Post-pandemic Growth Opportunity Analysis of the Global Commercial Aircraft Market

Global stand-alone commercial Aircraft Market size is expected to reach USD 341.66 billion by 2025, growing at a CAGR of 5.8% during 2019 to 2025.

The global commercial aircraft market is expected to decline from USD 243.6 billion in 2019 to USD 236.8 billion in 2020 at a CAGR of -2.9%.

The decline is mainly due to economic slowdown across countries owing to the COVID-19 outbreak and the measures to contain it.

Definition / Scope
Market Overview
Key Metrics
Market Risks
Market Trends
Technology Trends
Regulatory Market Trends
Other Key Market Trends
Market Size and Forecast
Market Outlook
Technology Roadmap
Competitive Landscape
Competitive Factors
Key Market Players
Strategic Conclusion
References
Appendix

Definition / Scope

The manufacturing of an aircraft requires a period of about 10 years with spending over one billion USD, from the planning phase to entry into service. Even more time is needed to recoup the investment.

Then, the newly developed model continues to be manufactured for several decades while several derivatives are developed. Once the airplane is delivered, it will continue to be operated for at least 15 years, and some for more than 40 years.

Because airplanes are such long-lived products, the aircraft industry is said to have a very high business risk.

The aircrafts are designed and developed either for commercial use or for defense use owned by the government. There are various types of aircrafts based on the type and seat capacity.

The three broad categories of an aircraft include small body, medium body, and large body. Further, the aircrafts can be used either for carrying passengers or for the movement of passengers from origin to destination.

Low Cost Carriers (LCCs) are the recent entrants in the market competing with the established big businesses and flanking their market dominance.

Small aircraft

These aircrafts have seating capacity of 100 to 200 seats, such as the A220 and A320 families and are used principally for short-range and medium-range routes of up to 3,000 nautical miles.

Medium aircraft

These aircrafts typically offer up to 300 seats on routes of up to 5,000 nautical miles. This includes long range versions of the A321 as well as the A330 family.

Large aircraft

Aircrafts such as the A350XWB are wide-body twin aisle which seat more than 350 passengers on routes of up to 10,000 nautical miles.

Freight aircraft

These form a fourth, related segment and are a combination of new build and converted ex-passenger aircraft.

Market Overview

Global airline passenger demand grew 4.2% in 2019. Worldwide air passenger numbers exceeded 4.3 billion in 2018. But, in 2019, freight tonne kilometres (FTKs), fell by 3.3% compared to 2018. The FTK recorded in 2018 was 262 million.

Air transport is vital for global economy, particularly trade in components which is a major part of cross border trade today. The value of international trade shipped by air was recorded USD 6.7 trillion. Tourists travelling by air in 2019 spent USD 902 billion in 2019.

The commercial airlines took delivery of over 2,206 new aircraft, an investment of around USD 123 billion by the industry in 2019.

The total aircraft fleet operating worldwide reached 22680 in 2019 with total seat capacity of 4.5 million and with freight load factor of 46.7%.

There are three major global airline alliances: Star Alliance, SkyTeam and oneworld. The airlines belonging to these three alliances account for 59% of RPK and 64% of operating revenue.

The total number of aircrafts based on type and manufacturer are depicted in the table below:

Passenger Aircraft

AIRBUS AIRCRAFT	In Service	In Storage	On Order	Standard Seating	Operators
Airbus A318-100	44	3	0	107	9
Airbus A319-100	1316	27	25	124	131
Airbus A319-100N	0	47	0	140	3
Airbus A320-200	4048	62	231	150	266
Airbus A320-200 (NEO)	131	7	3540	165	73
Airbus A321-100	54	0	0	185	10
Airbus A321-200	1443	16	243	185	109
Airbus A321-200 (NEO)	6	0	1349	199	55
Airbus A321-200NX	0	0	74	206	8
Airbus A300-600R	22	10	0	564	8
Airbus A310-200	26	15	0	220	13
Airbus A330-200	528	25	25	406	92
Airbus A330-800N	0	0	8	406	1
Airbus A330-300	663	14	72	440	75
Airbus A330-900N	0	0	204	440	10
Airbus A340-200	0	7	0	261	3
Airbus A340-300	103	28	0	440	35
Airbus A340-500	3	19	0	375	7
Airbus A340-600	60	25	0	475	10
Airbus A340-800	0	0	8	440	1
Airbus A340-900	105	2	520	440	44
Airbus A350-1000	0	0	212	440	13
Airbus A380-800	214	1	102	853	18
Total	8766	308	6613	NA	994

BOEING AIRCRAFT	In Service	In Storage	On Order	Standard Seating	Operators
Boeing 717-200	154	1	0	134	5
Boeing 737-300	218	131	0	149	104
Boeing 737-400	142	71	0	174	76
Boeing 737-500	162	34	0	138	62
Boeing 737-600	48	0	0	138	5
Boeing 737-700	1023	26	3	149	80
Boeing 737-7	0	0	65	172	4
Boeing 737-800	4481	34	503	189	193
Boeing 737-8	9	7	2056	189	63
Boeing 737-8-200	0	0	210	200	2
Boeing 737-900	52	0	0	189	6
Boeing 737-900ER	434	3	74	220	21
Boeing 737-9	0	0	119	220	12
Boeing 737-10	0	0	256	230	13
Boeing 757-200	333	91	0	195	49
Boeing 757-300	55	0	0	234	6
Boeing 767-200	16	20	0	192	19
Boeing 767-300	452	49	0	229	77
Boeing 767-400ER	37	0	0	267	2
Boeing 787-8	322	2	79	224	44
Boeing 787-9	242	0	436	290	49
Boeing 787-10	0	0	168	330	10
Boeing 777-200	62	5	0	317	8
Boeing 777-200ER	348	46	0	313	44
Boeing 777-200LR	54	1	0	317	11
Boeing 777-300	48	7	0	425	13
Boeing 777-300ER	745	6	68	396	42
Boeing 777-8	0	0	53	365	3
Boeing 777-9	0	0	263	414	7
Boeing 747-400ER	165	56	0	344	38
Boeing 747-400M	13	3	0	264	5
Boeing 747-8I	36	0	1	410	4
Total	9651	593	4354	NA	1077

BOMBARDIER AIRCRAFT	In Service	In Storage	On Order	Standard Seating	Operators
Bombardier CRJ100/200/440	499	221	0	50	73
Bombardier CRJ700/ NextGen	292	14	8	66	20
Bombardier CRJ900/ NextGen	414	11	24	81	22
Bombardier CRJ1000/ NextGen	53	1	14	97	5
Bombardier CS100	8	0	105	108	6
Bombardier CS100	10	0	190	130	11
Total	1276	247	341	NA	137

EMBRAER AIRCRAFT	In Service	In Storage	On Order	Standard Seating	Operators
Embraer ERJ-135	40	44	0	30	19
Embraer ERJ-140	9	65	0	44	5
Embraer ERJ-145	417	175	0	50	65
Embraer 170	151	32	1	66	19
Embraer 175	477	1	52	76	16
Embraer 175-E2	0	0	100	80	1
Embraer 190	484	39	52	96	44
Embraer 190-E2	0	0	83	97	8
Embraer 195	149	7	8	100	19
Embraer 195-E2	0	0	102	120	5
Total	1727	363	398	NA	201

Other Passenger Aircraft

Fokker

McDonnel Douglas

Mitsubishi

Sukhoi

Irkut

Comac

Turboprop Aircraft

Freighter Aircraft

Freighter and Aircraft	In Service	In Storage	On Order	Payload (lb)	Operators
Bombardier
CRJ100/200PF & CRJ100/200SF	10	0	0	14800	4
McDonnel Douglas
MD-80SF	9	1	0	46600	4
MD-11F	34	8	0	190000	5
MD-11BCF	85	14	0	190000	8
Boeing
Boeing 737-300SF/300C	109	12	0	42500	43
Boeing 737-300QC	29	3	0	40000	17
Boeing 737-400SF	124	7	0	45000	40
Boeing 737-700SF	1	1	0	45000	1
Boeing 757-200PF	79	0	0	84120	5
Boeing 757-200SF	205	8	0	69000	24
Boeing 757-200Combi	6	1	0	69000	4
Boeing 767-200ER	59	1	0	95000	12
Boeing 767-300F	126	2	64	115700	12
Boeing 767-300ER	56	4	0	115000	12
Boeing 777	129	1	31	224900	19
Boeing 747-400ER	143	17	0	250000	38
Boeing 747-400BCF	43	17	0	237750	21
Boeing 747-8F	71	0	17	300000	13
Airbus
A310-200F/300F	10	0	6	87000	3
A300-600F	103	0	0	115000	4
A300-600	68	0	0	10910	11
A330-200F	37	1	4	147000	11
Total	1426	98	122	NA	311

In 2019 alone, Boeing and Airbus shipped 380 and 863 jets respectively. There were 806 and 800 jets delivered by Boeing and Airbus respectively in the previous year.

Regional Jet accounted for the least 11% of global commercial aircraft share by type. Wide Body aircraft held 19% of total aircraft share in 2019. Narrow Body aircraft dominated the aircraft market holding 70% global share in 2019.

There will be a little growth of just 2% in the number of narrow body and wide body aircrafts by 2025; however, the number of regional jet will slip by the same but negative growth rate.

Fleet Size	Regional Jet	Narrow Body	Wide Body
2019	2600	20000	4300
2025	2300	23000	4500
2019 Share %	11%	70%	19%
2025 Share %	9%	72%	21%

Key Metrics

Metrics	Base Year 2019
Total Aircraft Fleet Size (units)	22,680
Fleet Size Growth	5.8% CAGR
Consolidated Global Aircraft Market Size (value)	USD 8.4 Trillion
Stand-alone Global Commercial Aircraft Market Size (value)	USD 243.6 Billion

Market Risks

Material procurement

The most important raw materials required for the aerospace products are aluminum (sheet, plate, forgings and extrusions), titanium (sheet, plate, forgings and extrusions) and composites (including carbon and boron).

These sources generally originate through various parts of the globe. Approximately 24,000 suppliers from more than 100 countries supply parts, components, systems and services. There could be the risk of failure of suppliers or subcontractors to meet qualification and performance standards that could adversely affect production line.

Accidental loss

Aircrafts are prone to fatal accidents and the consequences of such big accidents hamper business of the operator and manufacturer. On March 13, 2019, the Federal Aviation Administration (FAA) issued an order to suspend operations of all 737 MAX aircraft in the U.S. and by U.S. aircraft operators following two fatal 737 MAX accidents.

The grounding of 737 MAX booked company to lose USD 38 billion in market value in just three months. The ban on production directly cost company for its in service aircrafts on one side while it also affected the order backlog of the same model on the other side.

Epidemics

Demand for the commercial aircraft is further influenced by airline profitability, price and other competitive factors like fuel prices, terrorism, and epidemics.

Significant deterioration in the global economic, the financial stability of airline operators come at risk, resulting in fewer new orders for aircraft or services, or could cause customers to seek to postpone or cancel contractual orders and/or payments to manufacturers.

In the first two quarters in 2020, Airbus announced to cut its best-selling A320 narrow-body aircraft production from 120 to 40 units a months.

It also cut production of larger wide-body jets with the A350 falling by about 40% to six aircraft a month, and the A330 family down by more than 40% to two aircraft a month. Boeing, likewise, set to cut its 787 Dreamliner output volume by about half amid global pandemic.

Boeing made delivery of just 380 aircrafts in 2019 compared to 803 aircrafts in 2019; this delivery fell significantly down in 2019.

Market Trends

Fuel Costs:

The slower global economic growth in 2019 contributed to lower energy demand, with crude oil prices averaging around USD 65 per barrel (Brent), compared to USD 71.60 in 2018. Oil supply is also plentiful, boosting inventories.

As a result, oil prices are expected to dip further in 2020 to USD 63 (Brent). Jet kerosene prices are also expected to dip, averaging USD 75.60 per barrel versus USD 77 per barrel in 2019. The expected industry fuel bill of USD 182 billion will represent 22.1% of expenses, down from 23.7% of expenses in 2019.

Aviation Growth in Emerging Markets:

Between 2008 and 2019, three quarters of traffic growth touched emerging markets while just one-quarter occurred within advanced markets.

Airport Infrastructure:

Increasing capacity in the aviation is directly proportional to growth in the number of airports. Between 2012 and 2019, there was increment of 176 airports worldwide. Most of these (165) were in the Asia-Pacific region.

Growth through improving existing facilities is more prevalent in well-established aviation markets, while new airports were being built in emerging markets. Additionally, the Asia-Pacific region leads this investment boom with 17 new airports and 17 additional runways planned to open by 2030.

Secondary airport growth has also been strong in many regions, absorbing passenger growth from a nearby primary, or hub, airport. Low cost carriers have grown rapidly at secondary airports because here they avoid the expense, delays and congestion of many primary airports.

Airports also grow capacity through increasing operational efficiency. This includes improved air traffic control, more efficient use of airport gates, added runways and longer operating hours.

Reducing Airfare:

Liberalization has encouraged significant traffic growth by removing constraints on route entry, pricing, service capacity, and airline cooperative arrangements. As airline competition and operating efficiency have improved, pricing has fallen in real terms while flight frequencies and product choices have increased for passengers worldwide.

The development of low cost carriers (LCCs) is a primary example of the outcome of market liberalization. Such low cost airline business models would not have flourished without the relaxation of government-regulated airline ticket pricing and removal of regulatory barriers to new market entrants.

Southwest Airlines, AirAsia, AirAsiaX, Indigo, and EasyJet are the popular LCCs around the globe. LCCs hold 33% of the global commercial airline market. In Asia-Pacific, over 50% of the airline market is captured by LCCs. Similarly, LCCs account for 42% of the European airline industry.

High Demand of Network Airlines:

Network carriers will account for the largest overall share of new aircraft.

There will require more than 18,000 new aircraft, with nearly two thirds of these (11,000) being single-aisle airplanes. Network airlines are forecast to take delivery of over 6,200 wide body passenger aircraft of which more than half (55 percent) will be in the small wide body category.

With these airplanes, they will continue to fragment the market and serve an ever increasing number of routes. About half of our forecasted deliveries to large network carriers will be for growth, both to open new markets and to add frequencies in existing markets, while the remaining half will replace retiring airplanes.

Rising Air Passengers:

Airline passenger traffic is expected to grow by an average annual rate of 4.6 percent over the next 20 years. Air travel growth within Asia is set to make it the world’s largest overall travel market with 5.5% annual growth, with rapid growth within China (6.2% annual growth) making its domestic market the largest of all.

To meet this demand, the in-service fleet will grow at an average annual rate of 3.4 percent, with the number of jet airplanes in service nearly doubling to 50,660.

Technology Trends

Natural Laminar Flow

Natural Laminar Flow (NLF) control achieves laminar flow only by designing the surfaces of the wings and other aircraft parts with a suitable shape. This technology is studied for example in the project BLADE (Breakthrough Laminar Aircraft Demonstrator in Europe).

Since 2017, flight tests have been conducted with an A340 test aircraft, on which the outer wing sections, of about 10 meters width, were replaced by laminar profiles. The size of the laminar sections is representative for the wing dimensions of typical narrow-body aircraft, which are likely to apply the laminar flow technology first.

From the test flight results, the fuel saving potential of NLF for an 800-nautical mile flight would be around 4.6%.

Hybrid Laminar Flow

Hybrid Laminar Flow Control (HLFC) uses boundary-layer suction to maintain laminar flow over the aircraft surface.

This technology is particularly suited for swept wings and fins. NASA, in the framework of its Environmentally Responsible Aviation (ERA) research program, carried out a series of test flights on a B757 equipped with a HLFC system to evaluate the dependence of laminar conditions on factors such as surface manufacturing, suction devices and surface coatings to prevent contamination.

Regulatory Trends

EASA certifies aircrafts, engines, propellers, parts to be installed on aircrafts, and other non-installed equipment in Europe.

Likewise, the FAA is a governmental body of the United States with powers to regulate all aspects of civil aviation in that nation as well as over its surrounding international waters.

In the U.S., the commercial aircraft products are required to comply with FAA regulations governing production and quality systems, airworthiness and installation approvals, repair procedures and continuing operational safety

CO2 emission regulations and emissions trade obligations

EU began applying this regulation since 2012. As this system is applied to all flights operated from or to Europe, including flights by foreign carriers, the governments of the U.S., China, India, Japan, Russia and other countries have expressed opposition to such a system.

The EU later revised the regulation and now it requires only to carriers, which operate from, or to Europe from 2014 to 2020, relevant only to flights within Europe, which are covered by the EU-ETS).

Other Key Market Trends

Grounding of 737 MAX

After two 737 MAX aircrafts crashed within five months in 2018, aviation authorities in many countries banned the operation of 737 MAX. FAA require Boeing to test and fix its software regarding the safety issue, however, its future is uncertain when it will revamp in the air industry.

The company lost USD 38 billion in market value in the three months after its aircraft crashed. There were more than 500 units of 737 MAX that have been grounded since the crash took place.

Market Size and Forecast

Global Commercial Aircraft Fleet Size by Volume:

In 2019, there was 22,680 aircrafts globally. Asia-Pacific airline market holds the largest share (34%) with 7,105 aircrafts of all types (passenger, freighter) operating in 2019. The number of commercial aircraft in the region is expected to grow at a CAGR of 5.8%.

Europe and North America ranks second and third respectively in terms of number of aircrafts operation with global share representing 23% each. There were 4870 total commercial aircrafts operating in Europe and 4690 in North America. The two markets are projected to grow in number of aircrafts by 3% and 2.1% respectively.

Similarly, there were 1,375 aircrafts hovering in Latin American air and the number is forecasted to rise by 4.7% CAGR.

The number of commercial aircrafts in Middle East is predicted to go up at a CAGR of 5.6% from 1285 units in 2019. Africa had the lowest number of aircrafts numbering 605 but the market is likely to grow at a CAGR of 5.4%.

Consolidated Global Commercial Aircraft Market Size in Value:

Asia-Pacific commercial aviation service market was worth USD 3.8 trillion in 2019 and the market value is expected to peak at a CAGR of 5.1% during 2019-2025.

Commercial aviation service market was worth USD 1.9 trillion in Europe with the positive growth expectation of CAGR 3.3%.

In North America, the aviation service market reached USD 1.8 billion in 2019 and is expected to increase at a CAGR of 2.8% during 2019-2025.

Similarly, Middle East and Latin America each surpassed the commercial aviation service market over USD 500 billion in 2019 and is projected to maintain CAGR 4.7%.

CIS and African region witnessed market worth USD 200 billion in 2019. Africa will maintain fabulous growth rate of 5% while in the CIS region, the growth rate is minimal around 2.7%.

Stand-alone Aircraft Market Size in Value:

Global Stand-alone Commercial Aircraft Market size is expected to reach USD 341.66 billion by 2025, growing at a CAGR of 5.8% from 2019 to 2025.

Market Outlook

Outlook to 2025:

Growing at a CAGR of 5.8%, Asia-Pacific region will increment the number of aircrafts to 10,718 by 2025. Likewise, Europe will maintain 3% CAGR and there will be 5,815 aircrafts by 2025.

In North America, the CAGR of 2.1% will make the total aircrafts to reach 5,313 by 2025. Middle East and Latin America will surpass over 1,500 aircrafts each by 2025. And CIS and African airline industry will see more than 8,00 aircrafts each by 2025.

The aviation market will demand for 39,210 passenger and freight aircraft over the next 20 years. By 2028, there will be an addition of 17,580 aircrafts worldwide. 36% of which will be required for aircraft replacement, and 64% for new growth.

The Small Aircraft segment will represent 76% of deliveries. The Medium Aircraft and Large Aircraft segments will represent 24% of demand in units.

Asia-Pacific will account for 37% of deliveries, with airlines in North America and Europe together representing 40% of the passenger and freight aircraft deliveries.

New Deliveries	2019-2028	Small	Medium	Large	Share of 2019-2028 New Deliveries
Africa	520	77%	15%	8%	3%
Asia-Pacific	6500	78%	13%	9%	37%
CIS	700	87%	8%	5%	4%
Europe	3790	77%	14%	9%	21%
Latin America	1330	89%	7%	4%	8%
Middle East	1410	51%	15%	34%	8%
North America	3330	82%	12%	6%	19%
Total	17580	NA	NA	NA	100%

Long Term Outlook to 2038:

By 2038, the number of aircrafts will reach to 47,680.

Asia-Pacific commercial and freighter fleet size:

Total Fleet: 17,390

Fleet Growth: 4.6%

Traffic Growth: 5.5%

Airplane Market Value: USD 2,830 Billion

Asia-Pacific Fleet Size and Share by Type	Fleet Size in 2018 and Share	Fleet Size in 2038 and Share
Regional Jet	140, 2%	260, 1%
Single Aisle	5680, 72%	13950, 72%
Wide Body	1710, 22%	4080, 21%
Freighter	350, 4%	1130, 6%

North America commercial and freighter fleet size:

Total Fleet: 9,130

Fleet Growth: 1.9%

Traffic Growth: 3.2%

Airplane Market Value: USD 1,155 Billion

North America Fleet Size and Share by Type	Fleet Size in 2018 and Share	Fleet Size in 2038 and Share
Regional Jet	1840, 24%	1680, 15%
Single Aisle	4130, 55%	7060, 65%
Wide Body	670, 9%	990, 9%
Freighter	910, 12%	1200, 11%

Europe commercial and freighter fleet size:

Total Fleet: 8,990

Fleet Growth: 2.9%

Traffic Growth: 3.6%

Airplane Market Value: USD 1,370 Billion

Europe Fleet Size and Share by Type	Fleet Size in 2018 and Share	Fleet Size in 2038 and Share
Regional Jet	260, 5%	80, 1%
Single Aisle	3770, 71%	7070, 76%
Wide Body	950, 18%	1720, 18%
Freighter	310, 7%	470, 6%

Middle East commercial and freighter fleet size:

Total Fleet: 3,130

Fleet Growth: 4.9%

Traffic Growth: 5.1%

Airplane Market Value: USD 7,250 Billion

Middle East Fleet Size and Share by Type	Fleet Size in 2018 and Share	Fleet Size in 2038 and Share
Regional Jet	50, 3%	30, 1%
Single Aisle	670, 43%	2000, 50%
Wide Body	750, 49%	1860, 46%
Freighter	80, 5%	140, 3%

Latin America commercial and freighter fleet size:

Total Fleet: 2,960

Fleet Growth: 3.9%

Traffic Growth: 5.9%

Airplane Market Value: USD 395 Billion

Latin America Fleet Size and Share	Fleet Size in 2018 and Share	Fleet Size in 2038 and Share
Regional Jet	90, 6%	30, 1%
Single Aisle	1240, 78%	2890, 85%
Wide Body	160,10%	340, 10%
Freighter	90, 6%	120, 4%

Africa commercial and freighter fleet size:

Total Fleet: 1,160

Fleet Growth: 4%

Traffic Growth: 5.9%

Airplane Market Value: USD 175 Billion

Africa Fleet Size and Share	Africa Fleet Size in 2018 and Share	Africa Fleet Size in 2038 and Share
Regional Jet	130, 18%	90, 5%
Single Aisle	400, 54%	1020, 63%
Wide Body	150, 20%	370, 23%
Freighter	60, 8%	140, 9%

Covid-19 Impact Outlook

The global commercial aircraft market is expected to decline from USD 243.6 billion in 2019 to USD 236.8 billion in 2020 at a CAGR of -2.9%.

The decline is mainly due to economic slowdown across countries owing to the COVID-19 outbreak and the measures to contain it. The market is then expected to recover and grow at a CAGR of 5% from 2021 and reach USD 269 billion in 2023.

Change from original forecast

Under the conservative forecast scenario, the market is estimated to witness a dramatic drop in revenues, reaching USD 149.24 billion in 2020 and garnering revenue of USD 271.67 billion by 2025.

However, the optimistic forecast scenario reflects a faster rebound, estimating that the market could hit USD 411.63 billion by 2025, at a CAGR of 6.2%.

Scenario 1: Conservative

Year	Growth Rate
2020	-2.9%
2021	-3%
2022	-2.3%
2023	-2.3%
2024	-2.3%
2025	-2%

Scenario 2: Optimistic

Year	Growth Rate
2020	-2.9%
2021	-3%
2022	-3%
2023	-1.3%
2024	-0.73%
2025	0%

Manufacturers have halted the backlog orders of more than 1,500 temporarily in 2020 due to the global pandemic amid coronavirus. The Boeing-Embraer merger and acquisition deal couldn’t happen in 2020 and the Mitsubishi-Bombardier CRJ program transition could be disrupted by pandemic, however, more consolidation is expected to emerge. The expected reduction in backlog will exceed missed deliveries in the short term.

While aircraft manufacturers have resources and assets to maintain employees for the short term, suppliers around the world will have a greater struggle with shipping raw materials and delayed payments and with keeping their workforce going.

Technology Roadmap

New Engine Core Concept (2^nd Gen)

These engines have higher by-pass-ratios (BPRs) than previous engine models. In the case of regional jets and single-aisle aircraft such as the MRJ, the Embraer E2 family, A220, and A320neo, new engines operating on these aircraft have a BPR of 9 to 12, which allow fuel burn 19 reductions of about 15% compared to earlier engines with a BPR of typically 5 to 6.

New engines for wide-body aircraft including A330neo and 777-9 reduce fuel burn by 10% compared to previous engines.

As an example, Rolls-Royce is working on two new efficient designs planned for launch in 2020 and 2025, respectively: the Advance and the UltraFan engines. The Advance engine presents three-shaft architecture with a new high-pressure core.

The UltraFan is a step further using the Advance core but with a two-shaft configuration coupled to a geared turbofan. The Advance Engine is expected to have at least 20% reduction in fuel burn and CO2 emissions relative to the Trent 800.

The Ultrafan Engine is a further development of the Advance Engine, with an expected minimum 25% improvement in fuel burn and CO2 emissions relative to the Trent 800.

Open Rotor

The open rotor is a fuel-saving engine architecture that is a hybrid between a propeller and a turbofan engine, characterized by two counter-rotating, enshrouded fans. It allows a reduction of fuel burn and CO2 emissions of typically 30% compared to conventional turbofan engines, such as the CFM56.

While the open rotor concept itself is several decades old, its development was slowed down mainly by challenges to reduce its noise levels, which are higher than from comparable turbofan engines. Manufacturers envisage the open rotor engine to enter service around the year 2030.

Hybrid-Electric Aircraft

Hybrid-electric systems rely on gas turbine engines for propulsion power generation and for charging batteries. Also, the batteries provide energy needed for propulsion during several phases of flight.

Parallel-hybrid: with this system, a turbine engine and a battery-powered motor are both mounted on a shaft which drives a fan, so that either or both components can provide propulsion at any time given. Series-hybrid: with this technology, only the electric motors are connected to the fans mechanically.

The function of the gas turbine is to drive an electric generator, which in turn drives the motors and/or charges the batteries. Series-hybrid systems are compatible with distributed propulsion concepts that use multiple small motors and fans.

Series/Parallel partial hybrid: this system has one or more fans which can be driven directly by a gas turbine while other fans can be driven by electric motors exclusively; these motors can be powered by a turbine driven generator or by a battery.

In 2017, Airbus, Rolls-Royce and Siemens formed a partnership with the objective to develop and build a hybrid-electric demonstrator aircraft, the E-Fan X, planned to fly in 2020. It uses serial hybrid-electric technology to power a 2-megawatt electric motor, mounted on a 146 flying test bed replacing one of the four gas turbine engines.

Fully Electric Aircraft

Plans to use electricity as a clean propulsive energy for aircraft have recently made strong advancements. Electric motors do not produce any emissions during their operations; this makes them a crucial technology element in reaching the environmental goal for 2050.

Electric power generation is obviously not emissions-free today, but it can be expected that the related emissions will go down considerably between now and 2050.

Aircraft manufacturers in conjunction with electric equipment providers or specialized niche companies are currently developing electric technologies to serve as a propulsive energy and to provide energy onboard the aircraft.

All-electric systems rely on batteries as the only propulsive power source on the aircraft.

Competitive Landscape

After the airline market liberalization in Europe, Middle East, and Asia, the commercial aircraft industry remains extremely competitive. The emergence of LCCs is increasing the pressure on airfares.

This results in continued cost pressures for all airlines and price pressure on aircraft manufacturers. The international players are offering competitive products and have access to most of the same customers and suppliers.

The grounding of the 737 MAX and the associated suspension of 737 MAX deliveries have significantly reduced market share of Boeing with respect to deliveries of single aisle aircraft in 2019 and may provide competitors with an opportunity to obtain more orders and increase market share.

After acquiring a majority share in Bombardier’s A220 in 2018, Airbus continues to expand in the 100-150 seat transcontinental market. Additionally, other competitors from Russia, China and Japan are developing commercial jet aircraft. This market environment has resulted in intense pressures on pricing and other competitive factors. With seating capacity over 150, the manufacturers operate in a competitive duopoly where Airbus and Boeing take the dominant market share.

Embraer, (whose commercial aircraft business’ joint venture with Boeing is subject to regulatory approval) who originally was primarily focused on the regional market, has also focused on the development of larger airplanes.

In October 2017, Airbus SE and Bombardier Inc. agreed to form a partnership in relation to the C Series.

Airbus accounted for 69% of total commercial aircraft deliveries, 82% of total gross orders (in units), and 58% of the total year-end backlog (in units).

Competitive Factors

Engineering

The robust engineering is characterized by extensive research and development costs requiring significant up-front investments with a high level of complexity. For the year 2019, Airbus, for instance, invested USD 3.8 billion in research and development expenses.

Successful development of new programmes also depends on the Company’s ability to attract and retain aerospace engineers and other professionals with the technical skills and experience required to meet its specific needs.

Manufacturing

The availability of inventory to meet the demand but that doesn’t incur unnecessary holding cost is the critical factor for aircraft manufacturers. Another issue is dealing with choosing built to order or just in time manufacture or make to order.

There are various factors impacting the decision since these decisions directly affect the competitive advantage in the industry.

Marketing

Although, there aircraft manufacturing industry is highly consolidated, the competition arises with the different models of aircrafts. For example, Between Boeing and Airbus, the competition highly occurs for wide body aircraft having seat capacity over 200.

However, Boeing competes with Bombardier and McDouglas for the regional Jet aircraft that has less than 200 seating capacity. Therefore, choosing the right pricing and delivery strategy differentiates players from others.

Key Market Players

Airbus

Airbus SE is a company based in the Netherlands that is active in the aerospace and defence industry. The company operates through three segments: Airbus, Airbus Helicopters and Airbus Defence and Space.

The Airbus segment focuses on the development, manufacturing, marketing and sale of commercial jet aircraft and aircraft components, as well as on aircraft conversion and related services.

The total revenue reported in 2019 was USD 78.78 billion. The Airbus segment accounted for 77.72% (USD 61.23 billion) of the company’s total revenue. It took new order value of USD 73.55 billion for Airbus segment in 2019.

It had order backlog of USD 474.03 billion for Airbus segment as of 2019. Airbus delivered 863 aircraft in 2019.

31% of its order book value was originated from Asia-Pacific region followed by 28% from Europe. North American market contributed 18% towards its order book value in 2019.

Boeing

The Boeing Company was founded in 1934 as an aerospace firm. The company operates in four segments: Commercial Airplanes (BCA); Defense, Space & Security (BDS); Global Services (BGS), and Boeing Capital (BCC).

Commercial Airplanes Segment:

This segment develops, manufactures and delivers commercial jet aircraft and offers fleet support services, particularly to the commercial airline industry worldwide. It is also producer of commercial aircraft and offer a family of commercial jetliners designed to meet a broad spectrum of global passenger and cargo requirements of airlines.

This family of commercial jet aircraft in production includes the 747, 767, 777 and 787 wide-body models. Development continues on certain 737 MAX derivatives and the 777X program.

The company made revenue of USD 76.56 billion in the fiscal year 2019. The revenue from commercial aircrafts represented USD 32.26 billion, 42.13% of its total revenue for the year.

Total revenues decreased by USD 24.57 billion in 2019 compared with revenue in 2018 since it had to shut down many of its 737 MAX models. The revenue from commercial aircraft sale fell by 78.26% in 2019.

Bombardier

Bombardier Inc is engaged in the manufacturing of both planes and trains. The company operates through two reportable segments: Aviation and Transportation.

The Aviation segment is engaged in designing, developing, manufacturing, marketing and providing aftermarket support for three families of business jets such as Learjet, Challenger and Global.

The company’s revenue recorded in 2019 was USD 15.8 billion. The revenue from aviation segment was USD 7.5 billion.

Embraer

Embraer S.A. is a manufacturer of jets of 70 to 130 seats. The Company produces aircraft for commercial and executive aviation, and for defense and security purposes and related services.

Its commercial aviation business involves the development, production and sale of commercial jets, and rendering of support services, particularly in the regional aviation segment and aircraft leases.

Total earning was USD 5.07 billion in 2019. Commercial aviation accounted for 46.5% of its business in 2019.

Manufacturer	Delivery in 2019	Cumulative Delivery till 2019	Undelivered units
Airbus	863	12,626	7,482
Boeing	380	12,736	5,406
Bombardier	175	–	–
Embraer	101	–	368

Strategic Conclusion

The long-term outlook for the commercial aircraft industry continues to remain positive due to the growth drivers of air travel demand, economic growth and the increasing propensity to travel due to increased trade, globalization, and improved airline services driven by liberalization of air traffic rights between countries.

In the twenty-year forecast projects a long-term average growth rate of 4.6% per year for passenger traffic and 4.2% for cargo traffic is expected to witness. Based on long-term global economic growth projections of 2.7% average annual GDP growth, the aircraft industry is projected a USD 6.8 trillion market for approximately 44,000 new airplanes over the next 20 years.

However, due to the global pandemic amid corona virus, the industry will see negative growth rate of 2% to 3% during 2020-2025 in conservative scenario and a negative growth of 2% to 3% during 2020-2023 in an optimistic scenario.

References

Appendix

CAGR- Cumulative Annual Growth Rate
EASA- European Union Aviation Safety Agency
FAA- Federal Aviation Administrative
FTK- Freight Tonne Kilometers
HLFC-Hybrid Laminar Flow Control
NLF- Natural Laminar Flow
USD- US Dollars