Airbus Global Market Forecast

Transcript

Bob Lange:Good morning, everybody. I'd like to build on, on what the presenters have shown so far and really try and look a little at what we see some of the drivers behind the growth are. So a review of our global market forecast for the next 20 years. So this chart looks, looks fairly similar to the chart that Brian put up. It's— when we show this chart, I'm usually asked, well, isn't this an industry self-serving view of a bright future? Clearly, when you look at a 20-year view, you smooth out the risks of the peaks and troughs on the way. But 2 points from this chart. First of all, Even when we've seen shocks due to unknown unknowns, the industry worldwide has slowed by, by having a pause of 1 or 2 years on growth before correcting and picking up the trend. So those pauses are very dramatic for the airlines who are conscious of their cash flow at that time, but the fundamental need for travel still exists. And also, if we look at the end of that forecast period, the annual increment in growth in RPKs worldwide in the industry is equivalent to the total worldwide industry in 1969 when the 747 entered service and revolutionized popular air travel. I promised I wasn't going to promote Airbus aircraft. Now, last year we had another strong year. The figures speak for themselves. An 8th year of impressive profitability. Impressive from the point of view of our industry's norms and expectations, but for airline CEOs, a return on investment which just covers your cost of capital or a little over is, is not quite enough to really build for the future. So we shouldn't be comfortable with that situation, and, and the industry still needs to become more consistently profitable over a more worldwide basis, because half the, the $56 billion of industry profits were generated in the US alone. I'd like to, to now project a little bit further, looking at the way people are traveling. It's a little bit of a complex graph. Vertical scale is trips per capita, horizontal scale is GDP per capita. Each bubble is a sovereign country, and the size of the bubble is relative to the population. So the reasonably large yellow dot in the middle is the US, about 2 trips per capita. The red dot that is the highest and the furthest to the right is China, and the other red dot is is India. Now, a lot of the drive for that travel, it's far much more leisure than business. It's driven by families whose household incomes allow them to be able to access air travel for the first time. Once they've, they've got roofs over their heads, they're feeding their families, they, they have employment, they can only later think about air travel. As we then project forward 20 years, it's interesting to see the relations that you see each country heading in a similar direction. But in particular, that global middle class by The Economist definition is going to double in that period. So we're going to see a lot more people being able to access air travel for the first time. first time. And at the end of the period, globally you'll see, despite other regions overtaking US, North America, Europe in terms of traffic, the propensity to travel will still be very high in the, the developed economies, but China will be roughly where US is today, and India will be roughly where China is today. This year when we were looking at our market forecast, and our market forecast is a demand forecast, so it's not telling you exactly which aircraft will, will carry people in 20 years' time. In many cases these aircraft don't exist yet. But we, we look at the way business models have evolved from 2007. The larger bars here show the the so-called legacy or full-service carrier business models, which were predominant in most parts of the world, with low-cost having taken off initially in North America and then with great vigor in Europe. When we fast-forward to, to last year, you'll see that it's the, the old legacy models that have been squeezed. And more than anything, business models in airlines these days are becoming more hybrid business models. I'm sure other speakers will allude to this in the next 2 days. But in the same aircraft product that they will be having, they may have business classes that compete with full-service carrier business classes, and they may have economy seats which, from a price and product point of view, they, they strip out and they're competing with ultra-low-cost carriers. in, in the same vehicle. We also look at the way aircraft have been used, because traditionally big aircraft fly long distances and small aircraft fly shorter distances. And again, we've seen that evolve over time. Here we see a little bit of a heat map of today's airline operations. Each pixel is a cluster of flights, and the darker the pixel, the more concentrated they are. In terms of the, the real aircraft capacity, the seats offered per aircraft, and the range of the flights. And you'll see that there's a big concentration of A320s and 737s in there today. There's a larger spread of A330s and 787s. And there's a gray area on the top left, which is where larger capacity widebodies are used on shorter sectors. Right. Isn't that misusing the aircraft? Well, some people might say it is, but the, the simple fact is when you're an airline, you're trying to maximize your asset utilization, and by using the capacity that you have on longer services and shorter services, you're able to improve your schedule and increase the number of hours that each aircraft is flying each year. So it would be a question mark whether that, that phenomenon continues over time. Here again, an observation. We usually claim in press releases that our aircraft have so much capacity and can fly so much range. So obviously we talk about the maximum range of the aircraft. Here you see a statistical spread of the way Airbus aircraft are actually used in service today, which also bears out the fact that the larger aircraft are used on anything A330 is used on anything from 30 minutes to, to 14 hours today. So we decided to segment the market this way, which is a departure from us talking about single-aisle aircraft and wide-body aircraft, because aircraft may be different in the future. So we simply define them by capacity and range. A small segment up to 230 seats and 3,000 nautical miles going towards an extra-large segment of above 350 seats and up to 10,000 nautical miles. That's a little mapping of the way our aircraft fit those segments today, although what I show is very hard boundaries there in reality are not hard boundaries. There's a lot of blurring of boundaries. But when we have this segment again in our, in our forecast, we predict that over the next 20 years the industry will need a little more than 37,000 aircraft units. Our forecast is maybe a little bit conservative. Around 3 quarters of those, by the number of hulls to be delivered, will be in that small category, but about half the value because of course the the wide-body aircraft are more productive and fetch higher prices. So as we again look at the, the world aircraft fleet, we do expect it to double over the next 20 years. We see beginning of '18, 21,450 aircraft that were in the fleet. And I think we, as forecasters as a community, we try and be humble because it's very easy to put a forecast out there, and the one thing you can guarantee is that life will not pass exactly as you predict. So I was talking to our CFO recently, and he teased me about this number, and I said, well, the 2018 number how accurate do you think that is? And he said, oh, it must be very accurate because you can count them. I said, well, at any time there are about 4,000 single-aisle aircraft parked and— sorry, not 4,000, 4% of the fleet is parked, and up to 8% of widebodies are parked at any moment in time. Some of those will come back into the fleet, some will be retired. So the accuracy of that starting number is between plus or minus 1% and plus or minus 2%. So we need to be realistic about the future as well. Anyway, half of these will stay in service and still be in service in 20 years' time. The other half of them will be replaced in that period, and the remainder of the deliveries, some 26,000, will be for growth. So roughly that is 70% for growth and 30% of replacement as we see it. So with that, I'll conclude. Again, I promised not to promote our aircraft, but I will promote our forecast. And if you are interested, our forecast is available in an app that you can download free from the Android Store or the, the Apple Store. Thank you.

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