Boeing Adjusts Commercial Outlook on Covid Effects

While the so-called exogenous shock of the Covid-19 pandemic has affected Boeing’s Commercial Market Outlook for 2020 by virtually every measure, company forecasters see the 20-year market for commercial airplanes recovering to within about 5 percent of the trend the CMO predicted last year. The relatively optimistic view assumes that traffic won’t return to its previous trendline until after five years, however, suggesting a far greater difference in the company’s forecast for the next decade. Over the next 10 years, the CMO showed demand for 11 percent fewer airplanes compared with the 2019 forecast.

Boeing projects that over the next decade, manufacturers will deliver 18,350 airplanes, of which narrowbodies would account for 13,570. In the second decade of the forecast, Boeing expects 43,110 deliveries, including 32,270 narrowbodies. The more than tripling of the total number of deliveries during the second decade reflects the delay in the acceleration of the rate of recovery from Covid and, while the company hasn't changed its view that narrowbodies will dominate demand, the pandemic's effect on international travel will make the difference in demand between single-aisle airplanes and widebodies even more pronounced.

While Boeing believes long-term fundamentals will remain in place and traffic growth trends will return to pre-Covid levels, some structural differences appear likely in terms of the share of replacement and growth demand, for example. History shows that during disruptions to growth due to exogenous shock, rates of aircraft replacement essentially double. The Covid crisis will follow that trend and in a more obvious way, according to Boeing managing director for marketing Darren Hulst.

“The replacement element of the fleet on an annual basis tends to average between two and three percent of the in-service fleet during normal times,” said Hulst. “After the last two great financial crises and after the 9/11 and SARS combination, those rates doubled to somewhere between four and five percent…Obviously airlines avoided cost on aging aircraft [and] looked for ways to enhance efficiencies and also to manage capacity in the near term. Our view is that we'll see something very similar in this case…[and] maybe even more pronounced in the near term because of the impact to the industry and its significance on a global basis.”

Last year’s forecast showed that 44 percent of overall deliveries would involved replacements over the next 20 years. This year, Boeing projects that over the same time period replacements will account for 48 percent of deliveries. In fact, over the next 10 years, the phenomenon appears more pronounced, as replacements account for 56 percent of deliveries.

Overall, the CMO projects the global commercial fleet will reach 48,400 by 2029, compared with 25,900 airplanes today. During that period, Asia will continue to expand its share of the world’s fleet, accounting for nearly 40 percent of the total compared with about 30 percent today. Single-aisle demand will recover sooner due to what Boeing calls its key role in short-haul routes and domestic markets as well as passenger preference for point-to-point service. In the widebody market, Boeing forecasts demand for 7,480 new passenger airplanes by 2039. Widebody demand will feel the effects of a slower recovery in long-haul markets—typical after air-travel shocks—and uncertainties arising from Covid-19’s effect on international travel. Finally, air cargo demand, what Boeing called a relative bright spot in 2020, will grow 4 percent annually and generate further demand for 930 new widebody production freighters and 1,500 converted freighters over the forecast period, according to the CMO.