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28 July 2006

Heading into August

Before we enter into the traditional August lull in the aviation world, I wanted to share a few additional thoughts and items coming out of Farnborough - including some great news coverage at the show.

At the DreamSpace exhibit, Aviation Week conducted a walk-through of the 787 mockup. Av Week's Jim Mathews talked with Ken Price, BCA's marketing director of fleet revenue management - an expert on the 787 cabin interior.

787 mockup in the Boeing DreamSpace at Farnborough photo

The 787 mockup in the Boeing DreamSpace at Farnborough drew quite a crowd each day. Until entry into service in 2008, it's the next-best thing to flying on the Dreamliner.

As I think back to last week, I'm still intrigued with the latest A350 offering. Particularly with the fact that they seem to be recognizing the value to airlines of more point-to-point and higher frequency airplanes in the widebody sector. In the proposal made at Farnborough, they appear to be recognizing the value of a wider, more comfortable cabin, with lower cabin altitude, higher humidity, bigger windows, better lighting, and the rest. Sound familiar?

Yet the A350 still seems to fall short. One might question whether they can do all those things and also produce an efficient airplane, given that they have not incorporated all the breakthrough technologies of the 787 Dreamliner.

At Farnborough, the emphasis was all about a cabin that would be slightly wider than the 787. But it's kind of curious because with all this focus on the wider cabin, two out of the three models in the A350 family are competing directly with the very successful 777 - which is 10 inches or more wider.

It seems interesting to me that you would draw attention to measuring cabin widths when you fall significantly short of your main product competitor.

2,000th Next-Generation 737 at take off photo

Southwest Airlines took delivery of Boeing's 2,000th Next-Generation 737 this week - about nine years after the very first delivery of this model, which was also to Southwest.

And finally, we've had some news coming out of Seattle post-Farnborough. This week the 737 program made history again. A milestone delivery of a 737-700 to Southwest Airlines marked the 2,000th Next-Generation 737. This delivery comes nearly seven years sooner than any other commercial jet airplane model has ever reached the 2000th delivery milestone.

This is a versatile, reliable, fuel efficient and economical airplane. Which is probably why the Next-Generation 737 family is Boeing's best-selling airplane model. So far this year alone we've sold about 400 of them. And while we're on the subject, a recent piece in Flight International focuses on Lion Air's new fleet of 737-900ERs.

It's been quite a month, starting with the run-up to the air show and the release of the 2006 Current Market Outlook, all the way through a frenetic and sweltering week at Farnborough.

So I'll be taking some time off to recharge the batteries, as I'm sure many of you are doing as well. But check back later next month, when we'll talk more about the progress on the 787 Dreamliner program, as well as feature a conversation with Joe Sutter, the "father" of the 747.


26 July 2006

2Q 2006

Back in Seattle just in time for the release of Boeing's second quarter earnings report.

And taking a look at the data, I just have to reflect on the hype surrounding orders at Farnborough last week. As someone said during the show, Boeing measures its results over a 52 week period. An air show is just one week out of 52. So this business about who "won" the air show really misses the point.

A number of years ago we decided we were not going to save up orders for air shows. And as a result you will see that Boeing customers make announcements throughout the year - including a few during air show week. Rather than try to keep score during an air show, the place to track our booked orders all through the year is our Orders and Deliveries Website, which you can check out at any time. It is updated every week, on Thursdays.

As the second quarter results show, at the end of the first half of 2006 we had close to 500 gross orders on strong customer demand - more than 300 of those orders coming in the second quarter.

We had a good quarter in terms of deliveries as well - up 14% to 97 deliveries. In comparison, in the second quarter of 2005 we delivered 85 airplanes. We've been successfully managing our production ramp-up and expect to hit our target of 395 deliveries for the full year.

787 wing test photo

Solid progress continues on the 787 program. This is the first Dreamliner demonstration wing box. It was designed and built by a joint team of Boeing, Mitsubishi Heavy Industries, and Fuji Heavy Industries, and will be tested at Boeing's developmental center in Seattle.

Of course the 787 program is an important area of focus as we get ready for the start of flight testing in 2007. Work began last month on the first major assembly of the Dreamliner as Fuji Heavy Industries began assembling the center wing box. The program now has 364 firm booked orders from 25 customers.

And as Boeing's chief financial officer, James Bell, noted this morning, we're increasing our R&D investment to help focus on 787 program goals relating to weight and schedule. The program is on track to meet its overall budget, its performance commitments, and its 2008 entry into service.

It was a solid quarter for all of Commercial Airplanes. Orders included 18 787s, 22 777s, 262 Next-Generation 737s, and 9 747s.

Highlights of the past quarter include an order for 79 737s with Southwest, 30 737-900ERs for launch customer Lion Air, and 24 737s and 13 787s for Continental. BCA's backlog is now at a record $142 billion.

Our momentum is incredible - sold out for 2006, and more than 99% sold out to our guidance of 440-445 airplanes in 2007. Commercial Airplanes president and CEO Alan Mulally pointed out in a message to employees that we're committed to continuous productivity improvement. We have a product strategy that's sharply focused on our customers. And those customers are responding to our market-leading customer support, as well as to our family of lighter, faster, more fuel-efficient airplanes.

At about the mid-point of the year, that's a good place to be in.


21 July 2006

Aisle be back

FARNBOROUGH, England - It's something of a tradition at air shows for us to visit the exhibit areas of our competitor and for them to do the same. You may recall that last year at Paris it made for a fun photo op when BCA executives posed inside the A380 with Airbus, and Airbus execs visited the 777-200LR Worldliner as well.

Exterior of Boeing's display at Farnborough photo

It’s farewell time for Farnborough 2006. I had a lot of great conversations here this week, and renewed acquaintances with reporters and colleagues.

Today being our last day at Farnborough, we took a walk over to the exhibit hall where Airbus has some of their mockups, including a double-decked section of the A380 interior. Our gracious counterparts took me through their various cabin interior concepts.

It's certainly been an intense week, and even though media presence starts to slow down toward the end, I've stayed busy these past couple of days, talking with the Washington Post, and with aviation trades and wire services as well as French and German broadcasters.

The Reuters story about freighters that we discussed yesterday in the blog is now out. You can read it here.

All in all I think this was a terrific air show for Boeing. Clearly, the industry understands our products and services offerings. And if you haven't had an opportunity to check our updated orders Website, we now stand at 510 firm orders for 2006. Just an outstanding endorsement for Boeing Commercial Airplanes.

DreamSpace mockup at Farnborough photo

The DreamSpace has been a huge hit at Farnborough.

Someone asked me how many air shows I've attended as a Boeing employee. My first air show was Farnborough 1986! And since then I've been to many of the Farnborough and Paris air shows over the years. And also many of the regional shows including Singapore, Dubai, Zhuhai, Beijing, and others.

And there's no question - I'll be back.


20 July 2006

Weight watchers

FARNBOROUGH, England - They say it was a bit cooler here today, and perhaps that's true. But to me the humidity seemed higher, so it felt even more sweltering at the air show grounds.

An umbrella came in handy today at Farnborough photo

An umbrella came in handy today at Farnborough - as a sun shade.

Flight Daily had an interesting item today about the heat. It seems that temperatures inside some of the exhibit halls reached the low 90s yesterday as air conditioning systems struggled to keep up. There was a power outage in the media center. And at one pavilion the glass doors shattered because of the heat difference between outside and in!

Much to my surprise, another hot topic around here today was a couple of blogs I did back in April and May. The initial blog and its follow up compared the various attributes of the 747-8 Freighter and the A380F.

Apparently some reporters were contacted this week by people who question our data and our freighters story.

So I sat down for about 90 minutes this morning with Reuters' Paris and New York correspondents. I wanted to make sure they understood that if anything, we've actually been giving Airbus the benefit of the doubt on their A380 freighter claims.

My colleague, Randy Tinseth, our marketing V.P. for the 747-8 program, joined me for the talk. We addressed the misperception that since the 747-8 is an "older" airframe, and the A380 is a new airplane, then the Airbus airplane has to be more efficient.

As we explained, overall airplane efficiency is based on three things: 1) structural weight, 2) aerodynamics - or wing efficiency, and 3) engine efficiency.

And no matter how you slice it, number one, the A380 weighs more than the 747-8. Using Airbus' own numbers (which we do in our comparisons), they are 74 tonnes heavier.

Boeing 747-8F image

We got a chance to weigh-in on the freighter story today. The new 747-8F offers the lowest ton-mile cost of any large freighter.

In aerodynamics, the 747-8 has a new wing, but we'll give the A380 a slight advantage there, although the wings are very comparable.

And as far as the engine goes, ours is better. It's the technologically-advanced 787 engine optimized for the 747-8.

So overall, the 747-8F is clearly the more efficient freighter.

One funny moment broke up our extended technical discussion when one of the reporters pointed out that the A380 is perceived to be opening up a whole new kind of freight market - big quantities of cargo flown nonstop across wide distances. To which (I couldn't help myself) I replied, "You mean point to point?" That brought more than a few chuckles all around.

Another point we made was that a bigger airplane should be more efficient. But even though the A380 has more payload capacity, it's actually less efficient.

Randy Tinseth put things in perspective when he said that we could talk about these numbers for days. But the fact is we provide our data to the airlines. We have an airplane that's been in service now for a number of years. It's well understood. Everyone knows how much it can carry, how much the airplane weighs, and what its maximum capability is.

So we're sorry if people get upset about our numbers. Our objective is to provide our customers the right data so they can evaluate our airplanes. And the outcome is that in the last 12 months we've sold 50 freighters. In the last 12 months the other guys have sold 10 freighters.

Since they launched their A380 freighter, we've had about 80% market share. And that's the bottom line.

I couldn't close today's blog without mentioning a small item in today's Daily Telegraph. It sets the scene during the last time Britain suffered through so much sustained heat in July - it was back in 1911.

The story manages to weave in Queen Mary, Winston Churchill, and a guy walking six miles through town, shedding clothes along the way. Funny stuff. Read it here.

Not quite such desperate times here in the heat wave of 2006. But I can sum up today's weighty topics by saying that after several days in the sauna that is Farnborough I think I must have achieved some efficiencies myself - by sweating off a few pounds.


19 July 2006

Flying circus

FARNBOROUGH, England - And now for something completely different. A little change of pace. Some flavor of what's happening on the ground at the air show while the airplanes are soaring overhead in the searing heat this week.

787 window in the DreamSpace mockup at Farnborough photo

The small button below the 787 window in the DreamSpace mockup is a working control that allows air show visitors to experience what this breakthrough technology will mean for the traveler. Note the dimming effect versus the window to the left.

I mentioned the other day the gee-whiz stuff packed into the 787 mockup at this year's Boeing exhibit - what we call the DreamSpace. For instance, while you're sitting inside the mockup, digitally-created images of a landscape and sky appear to flow by outside the big windows - simulating the feeling of flight.

But the most fascinating thing about these windows is there's no physical window shade. Just a single passenger button that electronically controls window dimming. Kind of like sunglasses that dim depending on how bright the sun is. These new kind of window shades can be adjusted up or down at the passenger's touch. We've never demonstrated this in our mockup before.

Another buzz-generator at the show is the presence of an 85-year old Boeing legend. Joe Sutter, the "father of the 747," is here.

Joe Sutter photo

Joe Sutter signed quite a few books at the Boeing media reception Tuesday night. Star-struck aviation reporters lined up to get their books personalized.

He's got a new book out about his adventures in commercial aviation. And he's been quite the hit at the Boeing Chalet and out and about at various events.

Order announcements always seem to generate quite a bit of media interest at air shows. No different this time around.

Two such events led to standing-room-only conditions in the Boeing media chalet briefing room. It's not because reporters wanted to share in the celebration for the companies involved. I think it's mostly because the media gets a chance to ask questions of top Boeing and airline executives.

Today, International Lease Finance Corp. (ILFC) chairman and CEO, Steven Udvar-Hazy, joined Boeing's Alan Mulally to announce an order for 10 airplanes - a mix of 787 Dreamliners, 737-800s, and 777-300ERs. And the questions ran to their thoughts about the competition between Boeing and Airbus products.

On Tuesday there was a great deal of interest in one of the biggest commercial airplanes deals of the show when Emirates and Boeing signed an agreement for 10 747-8 Freighters. It's a big deal on many layers, signaling yet another endorsement from a major carrier, for the excellent capabilities of the -8F.

Emirates Sheikh Ahmed bin Saeed Al-Maktoum and Alan Mulally photo

Emirates Chairman and CEO Sheikh Ahmed bin Saeed Al-Maktoum, and Alan Mulally, Boeing Commercial Airplanes President and CEO, signing the 747-8 agreement yesterday at Farnborough.

You can catch up on all the orders news from Farnborough on our Web site.

Keep in mind that - as I've said before - Boeing doesn't "save up" orders for air shows. But when our customers choose to announce an agreement to purchase airplanes we're pleased to celebrate the event with them here.

Not including this week's announcements, we have about 500 firm orders on our books. That wouldn't be the case if we were holding orders for air show time.

There's been lots of good coverage of Farnborough out there on media web sites and discussion groups. There's also some good reporting on the XWB story here.

Oh, and have I mentioned that it's hot? Set a record today for the hottest July day on record in London.

And finally today, after Day 3, I find myself settling down for traditional fish and chips with mushy peas at one of my favorite pubs - and of course, a pint of good British ale - and reflecting on what great opportunities these air shows are. Where else can an airplane marketeer like me get the opportunity to talk to so many different industry people - customers and media, investors and investor-analysts, and people who finance airplanes - all in one place.

It almost makes up for the two-hour bus ride each way between Farnborough and central London. It's definitely point-to-point, but not exactly nonstop. Nonstop on London roads? Now THAT would be something completely different.


18 July 2006

The X-files

FARNBOROUGH, England - For most people, Day 2 at the big air show probably meant a second day of sunstroke and perspiration. I don't know if this is yet record heat, but this has to be one of the hottest weeks on record in southern England.

Finding a spot indoors, and near a good, working air conditioner has become something of a sport - and the Boeing Chalet has so far not escaped the withering effects of the heat. Wow. Felt like 100 degrees Fahrenheit today.

A 787 model soars over the entrance to the mockup at the Boeing DreamSpace at Farnborough photo

A 787 model soars over the entrance to the mockup at the Boeing DreamSpace at Farnborough.

But one of the coolest spots (literally and figuratively) at Farnborough has to be the DreamSpace - Boeing's exhibit building. We've constructed a full-scale, traveling mockup of the 787, with some gee-whiz appeal that we haven't even yet incorporated into its much larger cousin back in Seattle. So if you have the chance to attend the show later this week, you're in for a real treat.

We of course will be at the show all week. And one of the first impressions of the show for me was Monday morning when we pulled into the Farnborough show grounds. Looming in front of our car as we arrived were a couple of billboards shrouded in white sheets and emblazoned with a huge "X."

Well, now we all know what the X-factor was.

At the Airbus briefing yesterday they unveiled the A350XWB, which stands for "Xtra Wide Body." Airbus claims that the latest A350 offering will be "five inches wider at eye level" than the 787 Dreamliner. The new A350 family is said to have more range and greater efficiency, with better passenger comfort - a "leap ahead" of the 787 (there's that leap-word again) and a "generation beyond" the 777.

Those catchy slogans basically tell you that they're trying to position the A350 family against both the 787 and 777 families. But I just don't see anything in yesterday's news that changes my basic view - that an Airbus family with a single fuselage/wing/engine/landing gear just cannot efficiently span the entire 787 and 777 size category.

It's interesting to note that two out of the three proposed A350 models are presented as taking on the 777. But the 777 cabin is over 10 inches wider than the latest A350. What happens then to the "extra wide body" claim?

So let's open the files on the XWB.

Right now there's not nearly enough information available for anyone to make an independent assessment. But I do think that the A350 seat counts and other claims put out on Monday may be a bit skewed.

When they compare their airplanes to ours, they seem to compare each model with an airplane that is significantly smaller, rather than like-size. And they compare the two on a per-seat basis.

For example, their A350-800 (which they claim seats 270) is compared to the 787-8 (at 242 seats). They say the Airbus product would have about a 6% advantage in fuel consumption per seat. Well in my view, the more appropriate comparison is with the 787-9, which seats 280 - only a 10 seat differential, rather than a 30 seat differential.

I suppose the reason they don't do the more comparable comparison is that the "6% advantage per seat" would probably end up being in favor of the 787-9, with possibly an even bigger advantage.

And to really tell the whole story you need to start the comparing in the 200-250 seat segment where the 787-8 is positioned. Airbus has no entry in this market. And it's a very significant market. In this sector the demand for replacement airplanes alone (A300s, A310s and 767s) is 1,500 airplanes!

Models of Boeing's line of efficient and passenger pleasing airplanes - on display at the Farnborough International 

Airshow photo

Boeing offers complete market coverage from 100-450 seats. Our line of efficient and passenger pleasing airplanes - on display at the Farnborough International Airshow this week.

We'll have plenty of time to take a closer look at all of this. But for starters you have to ask a basic question. How can you claim that an airplane with a larger cross-section, bigger wing, larger engine, heavier landing gear and more range capability is more efficient than the 787-8 and 787-9? All the while incorporating less composite technology?

For sure they're attempting to add in many of the attributes that our airplanes have - passenger comfort, range capability, and efficiencies. But how are they planning to do that without committing to the technologies? The 787 has a composite fuselage and advanced electronic systems to provide both a better passenger experience AND greater efficiencies through lower weight, lower fuel burn and lower costs.

Anyway, Airbus has certainly recognized this is an important market to be in. In fact, in our forecast the 200 - 400 seat segment represents 90% of the widebody passenger airplane deliveries over the next 20 years.

So they've finally put their new airplane family on the table. And as the definition becomes clearer I'll have some more thoughts as to how the XWB competes with our very successful 787 and 777 families.

The truth is out there.


17 July 2006

Counting crows

FARNBOROUGH, England - I know this is supposed to be a week-long marathon, and we're supposed to pace ourselves, but today was a sprint from start to finish.

It began on the broadcast viewing platform overlooking the airfield bright and early with Breakfast TV. A warm sun was already baking the show grounds when I chatted live with BBC-TV, Bloomberg TV, and CNBC Europe. And that was just in the first hour.

And in between Dragon Dancing at the EVA 777 (which I did not get to see, as it turns out), and jets roaring overhead, I chatted with the New York Times, BBC World Service radio, BBC Radio 5 Live, Italy's Radio 24, the Washington Post, Seattle Times, Seattle P-I, and several others.

Dragon Dancing at the EVA 777 photo

The Dragon Dance must go on - even if I didn't get a chance to see it in person today.

And setting a theme that would stick around through the day, one of the earliest questions for me was: does Boeing take any comfort from Airbus' troubles and delays? My answer is no, these are complex programs. And as I've said here in the blog, I know they'll work through it all.

This was the same message I heard from Commercial Airplanes President and CEO Alan Mulally later in the morning at his briefing in the Media Centre.

And yet, I had to just scratch my head at a story posted on the BBC Website today, titled, "Airbus struggles as Boeing crows." Well, I haven't seen or heard a Boeing person crowing here at Farnborough or anywhere else for that matter. And I have yet to see a story with a headline like this backed up with any quote to that effect.

This particular story stated that Alan Mulally "could hardly contain his glee at the additional delay to the A350's launch." Really? What Mr. Mulally said was that we have compassion for what they're going through. That new airplanes are hard, and that Airbus is a terrific competitor. I'll let you decide if that sounds like "glee."

Randy with Radio 24's Sebastiano Barisoni photo

Intensely discussing the commercial airplanes market with Radio 24's Sebastiano Barisoni.

There was some news today out of the Boeing Chalet. Indonesia's Lion Air exercised purchase rights and ordered an additional 30 737-900ERs - our newest, most efficient and capable single-aisle airplane. Lion Air is the launch customer for the -900ER.

And Kuwait's recently-launched LoadAir Cargo signed an order for two 747-400 Extended Range Freighters. LoadAir plans to develop local, regional and intercontinental cargo operations from its base in Kuwait City.

As for the news out of the competition - we'll save for another day a discussion of the latest A350 offering. Meantime check out Boeing's Farnborough Airshow Website and catch up on the latest happenings.


16 July 2006

777 on stage

FARNBOROUGH, England - A brief note from the show grounds today. I had to mention the big beautiful bird that has arrived at Farnborough. Early this morning Taiwan's EVA Air landed at the airfield with a 777-300ER in special livery.

Boeing delivered this 777-300ER to EVA just last month. It happens to be the third 777-300ER for EVA, one of the launch customers for the 777. EVA flies the -300ER on routes such as London-Taipei and Los Angeles-Taipei, perfect examples of the long-haul point-to-point service this airplane is made for.

777-300ER in EVA livery photo

EVA's vividly-colored 777-300ER arriving at Farnborough this morning.

The EVA aircraft with 777-300ER brightly emblazoned across the fuselage will be on static display here at Farnborough through July 23.

This is EVA's very first time at a major air show, and I understand there's a lot of buzz and excitement in the airline's London office about their presence at Farnborough.

Tomorrow we're looking forward to seeing Dragon Dancers at a couple of performances at the airplane. I'll try to catch a glimpse of that if I can steal away some time from the many media interviews I expect to do during the day on Monday.


They say it's your birthday

LONDON - I can't think of a more fitting way to kick-start the Farnborough Air Show, which begins tomorrow, than to celebrate a big milestone for The Boeing Company. Call it a birthday, call it an anniversary, but 90 years ago this weekend Bill Boeing began this company on a humble site along the Duwamish River in Seattle.

The company was called Pacific Aero Products. Just 21 employees and two airplanes. A year later, in 1917, the company would take on the name Boeing Airplane Company.

Boeng Employees Christmas Eve, 1921 photo

Boeing employees at "Plant 1" on the Duwamish in Seattle - Christmas Eve, 1921.

As Boeing historian Mike Lombardi puts it, in a story in this month's issue of our employee magazine, Frontiers, Bill Boeing saw past the dogfights in the skies over Europe in World War I, and imagined a future where airplanes would serve the planet for transportation and commerce.

Mr. Boeing even put this vision into the original articles of incorporation which had provisions for not just building airplanes but "...to act as a common carrier of passengers and freight by aerial navigation...operate schools of aviation, and for teaching of all branches of knowledge and of the arts and sciences in any way connected with or useful to the operation of aeroplanes..."

In 1929, Boeing and a number of companies combined to form United Aircraft and Transport Corporation (UATC). The corporation built planes and engines, constructed airports, trained pilots, and managed passenger and freight carriers. In effect, Boeing and his partners helped create the national aviation infrastructure in the U.S. Besides The Boeing Company itself, some other parts of Bill Boeing's UATC survive today as United Technologies, and United Airlines.

The Boeing Company is still guided by Bill's vision. And over the years, he was joined in the company legacy by other pioneers such as Donald Douglas, James McDonnell, Dutch Kindelberger, Howard Hughes, Lloyd Stearman, Frank Piasecki and Elrey Jeppessen.

Boeng Flightline Photo

Classic view of the flightline at Boeing Field, April 1975. Aircraft present are 707, 727, 737, 747 and AWACS.

And as we get ready to celebrate the aviation industry of 2006 in a big way, at the biggest show of the year, it's the right time to reflect on this heritage.

In his article, historian Mike Lombardi lists a number of legendary Boeing employees - those he describes as "a who's who" of aviation history: Ed Wells, Tex Johnston, William Allen, Ed Heineman, Arthur Raymond, Harrison Storms, Scott Crossfield, Lee Atwood. And as he points out, millions of others may not be legends, but aviation history would not have been built without them.

So this is a salute to all the men and women who have come to their factories and offices every day across the globe. They are the ones who have made this a great company and a great industry.

And on that note, being that I'm in the British capital tonight and not all that far from Abbey Road, I'd just like to sing, as Lennon and McCartney might put it, "Boeing, I'm glad it's your birthday. Happy birthday to you!" 90 years young.


12 July 2006

In the year 2025

There was a pop song in the late 1960s called, "In the Year 2525." Aside from projecting a very gloomy outlook for the future, the song's performers, Zager and Evans, also have the dubious distinction of being the only group or artist to have a number one hit on both the U.S. and UK pop charts and then never have another single on those charts again.

I tell you this because, in contrast, our new commercial airplanes market forecast, which projects out through the year 2025, has a much more optimistic view. And we hope it will top the charts again this year!

I've just finished up a media briefing and teleconference from London today where we released our annual 20-year forecast for the commercial aviation market. Boeing's Current Market Outlook (CMO) is always rolled out around the big air show of the summer - this year's being the Farnborough International Air Show coming up next week.

Those of you who follow these things closely know that this forecast is a significant part of the story each year for us because it is a major influence on our business strategy going forward. You may have heard or read about me saying many times that our market forecast drives our product strategy.

So with that in mind, let's get to the data. We think that over the next 20 years air travel will grow an average of 4.9% a year, driven by an annual GDP growth rate of 3.1% - both up slightly from last year's forecast. Air cargo will grow at an average of 6.1% per year.

This means that the impacts of liberalization will continue. Airlines will continue to demand new airplanes so they can continue to respond to what passengers want: more nonstop, point-to-point flights, and more frequencies.

Current Market 

Outlook chart

As a result, I think we'll see continued strong commercial airplane demand in the forecast period between now and 2025 - a $2.6 trillion market for new aircraft. That's an increase of $500 billion over last year's forecast.

And our forecast is up by about 1,500, to a projected 27,200 new airplanes over the next 20 years - including passenger airplanes and freighters.

You can see that single-aisles (737-size) will continue to be the majority of those new airplane deliveries - 61%. Twin-aisle jets in the category of 200-399 seats (767,777,787-size) will make up 23% of the demand. But I should point out that those same twin-aisles will comprise 45% of the dollar value of new deliveries.

Overall, the world commercial airline fleet will more than double over the next 20 years - to nearly 36,000 airplanes.

In the chart below, the figure of 17,330 represents the current worldwide commercial airplane fleet. 35,970 represents the size of the fleet we predict in 20 years.

Current Market Outlook 

chart

So, we're projecting 17,630 new commercial airplanes due to growth between now and 2025.

Some airplanes will need to be replaced due to retirements, and we project that number to be about 9,580 airplanes. In all, airlines will need about 27,210 new airplanes to handle growth and replacement.

Combined with a retained fleet of about 8,760 airplanes (which are out flying today and will still be in the fleet in 2025) you get a total worldwide fleet of about 35,970 airplanes.

One of the more interesting projections in our outlook is that a lot of the growth will be in the Asia-Pacific market. In fact, in terms of delivery dollars, Asia-Pacific will make up 36% of the value of the commercial airplanes market.

Bottom line: while I can't yet provide a 500-year outlook all the way to the year 2525, I think I'll go out on a limb and say that 20 years into the future at least, people will still be flying on airplanes, and we'll still be making lots of them!

For more details click over to the 2006 Current Market Outlook page.

If you'd like to delve deeper into the forecast, you can view my 2006 Market Overview presentation.

And I'll be keeping you in touch with some of the doings throughout the upcoming week as the Farnborough Air Show gets underway.


07 July 2006

Leapfrog

A quick Google search will tell you that "leapfrog" is a children's game in which one player "leaps" over another player's back.

So, you might say, "Randy, what's that got to do with the current state of commercial airplanes?" Well, a lot. And also, very little.

Industry chatter about what Airbus is seemingly about to do with its widebody product line keeps mentioning this concept of "leapfrog." And I'm pretty sure it has nothing to do with the children's game.

"Leapfrog" has two important elements: enough leap, and at the right time. And in airplanes we're talking about the same elements.

Leap Frog image

The game of "leapfrog" requires enough leap at the right time.

First, "enough leap" implies technology - an efficiency and value leap. The "right time" element is all about leaping over something at the correct point. If you're too late, there's nothing there to leap over.

Some people seem surprised when I explain it that way. But, you know, if you jump too late, even if you have an improved product, there's nobody to leap over because the object of your "leap" may have already moved on by then.

We received a comment recently from Eric in Lombard, Illinois. It's a good segue into this topic:

Much has been made of Airbus' late arrival with the A350 / 70, but through the history of aviation victory hasn't always gone to the first, but to the best, and time often gives the advantage of technological superiority and more detailed knowledge of the market.

Eric, that's true enough. That's why I want to point out that on the technology side, from what we see, there are no "leapfrog" technologies in anything Airbus is talking about.

If you take the example of the Boeing 777, that was definitely a case where waiting a couple of years after the introduction of the A340 did indeed produce a significant shift in efficiency and value: the 777's twin engines vs. the Airbus 4-engine product.

But in today's case we're not seeing anything along those lines. Of course we don't know what they're going to do. But from what we've read and heard it's going to be an airplane that uses essentially the same technology and economics as airplanes being offered today.

We don't know exactly where they are on composites, but at an EADS/Airbus briefing at the beginning of the year, they gave a clue when they said they were going to need to increase funding for their composite research in 2007 and 2008 because they want to lighten up their fuselages.

(Of course, I should tip my hat to the competition. They seem to have finally realized they need to step up to the technologies that make the 787 such a breakthrough!)

But that's going to be a bit of a catch-up game there, because by next year of course you'll already be seeing a composite airplane flying, and by 2008 you'll be able to buy a ticket on one. It's called the 787 Dreamliner.

Boeng 787 Dreamliner image

In 2008 you'll be able to fly on a composite airplane called the 787.

So in other words, you can "leap" with yet another new version of the A350, but when all is said and done it appears that the first model of this airplane - whatever it is - will be four years behind the Boeing 787-8.

Industry buzz speculates that introduction of the Airbus airplane would not be until 2012, with follow-on models through 2014, which is eight years from today. The curious thing about the 2012 - 2014 time frame is that it's also the time Airbus had been talking about an A320 replacement.

Now, even if you assume that Airbus can put it all together and deliver four years after the 787 - in other words, in 2012 - why would you want to wait that long for a "me-too" airplane? In 2012 the Dreamliner will have four years of proven and reliable performance, with established infrastructure in place.

And keep in mind that Boeing will not be just standing in place either. Innovations and technology from the 787 will improve and enhance our entire product line.

Which brings me back to the children's game of "leapfrog." And clearly, this is no child's play.