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Global Market ForecastMethodology
Agenda
Global Market Forecast
GMF process
GMF 2018 results
Market Forecast Team Missions and Deliverables
3
Assess market trends
for our current aircraft1. Forecasting
travel demand2.
GLOBAL MARKET FORECAST (GMF)
20 year aircraft demand &
passenger traffic forecast
Explain Airbus strategy
Share our vision
First GMF: Early 80s
ICAO ADAP – July 2019
GMF team skills
4
November 2018
Operations Research
PythonStatistics
Computer programming
Optimization
Visualization
Economics
• Our team has a diverse range of skills…
Systems Dynamics
R
SQL
Machine Learning
• …But mathematical models can only take you so far
• The world is too complex to capture everything – pragmatic interpretation is needed
Client contact & Market awareness are absolutely essential
Network Analysis
Market Research
ICAO ADAP – July 2019
Agenda
Global Market Forecast, why ?
GMF process
GMF 2018 results
The GMF answers the 3 following questions
6
How many passengers will fly?
Traffic forecast
Where will passengers fly?
Network forecast
How will passengers fly?
Demand forecast
ICAO ADAP – July 2019
Global Market Database sources
7 Source: Airbus GMF
Economy
Finance
Other airport data
Geography
Fleet
ADS-B data Offer
ENAC & other
Traffic
Created using UNREGISTERED Top Draw 9/14/95 3:14:10 PM
Airlines reports
+ Airlines and Airports
associations
Bureau of statistics Civil
Aviation authorities
CONSOLIDATED & CROSS-VALIDATED
GLOBAL MARKET DATABASEHistorical data since 1972
ICAO ADAP – July 2019
145
6068
50
111
184
26
57
30
67 65
101
202
78
0
50
100
150
200
250
Airlines distribution per region
Num
be
r o
f a
irlin
es
48%
19%
5%
17%
3%
8%
4%9%
20%
6%
16%
45%
Global Network Major Network Small Network
LCC Regional & Affiliate Charter
Installed seats in service (outside circle)
Number of airlines (inside circle)
Airlines distribution per type
8
GMF Operations – Airlines
• Source: Ascend, Airbus GMF2018
ICAO ADAP – July 2019
The GMF answers the 3 following questions
9
How many passengers will fly?
Traffic forecast
Where will passengers fly?
Network forecast
How will passengers fly?
Demand forecast
ICAO ADAP – July 2019
10
Traffic Forecast – Problem Definition
How to predict traffic growth based on economic forecasts?
Traffic growth is not that closely correlated to GDP growth…
Source: ICAO, IHS Economics, Airbus GMF
Traffic (RPK) and real GDP growth - % (year-over-year)
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2017
RPK growth 2016-2017
+7.6%
GDP growth 2016-2017
+3.0%
ICAO ADAP – July 2019
11
Liberalisation
Tourism trends
Geopolitics
Airlines Business models & strategy
Jet fuel price
Air fares
Traffic Forecast – Problem Definition
…So we need to use other variables too
ICAO ADAP – July 2019
12
The world is divided into 20 traffic regions…
…And traffic is predicted on ~70 flows
Accuracy versus validityAs many aggregations as possible, as many exceptions as necessary
Traffic Forecast – Flow Aggregation
Source: Airbus GMFICAO ADAP – July 2019
13
Traffic Forecast – Multi-Model comparison
Model 1:
GDP, CPI
Model 3:
GDPR, PC
Model 2:
GDP, DPI
Model 4:
GDPR, CP
Forecast trends
Best combination of parameters for each flow
ICAO ADAP – July 2019
(Models are illustrative)
14
Traffic Forecast - Long term validity
World annual traffic (trillion RPKs)
0
2
4
6
8
10
12
14
16
18
1992 1996 2000 2004 2008 2012 2016 2020 2024 2028 2032 2036
• Source: ICAO, Airbus GMF2018
GMF2018
4.4% growth p.a.
GMF 2000
forecast
History
ICAO ADAP – July 2019
15
Over the last 30 years, air transport’s centre of gravity has moved south and east
16
Centre of gravity movement will slow as air traffic equalises globally
The GMF answers the 3 following questions
17 • Source: Airbus GMF
How many passengers will fly?
Traffic forecast
Where will passengers fly?
Network forecast
How will passengers fly?
Demand forecast
ICAO ADAP – July 2019
18
First traffic flows are disaggregated…
Network Forecast – Where will passengers fly?
…to reflect the global network at base year
How will the global traffic network evolve?
ICAO ADAP – July 2019
• Source: OAG, Airbus GMF2018
Network Forecast – Where will passengers fly?
19
Prediction of specific new routes is very difficult… …But statistically, pattern reflect existing network:
How much traffic will go to the new network?
2017 Routes 2018 New Routes
# N
ew
Ro
ute
s (
no
rma
lize
d)
Distance Band Km
Existing Routes New Routes
ICAO ADAP – July 2019
Network Forecast – How much fragmentation?
20
2010 2011 2012 2013 2014 2015 2016 2017 2018
Tra
ffic
(P
ax)
Historic Fragmentation trend
Traffic on Existing Routes Traffic on New Routes
Level of fragmentation depends on:
Region
Growth Rate
Leg Length
Frequency constraints
• Source: OAG, Airbus GMF2018
ICAO ADAP – July 2019
The GMF answers the 3 following questions
21
How many passengers will fly?
Traffic forecast
Where will passengers fly?
Network forecast
How will passengers fly?
Demand forecast
ICAO ADAP – July 2019
Demand Forecast - Overview
• Need to convert Traffic & Network Forecast into a Demand Forecast
• This is the most complex part of the process
• Fundamental idea is to match:
…with actual FleetOperations-based Demand…
Route 1
Route 2
Route 3
Route 4
Demand for
New Aircraft
ICAO ADAP – July 2019
Y = 0
Y = N
Y = 20
Age Distribution
23
Fleet & backlog is derived from fleet data supplier
Demand Forecast - Base Fleet Preparation
Assumed Replacement age/Airline
Commercial feedback & market knowledge
Most fleet replacement ages are
not explicitly defined
How to know when an aircraft
will be replaced?
Source: Airbus GMF
ICAO ADAP – July 2019
24
Demand Forecast – Operations-based Demand
Frequency
CapacityBubbles proportional to ASKs
Step 1
increase in Frequency only
Step 2
increase in both Frequency & Capacity
Step 3
increase in Capacity only
Route
opening
Traffic (RPK index 100 @ year1)
0
50
100
150
200
250
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Time (years)
Typical evolution on a route enjoying growth
Frequency increase
Frequency
&
Capacity
increase
Capacity
increase
Threshold depending on
market characteristics
Airlines business models
Traffic flow (region)
Route length
Number of players
• Frequency/Capacity model to capture changing nature of demand
ICAO ADAP – July 2019
Demand Forecast – Operations-based Demand
25
• Use aircraft utilization statistics to calculate number of A/C required
Average utilisation
rate by A/C type
Annual hours flown
along route
Annual hours flown
per A/C
Fit the average
utilisation curve
Get number of A/C
Compare with Route
requirements
Source: Airbus GMF
ICAO ADAP – July 2019
Route 1
Route 2
Route 3
Route 4
Operations-based Demand
(Colour indicates seat count)
Demand Forecast – Open Demand
26
• From the Demand-based Forecast…
How much demand can be satisfied by recycled aircraft?
(Graphs are illustrative only)
ICAO ADAP – July 2019
(Colour indicates seat count)….Fleet Forecast can be computed
27
Demand Forecast – Recycled & Leasing Market
• Part of the Open Demand will be filled in by either:
• Recycled aircraft
• Leased aircraft on backlog that have not yet been allocated
• Attrition curve What is the probability that an aircraft will be flying after X years?
ICAO ADAP – July 2019
28
Demand Forecast – Recycled & Leasing Market
Y = 0
Y = N
Y = 20
Age Distribution
Recycled &
Leased aircraft
Applying the recycled & leased
aircraft to fill up part of the Open
Demand…
Recycled Pool
…Gives the final market of
new aircraft
(For illustrative purposes)
ICAO ADAP – July 2019
Agenda
Global Market Forecast, why ?
GMF process
GMF 2018 results
GMF18 anticipates an additional 2,500 new aircraft deliveries over 20 years
GMF17 GMF18GDP20-year avg. growth 2.8% 2.8% +US$ 2.9 trillion
at end of period
RPK20-year avg. growth 4.4% 4.4% +2.4 trillion RPK
at end of period
FLEETstart
21,50020,500 +1,000
47,99042,530FLEETend
+5,460
DELIVERIES20-year NEW
37,40034,900 +2,500
Notes: Passenger aircraft (≥ 100 seats) | Jet freight aircraft (>10 tonnes) | 20-year forecast period
Source: Airbus GMF 201830
The world fleet will more than double over the next 20 years
Notes: Passenger aircraft (≥ 100 seats) | Jet freight aircraft (>10 tonnes), Rounded figures to the nearest 10
* Assuming same rules as today
Source: Airbus GMF 201831
Number of aircraft
20-year
new deliveries
Replace
Grow
Stay
47,990
21,450
10,600
10,850
26,540
37,390
-
10,000
20,000
30,000
40,000
50,000
Beginning 2018 2037 New Deliveries
1,760 (5%) $0.6 tn (10%)
$1.4 tn (25%)5,480 (15%)
$3.2 tn (54%)
$0.6 tn (11%)
S
M
L
XL
Around 37,400 aircraft will be required over the next 20 years
Notes: Passenger aircraft (≥ 100 seats) | Jet freight aircraft (>10 tons)
Source: Airbus GMF 201832
2018-2037 new deliveries
37,400aircraft units
$5.8 trillionaircraft value
S
M
L
XL
28,550 (76%)
1,590 (4%)
The Airbus
Global Market ForecastApp