Even though aviation is only slowly recovering from the repercussions of the COVID-19 pandemic, all signs are pointing to growth in the medium and long term. Passenger numbers have been steadily increasing again since the second half of 2021, with the long-term trend pointing upwards, as was the case prior to the pandemic. Consequently, the demand for aircraft is also set to increase further.
This is good news for FACC, which is represented with its components on all major aircraft platforms. The future also looks bright for the two other business segments of the Group, Urban Air Mobility and Space. Here, too, FACC excels with its know-how and outstanding quality, and has already been able to secure attractive orders.
People long to travel, and even the coronavirus has not put a damper on this. As soon as lockdowns ended, bookings went up again. Wherever restrictions were eased, tourism bounced back fast. Take England, for instance: Scarcely a day after Prime Minister Boris Johnson presented his exit plan from the lockdown in February 2021, vacation bookings with travel and flight providers soared. Another case in point is Germany, where travel to Majorca skyrocketed at Easter 2021 following the easing of restrictions – more than 200 additional aircraft were deployed at short notice to meet demand on the required routes. Similar developments are shaping booking and travel patterns in virtually all countries of the Western world.
Marked upward trend in air traffic
This development is also reflected in the numbers: While international air traffic on intercontinental routes still fell far short of its pre-pandemic levels, 2021 showed a substantial recovery, albeit in waves triggered by lockdowns and coronavirus mutations. Revenue passenger kilometers thus increased worldwide by 18 percent in 2021, following a 66 percent slump in 2020, with passenger numbers rising by 470 million after a drop of 2,700 million the year before. The load factor, i.e. the ratio of capacity utilization to available flight capacity, similarly increased by two percentage points to 67.1 percent.1) In the United States, it even reached 78.9 percent in December 2021, and is thus approaching the global figure of 82.5 percent for 2019.2)
The individual market segments and world regions are developing quite differently: While international passenger volumes still have a lot of catching up to do – they were still just under half the level of 2019 in 2021 – continental travel as well as business and cargo traffic have largely recovered. The business jet business and air freight have, in part, even exceeded the levels of the last pre-crisis year. In general, cargo traffic has shifted to specific cargo aircraft since the onset of the pandemic. Consequently, above-average growth is forecast for the global cargo fleet; Boeing, for instance, expects an increase of 70 percent to 3,435 aircraft by 2040.3)
At a regional level, Europe has been experiencing a recovery in air traffic since June 2021, driven not least by tourist traffic, while a positive trend is also noticeable in North America. Only Asia is showing a stagnant development again since the spring of 2021, following a brief recovery, mainly caused by the delta variant of the coronavirus. In general, international traffic has recovered to a lesser extent than domestic flights, which mainly take place within major internal markets such as the U.S. and China.
The overall picture is thus in line with past experience: Following previous crises such as 9/11, SARS or the financial crisis of 2008, the aircraft industry usually recovered within a few years. The current downturn is therefore only likely to delay the long-term upward trend – and not for long: Airbus anticipates a full recovery between 2023 and 2025, driven not least by rising prosperity in the Asia-Pacific region and the growth of the affluent and well-travelled middle class worldwide.
Economic upswing continues
Like traffic volumes, the global economy has also made a marked recovery in 2021 following the outbreak of the coronavirus pandemic. Global GDP thus increased by 5.6 percent in the past year (2020: -3.4 percent), while the euro zone and the USA grew by 5.2 percent (2020: -6.5 percent) and 5.6 percent (2020: -3.4 percent) respectively. China recorded a plus of 8.1 percent in 2021, following a significantly lower growth rate of 2.3 percent in the previous year. Economists predict a further continuation of the upward trend for the current year as well. The OECD anticipates global growth of 4.5 percent in 2022, with the positive pace set to continue in 2023 at plus 3.2 percent.4)
Almost ten billion air passengers in 2040
For the airline and aircraft industry, the medium and long-term outlook also remains positive: The German Aerospace Center predicts an annual growth rate of 3.7 percent for global air traffic over the next 20 years, with passenger numbers expected to increase from approximately 4 billion in 2016 to 9.4 billion by 2040, thus approaching the ten billion mark. While passenger kilometers flown worldwide totaled 8.5 trillion in 2019, they are forecast to reach 19.2 trillion by 2040 according to the latest edition of Boeing’s annual Commercial Market Outlook.
According to estimates by the German Aerospace Center, the number of flights is expected to grow from 35.5 million annually to approximately 53 million over the same period, which represents an annual increase of 1.6 percent. This growth rate, which is lower than that for passenger numbers, reflects the expectation that the number of seats on short and medium-haul aircraft will increase over time: According to the latest calculations, the seating capacity per aircraft and flight is projected to stand at 179 in 20 years’ time, compared with just 111 in 2016. Boeing also expects growth in the number of flights in the medium and long term, and its forecast of an annual increase of 4.0 percent for the period 2021 to 2040 is even slightly higher than that of the German Aerospace Center.
Demand for aircraft remains high
Similar trends can be observed in the demand for aircraft: Boeing expects the delivery of 43,610 new aircraft by 2040. While the focus over the next few years is likely to be on fleet renewal through the replacement of aging aircraft, the medium term should see a return to the previous growth path. Thus, a total of 19,330 shipments are anticipated for the period 2021–2030, compared to a significantly higher figure of 24,280 for the period 2031–2040. Specifically, the forecast comprises deliveries of 2,390 new regional jets, 32,660 single-aisle aircraft, 7,670 wide-body aircraft and 890 transport aircraft. As a result, a total of 49,405 aircraft are forecast to be in service in 2040, representing an annual fleet growth of 3.1 percent relative to the 25,900-strong fleet as of the end of 2019.
High dynamism in the strategic areas of UAM and Space
Sectors such as Urban Air Mobility (UAM) and Space, which FACC introduced as new strategic areas in its FACC 2030 Strategy in 2020, also present attractive opportunities. Demand is high in the two fields – as is competition. In both, FACC is able to score with its wide-ranging know-how and its premium high-tech components.
The UAM segment, in which FACC has already established a firm foothold over the past years, offers high potential in various fields of application. According to estimates by the business data platform Statista5), the market volume of autonomous last-mile deliveries alone is set to reach almost USD 50 billion by 2027, representing a fourfold increase compared to 2020. In addition, there will be at least as much demand for surveillance services and passenger transportation via drones. In November 2020, the internationally renowned consulting company Roland Berger estimated that 160,000 commercial passenger drones would be populating the skies worldwide by 2050.6) However, developers, producers and operators still face one obstacle: certification for commercial use. This could be achieved more quickly for logistics and surveillance drones, as they are less complex overall.
Similar dynamics are also apparent in the Space sector, which has long ceased to be dominated exclusively by traditional national programs: Not only major powers are competing for security and sovereignty in space, but also private-sector players such as SpaceX, BlueOrigin, Oneweb, Telesat and the like are tapping into an ever broader range of utilization and business opportunities, including offerings for tourists. This is a model also followed by Russia, which flew wealthy space tourists to the International Space Station (ISS) again as recently as December 2021. Far more important, however, are applications such as terrestrial observation, internet from space, or satellite communication and navigation services, which are steadily increasing in variety and volume in a society shaped by digitalization and mobility. New business models such as interplanetary transport, space resource utilization or manned flights in low Earth orbit are fueling the collective imagination.7)
Estimates of the current annual market volume in the Space segment range from just under USD 300 billion to USD 420 billion, depending on the source, with a clear upward trend. By 2040, this volume is likely to have surpassed the USD 1,000 billion mark.8) FACC wishes to profit from this trend. Already in the first year of its active involvement in this market, FACC was able to score an important success with an order from the European Space Agency ESA.
Alongside these new product areas, retrofitting and maintenance are gaining in importance, particularly under difficult economic conditions. These are fields in which FACC has firmly positioned itself in recent years with its Aftermarket Services, which span all segments.
Sources
1) Airbus – Global Market Forecast 2021–2040
2) EUROCONTROL – Covid 19 Impact on European Aviation, Dezember 2021
3) Boeing – Commercial Market Outlook 2021–2040
4) OECD – Economic Outlook, Volume 2021, Issue 2
6) Roland Berger, Urban Air Mobility | USD 90 billion of potential: How to capture a share of the passenger drone market
7) PwC, Main Trends & Challenges in the Space Sector, 2nd Edition, December 2020
8) https://www.statista.com/statistics/946358/space-economy-global-revenue-segment-2040