in aircraft deliveries, with a significant number of airplanes requiring replacements.

Europe – the second largest market in terms of the number of aircraft in use – will witness increasing long-haul traffic driven by the liberalisation of immigration rules on inter-continental travel. Further, the current fleet in Asia Pacific will witness a rise with an increase in the number of leased aircraft as well as the deliveries of additional orders that are likely to be placed by several airlines in the region.

Single-aisle jets, which are utilised in regional and domestic short-haul flights, dominate the air traffic in most countries. Hub-and-spoke networks of international air traffic will also continue to accelerate the need for small-sized airplanes.

Additionally, growing emphasis on international mobility is likely to boost demand for twin-aisle airplanes, which are used on long-haul international and inter-continental routes. In comparison, very large jets will be used only between major international hubs in Asia Pacific, Europe and North America.

Soaring fuel prices, reducing profit margins and intensifying competition, especially from low-cost carriers are compelling traditional airlines to reduce costs and improve efficiency to gain a competitive edge.

“The worldwide emergence of low-cost carriers is a challenge for traditional airlines and this is augmented by growing customer awareness of the product-value relation, fuelled by reduced fares of low-cost airlines,” explains Ms. Zlobinska. “As a result, airlines will need to focus on fleet renewal that will help them to lower operating costs, as new-generation aircraft can be up to 30% more efficient. Early fleet renewal will allow airlines worldwide to benefit from cost advantages associated with improved fleet management.”

As efficient economic models will play a pivotal role for growth, airlines will need to create efficiencies in fleet modernisation to augment their revenue potential. “Hence, all airlines should adopt improved fleet management, restructure their fleets as well as operate young aircraft to lower maintenance and fuel costs to remain competitive”, states Ms. Zlobinska.

If you are interested in a virtual brochure, which provides manufacturers, end-users, and other industry participants an overview of the latest analysis of the World Commercial Aircraft Capacity and Growth (B801-22), then send an e-mail to Srividhya Parthasarathy, Corporate Communications, at sparthasarathy@frost.com with the following information: your full name, company name, title, telephone number, fax number and e-mail address. Upon receipt of the above information, an overview will be sent to you via e-mail.

World Commercial Aircraft Capacity and Growth

B801-22

Background

Frost & Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years. The company’s industry expertise integrates growth consulting, growth partnership services and corporate management training to identify and develop opportunities. Frost & Sullivan serves an extensive clientele that includes Global 1000 companies, emerging companies, and the investment community, by providing comprehensive industry coverage that reflects a unique global perspective and combines ongoing analysis of markets, technologies, econometrics, and demographics.

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