Global Market Forecast 2000 - 2019

July 2000

1 The Airbus Global Market Forecast can also be found on the Internet at http://www.airbus.com

AI/CP 390.0031/00

The statements made herein do not constitute an offer. They are based on the assumptions shown and are expressed in good faith. Where the supporting grounds for these statements are not shown the Company will be pleased to explain the basis thereof.

Printed in France Contents

1. Forecast highlights 4 2. Key forecast parameters 8 3. Introducing the GMF 9 4. Demand for air travel 12 5. Air transport operational evolution 15 6. Fleet renewal 21 7. World passenger fleet development 23 8. Demand for passenger aircraft deliveries: 27 - Regional jets 31 - Mainline single-aisles 32 - 200/250-seaters 33 - Mid-sized & large twin-aisles 35 - Very large aircraft 36 9. Air cargo forecast 41

Appendices

A.Geographical regions & airlines analysed 58 B. Route network development 61 C. Passenger market segmentation 62 D.Seat supply analysis 64 E. Passenger traffic forecast methodology 66 & results F. Aircraft replacement methodology 70 G.Detailed passenger fleet results: - Ten years: 2000 to 2009 72 - Twenty years: 2000 to 2019 74 H.Cargo forecast methodology 76 I. Cargo forecast results 83

3 2000 Global Market Forecast 1. Forecast highlights

During the last year since the issue of Airbus Industrie's previous Global Market Forecast (GMF), economic forecasters have become somewhat more cautious regarding the prospects for long-term economic growth. Nevertheless the results of the latest GMF confirm Airbus' confidence in the continued strength of the civil aircraft market over the next twenty years, provided ways and means can be found to ease the problems caused by congestion. A significant role in the development of the world fleet will be played by a new generation of aircraft larger and more economical than anything flying today, and designed to be compatible with existing airport infrastructure. Airbus' latest GMF covers the evolution year by year during the period 2000 - 2019 of the fleets of passenger and combi aircraft with at least 70 seats, as well as dedicated freighters, operated by the world's largest 228 airlines and 49 subsidiaries, together with 187 additional cargo operators. In response to widespread demand, this summary document presents the results for the ten-year period to 2009 as well as for the full twenty years covered by the forecast. The major predictions are that: l Driven mainly by continuing economic (GDP) growth and reduced fares, passenger traffic (revenue passenger-kilometres) will grow at an average annual rate of 5.2 per cent during the next ten years. Growth will slow as markets mature, to average 4.6 per cent through the following decade, resulting in twenty-year average annual RPK growth of 4.9 per cent through 2019, when the airlines will be generating 160 per cent more RPKs than today. l Cargo traffic will be stimulated by the development of global e-commerce and manufacturing trends, and freight tonne-kilometres will grow more rapidly than passenger traffic. FTKs will increase at an average annual rate of 6.1 per cent through 2009, slowing to 5.3 per cent annually during the following ten years. Twenty-year annual FTK growth will average 5.7 per cent through 2019. l Modest increases in speed, load factor and utilisation will result in improvements in productivity. The number of annual RPKs produced by each seat installed in passenger aircraft will increase from about 1.66 million in 1999 to 1.8 million in 2009 and more than 1.9 million in 2019. Similarly, the number of annual FTKs produced by each tonne of capacity in freighters will increase from just under 1 million in 1999 to 1.14 million in 2009 and 1.27 million in 2019. l Consequently, to accommodate growing demand, the number of seats in passenger service will increase from 1.85 million today to

4 Forecast highlights

2.8 million in 2009 and nearly 4.2 million in 2019. At the same time the capacity of the dedicated freighter fleet will grow from nearly 69,000 tonnes to 113,000 tonnes in 2009 and 184,000 in 2019. l As passenger airlines increase frequencies on existing routes and operate additional routes, the number of departures will increase more rapidly than in the past. Annual departures will increase at an average 3.8 per cent per year through 2009. Limited infrastructure capacity will constrain further growth in departures to just 2.7 per cent per year through the next decade, resulting in a twenty-year average annual growth in departures of 3.3 per cent through 2019, when the airlines will be making 90 per cent more daily departures than today. l Since the number of departures will be unable to keep pace with the growth of traffic, the airlines will have to offer more seats per departure. From the current average of 158, seats per departure will reach 168 in 2009 and 190 in 2019; an overall increase of 32. l Smaller aircraft tend to make more flights than larger ones, so the average number of seats per aircraft will need to grow more rapidly than seats per departure. From the current 179 seats, average aircraft size will increase at an accelerating rate to 191 in 2009 and 217 in 2019; an increase of 38. Thus, over the next twenty years, seats per aircraft will increase by 19 per cent more than seats per departure. l As a result, to provide the required increase in capacity, the number of passenger aircraft in service will increase from some 10,350 in 1999 to 14,820 in 2009 and 19,170 in 2019.

The world jetliner fleet will grow by nearly 11,000 aircraft World fleet change 2000 - 2019 (2000 - 2009 in brackets)

14,661 New 703 (7,337) 15,364 (271) (7,608)

PassengerPassenger Freighter

Fleet Converted FleetFleet 2,389 Recycled (1,166) 3,174 (1,644) Retired 3,448 4,601 1,153 (1,705) (703) (2,408) l By 2009, some 4,520 of the passenger aircraft currently in service will have been replaced by their current operators as they seek to

5 2000 Global Market Forecast maintain a youthful fleet. Of these, 1,640 will be recycled back into the world fleet, leaving a need for delivery through 2009 of a total of about 7,340 new passenger aircraft. l During the following ten years another 4,500 aircraft will be replaced, of which 1,530 will be recycled, leaving a need for another 7,320 new aircraft for growth and fleet renewal. So over the twenty years through 2019 the airlines will take delivery of a total of about 14,660 new passenger aircraft. And of the 9,000 aircraft replaced during this period, almost 2,400 will be converted to freighters and enter dedicated cargo operations.

Nearly 15,400 new aircraft will be delivered ...

2000 - 2009 2000 - 2019

70- & 85-seater regional jets 437* 692*

Mainline single-aisle types like the Airbus A318, A319, A320 and A321 4,330 7,570 200/250-seaters like the Airbus A300, A310 and smaller model A330s 1,127 3,046 Larger twin-aisles like the Airbus A330-300 and A340 1,083 2,118 Very large and economical aircraft like the Airbus A3XX 360 1,235

Total passenger aircraft 7,337 14,661

Freighters 271 703

Passenger + freighter aircraft 7,608 15,364

* many more of these aircraft will be needed by smaller airlines and current turboprop operators not covered by the GMF l The average delivery rate of 733 new passenger aircraft per year projected through the first ten years of the forecast will be sustained through the second decade in terms of units. However the progressive trend towards larger aircraft means that the dollar value of deliveries in the second decade will be greater. l The biggest share (35 per cent) of deliveries of passenger aircraft will go to airlines in North America. European airlines will take 30 per cent, and Asia-Pacific airlines 24 per cent, leaving just 11 per cent for airlines in Latin America, the Middle East and Africa. l Higher growth in air travel markets outside the USA means that the percentage of the world passenger fleet operated by airlines based in North America will decline from its current 43 per cent to 36 per cent in 2019, while the share of airlines in Europe and Asia- Pacific rises. In terms of capacity, the most spectacular gain will be made by the Asia-Pacific airlines, whose share of world seats will grow from 24 to 29 per cent.

6 Forecast highlights

l The world freighter fleet will grow from 1,510 aircraft with an average capacity of 45.5 tonnes in 1999 to 2,240 aircraft with an average capacity of 50.5 tonnes in 2009. During this period some 700 freighters, having reached the end of their economic lives, will be retired, creating the need for acquisition of a total of 1,440 aircraft, including 1,170 passenger-to-freighter conversions and 270 new aircraft. l From 2009 to 2019 the freighter fleet will grow to 3,450 aircraft with an average capacity of 53.3 tonnes, while another 450 old aircraft will be retired. Of the 1,650 aircraft delivered, 1,220 will be conversions and 430 new freighters. Thus a total of some 700 new dedicated freighters will be delivered during the next twenty years. l The new 7,610 passenger and cargo aircraft delivered during the next ten years will be worth approximately $560 billion (2000 catalogue prices) and the 7,750 aircraft delivered during the following decade will be worth another $750 billion, giving a total twenty-year business volume of $1.31 trillion.

… a business worth $1.3 trillion

2000 $ (billion) 350 327.4 319.3

300 280.7 281.8

250

200

177.0 150 161.4 96.0 100 105.0 77.4 50 8.4 5.2 34.0 0 70&85 100 to 175 210 & 250 300, 350 & > 400 freighter 400 2000 - 2019 1% 25% 21% 24% 22% 7% 2000 - 2009 1% 32% 19% 29% 14% 6%

7 2000 Global Market Forecast 2. Key forecast parameters

The numbers of aircraft and seats needed at any point in time to generate the forecast number of revenue passenger-kilometres at the projected levels of service frequency will flow directly from the assumptions made regarding the evolution of such concrete operational parameters as speed, aircraft utilisation, load factor and average flight distance. To facilitate understanding of the GMF results and comparison with other forecasts, the table below presents the actual and forecast values at the beginning, middle and end of the twenty-year forecast period of eight key parameters, from which the corresponding values of a range of other operational parameters (such as speed) can be easily derived. These values, and the relationships between them, also provide a useful test of reasonableness of the forecast's results.

Key forecast parameters

Passenger aircraft only End 1999 End 2009 End 2019

World RPKs (billion) 3,080.1 5,100.2 7,985.7

World ASKs (billion) 4,378.5 7,076.9 10,864.2

Number of aircraft 10,349 14,815 19,173

Number of installed seats 1,852,641 2,834,332 4,168,701

Number of departures (000) 16,156.0 23,464.6 30,738.8

Seats per departure 158 168 190

Average flight distance (km) 1,370 1,414 1,444

Block hours per aircraft per year 3,502 3,636 3,736

Each of these numbers is a result, not an input !

8 3. Introducing the GMF

The millennial edition of Airbus Industrie's annual GMF predicts the numbers of passenger and combi aircraft with at least 70 seats, as well as dedicated freighters, that will be required during the twenty years from 2000 to 2019 to accommodate traffic growth and to allow fleet renewal by a total of 228 individual passenger airlines plus 49 subsidiaries, outside the Commonwealth of Independent States, which altogether account for 98 per cent of scheduled passenger operations, as well as 187 additional cargo carriers. The airlines studied, grouped into seven consolidated geographical regions, as well as the criteria for inclusion in the GMF, are listed in Appendix A.

The GMF covers 228 passenger airlines ...

North America P.R. China 29 airlines Europe Middle East 78 airlines 19 airlines 4,418 aircraft 11 airlines 491 aircraft 2,789 aircraft 261 aircraft

Asia-Pacific Latin America Africa 36 airlines 32 airlines 23 airlines 1,430 aircraft 687 aircraft 273 aircraft

… and 187 freighter operators

North America P.R. China 47 operators Europe Middle East 37 operators 4 operators 1,055 freighters 15 operators 15 freighters 168 freighters 37 freighters

Asia-Pacific Latin America Africa 31 operators 19 operators 34 operators 97 freighters 75 freighters 63 freighters

9 2000 Global Market Forecast

Airbus recognises the great potential that exists for growth in passenger and cargo traffic carried by airlines based in the Commonwealth of Independent States. Currently, however, the lack of a consistent statistical base and reliable economic projections does not allow the application to these airlines of the forecasting techniques used in the GMF. Consequently Airbus makes a separate forecast of the evolution of the fleets of the airlines in the CIS, based on plausible assumptions, which is contained in a separate document. The GMF is a “bottom-up” forecast, projecting the year-by-year evolution of passenger traffic, flight frequencies and aircraft capacity on a total of 10,013 individual airport-pair route sectors linking 1,896 airports in 82 distinct domestic and international sub- markets. This avoids the errors inherent in “top-down” forecasts derived from aggregations of averages. The route-by-route projections are then consolidated so as to forecast the evolution of the individual fleets of each of the airlines, and then further consolidated into the regional fleet forecasts shown in this summary document. Appendix B explains how the GMF simulates the impact of new route development.

Demand is forecast in 19 categories

Passenger aircraft Cargo aircraft

Q 70 & 85-seaters * Q < 30 tonnes capacity Q 100,125,150 & 175-seaters Q 30 to 50 tonnes capacity Q 210 & 250-seaters Q 50 to 80 tonnes capacity Q 300, 350 & 400-seaters Q > 80 tonnes capacity Q 500, 600, 800 & 1000-seaters

* the GMF does not predict total demand for aircraft in this category, because many more will be needed by smaller airlines and current non-jet operators

Unlike many forecasts, the GMF uses a very rigorous method of product segmentation into 15 “neutral” seating categories. Depending on its particular seating layout, any individual passenger aircraft will fall between two categories and contribute seats to each. This ensures that at any time the number of aircraft (and hence flight frequencies) and seats in each individual airline fleet match exactly the forecast demand. Appendix C describes this

10 Introducing the GMF approach in more detail, while Appendix D illustrates the application of the GMF methodology to a typical route. Cargo aircraft are segmented into four capacity categories. The passenger traffic forecast methodology and results are described in Appendix E. The GMF is a pure demand forecast. The extent to which any available aircraft type will satisfy the predicted future demand for seats (or - for freighters - tonnes of lift) at projected levels of frequency will depend largely on its competitiveness, and a versatile passenger aircraft type, in service in a wide variety of seating layouts, will contribute seats to a number of different “neutral” seat categories. Moreover, the GMF recognises that many airlines replace passenger aircraft in their fleets long before the aircraft are converted to freighters or definitively withdrawn from airline service. A proportion of these aircraft are then “recycled” back into the fleets of other airlines through the used aircraft or operating lease markets. At the level of individual airline fleets, the GMF identifies the corresponding opportunities to introduce new aircraft before the existing aircraft reach the end of their economic lives. This summary shows the extent to which overall forecast demand for aircraft deliveries will be satisfied by used aircraft, as described in Appendix F. The detailed results of the GMF passenger fleet forecast through 2009 and 2019 are presented in Appendix G. A significant proportion of airfreight continues to be transported by dedicated freighters on a non-scheduled basis, rendering the available flight schedule databases non-comprehensive. Until a comprehensive database becomes available, the GMF freighter analysis will continue to deduce pertinent information about the nature of the markets served and the type of service offered from available aircraft-by-aircraft operational data. The freighter and passenger aircraft forecasts are presented separately due to the inevitable differences between the methodologies. However the two forecasts are to some extent interdependent because passenger aircraft operations play a crucial role in global airfreight by making available significant freight capacity in the belly-holds of passenger and combi aircraft, and by providing significant dedicated freighter lift capacity through passenger-to-freighter conversions. The freighter forecast methodology and results are shown in Appendices H and I.

11 2000 Global Market Forecast 4. Demand for air travel

Demand for air travel will continue to be driven primarily by economic (GDP) growth, though as markets mature demand tends to become more sensitive to changes in real fares. Initially, when air travel can be afforded by only a tiny percentage of the population, the fare level is largely irrelevant and the convenience of the journey paramount. But as air travel becomes generally affordable, more and more passengers - paying for their own tickets - will, if necessary, go to considerable inconvenience if this enables them to obtain a cheaper fare. To maintain the growth in their business, airlines will have to find ways to continue to reduce fares in real terms. Airbus forecasters predict that in future the availability of still more efficient and productive aircraft will make a major contribution to this. Airbus anticipates that high-speed rail systems will continue to take a share of some highly-travelled short-haul travel markets, and this is reflected in the GMF's growth rate projections. However the enormous investment required, together with environmental concerns, will severely limit the proliferation of such systems. Further, Airbus predicts that advanced telecommunications will have an overall neutral impact on demand for air travel, any direct substitution being counterbalanced by the stimulus they will provide to economic growth. Airbus does not expect that a new-generation supersonic aircraft will achieve any significant penetration of the market during the next twenty years. It also assumes that during this period the development of subsonic air transport will not be significantly

Air travel will continue to grow strongly

World annual traffic - trillion RPK 9

8 ICAO traffic history (4.6% p.a.) 7

(5.2% p.a.) 5

4 (4.5% p.a.) 3 (6.9% p.a.) Airbus projection 2 + 4.88 % per annum (11.2% p.a.) 1

0 1969 1979 1989 1999 2009 2019

12 Demand for air travel affected by a lack of availability of conventional hydrocarbon fuels, although their increasing price as well as intensifying environmental pressures will continue to provide strong incentives to improve fuel efficiency. Overall, Airbus predicts that during the ten years to 2009 scheduled revenue passenger-kilometres (RPKs) carried by the GMF airlines will grow at an average annual rate of 5.2 per cent, declining to an average annual rate of 4.6 per cent as markets progressively mature during the following decade. This results in a forecast average RPK growth rate of 4.9 per cent per year through 2019. Thus during the next twenty years world annual RPKs will grow to eight trillion compared with the current level of three trillion. Compared with the 1999 GMF, Airbus forecasters have increased their estimate of annual traffic growth for the first decade by 0.1 percentage points, and reduced that for the following ten years by 0.3 percentage points. This reflects a change, following the faster- than-expected recovery of the economies of several Asian nations, in the long-term outlook of the independent economic forecasts used by Airbus as an input to its forecasting models. The result is a modest reduction by one-tenth of a percentage point of the average annual growth in RPKs projected over the next twenty years.

Travel growth will vary widely between different markets

Average annual growth rate (% p.a.) 1999 - 2019

7 6

3 2 . USA 1 Dom Europe - USA Europe - Asia Domestic Europe Africa - Europe Asia - USA Intra Europe Domestic P.R.China P.R.China - Asia Intra Asia 0 % of world 16.8% 13.3% 8.8% 7.6% 6.5% 3.9% 2.9% 2.4% 2.3% 2.2% 2019 RPK

The individual sub-markets will grow at substantially different rates. The mature US domestic air travel market is expected to grow at just 2.9 per cent per year through 2009 and 2.3 per cent per year through the following decade, resulting in a twenty-year average annual growth rate of 2.6 per cent. In contrast, passenger traffic growth on domestic routes in the People's Republic of China

13 2000 Global Market Forecast

- driven largely by high GDP growth - is expected to average a stunning 9.2 per cent annual growth through 2009, and 7.0 per cent through the next decade. This means that during the next twenty years domestic PRC traffic will increase nearly five-fold, at an average annual rate of 8.1 per cent per year. The lower-than-average growth projected on US domestic routes will result in the share of world RPKs generated in this market declining to 17 per cent in twenty years' time from its current level of 26 per cent. During the same period domestic routes in the PRC will double their share of world RPKs, increasing from 2.1 to almost four per cent. By 2019 the top ten sub-markets alone will generate two-thirds of total world RPKs, but despite this concentration Airbus believes that to understand the traffic growth potential for each individual airline it is necessary to study all the 82 sub-markets. These are listed in Appendix E together with the average annual RPK growth rates projected over the two ten-year periods covered by the GMF.

US domestic share of world traffic will decline

US domestic 17% US domestic 26%

World total World total at end 1999 at end 2019 3.08 trillion RPK 7.99 trillion RPK

14 5. Air transport operational evolution

The results of the GMF flow directly from the assumptions made regarding not just traffic growth but also such operational parameters as speed, aircraft utilisation, load factor and average flight distance. The values of these parameters also provide an excellent “test of reasonableness” of the forecast results. During the past twenty years the overall values of all these elements have been increasing as route networks have evolved and airlines have responded to global competition. Airbus forecasters predict that during the next twenty years these historical trends will continue, within the constraints of airport and air traffic management capacity. For the GMF passenger airlines, they expect that: l Average flight distance will increase from 1,370 km in 1999 to 1,414 in 2009 and 1,444 in 2019; l Average block speed, severely constrained by congestion, will increase from 611 km/h in 1999 to just 616 in 2009 and 620 in 2019; l Average passenger load factor will increase from 70.3 per cent in 1999 to 72.1 in 2009 and 73.5 in 2019, and l Aircraft annual utilisation will increase from an average of 3,502 block hours in 1999 to 3,636 in 2009 and 3,736 in 2019.

Increasing seat productivity will absorb part of traffic growth RPKs per seat Seats in service

0.7% World traffic (RPKs) 4.9% 4.1%

-1 0 1 2 3 4 5 Average annual growth (% p.a.)

Elements of productivity 1999 2019

Block speed (km/h) 611 620

Utilisation (block hours/year) 3,502 3,736

Passenger load factor 70.3 73.5

As is invariably the case, these average figures embrace a wide range of variations. Higher-than-average traffic growth on longer international routes flown by the airlines in Europe, the Americas and the Asia-Pacific region will serve to increase average flight

15 2000 Global Market Forecast distances and hence average speeds over the twenty-year forecast period. The most striking development will be among Asia-Pacific airlines, for which a 146 km growth in average distance will result in a 16 km/h increase in average block speed. On the other hand, higher-than-average growth on local and domestic routes served by the airlines of Africa, the Middle East and the PRC will lead to a reduction in average flight distance and block speed. The projected overall increases in speed, load factor and utilisation combine to enable each seat in service to generate more RPKs each year. Average annual RPKs per installed seat are projected to increase from 1.66 million in 1999 to 1.8 million in 2009 and 1.92 million in 2019. This represents an average annual growth in seat productivity of 0.8 per cent through 2009 and 0.7 per cent through 2019. Consequently, to provide the forecast increase in RPKs, the airlines will have to increase the numbers of seats they operate by respectively 4.3 per cent per year through 2009 and 4.1 per cent per year through 2019. As a result, the capacity of the GMF passenger airline fleet will grow from its current 1,852,600 seats to 2,834,300 in 2009 and 4,168,700 in 2019.

Seat productivity and capacity growth will vary between the different airline regional groups

RPK per seat Capacity (seats in service)

0.7 World traffic (RPKs) 4.9% 4.1

0.6 P.R. China 7.7% 7.1

1.0 Latin America 4.7% 3.7

1.1 Asia-Pacific 5.6% 4.5

0.7 Africa 4.4% 3.7

0.6 N. America 3.8% 3.2

0.9 Middle East 4.3% 3.4

0.7 Europe 5.2% 4.5

-2 -1 0 1 2 3 4 5 6 7 Average annual growth(%)

These global average figures embrace a considerable variation between airlines based in the different geographical regions. Annual average growth in seat productivity by as much as 1.1 per cent is expected for the airlines of the Asia-Pacific region, where the GMF projects a five-point increase in passenger load factor during the next twenty years. On the other hand the highly productive but predominantly short-haul airlines of North America are forecast to

16 Air transport operational evolution increase seat productivity by an average of just 0.6 per cent per year. During the next twenty years, to accommodate the projected 7.7 per cent annual growth in RPKs, the airlines of the PRC will have to increase the number of seats they operate four-fold, from 97,100 to 380,600. At the other extreme, the airlines of North America will increase capacity by less than 90 per cent, growing from almost 700,000 seats in 1999 to just 1.3 million in 2019. The seat productivity and fleet capacity growth rates shown on the chart are the average increases needed for the airlines based in each geographical region to accommodate the growth in air travel projected in all the sub-markets they serve. They are not the growth in seats needed on routes to, from and within the different regions. Similarly, these figures cover a substantial variation between the different individual airlines based in each of the regions. Among airlines based in Europe, for example, twenty-year annual capacity growth rates are forecast to range from a low of 0.6 per cent to a high of 8.6 per cent, while airlines based in North America will increase capacity at annual rates ranging from 2.2 per cent to as much as 23.2 per cent in one extreme case. The additional seats will be provided partly by an increase in the number of aircraft operated (very largely determined by the increase in numbers of flights), and partly by an increase in average aircraft capacity. The method used by Airbus to determine the relative contribution of these two variables is derived from a detailed study of the actual distribution of flight frequencies between many thousands of airport-pairs as a function of stage distance. For

The GMF assumes liberal frequency development Daily flights 60

40 Capacity Capacity growth only share Capacity/ 20 frequency split Maximum service levels 10 8 6

Frequency Satisfactory share regional 2 Frequency growth only service levels (Europe shown)

1 200 400 600 800 1000 2000 4000 6000 800010000 Distance (km)

17 2000 Global Market Forecast virtually all routes the numbers of daily departures are no greater than those defined by the upper (blue) line. Rational behaviour by the airlines means that this represents the maximum level of frequency beyond which a further increase will not in itself stimulate any additional travel demand. The lower (red) line, specific to each region-to-region sub-market, represents the minimum level of service at which air travel becomes fully attractive. Thus within Europe, for example, on short routes of up to 500 km, the minimum satisfactory service level is seven daily flights each way, and where demand exists the GMF allows daily service to grow to 60 flights each way. Corresponding frequency levels on a 6,000 km flight range from a minimum of two to a maximum of 18 daily flights, each way. As traffic grows on a particular sector, additional capacity will be required. As long as the minimum satisfactory level of service has not been reached, all additional capacity is provided by adding daily flights, keeping the same aircraft size. Beyond this point both frequency and aircraft size will be increased. The transition from frequency to aircraft capacity is carefully tailored to favour increasing frequency as demand grows, so as to simulate the opening of additional routes (this aspect is further discussed in Appendix B). Once frequency reaches the maximum level all further increase in demand is accommodated by an increase in aircraft size. The overall result is a very liberal growth in frequencies. The GMF predicts that in ten years' time the airlines will be making 45 per cent more daily departures than today. This average annual increase

Aircraft size will have to increase

No. of seats (4.1%*) No. of flights (3.3%*) Seats per Flights per aircraft (1.0 %*) aircraft (0.1%*)

No. of aircraft (3.1%*)

*20-year average annual growth rate

18 Air transport operational evolution of 3.8 per cent represents a faster growth in frequencies than has been achieved during the past 25 years, despite the inevitable increase in congestion and the assumed availability of larger aircraft. The projected 3.3 per cent per year growth in daily departures during the whole twenty year period of the forecast means that by 2019 the airlines will be making 90 per cent more flights than today. Despite the anticipated increase in average flight distance during the next twenty years, the GMF predicts that airlines will be able to increase the average number of annual flights made by each aircraft from 1,561 to 1,603, a gain of nearly three per cent. So to achieve the forecast 90 per cent increase in annual departures, the airlines will have to increase the numbers of aircraft they operate by 85 per cent (1.85 x 1.03 = 1.90). This represents an average annual increase of 3.1 per cent in the number of aircraft operated. This in turn means that to achieve the projected annual 4.1 per cent increase in installed seats, they will have to increase average aircraft capacity by 1.0 per cent per year, from 179 seats per aircraft at end 1999 to 191 in 2009 and 217 in 2019, an increase of 38 seats per aircraft over the twenty-year period.

The Asia-Pacific airlines will lead the way in aircraft size growth Seats per aircraft 307 300

280

260

240 242 243

220 224 215 214 217 2019 200 198 191 189 2009 183 180 182 179 1999 170 160 157 146 140

Africa Europe Middle East P.R.China World average Asia-Pacific Latin America North America

Once again, the global average covers a wide range of regional variations as well as differences within the different regions. Thus airlines in the Americas are expected to continue to carry below- average loads and remain well below the world average in terms of seats per aircraft. Airlines in Africa and the Middle East, driven by the need to increase frequencies, will increase aircraft size only marginally. But in contrast the Asia-Pacific airlines, already well

19 2000 Global Market Forecast above the world average, will have to increase the average size of their aircraft by no less than 65 seats - mostly during the second decade of the forecast - if they are to meet strongly growing demand in an increasingly congested environment. Small aircraft tend to make more flights than large ones, so that any forecast growth in average seats per departure will generally require a more rapid increase in average seats per aircraft. The GMF predicts that average seats per departure will increase by just 32 seats, from 158 at end 1999 to 190 in 2019. Thus during the twenty-year forecast period, average seats per aircraft will need to increase by 19 per cent more than average seats per departure.

20 6. Fleet renewal

Airline fleet forecasters commonly assume that, once introduced into the passenger fleet, an aircraft will remain in passenger service until the end of its economic life. In fact many airlines tend to maintain a “young” fleet, and replace their passenger aircraft much earlier. Each time an airline replaces a passenger aircraft, and whenever an operating lease expires, this creates an opportunity to introduce a new aircraft into the airline's fleet, while the aircraft replaced - assuming sufficient economic life remains - becomes a candidate either for conversion to a freighter or to be recycled back into the world passenger fleet through the used aircraft or operating lease markets. The methodology used in the GMF to determine the numbers of aircraft replaced, recycled, converted to freighters or (ultimately) withdrawn from airline service, is described in Appendix F. It reflects as far as possible each individual airline's approach to fleet renewal. Where no clear pattern of behaviour is apparent, it assumes that passenger aircraft are replaced by their first operator at a regional default age from new which varies from 20 years for airlines in Asia-Pacific to 29 years for airlines in Latin America. The overall result is an average replacement age from new of 24 years.

Airlines will continue to replace passenger aircraft before the end of their economic life

Default replacement age 30

25 24 years world average 20

5 Asia-Pacific P.R.China North Africa Eastern Europe Western Europe North America Rest of Africa Middle East Latin America Indian Subcontinent 0

On this basis, the GMF predicts that by end 2019 only 1,338 (13 per cent) of the 10,349 passenger aircraft with at least 70 seats in service with the GMF airlines at end 1999 will still be in service

21 2000 Global Market Forecast with their current operators. Of the 4,515 passenger aircraft replaced by end 2009: l 1,644 will be “recycled” back into passenger service with other operators; l 1,166 will be converted to freighters (see Chapter 9), and; l 1,705 will be definitively withdrawn from airline service, to be scrapped or to enter VIP, government or other non-airline use. Another 4,496 passenger aircraft will be replaced during the period 2010 - 2019. Of the total of 9,011 aircraft replaced by end 2019: l 3,174 will be “recycled”; l 2,389 will be converted to freighters, and; l 3,448 will be withdrawn from airline service. In the case of dedicated freighters, the GMF assumes they will remain in service until the end of their economic life, which is estimated to be 37 years since new for standardbody aircraft and 35 years for widebodies. On this basis, a total of 703 freighters will be retired during the period 2000 - 2009, and another 450 during the period 2010 - 2019.

22 7. World passenger fleet de