Report: World Commercial Aircraft Capacity & Growth

Research Overview

Record Orders for New Aircraft to Boost Fleet Expansion

Due to increasing passenger traffic and the liberalisation of international services, the world airline market is investing in fleet expansion to increase seating capacity and offer improved efficiency. Accordingly, Airbus and Boeing have received record orders for new airplanes in 2005 from airlines all over the world, which have almost doubled their total orders. Such large orders indicate a rapid increase in seat capacity in the near future. A significant number of deliveries however, will be utilised for fleet renewal as many airplanes are in need of replacement. Approximately 42 per cent of the deliveries between 2006 and 2010 will be dedicated to fleet modernisation, which will result in increased efficiency and safety that will bring next-generation airplanes.

The Frost & Sullivan research service examines the global airline market, segmenting it into single-aisle, twin-aisle and very large jets. The study analyses major industry challenges, market drivers and restraints as well as potential threats faced by market participants along with a comprehensive analysis of the market.

Fleet Modernisation to Assist Cost Reduction and Increase Efficiencies

While growing passenger air traffic drives the world airline market, increasing competitiveness and soaring fuel prices are affecting the profitability of airlines. The worldwide emergence of low-cost carriers challenges traditional airlines and this situation is escalated by increasing customer awareness of the product-value relation triggered by the cost effectiveness of low-cost airlines.

"High pressure on cost-savings reinforces the need for fleet renewal that will enable airlines to reduce their operating expenses, particularly on fuel as new-generation aircraft can improve efficiency by up to 30 per cent", remarks the analyst of the research service. "Early fleet renewal will assist airlines in creating cost efficiencies, thus enabling them to remain competitive." Additionally, airlines are heading towards larger participation of leased aircraft in their fleets, which will help forge closer relationships between leasing companies and airlines, thus resulting in long-term partnerships.

Economical Business Models Required to Increase Revenues in the Global Airline Market

Single-aisle jets, which are utilised for regional and domestic short-haul flights, dominate the air traffic in most countries. Hub-and-spoke networks of international air traffic are also likely to continue accelerating the need for small-sized airplanes. Additionally, growing emphasis on international mobility is expected 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.

With airlines eager to reduce costs and offer improved efficiency, adopting viable business models will be pivotal to increasing revenue potential and combating reducing profit margins. Passengers are becoming increasingly price-sensitive and traditional airlines will be compelled to focus on creating efficiencies and reducing costs to compete with low-cost carriers. "Hence, all airlines should develop a strategy to restructure their fleets, adopt efficient fleet management and operate new aircraft to lower maintenance and fuel costs", remarks the analyst.