The aviation sector should not to be too bullish about fleet growth over the next 10 years, according to consultancy firm ICF International.
In its latest report, Black swans in the air, two of its most senior analysts predict that passenger traffic will grow by an average of 3.9 per cent annually up to 2033, significantly lower than the 4.7–5 per cent growth expectations of OEMs.
Furthermore, the number of aircraft expected to be in service in 2033 may be as much as 16% below that predicted in other forecasts. ICF anticipates the fleet to total around 41,850 in 2033, rather than 50,088.
The authors of the report, Samuel Engel and Michael Oestreich, argue that traditional growth predictions are based on the stable continuance of historic trends and ignore the potential impact of “black swans” – unanticipated events that have a negative impact on the market, such as the 2009 economic meltdown or 9/11.
In the paper, Engel and Oestreich outline four potential swans that could dent growth in the global commercial fleet. The first questions the impact of LCCs in emerging economies.
If such LCCs fail to inspire established carriers to streamline their operations and launch new products – as they’ve done in Europe, the Americas and Australasia – the impact on traffic and fleet numbers will be significant.
"In China alone, where liberalisation has barely begun, delayed or slower LCC penetration could swing the future fleet by 2,700 aircraft,” the ICF report warns.
The prediction comes as Singapore-based LCC Tiger Airways close their Indonesian subsidiary Tigerair Mandela.
Another threat to aircraft numbers is posed by airlines continuing to increase the utilisation of their existing fleets. If airlines increase seat density by 3.8 per cent, through slimline seats for example, while boosting load factors to 85 per cent, the number of aircraft needed in 2033 will be 5 per cent lower than anticipated.
Rationalisation of airlines in the Middle East, which currently hold more than 20 per cent of widebody aircraft orders, is also predicted to impact fleet numbers.
While jokes are often made about Donald Rumsfeld’s infamous “unknown unknowns” speech, the former US defense secretary had a point. Companies in the aerospace sector cannot blindly hope that positive growth forecasts will come true while ignoring the risk posed to their business by events that they haven’t anticipated.
ICF International’s report is a good reminder to keep a wary eye on the horizon.