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20-Year Market Outlook for Jetliners: Airbus vs. Boeing
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The commercial airplane demand is on the rise due to a steady improvement in passenger and freight traffic. The major driver behind the increase in demand can be attributed to growth in the single-aisle airplane segment. In fact, this segmental growth is backed by the global popularity of the low-cost carrier business model and expansion of air service into emerging markets such as Asia, thereby compelling airlines to accelerate the replacement of aged airplanes.
Notably, these single-aisle jets have been the main area of competition between two arch rivals, Airbus Group SE (EADSY - Free Report) and The Boeing Co. (BA - Free Report) . Currently, these two aerospace behemoths are wooing the market with the updated versions of their popular single-aisle jets – Boeing’s new 737 MAX 10 against Airbus' new A321 neo.
20-Year Market Outlook
Airbus recently raised the 20-year forecast for jetliner demand by 6% based on the growing need for the improvement of fuel-efficient single-aisle airliners. In Jul 2016, its rival Boeing had raised its 20-year forecast for jetliner demand by 4.1%.
Airbus’ New Forecast
Per Airbus’ current outlook, the world will need more than 34,899 new planes, worth $5.3 trillion, between 2017 and 2036. This anticipated number is pegged above last year's projected demand of 33,070 jets, worth $5.2 trillion, for the period of 2016–2035. Of the total units, 40% of the demand will be for the replacement of older, less-efficient aircraft.
Airbus expects single-aisle jets to be the major driver behind demand growth, comprising more than 70% of the total projection. This translates into worldwide demand for 24,810 single-aisle jets, worth $2.4 trillion, in the next 20 years.
As the world’s passenger aircraft fleet above 100 seats will double over the next 20 years, it will require 530,000 new pilots and 550,000 new maintenance engineers. This, in turn, is expected to act as a catalyst for growth of Airbus’ global services business.
Boeing’s Forecast
Boeing forecasted that the world will need 39,620 new planes, worth $5.9 trillion, between 2016 and 2035. Of the total units, 43% of the demand will be for the replacement of older, less-efficient aircraft.
The company added that it expects single-aisle jets to be the major driver behind demand growth, comprising 71% of the total projection. This translates into worldwide demand for 28,140 single-aisle jets, worth $3 trillion, in the next 20 years.
Other Categories
Trailing behind single-aisle jetliners are their large wide-body, twin-aisle counterparts. For this category, Airbus projects demand for 10,100 new planes in the 2017–2036 period. Even though the figure appears unimpressive, the price of these planes is enough to compensate for the difference in volume. The company estimates that the total value of all wide-body planes (comprising small, medium or large) sold over the period to be $2.9 trillion compared with $2.4 trillion for the narrow-body variety.
In contrast, Boeing projected demand for 9,100 new planes in the 2016–2035 period valued at $2.82 trillion. Meanwhile, regional jets were expected to account for $110 billion in global sales.
Air and Passenger Traffic Forecast
Airbus lowered its projection for air traffic growth to 4.4% a year from 4.5% as it took a more cautious view on mature markets such as North America. We note that air traffic growth is highest in emerging markets such as China, India, the rest of Asia and Latin America.
Over the next 20 years, new deliveries to Asia Pacific will be 41%, followed by 20% and 16% in Europe and North America, respectively.
Again, Boeing anticipated the commercial fleet to double over the next two decades to 45,240 airplanes by the end of 2035, fueled by sustained 4.8% annual growth in commercial passenger traffic. About 40% of the total commercial demand is likely come from the Asian markets, another 40% from Europe and North America, and the balance from the rest of the world.
Boeing provided its 20-year forecast for average annual cargo traffic growth at 4.2%. By the end of the period under consideration, the company expects that the world will need 930 new freighters and 1,440 converted freighters.
Other Players in the Space
Undoubtedly, Boeing and Airbus dominate the commercial aerospace manufacturing market, with major airlines worldwide using their airplanes. Nevertheless, Canada’s Bombardier Inc. and Brazil’s Embraer S.A. (ERJ - Free Report) are also in the commercial race but their presence in the market is negligible compared to the former two.
Embraer continues to lead the 70- to 130-seat commercial jet market. In 2016, the company released its 20-year Market Outlook, according to which it expects total market deliveries of 6,400 jets – 2,300 units in the 70- to 90-seat segment and 4,100 units in the 90- to 130-seat segment by 2035.
The 70- to 130-seat jet world fleet-in-service will increase from 2,670 aircraft in 2015 to 6,690 by 2035, thereby making it the fastest growing aircraft seat segments among all. Replacement of ageing aircraft will represent about 37% of new deliveries, while 63% of deliveries will represent market growth.
Last 12-Month Return
In the last 12 months, Airbus’ stock has surged 47.1%, better than Boeing’s gain of 46.2%.
Both Boeing and Airbus’ return was better than the Zacks categorized Aerospace–Defense industry’s gain of 23.3% during the same time frame.
Furthermore, it should be noted that the Aerospace – Defense Zacks Industry Ranks #114 out of the 256 industries in our coverage. Impressively, this puts the industry in the top 45% of the list.
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20-Year Market Outlook for Jetliners: Airbus vs. Boeing
The commercial airplane demand is on the rise due to a steady improvement in passenger and freight traffic. The major driver behind the increase in demand can be attributed to growth in the single-aisle airplane segment. In fact, this segmental growth is backed by the global popularity of the low-cost carrier business model and expansion of air service into emerging markets such as Asia, thereby compelling airlines to accelerate the replacement of aged airplanes.
Notably, these single-aisle jets have been the main area of competition between two arch rivals, Airbus Group SE (EADSY - Free Report) and The Boeing Co. (BA - Free Report) . Currently, these two aerospace behemoths are wooing the market with the updated versions of their popular single-aisle jets – Boeing’s new 737 MAX 10 against Airbus' new A321 neo.
20-Year Market Outlook
Airbus recently raised the 20-year forecast for jetliner demand by 6% based on the growing need for the improvement of fuel-efficient single-aisle airliners. In Jul 2016, its rival Boeing had raised its 20-year forecast for jetliner demand by 4.1%.
Airbus’ New Forecast
Per Airbus’ current outlook, the world will need more than 34,899 new planes, worth $5.3 trillion, between 2017 and 2036. This anticipated number is pegged above last year's projected demand of 33,070 jets, worth $5.2 trillion, for the period of 2016–2035. Of the total units, 40% of the demand will be for the replacement of older, less-efficient aircraft.
Airbus expects single-aisle jets to be the major driver behind demand growth, comprising more than 70% of the total projection. This translates into worldwide demand for 24,810 single-aisle jets, worth $2.4 trillion, in the next 20 years.
As the world’s passenger aircraft fleet above 100 seats will double over the next 20 years, it will require 530,000 new pilots and 550,000 new maintenance engineers. This, in turn, is expected to act as a catalyst for growth of Airbus’ global services business.
Boeing’s Forecast
Boeing forecasted that the world will need 39,620 new planes, worth $5.9 trillion, between 2016 and 2035. Of the total units, 43% of the demand will be for the replacement of older, less-efficient aircraft.
The company added that it expects single-aisle jets to be the major driver behind demand growth, comprising 71% of the total projection. This translates into worldwide demand for 28,140 single-aisle jets, worth $3 trillion, in the next 20 years.
Other Categories
Trailing behind single-aisle jetliners are their large wide-body, twin-aisle counterparts. For this category, Airbus projects demand for 10,100 new planes in the 2017–2036 period. Even though the figure appears unimpressive, the price of these planes is enough to compensate for the difference in volume. The company estimates that the total value of all wide-body planes (comprising small, medium or large) sold over the period to be $2.9 trillion compared with $2.4 trillion for the narrow-body variety.
In contrast, Boeing projected demand for 9,100 new planes in the 2016–2035 period valued at $2.82 trillion. Meanwhile, regional jets were expected to account for $110 billion in global sales.
Air and Passenger Traffic Forecast
Airbus lowered its projection for air traffic growth to 4.4% a year from 4.5% as it took a more cautious view on mature markets such as North America. We note that air traffic growth is highest in emerging markets such as China, India, the rest of Asia and Latin America.
Over the next 20 years, new deliveries to Asia Pacific will be 41%, followed by 20% and 16% in Europe and North America, respectively.
Again, Boeing anticipated the commercial fleet to double over the next two decades to 45,240 airplanes by the end of 2035, fueled by sustained 4.8% annual growth in commercial passenger traffic. About 40% of the total commercial demand is likely come from the Asian markets, another 40% from Europe and North America, and the balance from the rest of the world.
Boeing provided its 20-year forecast for average annual cargo traffic growth at 4.2%. By the end of the period under consideration, the company expects that the world will need 930 new freighters and 1,440 converted freighters.
Other Players in the Space
Undoubtedly, Boeing and Airbus dominate the commercial aerospace manufacturing market, with major airlines worldwide using their airplanes. Nevertheless, Canada’s Bombardier Inc. and Brazil’s Embraer S.A. (ERJ - Free Report) are also in the commercial race but their presence in the market is negligible compared to the former two.
Embraer continues to lead the 70- to 130-seat commercial jet market. In 2016, the company released its 20-year Market Outlook, according to which it expects total market deliveries of 6,400 jets – 2,300 units in the 70- to 90-seat segment and 4,100 units in the 90- to 130-seat segment by 2035.
The 70- to 130-seat jet world fleet-in-service will increase from 2,670 aircraft in 2015 to 6,690 by 2035, thereby making it the fastest growing aircraft seat segments among all. Replacement of ageing aircraft will represent about 37% of new deliveries, while 63% of deliveries will represent market growth.
Last 12-Month Return
In the last 12 months, Airbus’ stock has surged 47.1%, better than Boeing’s gain of 46.2%.
Both Boeing and Airbus’ return was better than the Zacks categorized Aerospace–Defense industry’s gain of 23.3% during the same time frame.
Rank & Sub-industry Ranking
Boeing and Airbus currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Furthermore, it should be noted that the Aerospace – Defense Zacks Industry Ranks #114 out of the 256 industries in our coverage. Impressively, this puts the industry in the top 45% of the list.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>