Boeing projects that the global coronavirus pandemic will result in 11% fewer new jets being delivered in the next decade compared to previous forecasts.
That’s about 2,200 fewer large aircraft built by all manufacturers, or 220 fewer per year on average. Those are mostly projected to be Airbus and Boeing jets but also include smaller regional jets and some built by up-and-coming competition in China.
The projection, part of Boeing’s annual 20-year forecast of total commercial jet industry demand, indicates the severity of the downturn in the aviation business, the challenges still ahead and a painfully slow path to recovery.
Boeing’s forecast, released Tuesday, assumes that the pandemic’s impact will hit hardest through the next three years.
Briefing journalists on the projections, Darren Hulst, vice president of commercial marketing at Boeing, said it will take that long for passenger traffic to recover to 2019 levels.
And he said it will be five years before traffic is back to where it would have been if COVID-19 hadn’t happened and the long-term trend of about 4% growth per year resumes.
For the past decade, passenger air traffic had been growing at about twice that pace and airlines were raking in cash. COVID-19 halted the boom.
Hulst said that annual passenger-traffic growth through 2024 will be about a third of what it had been in the boom decade — and starting from very depressed current traffic levels.
The latest International Air Transport Association (IATA) data shows passenger traffic in August down 75% worldwide compared to a year earlier. Domestic traffic was just less than half what it was in 2019, and international traffic was 12% of the level a year ago.
Difficult as the downturn is for all jetmakers, analysts believe Boeing’s relative position in the market means it may feel more pain than rival Airbus.
Longtime aviation analyst Richard Aboulafia of the Teal Group in an interview pointed to Airbus’s A321neo as a jet likely to lead the recovery as airlines seek to slash costs by flying international routes with smaller, long-range single-aisle jets that are much cheaper to operate than widebody airplanes like the 787 or the 777.
“It looks like that one segment will outperform all the others during the downturn,” Aboulafia said, adding that with Boeing having shelved its plan to develop a new mid-market-size airplane, “it simply doesn’t have a product that serves that market effectively.”
Looking beyond the downturn
Boeing’s annual market analysis would normally have been released at the Farnborough Air Show in England in the summer. That show was canceled and Boeing took time to recalculate, factoring in the impact of the drastic pandemic-driven downturn.
Boeing Chief Strategy Officer Marc Allen in a statement stressed Boeing’s confidence in a long-term recovery.
“While this year has been unprecedented in terms of its disruption to our industry, we believe that aerospace and defense will overcome these near-term challenges, return to stability and emerge with strength,” Allen said.
Hulst in his presentation predicted an inevitable, if slow, recovery for the air travel industry, based on how it took previous shocks in stride — including the 9/11 attacks in 2001, the outbreak of the SARS pandemic in Asia in 2003 and the hit from the global financial crisis in 2008.
The downturn this time is far deeper than anything before and so recovery will take longer, yet, Hulst said, “The industry will prove resilient again.”
Over the full 20 years — and excluding the smaller regional jet category, so counting only aircraft of the size built by Boeing — Boeing projects total deliveries of 40,680 new commercial jets worldwide through 2039, down 2.7% from the 41,800 in last year’s 20-year forecast.
This smaller percentage drop in deliveries over 20 years reflects Boeing’s confidence that the fundamentals of the aviation market make certain an eventual return to pre-pandemic levels of air travel. Hulst cited the tens of millions of jobs globally that depend on trade and tourism.
“Air travel is a key and fundamental piece of the global transportation system,” he said.
Uncertainties ahead for aviation
The lower number of deliveries, in addition to slightly more retirements of airplanes in service, will result in a smaller world fleet of commercial aircraft 20 years from now than Boeing was forecasting previously.
The worldwide fleet of all commercial jets today stands at 25,900 aircraft, of which 29% were still parked and inactive last month.
Boeing’s analysis predicts that two decades from now, the world fleet will be 87% larger, numbering 48,400 aircraft in 2039.
The bottom line is that this 2039 fleet projection is almost 4,000 jets smaller than expected when compared to last year’s forecast for 2038 extrapolated with the pre-COVID-19 growth rate for one more year.
That represents a huge loss of business revenue for Airbus and Boeing, with the worst impact over the next three years.
And the brunt of that pain will be felt in the manufacturing of widebody jets, which Boeing builds in Everett and North Charleston, S.C.
International travel is currently severely restricted by governments all over the world, who are regulating who can fly where to contain the spread of the virus.
In China, domestic flights flown mostly by smaller, single-aisle planes have recovered since March almost back to pre-pandemic levels. But the dearth of international travel means that even China’s flights are still down 20% overall compared to normal levels.
With recovery slowest for the bigger, long-haul jets, Boeing’s new analysis projects just over 3,000 total widebody jet deliveries in the next 10 years, versus the 3,600 forecast last year.
Boeing does have the best-selling 787 Dreamliner, which is a relatively smaller widebody, so it should be a favored long-haul jet as airlines ramp back up international service.
Recently, for example, British Airways was flying a 787-9 from London to Seattle instead of the much larger 777s or 747s it normally would use on that route.
However, the 787 is the jet that Everett is losing next year, with Boeing’s decision to consolidate its production in South Carolina.
Much more problematic for Boeing is the new 777X, the largest passenger jet it now produces, built in Everett. The first version, the 777-9X, was due to be delivered next year, though now the first delivery seems certain to slide into 2022.
Hulst asserted that over the next 20 years, the market for the 777X will be solid as airlines replace larger 747 jumbo jets and Airbus A380 super jumbos with this smaller and more fuel-efficient airplane.
But that’s long term. In 2022, few airlines may want a plane carrying more than 400 passengers.
While forecasting overall demand for air travel 20 years out is possible, it’s hard to predict how the market may shift and what share of the market Boeing will win.
In addition to Boeing’s strategic disadvantage in the large single-aisle jet sector, Aboulafia said another worry is a possible restriction of Western access to the Chinese market, expected to be the largest in the world over the next two decades.
With China’s relations with the West under strain, the Chinese government could choose to heavily favor its own aircraft industry.
Possible restrictions on aviation carbon emissions, especially in Europe, is another factor that will affect the market, though it’s unclear exactly how.
Yet another unknown that will critically affect airline profits is how well business travel returns from the era of working from home and remote video meetings. Especially for long-haul flights, airlines depend on selling premium fares.
Hulst cited “the fundamental need for people to connect to do business” as one reason for Boeing’s optimistic projection of a long-term return to something close to how air travel used to be.
“The virtual way of working will serve as a complement, not a replacement, for people to travel,” he said.
Bleak as Boeing’s new forecast is in the near term, it’s founded on such relatively optimistic assumptions.