World regions

Globalized demand

Aviation is an increasingly integral part of life, bringing people closer together. As the world’s emerging markets continue to grow and new business models expand, airplane manufacturers are seeing greater diversity in their customer base. In 1994, airlines in Europe or North America carried more than 73 percent of all traffic. By 2034, that share will shrink to 38 percent, with Asia Pacific and Middle East airlines becoming prominent in global aviation.

The low-cost business model continues to drive growth in the single-aisle market. Passengers have access to a wider range of destinations and the benefit of the speed and convenience that flying offers over traditional modes of transportation. Meanwhile, new, efficient widebody airplanes are enabling smaller operators in developing markets to compete on longer routes that large foreign network carriers have traditionally dominated. The range and economics of these airplanes are dramatically expanding the number of long-haul nonstop city pairs offered.

Rapidly evolving aviation services in emerging regions are broadening the geographical balance of airplane demand, spurring a worldwide requirement for 38,050 new jet airplanes, valued at $5.6 trillion.

Regional focus

Each region will respond to its unique situation and conditions with specialized requirements. Middle East airlines continue to favor widebody airplanes and premium passenger services to leverage the area's geographic advantages and prominence in business travel. Europe and North America airlines will respond to growing competition from low-cost carriers by replacing older, fuel-inefficient airplanes with more economical single-aisle models. The large installed airplane base in these areas generates a need for a considerable number of replacement airplanes, even though growth is slower than in other parts of the world. In Asia, rising demand will require a mix of single-aisle and widebody airplanes.

All regions will face similar challenges of fuel-price volatility, emission control regimes, and ever-increasing airport congestion as the growing world fleet works to keep pace with burgeoning international and local demand for air travel.

World market value: $5.6 trillion

Key indicators and new airplanes

Asia new airplanes: 14,330

Asia has become one the biggest aviation markets in the world—at last count, a billion passengers travel to, from, or within the region each year. And more than 100 million new passengers are projected to enter the market annually for the foreseeable future. As a result, the airlines and airports in this region are continually growing, with several ranked among the largest in the world. This evolution has been due largely to regional economic growth; liberalization and deregulation; new, efficient airplanes, and new business models. Over the past decade,

  • Jet fleets of Asia airlines have nearly doubled, from 2,900 to 5,850.
  • The number of Asia airlines with jet fleets has grown from 150 to 225.
  • The capacity that these airlines provide has grown on average by 7 percent annually.
  • Routes to, from, and within Asia have increased 57 percent, from 2,200 to 3,800.


The low-cost carrier (LCC) business model has proved successful throughout the world but particularly so in Asia Pacific. Typical LCC strategies include operating at secondary airports, flying a single airplane type, increasing airplane utilization, relying on direct sales, offering a single-class product, avoiding frequent-flyer programs, and keeping labor costs low. Over the past 10 years, the region's LCCs have generated an average annual growth rate of 24.5 percent. By comparison, Europe's LCCs grew 13.4 percent annually during the same period, and North America's grew a modest 2.2 percent annually.

The countries in Southeast Asia were some of the first in the region to employ the LCC business model, and today, LCCs are flying nearly 20,000 weekly flights. Northeast Asia, on the other hand, has been slower to see the growth of LCCs, owing in part to the large high-speed rail network in Japan and to an aging population. China is the latest region to embrace the LCC model, with a large increase in the number of entrants in the past two years.

To expand outside their home country, many airlines have created joint-venture subsidiaries to avoid restrictions on foreign ownership. These subsidiaries, which employ the LCC business model, are often cobranded with the parent airline and share its name and livery. Although the vast majority of this activity has been in short-haul markets using single-aisle airplanes, the region is beginning to see joint ventures flying widebody airplanes on medium-haul operations in response to strong traffic growth.

At the other end of the spectrum, Asia's network carriers include some of the largest, oldest, and most well-regarded airlines in the world, such as Korean Air, Air China, and JAL. Network carriers tend to have major hub operations for domestic, regional, and international services and large, complex fleets; airline alliances; and a broad array of service offerings (such as airport lounges, onboard meals, and multiple cabin classes) to enhance passenger satisfaction.

Hub operations significantly increase network reach and allow carriers to offer convenient, one-stop connections around the globe. Additionally, traditional Asia Pacific network carriers are evolving their businesses to satisfy passenger needs. They are continually upgrading their fleets for efficiency. Some—such as Qantas, Singapore Airlines, and Thai Airways—have also created their own LCCs to offer products that are similar to what other LCCs offer but without diluting their premium product offerings.

Future demand

Asia is expected to be the largest travel market in the world, growing at 6.1 percent annually. One factor in this growth is the region's GDP, which is expected to grow by 4.3 percent annually over the next 20 years. Although that growth will be mixed owing to the region's current composition of mature, developing, and emerging markets, Asia GDP and passenger traffic will drive an estimated need for 14,330 new airplanes valued at $2.2 trillion. The LCC market, for example, is helping grow the need for 10,370 new single-aisle airplanes, with the majority in the size category of the 737 MAX 8. This size of airplane gives airlines the efficiencies needed to open new routes while continuing to operate profitably on current routes.

Meanwhile, widebody airplanes such as the 787 and 777 provide the needed range and economics to open markets that were inaccessible in the past. The 787 continues to open new markets to and from the region. Both Japan, a mature market, and China, a rapidly growing market, have employed the 787 to grow long-haul share. In China, the long-haul growth rate since 2010 has been 18 percent, with the 787 being used primarily to open new markets. In Japan, long-haul growth has been at 9 percent since 2010, with more than two-thirds of its new 787s being used to open new markets. These market dynamics will lead to regional need for 3,590 new widebody airplanes by 2034.

Air cargo also plays a crucial role in Asia. The region transports vast amounts of goods over difficult terrain and vast stretches of ocean. Many of the world's largest and most efficient cargo operators are located in the region, where the air cargo market is expected to grow by 5.7 percent per year. As a result, carriers in the region are expected to need 380 new production freighters and 570 converted freighters in the years ahead.

Asia aviation trends

Asia LCC gaining traction in region

Asia 787s accelerating long-haul expansion

Asia market value: $2.2 trillion

Asia key indicators and new airplanes

Strong growth despite uncertainty

Europe's aviation market remained strong in 2014 despite significant economic uncertainties. Europe's GDP grew by 1.4 percent in 2014 and is forecast to grow by 1.8 percent annually through 2034. The Association of European Airlines reports that member airlines carried 4.1 percent more passenger traffic in 2014 than in 2013. Members of the European Low Fares Airline Association reported a 9.4 percent increase in passengers over 2013. European airlines acquired more than 180 new airplanes in 2014, of which 70 percent were single aisle.

The European aviation market is expected to grow over the next 20 years, with airlines forecast to acquire more than 7,300 new airplanes valued at over $1 trillion. Single-aisle airplanes will comprise the majority of deliveries, representing a 79 percent share of total deliveries. While European aviation growth is slower than aviation growth in emerging economies, the region's large installed base of more than 4,400 airplanes supports substantial demand for replacement airplanes. Replacement demand will account for 57 percent of Europe's total new airplane market.

Continued strategic evolution

Airline operations in Europe continue to evolve with the launch of new ventures, routes, and business models. The introduction of the 787 has allowed operators to economically serve long-haul, nonstop markets that have not been served before. European operators have been on the forefront of this trend, with 69 long-haul routes introduced since 2012—the most of any region.

Low-cost carriers (LCCs) continue to grow short-haul markets, providing 42 percent of intra-Europe capacity in 2014. Network airlines are shifting away from short-haul point-to-point traffic, which is targeted by LCCs, to flowing passengers through their hubs on longer itineraries. Smaller flag carriers and charter airlines will be challenged to compete in an environment where LCCs dominate short-haul, point-to-point service, and large network carriers and their alliance partners exploit the cost advantages of mega-hubs for long-haul traffic.

Large Middle East airlines have captured significant long-haul share from Europe's network carriers by providing one-stop service from Europe to destinations such as India, Australia, and Southeast Asia, where the geographic advantage of Middle East carriers is greatest. In response, Europe's network carriers have shifted long-haul capacity to more profitable markets—notably the North Atlantic, where their capacity has grown over 16 percent since 2009.

Europe leader in new long-haul routes

Europe market value: $1.1 trillion

Europe key indicators and new airplanes

North America leads global profitability

All the more striking by the fact that it comes after a decade of massive losses, the US airline industry is riding a five-year wave of profitability.

IATA calculates 2014 net income of North America airlines, fueled largely by US airline performance, at more than $12 billion—fully two-thirds of the projected net income for the entire global airline industry. And the region's airline profitability is expected to increase an additional $1 billion in 2015 as lower fuel expenses provide a further boost in earnings.

The reemergence of US airlines from the so-called “lost decade” required significant restructuring. Airlines undertook several tactics, including mergers and acquisitions, fleet and network rationalization, capacity discipline, and a strict focus on financial performance. Since 2008, four major airline mergers have occurred in the United States, resulting in the market dominance of those carriers, which now hold at least 85 percent of all available seat miles.

Low-cost carriers taking off

Low-cost carriers (LCC) are the fast-growing business segment of the domestic US market; they take advantage of the flight reductions of rationalized network carriers and backfill on those routes. In 2014, network carriers grew capacity year over year by 2.5 percent; LCCs grew capacity by 3.6 percent.

Post the 2008 downturn, the introduction of the ultra-low-cost carrier (ULCC) business model in the United States is literally taking off. Spirit Airlines is the fastest growing domestic airline, recording double-digit growth. Frontier Airlines, which is undergoing a change in strategy, is expected to challenge Spirit in the quest to become the preeminent ULCC in the United States. The expectation is that over time, the industry will further consolidate, with the LCC and smaller network carriers becoming potential consolidation targets.

Owing to network carrier capacity discipline, we think that the domestic US market is ripe for even higher growth than previously forecast. Our revised domestic forecast has traffic growth in the range of 2.5 to 3.0 percent over the next five years. With a load factor of 83 percent for 2014 (and average load factors in excess of 80 percent over the past few years), network carriers may be prompted to further ease their capacity discipline in the face of competitive pressures and continued economic recovery.

We forecast a need over the next 20 years for 7,890 new airplanes in North America. We forecast that the greatest need will be for single-aisle airplanes, with an estimated 5,070 units, or 64 percent of demand. Owing to a large installed fleet that is nearing economic retirement and the offering of new fuel-efficient airplanes, 66 percent of all new airplanes, slightly more than 5,200, will be for replacement needs.

North America market growth

North America market value: $940 billion

North America key indicators and new airplanes

Support for Aviation's Growth

Located at the crossroads between Asia, Africa, and Europe, airlines in the Middle East are well positioned to compete for traffic connecting these regions. About 80 percent of the world's population lives within an eight-hour flight of the Gulf, allowing carriers in the Middle East to aggregate traffic at their hubs and offer one-stop service between many city pairs that would not otherwise enjoy such direct itineraries.

Partnerships of various kinds also feed Middle East hubs, and between organic growth with selective code sharing, equity stakes in a range of out-of-region carriers, and traditional alliance membership, no single strategy has emerged as dominant. Each of these strategies creates opportunities to coordinate schedules across national boundaries, further enhancing the appeal of services connecting the Middle East.

The region's low-cost carriers have also been innovative, reducing short-haul fares, setting up cross-border subsidiaries, and developing mobile booking portals to improve access to air services. The business model is evolving as carriers broaden offerings to include business-class seating and as they expand networks into previously underserved areas, such as the Commonwealth of Independent States.

Infrastructure and airspace development

As the region's governments have increasingly come to view air transportation as integral to economic development and diversification, investment in airport facilities has followed. Although much of this activity focuses on the region's main hubs, smaller airports are significantly upgrading, from building new terminals to expanding into international airports. Significant projects are scheduled or are under way at airports in Manama, Bahrain; Cairo, Egypt; Tehran, Iran; Kuwait City, Kuwait; Muscat and Salalah, Oman; Doha, Qatar; Riyadh and Jeddah, Saudi Arabia; Abu Dhabi, Dubai, and Sharjah, United Arab Emirates.

Despite progress and growth in the region, challenges remain. Large sections of airspace remain under military control, reducing the airspace available for commercial traffic. Meanwhile, the region's air traffic control (ATC) systems are not centralized, leaving operators to contend with a patchwork of rules, agencies, and processes. Regional authorities are working to address these needs, and recent discussions of ATC coordination between the countries of the Gulf Cooperation Council and their neighbors show signs of progress.

Middle East aviation growth factors

Middle East market value: $730 billion

Middle East key indicators and new airplanes

Long-term growth fuels economic outlook

Long-term economic projections for Latin America and the Caribbean remain positive, with IHS Global Insight predicting growth in the region to improve steadily over the near term and, by 2017, to outpace world GDP growth.

Economic growth in Central America remains strong, led by Panama with growth averaging 5.6 percent over the next five years. Meanwhile, five-year average growth rates for Brazil and Mexico—the region's two largest economies—are 3.8 percent and 2.3 percent, respectively. Aviation is a key component of this growth dynamic because it facilitates trade, travel, and tourism, while promoting globalization and technology development. We continue to project strong demand for air travel over the long term for Latin America and the Caribbean.

Airline industry continues to evolve

The past several years have seen significant consolidation, including the mergers of LAN with TAM, Avianca with TACA Airlines, GOL with Webjet, and Azul with TRIP, resulting in larger, more stable, and more competitive airlines. Low-cost carriers are a growing presence in the region, expanding services and bringing affordable air travel to more people and more communities. Further liberalization of air service agreements is providing opportunities to expand networks and stimulate traffic. Implementation of the US-Brazil open-skies agreement will begin during the latter part of 2015. And agreement has been reached to further relax the US-Mexico bilateral arrangement. These developments produce new opportunities for cooperation through partnerships and alliances.

Traffic and fleets forecast to grow

Passenger traffic growth for Latin America and the Caribbean is forecast to average 6.0 percent per year over the next 20 years. The fastest growth is expected within intraregional flows, particularly in the near term as the economic outlook improves. Traffic within Latin America is forecast to average 6.6 percent per year through 2034.

Historically, Latin America has been viewed as having older, less technologically advanced airplanes and less productive fleets. But since the mid-2000s, significant fleet renewal has been under way. The average fleet age in Latin America has been dropping since 2004 and is now below world average. The current backlog of airplanes on order for the region now represents 50 percent of the in-service fleet.

The region's commercial fleet is projected to more than double between now and 2034—from nearly 1,500 airplanes today to more than 3,600. Latin America will need 3,020 new deliveries over the next 20 years to meet the combined demands of growth and replacement. The majority of these deliveries are expected to be in the single-aisle segment, reflecting continued growth of low-cost carriers and further expansion of networks within Latin America and the Caribbean.

Latin America fleet renewal underway

Latin America market value: $350 billion

Latin America key indicators and new airplanes

Africa has the world's fastest urbanization rate

At 40 percent, Africa's percentage urban population is the lowest in the world despite its average increase over the past 25 years being the highest of any region in the world—3.5 percent annually. Projections show that this trend will continue at a slightly more modest rate of 3.1 percent annually over the next 25 years, with urban growth outpacing the growth of the rural population. The result will be an increase to 50 percent urbanization, with African cities adding more than 500 million people—twice as many as rural areas over the same period.

Urbanization and economic growth are intricately related as agrarian-based regional economies transition to urban economies centered on industry and services. Successful conversion requires a shift in spending to projects that focus on integrated urban planning to improve infrastructure, spur productivity, and foster income growth. The increase in urbanization and economic growth, meanwhile, is expected to stimulate demand for air travel to, from, and within the continent.

Resilient economic growth continues

Africa's economy has grown at a rate of more than 4.5 percent per year over the past 10 years despite the global recession. As a result, two-thirds of the countries in Africa are now classified as middle income or higher, according to the World Bank. In addition, many of the low-income countries are in eastern Africa, which now has the highest rate of urbanization. Indicators show that GDP will continue to grow by almost 5 percent annually over the next decade.

Africa has the youngest population of any continent and will be adding 11 million people to the job market per year for the next 10 years. High unemployment is already a challenge in many countries, further emphasizing the need for proper skills and training. The biggest risks for the region include lower commodity prices and increased volatility in the international financial markets. Even so, the expanding middle class will positively affect aviation in the region.

Positive trends drive increased demand for airplanes

Flights between Africa and Europe account for almost 40 percent of the region's air travel but is projected to compose a smaller share over the next 20 years as flights between Africa and the Middle East and intra-Africa traffic both gain market share. Overall air traffic to and from Africa is expected to grow by about six percent annually over the next 20 years as new airplane technology increases efficiency and opens new international routes from high-altitude hot airports in Africa. This growth combined with the need to replace the region's aging fleet will result in a demand for 1,170 new airplanes. The majority will be for 830 single-aisle airplanes, but the need for new widebody airplanes will also increase.

Africa continued growth in urban population

Africa market value: $160 billion

Africa key indicators and new airplanes

Sustained long-term growth despite short-term challenges

Russia's economy continues to be the region's largest, accounting in 2014 for nearly 74 percent of GDP in the Commonwealth of Independent States (CIS). The economies of Ukraine and Kazakhstan are next in size.

Russia's economic situation challenges short-term aviation growth in the CIS. Russia faces a recession due in part to a global drop in oil prices and severe exchange-rate depreciation. The crisis is expected to last for the next few years before the economy returns to its pre-2014 growth trend.

Following the anticipated recovery, the economies of the CIS are expected to expand, with GDP growing 3.1 percent annually over the next 20 years. Despite current challenges, the commercial aviation outlook for the CIS is one of sustained growth in the long term. The region's size and diverse terrain make airline travel an attractive transportation option that is expected to increase as personal incomes rise.

The CIS has grown airline capacity by more than 9 percent annually over the past 10 years, and Russia's Federal Air Transport Agency reports that the number of passengers that Russia's five largest airlines carry rose to just over 93 million in 2014—an increase of 10.2 percent compared with 2013. Over the next 20 years, CIS airlines are projected to need 1,150 airplanes, valued at $140 billion.

Developing fleet

The economic crisis in Russia has affected international traffic, with CIS and foreign carriers experiencing a notable reduction in international demand. Russia's charter airlines and foreign carriers have seen the largest declines. Foreign carriers are, therefore, reassigning capacity to other international markets. Russian carriers are, however, seeing increased domestic demand, lessening the net impact of the economic challenges. According to the Federal Air Transport Agency, for example, Aeroflot's new low-cost carrier subsidiary picked up a healthy demand of 44,000 passengers in its first month of operation. And domestic Russia and Intra-CIS traffic is expected to grow at an annual rate of 3.3 percent, with expansion of low-cost carrier service over the near term driving up demand for single-aisle airplanes.

As the economic situation improves, we expect a return to increased international travel and a requirement in the region for more widebodies. International traffic is expected to grow at an annual rate of 4.2 percent over the next 20 years. CIS airlines will need 760 single-aisle and 200 widebody airplanes to handle the increased traffic. New airplanes will help the region's airlines grow their domestic routes while regaining and increasing their international footprint.

Although the region's fleet continues to grow, 53 percent of new airplane deliveries will replace older airplanes. And because they are more efficient, new airplanes, such as the 737 MAX and the 787 Dreamliner, will improve fleet efficiency.

CIS strong growth, historically

CIS market value: $140 billion

CIS key indicators and new airplanes