Under the impact of COVID-19, the demand for new aircraft and thus for aircraft parts dropped significantly in 2020. Nevertheless, FACC anticipates a stable upward trend in the aircraft market in the medium and long term. In addition, the company sees further potential in attractive new business areas such as urban air mobility and aerospace.
Market data of the past 60 years show that air traffic volumes have doubled approximately every 15 years. This also holds true for the past two decades, in spite of major crises such as 9/11, SARS or the financial crisis of 2008. Global air traffic has now suffered another major blow as a result of COVID-19, which should also be evaluated differently compared to previous crises. Forecasts for the near future are therefore fraught with difficulties. Nevertheless, in the latest edition of its annual Commercial Market Outlook, Boeing expects renewed growth in the medium and long term.
Air traffic and demand for aircraft continue to rise
This development is due to an expected further increase in air traffic volumes which, according to current estimates, should return to pre-crisis levels by 2025 at the latest, and, against the backdrop of average global GDP growth of 2.5 percent per year until 2039, the end of Boeing’s current forecast period, increase by an average of 4.0 percent per year. While total passenger kilometers flown worldwide stood at 12.2 trillion in 2019, this figure is expected to reach 18.7 trillion by 2039. As was the case with crises in the past such as 9/11, SARS or the global financial crisis of 2008, the airline industry usually recovered within a few years. The current slowdown in growth in the aerospace industry is therefore unlikely to be a long-term trend.
This slowdown is also contradicted by a look at the macroeconomic development: especially in the large growth markets of the Asia-Pacific region, prosperity is steadily increasing – and with it the number of revenue passenger kilometers. While a total of 4.9 billion air travelers were recorded in 2019, 80 percent of the world’s population had never traveled by plane. This fact alone illustrates the immense potential that still exists here. By 2050, global passenger traffic could quadruple relative to 2019, primarily as a result of the rising prosperity in the major markets of China and India.
Based on these forecasts, Boeing anticipates demand for 43,110 new aircraft by 2039. While the focus in the next few years is likely to be primarily on renewing the fleet by replacing aging aircraft, a return to the previous growth path should be possible in the medium term. Thus, a total of 18,350 deliveries are expected for the period 2020 to 2029, compared with a significantly larger number of 24,760 in the period 2030 to 2039. Specifically, the forecast includes deliveries of 2,430 new regional jets, 32,270 single-aisle aircraft, 7,480 wide-body aircraft and 930 transport aircraft. As a result, a total of 48,400 aircraft should be in service in 2039, representing annual fleet growth of 3.2 percent relative to 25,900 aircraft at the end of 2019.
The significance of cargo aircraft is set to increase steadily over the next two decades in view of the high importance of e-commerce. As a result, the global cargo fleet is projected to grow by almost 60 percent to 3,260 aircraft by the end of 2039. In addition to the 930 new units already mentioned, 1,080 standard and 420 wide-body aircraft are to be converted into freight aircraft.
Promising changes in the aerospace industry
Aside from the climate debate and the goal of substantially reducing CO2 emissions, COVID-19, in particular, has triggered or reinforced trends in the aviation industry that are opening up major advantages for FACC with its know-how and technology portfolio, production footprint and industry expertise. These include an even stronger emphasis on aspects such as efficiency, material and process optimization and automation, the call for geographical proximity to customers’ sites in the interest of perfect just-in-time and just-in-sequence deliveries, establishing a presence in best-cost countries and the increased demand for a circular economy. Here, the focus is on recyclable and renewable materials, improved aerodynamic structures, and the reduction of noise emissions.
Furthermore, society is showing a growing interest in new forms of mobility, including the growing field of autonomous flying (urban air mobility, UAM), as well as alternative propulsion systems, particularly those based on synthetic fuels, electric power or hydrogen. In addition, attempts are being made to find new applications for existing technologies such as fuel cells, wind power, batteries, medical engineering etc. At the same time, retrofitting and maintenance are gaining in importance, especially under difficult economic conditions. These are areas in which FACC has positioned itself strongly in recent years with its new Aftermarket Services business segment.
Great momentum in the UAM and space sectors
New fields of business such as UAM, in which FACC has already established a solid position, and aerospace also offer interesting potential. The internationally renowned consultancy firm Roland Berger estimates the annual market potential for passenger transport via drones alone at USD 90 billion by 2050, while applications such as parcel deliveries, medical transports or surveillance are also expected to reach a substantial scale. Moreover, Roland Berger forecasts that 160,000 commercial passenger drones will be needed worldwide by 2050. Until then, growth will be steep: around 5,000 will be required in 2030, approximately 45,000 in 2040, and around four times as many by the middle of the century.
Ongoing commercial flight operations are expected to take off in 2025, starting in European and North American cities such as Paris or Dallas. In China, commercialization will take place even earlier, with drone flights to be offered in major cities for tourism purposes as early as 2021. The main areas of application will be logistics flights for the transport of materials, cab services, airport shuttles and surveillance flights. Clearly, investors also appreciate the unbroken high momentum in this segment despite the COVID-19 pandemic: In the first half of 2020 alone, USD 907 million flowed into start-ups in this sector, twenty times as much as in the previous year.
Logistics and surveillance drones could develop even faster, as they are less complex overall. Current estimates predict a global market volume of approximately USD 27 billion for parcel deliveries by drones in 2030, mainly driven by the increasing demand for fast shipments and a decrease in restrictions on civilian drones.
In the space sector, on the other hand, momentum is increasing, not only due to the ever broader range of possible uses and applications, but also as a result of the entry of private-sector players alongside the conventional, national space programs. Contrary to the past, developments in this area are no longer primarily driven by national priorities, but by the market and its requirements, and are geared towards satisfying the demand for services. Of the approximately 180 new institutional satellites launched between 2015 and 2019, more than one third serve civilian purposes. In addition to terrestrial observations, the civil applications of primary interest to the private sector are satellite communications and navigation services, which are steadily increasing in variety and volume in a society shaped by digitization and mobility.
Satellite communications play the most important role in this regard. This field also includes new application areas such as machine-to-machine communication (M2M) and the Internet of Things (IoT), in-flight connectivity, connected cars, maritime security as well as promising areas such as the EuroQCI system, a new system introduced by the EU Commission to ensure cybersecurity. Estimates for 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 an upward trend. It is therefore unsurprising that various investors and large corporations have entered the market, among them SpaceX, BlueOrigin, Oneweb, Telesat etc., which are expected to launch thousands of satellites into space over the next few years. New business models such as space tourism, interplanetary transports, space resource utilization or manned flights in low-earth orbit provide a touch of futuristic imagination.
- Boeing, Commercial Market Outlook 2020–2039
- Roland Berger, Making Aerospace Manufacturing ready for the post-COVID future
- Roland Berger, Urban Air Mobility | USD 90 billion of potential: How to capture a share of the passenger drone market
- Pwc, Main Trends & Challenges in the Space Sector, 2nd Edition, December 2020