is seeing higher instability and slower growth. The jetliner industry, sadly, is falling in line with that environment. While there will be some additional modest growth, it will be in the 4-5% range, rather than the 9% or so of the past 12 years. On the positive side, military fixed wing segments, particu- larly fighter aircraft, are still growing. In April, SIPRI reported that global defense spending rose in 2015 for the first time since 2011. The Mideast, inevitably, is at the center of this increase. US defense procurement is also rising. However, this military market strength is not enough to compensate for the weakness we’re seeing in the civil rotorcraft and business aircraft markets. Both markets were transformed by unprecedented growth waves in the last decade. Both have spent the last eight years seeking renewed growth, with no suc- cess. But most of all, these two markets are now falling, largely due to the decline in energy prices and other factors. Next year, and for two years after, we’re expecting the industry topline to increase modestly, just because of the jetliner segment. But after 2020, we’re expecting a relatively gentle correction as the jetliner market reaches the end of a remarkable growth surge.
Summary of Findings • This industry remains the healthiest industrial segment of the world economy. After a brief hiatus in 2010, aircraft deliveries remain back on their decades-long growth trend. Both civil and military markets look set for growth through the end of the decade. While a handful of sub-segments and programs remain weak, suppliers with diverse program exposure continue to enjoy modest top line growth.
• We forecast production of 52,673 turbine-powered aircraft worth $1.999 trillion between 2016 and 2025. The military component of this market is worth $484.5 billion, while the civil sector is worth $1.45 trillion. These numbers are all in 2016 dollars.
• Our numbers exclude uninhabited aircraft, non-turbine aircraft, maintenance, overhaul, upgrades, and research.
• Compare these numbers with the last 10 years (2006– 2015), which saw deliveries of 44,415 aircraft worth $1.419 trillion (also in 2016 dollars). Despite the cyclical ups and downs, this represents nearly 40% growth.
• Over half of the new build market—$1.095 trillion— comprises commercial transports (including regional aircraft). Business aircraft are second ($269.7 billion). Fighters are third ($242.1 billion).
• Boeing’s jetliner product line rejuvenation, despite its stumbles, will gradually lead to growing market success. Boeing jetliner success, coupled with Lockheed Martin’s F-35 and broad US defense export market dominance, means good things for the US’s share of the industry. US primes are gaining global market share, largely due to their successful embrace of globalization.
• Europe looks set to retain its market share during our forecast period, largely due to Airbus. However, the outlook for European defense remains quite weak.
• Numerous macroeconomic trends are hindering non-traditional producers (those outside the US and Europe). These “emerging” producers will actually have roughly the same share of the market by the end of our forecast period, although thanks to increased outsourcing by the US and European primes some emerging players will still prosper.
Dark Clouds Loom The world aircraft industry is still growing. That’s the good news. The bad news is that the growth rate downshifted significantly last year. Meanwhile, the sluggish level of growth that remains is threatened by several looming macroeco- nomic trends. Most of all, the jetliner primes’ lofty production goals appear out of line with economic reality. Several market segments have already been impacted.
The result was a weak 2% growth rate for 2015 over 2014, measured in value of deliveries. This compares with the 7.1% compound annual growth rate (CAGR) seen in 2010–2014. Lackluster economic growth, particularly in emerging mar- kets, is one of the two big culprits. China, now the largest jet- liner market in the world, is weakening noticeably, with GDP growth falling below 7% last year. Russia and Brazil are stuck in a serious downturn. India’s civil aircraft demand has also been disappointing. Last year, Boeing delivered a mere three jetliners to the country, down from a peak of 36 in 2007. Meanwhile, Airbus and Boeing jetliner deliveries to China ramped up to 301 aircraft. That’s a record, both in raw num- bers and as a percentage of the total market. But again, China GDP numbers are dropping to a level not seen in 25 years. Weak energy prices are the second culprit. Inexpensive
fuel reduces the incentive for airlines to replace their older jets, and last year saw a worrying 38% decline in older jetliner retirements. While Airbus and Boeing show no signs of slow- ing down their announced production increases, there are more than ample reasons for caution. It’s quite possible that
December 2016 |
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